Legal Perspectives July 10, 2017
A monthly column dedicated to the latest and greatest to come down from the Ninth Circuit Court of Appeals and California appellate courts
The One Time When a Big Studio Actually Lost in the Ninth Circuit. Yes, we have seen the day when the Ninth Circuit actually handed down a loss to a major studio. It happened in Jordan-Benel v. Universal City Studios, Inc., __ F.3d __, 2017 WL 2637350 (9th Cir. June 20, 2017), which is an idea theft suit for the box-office horror smash the Purge. The studio attempted to SLAPP the plaintiff out of court, contending that it exercised its First Amendment rights to filmmaking by making the picture. Not so fast, concluded the Ninth Circuit, since it found that the suit arose out of the studio’s failure to pay for the idea rather than its filmmaking. This suit is also an interesting example of an idea theft suit employing a breach of contract claim rather than a copyright infringement cause of action: plaintiffs’ bar is getting creative, given the difficulty of proving infringement. Truly, it is the innovation that keeps the law alive.
How Fair is Fair Use? The U.S. Supremes might have effectively tripped up dancing babies everywhere by refusing to review the Ninth Circuit’s decision in Lenz v. Universal Music Corp., 815 F.3d 1145, 1150 (9th Cir. 2015), cert. denied sub nom. Lenz v. Universal Music Corp, 2017 WL 2621318 (U.S. June 19, 2017). Lenz is a mother who in 2007 posted a YouTube video of her then toddler dancing to Prince’s 1984 hit, “Let’s Go Crazy.” The video was removed after Universal notified YouTube that it infringed its rights. The Ninth Circuit tipped the balance in Universal’s favor by ruling that fair use of any copyrighted material depends on the copyright owner’s subjective belief. In other words, as long as Universal actually believed that the use was not fair, its takedown notice would stand. The case is now on the way to trial for Lenz to show that Universal actually knew that it was wrong to take down the dancing tyke.
Offend Away. The U.S. Supremes say you have a Free Speech right to offensive trademarks in Matal v. Tam, __ U.S. __, 137 S. Ct. 1744 (June 19, 2017). In this case, the Asian-American frontman for a rock band entitled the Slants argued that he had the right to trademark his band’s moniker in an effort to reclaim a stereotype. Justice Alito writing for the Court agreed, stating that “[s]peech may not be banned on the ground that it expresses ideas that offend.” Aside from potentially alleviating a great deal of confusion at the U.S. Patent and Trademark Office resulting from controversial trademarks, this opinion may also help the NFL’s Washington Redskins down the road, whose own marks were canceled for being disparaging to Native Americans. Clearly, the current landscape of political correctness is about to undergo a significant transformation under this new Law of the Land. Stay tuned.
Good Faith Cannot Rewrite Your Contract. It is almost summer, and the dearth of appellate decisions this month shows it. Division Two of the Second Appellate District seems to be the only one busy with relevant cases this month, ruling that a co-producer of a Jimi Hendrix concert movie did not breach the contract by refusing a distribution offer that would have spelled out a limited release for the film. In Experience Hendrix, LLC v. Last Experience, Inc., Case No. B268414 (May 8, 2017), the court rejected the other co-producer’s argument that the implied covenant of good faith and fair dealing supplies a nonexistent contractual term requiring acceptance of the offer. Similarly, any “reasonableness” limitations should have been written into the contract: “The parties knew how to impose a reasonableness requirement when they wanted one; we must give effect to their decision not to place one in the approval provision.” In other words, put it in writing.
When Speech Does Not Translate Into SLAPP. California State University cannot SLAPP out of court one of its professors who sued for wrongful denial of tenure. The Supremes ruled as much in Park v. Bd. of Trustees of California State Univ., 2 Cal. 5th 1057 (May 4, 2017). The court found that the professor’s claim, which was based on allegations that Caucasian professors with worse records got promoted over the plaintiff, who is of Korean origin, did not actually arise from any protected activity. This is because the claim arises from the tenure decision itself and the motives underlying that decision—not from the various communications surrounding it. The court rejected the University’s arguments that the tenure decision was inextricably linked with the underlying communications and that the decision itself necessarily triggered public interest: public interest alone does not suffice, unless the tenure decision furthered the University’s free speech rights.
