SLM 1

Appellate Case: 13-1407
Document: 01019186870
Date Filed: 01/15/2014
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No. 13-1407 IN THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT
STAN LEE MEDIA, INC. Plaintiff / Appellant
versus
THE WALT DISNEY COMPANY Defendant / Appellee Appeal from U.S. District Court, District Of Colorado The Honorable William J. Martinez U.S.D.C. Case No. 1:12-cv-02663-WJM-KMT APPELLANTS OPENING BRIEF
Robert S. Chapman Jon-Jamison Hill EISNER, KAHAN, GORRY, CHAPMAN, ROSS & JAFFE 9601 Wilshire Boulevard Suite 700 Beverly Hills, California 90210 Telephone: (310) 855-3200 Facsimile: (310) 855-3201
John V. McDermott Mark T. Barnes BROWNSTEIN HYATT FARBER SCHRECK, LLP 410 Seventeenth Street Suite 2200 Denver, Colorado 80202 Telephone: (303) 223-1100 Facsimile: (303) 223-1111 Attorneys for Appellant Stan Lee Media, Inc.
ORAL ARGUMENT IS REQUESTED
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CORPORATE DISCLOSURE STATEMENT The undersigned counsel for Appellant Stan Lee Media, Inc. states that: (a) Stan Lee Media, Inc. is a non-governmental corporate party; (b) Stan Lee Media, Inc. does not have a parent corporation; and (c) no publically held corporation owns ten percent (10%) or more of Stan Lee Media, Inc.
STATEMENT OF RELATED APPEALS There have been no prior appeals in this matter, and Appellant Stan Lee Media, Inc. is not aware of any related appeals pending in this Court.
Dated: January 15, 2014
EISNER, KAHAN GORRY, CHAPMAN ROSS & JAFFE
By:
/s/ Robert S. Chapman Robert S. Chapman Attorneys for Appellant Stan Lee Media, Inc.
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TABLE OF CONTENTS CORPORATE DISCLOSURE STATEMENT ..........................................................i STATEMENT OF RELATED APPEALS .................................................................i JURISDICTION......................................................................................................... 1 INTRODUCTION ..................................................................................................... 2 STATEMENT OF ISSUES ....................................................................................... 4 STATEMENT OF FACTS ........................................................................................ 4 I. II. Stan Lees Copyright Assigment And Disneys Use Of The Characters........ 4 Litigation Prior To SLMIs Lawsuit Against Disney. ..................................... 6
STATEMENT OF THE CASE .................................................................................. 9 STANDARD OF REVIEW ..................................................................................... 10 SUMMARY OF ARGUMENT ............................................................................... 10 LEGAL ARGUMENT ............................................................................................. 11 I. II. STANDARDS ON APPEAL. ....................................................................... 11 SLMIS COPYRIGHT INFRINGMENT CLAIM IS NOT BARRED BY COLLATERAL ESTOPPEL. ........................................................................ 12 A. Abadin I Did Not Decide The Issue Of SLMIs Copyright Ownership Or The Validity Of Stan Lees Assignment to SLMI. ..... 14 1. Abadin Is Finding That The Claims Are Barred By Applicable Statutes Of Limitations Does Not Equate To A Determination Of Copyright Ownership. ............................. 17 As A Matter Of Law, Neither Abadin I, Nor This Case, Is A Copyright Ownership Case. .................................................. 19
2.
ii
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3.
Abadin Is Determination That The 1998 Employment Agreement Implicated Californias Seven Year Rule Is Not A Determination Of Copyright Ownership. ...................... 22 The District Courts Ruling That The State Statute Of Limitations Deprived SLMI Of Its Right To Use Its Copyrights Is Subject To Preemption. ...................................... 25
4.
B.
SLMI