Oh Yes They Did! In this Ninth Circuit-centric month, the court held that LiveJournal’s moderators can be the website’s agents for purposes of an infringement suit by notorious paparazzi over a photo of Beyonce bearing the photographer’s watermark. The Ninth Circuit reversed a summary judgment ruling based on this conclusion in Mavrix Photographs, LLC v. LiveJournal, Inc., 853 F.3d 1020 (9th Cir. 2017), finding that the moderators of the popular Oh No They Didn’t! community devoted to celebrity gossip can subject the website to liability for copyright infringement. Although they are volunteers, “LiveJournal relies on moderators as an integral part of its screening and posting business model.” The court concluded that this gate-keeping function makes any takedown notice under the Digital Millennium Copyright Act unnecessary, since the moderators’ knowledge of the infringing material gets imputed to the website. Lesson learned: either get rid of moderators altogether or pay them enough to pay attention.
License to Commission. The Ninth Circuit has no problems with California's Talent Agencies Act (TAA), which leaves unlicensed personal managers in the dust when it comes to collecting commission on their talent’s work. In National Conference of Personal Managers, Inc. v. Brown, No. 15-56388, 2017 WL 1457037 (9th Cir. Apr. 25, 2017), the court rejected a slew of challenges to the statute, ranging from the dormant Commerce Clause to due process. Interestingly, the plaintiff also asserted the First Amendment challenge to the statute, albeit unpersuasively: “We agree with the district court that the TAA regulates non-expressive conduct, not speech …. Because the TAA ‘regulates a professional practice that is not inherently expressive, it does not implicate the First Amendment.’ It is only subject to rational basis review, which it survives."
How To Lose Billions in Claims Against Disney. In Mathew v. Walt Disney Company, No. 15-56726, 2017 WL 1629070 (9th Cir. May 2, 2017), the Ninth Circuit hands a major victory to Disney, finding that the alleged author of the copyrighted material that serves as the basis for Disney’s ever popular Pirates of the Caribbean franchise waited too long to reassert his claims against the company. Although this opinion technically spills into the next month, we simply could not wait to tell you that delay spells doomsday for your claims when Disney keeps making money off your creation and you say nothing for years. This holds true even if you actually asserted your claims in court and then withdrew them, signing a release agreement upon dismissal, as Mr. Mathew did here. Your rescission claims based on fraudulent misrepresentations brought years after the release will suffer the fate of “too little, too late,” as they did here.
Boxing SLAPP-style. As the SLAPP-jurisprudence is still as fertile as ever, the latest opinion on the subject comes from Division Seven of the Second Appellate District, proving that boxers' break-ups are newsworthy, but their newsworthiness has its limits. In Jackson v. Mayweather, Jr., Case No. B266466 (Mar. 27, 2017), the court affirmed what everyone suspected all along: all celebrity gossip is SLAPP-worthy. Floyd Mayweather can thus freely mouth off in public about the reasons he broke up with his girlfriend. But posting a sonogram to prove she had an abortion is going too far, as it “served no legitimate public purpose, even when one includes entertainment news within the zone of protection” and was thus “outside the protection afforded a newsworthy report.” As such, it was not a complete knockout for the former boxing champion, but most of the claims here did get SLAPPed out of court after all.
When the Contract Does Not Mean What It Says. Division Seven also handed a stunning defeat to Disney this month in Wind Dancer Prod. Grp. v. Walt Disney Pictures, Case No. B262426 (Mar. 22, 2017). The case arose out of the hit show Home Improvement. The writers and producers brought claims focusing on their profit participation statements that undervalued their participation rights. The case was dismissed below over the plaintiffs’ failure to abide by the “incontestability” clause in their contracts that set a time limit for bringing claims. Although plaintiffs argued that the studio orally waived the condition, the trial court ruled that the argument was precluded by the contract that required any modifications to be in writing. The court of appeals reversed, holding that Disney’s conduct in delaying the audit process may provide sufficient basis to estop the studio from invoking the “incontestability” clause. Moreover, the “no oral modification” clause itself may be waived by words or conduct, which turns the clause into an empty gesture for any future contract drafting in California.
C-O-P-Y-R-I-G-H-T! The United States Supreme Court thinks cheerleader uniforms deserve protection, finding them to be “two- or three-dimensional work of art” in Star Athletica, L.L.C. v. Varsity Brands, Inc., Case No. 15-866 (U.S. Mar. 22, 2017). Writing for the majority, Justice Clarence Thomas concluded that arrangement of stripes, chevrons and color blocks on cheerleader uniforms is entitled to copyright protection. The main issue here was whether the design could be separated from its utilitarian purpose: would anyone find it aesthetically interesting as opposed to simply useful? The Court ruled that the arrangement was artistic enough to be copyrightable because “when identified and imagined apart from the useful article, it would qualify as a pictorial, graphic, or sculptural work either on its own or when fixed in some other tangible medium.” In other words, go, Supremes, go!
Back in the SLAPP land, all jokes aside. In this relatively quiet month for appellate news, our first entry comes from the ever-prolific anti-SLAPP jurisprudence and involves one of the Wayans brothers. In Daniel v. Wayans, 8 Cal. App. 5th 367 (Feb. 9, 2017), Division One of the Second Appellate District affirmed the trial court’s dismissal of a lawsuit against Marlon Wayans. Plaintiff in this case, an African-American actor, brought claims based on certain (allegedly) offensive racial slurs directed at him by Marlon on the set of Marlon’s movie, Haunted House 2, as well as through Marlon’s tweets. The most notable strain of reasoning here was the appellate court’s determination that Marlon’s speech was SLAPP-worthy just because this was a movie sequel after all. As such, whatever creative process Marlon utilized for this movie, it must have involved a matter of public interest! As for the second prong of the anti-SLAPP analysis, the court essentially concluded that Marlon has a First Amendment right to be funny, thus presumably paving the way for Haunted House 3.
Big Pimpin', Not So Big in Egypt. Jay-Z and Timbaland are still stuck in the Ninth Circuit over their hit Big Pimpin' in a court battle that took over eight years to get to trial below. The case centers on a sample of an Egyptian 1957 song Khosara Khosara, which is the main hook in Big Pimpin'. And while the Egyptian song at issue now appears to have been validly licensed, the heirs of the song writer raise an interesting issue on appeal. In their latest brief filed in Osama Ahmed Fahmy v. Jay-Z (aka Shawn Carter) et al., Case No. 16-55213 (9th Cir.), they argue that the license could not have authorized Jay-Z and Timbaland to turn a chaste romantic ballad into rhymes about “hoes, drugs and spendin’ cheese.” In other words, the song writer’s family now raises moral objections to their family name being associated with Big Pimpin'. It remains to be seen whether this concept gets any recognition from the Ninth Circuit, which would dramatically alter the landscape of music licensing. Stay tuned.
On the mark, ready, SLAPP. In our first entry for this SLAPP-happy month, the Ninth Circuit affirms denial of an anti-SLAPP motion below in Safari Club Int’l v. Rudolph, No. 14-56236 (9th Cir. Jan. 18, 2017). The case involved an award-winning hunter, who had sued his hunting club for exiling him and then lured the club’s president to lunch to discuss the pending lawsuit, all the while surreptitiously recording their conversation so that he could post it on YouTube later. The opinion is remarkable in itself for its many hunting references alone: the Ninth Circuit wrote that “the season opened” with defendant’s own suit, defendant lured the club’s president to lunch “[w]ith his quarry in sight,” the club “fired back … with a barrage of legal claims,” and defendant “seeks to line up the perfect shot” on appeal, although his “marksmanship, apparently on target in the tundra, here is wide off the mark.” The hunting lingo aside, the opinion confirms that winning on the first “public interest” prong of the SLAPP analysis, as defendant did here (since the issues were of interest to a broad segment of society), does not guarantee SLAPPing your plaintiff out of court. Indeed, as the Ninth Circuit confirmed here, there is a reasonable expectation of privacy in a lunch conversation that allowed the club and its president to move forward on their invasion of privacy claims.
No jurisdiction, no problem. The Supremes confirm this month that you can get your attorney’s fees for prevailing on an anti-SLAPP motion even if the court lacks subject matter jurisdiction over plaintiff’s claims in the first place. In Barry v. State Bar of California, 2 Cal. 5th 318 (Jan. 5, 2017), an attorney disciplined by the State Bar sought to set aside the stipulation reached on her disciplinary charges, and the State Bar SLAPPed her out of court for lack of jurisdiction, since the State Bar has exclusive jurisdiction over attorney discipline matters. Reversing the appellate court contrary determination, the California Supreme Court held that if the trial court below had jurisdiction to deny the motion for lack of jurisdiction, it was also empowered to award attorney’s fees to the successful SLAPPer.
Keep your anonymous speakers alive—at least through your SLAPP appeal. James Woods means business. If you call the famous actor a “cocaine addict” online, he will “follow you to the bowels of Hell,” if not beyond. And courts would let him, too. When the anonymous poster’s lawyers attempted to SLAPP Woods’ $10 million defamation suit, the trial court denied the motion. The resulting appeal was dropped because the anonymous speaker died while the appeal was pending, thus eradicating his privacy interests. On January 3, 2017, the anonymous speaker’s attorneys were ordered to reveal their client’s identity in Woods v. John Doe, Case No. BC589746 (Cal. Super. Ct.). Sure, this entry involves no actual appellate decisions, yet we thought you should be warned to stay away from Woods’ Twitter account from now on—just to be on the safe side.
No SLAPP here. Our sole non-SLAPP entry of the month hands a major defeat to Perfect 10, an adult images website, that accused a Usenet provider of contributory copyright infringement when the images surfaced in some of its Usenet posts. The Ninth Circuit in Perfect 10, Inc. v. Giganews, Inc., No. 15-55500 (9th Cir. Jan. 23, 2017), decided that defendant failed to cross the required “volitional conduct” threshold by merely providing a platform for the exchange of the posts in question. Giganews walked away with over $5.5 million in attorney’s fees awarded against Perfect 10 under the Copyright Act, proving that sometimes defending your right not to get involved can be just as important in the whole scheme of copyright protections as protecting your creativity.
No Press Pass for CNN to Discriminate Against Its Employees. Stanley Wilson, a fired African-American Emmy Award-winning producer, gets to proceed with his employment discrimination suit against CNN, and the news station cannot hide behind the SLAPP statute, says Division One of the California Second Appellate District in Wilson v. Cable News Network, Inc., No. B264944 (Dec. 13, 2016). Just because CNN “shapes the news,” it does not mean that it should enjoy special privileges for discriminatory decisions as to who gets to report the news. After all, as the court concluded, “[t]he press has no special immunity from generally applicable laws.” In similar vein, CNN cannot freely bad-mouth its fired employees just because their job relates to issues of public interest: after all, their fitness to shape CNN broadcasts is a private matter that should remain between them and CNN.
American Idol is Still Interesting. On the opposite end of the SLAPP spectrum, Radar Online scores a get-out-of-court-free card from Division Three of the California Second Appellate District in Clark v. Radar Online, LLC, No. B264085 (Nov. 30, 2016). The court found that an American Idol contestant’s disqualification from the show due to reports that he had battered his sister was a matter of public interest. The interest in the show is widespread enough to rebut Clark’s claims that the matter was only relevant to a limited portion of the public (people who watch American Idol). Analyzing the publication as a whole (rather than parsing it out, as the trial court had done), the court also concluded that the publication was likely not actionable as defamatory because Clark failed to show that he never beat up his sister. It seems that if Clark sued to clear his name, it was advisable to make (at least) some showing that the battery allegations were untrue in the first place.
Football Coaches are Interesting, Too. Continuing with this month’s SLAPP extravaganza, Division Three of the California Second Appellate District in McNair v. Superior Court, No. B275282 (Dec. 23, 2016), had to deal with the fallout from its earlier SLAPP decision finding USC assistant coach to be a limited public figure for purposes of proving defamation damages. As a result, some of McNair’s claims were lost on appeal and some went forward. The case came back up when the NCAA attempted to exercise its second preemptory challenge against the presiding judge, and the Court of Appeals rejected that challenge, since the previous SLAPP ruling did not result in a reversal of a “final judgment.” Lesson learned: you do not get to keep changing referees in the middle of a game.
October - November 2016
Caveat Sectorem – “Broker Beware.” A broker missed out on a $925,000 commission on the purchase of a $45-million Bel Air estate for a friend because he failed to get the brokerage agreement in writing as required by California’s statute of frauds, says Division Two of the California Second Appellate District in Westside Estate Agency, Inc. v. Randall, No. B268455 (Dec. 1, 2016). Turns out, even for real estate transactions among friends, you need to get it in writing.
Real estate investors beware. Continuing with the real estate theme, an escrow company did not owe a duty of care to a non-party financier who was not listed as a third-party beneficiary of an escrow agreement in a real estate transaction. The California Third Appellate District in Alareza v. Chicago Title Company, Case No. C075547 (Nov. 16, 2016), says that even though the non-party suffered losses due in part to the escrow company’s admitted negligence in misidentifying an escrow purchaser in some insurance paperwork, the causal connection between this misidentification and the nonparty’s losses was too tenuous to impose liability. Once again, when seeking to create a legal relationship and head off future problems, the rule of thumb is to get it in writing.
Why your doorman matters (and it is not too late to buy him a Christmas gift). In Stroud Prods. & Ents. Inc. v. Castle Rock Ent. Inc., Case Nos. 14–16421 & 14–16422 (9th Cir. Oct. 25, 2016), the wife of Nina Simone's late husband, Andrew Stroud, argued that there was no jurisdiction over her due to, in part, improper personal service. In reviewing the efforts to serve her in New York, the court approved of the diligent efforts to serve her four times (including on a Saturday) and rejected her arguments that the papers needed to be left with the doorman because the doorman did not block access to her unit. As it turns out, if you live in an apartment building and your doorman does not block access at the entrance, then the entrance point is not your “actual dwelling” for purposes of personal service.
Get your alter ego early. Division Four of the California Second Appellate District in Wolf Metals Inc. v. Rand Pac. Sales, Inc., Case No. B264002 (Oct. 25, 2016), says that due process precludes you from adding an alter ego of your defendant to a default judgment. Luckily, if you are trying to add a successor company, it is another matter altogether, as long as the additional proposed judgment debtor is nothing but a “mere continuation” of the original defendant.
How not to lose $3 million in attorney’s fees. After allegedly losing millions of dollars in a hedge fund, investors sued the fund's administrator for breach of contract. The fund administrator won on summary judgment below and got awarded $3,027,237.96 in attorney’s fees under a contractual provision entitled "Standard of Care," which provides the administrator with the indemnity right for losses, including reasonable attorney’s fees pertaining to administration of the fund. Division One of the California Fourth Appellate District says “not so fast” in Alki Partners, LP v. DB Fund Servs., LLC, Case No. D068063 (Oct. 24, 2016). Reversing the award of attorney’s fees, the court explained that because the contractual language relied upon was a third-party indemnity provision, it did not create a right to attorney’s fees in litigation between the parties to the contract. But it was an easy fix for any transactional attorney worth his salt, as the court went on to observe that “[i]t would have been simple for the parties to provide: If any action is commenced to enforce or interpret the terms of this agreement, the prevailing party shall be entitled to recover reasonable attorney fees.”
August - September 2016
Your Class Action Waiver is No Good. The Ninth Circuit says mass employee class action waivers signed as condition of employment violate the National Labor Relations Act in Morris v. Ernst & Young, LLP, No. 13-16599 (9th Cir. Aug. 22, 2016). It is not a problem that the waiver directs the claims into arbitration: as long as employees can proceed by concerted action, they can be compelled to arbitrate. The bottom line is that your employees have a core right to proceed together, unless you are somehow exempted from the Act’s coverage.
Your Arbitration Agreement is No Good. Continuing with the theme of employment relations, your Employee Handbook does not create a binding agreement to arbitrate, says Division Four of the California Second Appellate District in Esparza v. Sand & Sea, Inc., No. B268420 (Aug. 22, 2016). Even if the employee signs the handbook acknowledgement form, this does not create a mutual agreement to arbitrate. The court went on to note that if the policy acknowledgement form provided clear notice that certain handbook provisions would create binding commitment after the employment ends and required all the employees to familiarize themselves with the handbook’s contents before signing the acknowledgement form, the arbitration provisions might have been upheld after all.
Your Suspended Corporation Cannot Defend Itself in a Lawsuit. The San Diego City Attorney learned this the hard way. In City of San Diego v. San Diegans for Open Gov't, No. D068939 (Sept. 22, 2016), Division One of the California Fourth Appellate District stripped him of a quarter million dollars in attorney’s fees for filing an answer on behalf of a suspended corporation. Even if your corporation gets revived along the way, it is its status during the relevant court appearance period that matters.
Keep Your Vogue On, Madonna. Ms. Ciccone’s hit is safe from claims of copyright infringement, but she cannot collect on her $720,000 attorney’s fee award after all. Following the Ninth Circuit’s decision back in June 2016 that the quarter-note single horn hit, full measure containing rests, and double horn hit from musical composition “Ooh I Love It (Love Break)” in Madonna’s Vogue was de minimis usage that does not rise to the level of copyright infringement, see VMG Salsoul, LLC v. Ciccone, 824 F.3d 871 (9th Cir. 2016), on September 23, 2016, the district court judge rained on Madonna’s parade by stripping her of her attorney’s fees award. The decision was based on the court’s finding that the suit was not entirely frivolous, while keeping the award would deter possibly meritorious copy right infringement claims. Lesson learned: while this was admittedly a close case, the district judge’s decision encourages de minimis infringement suits for years to come.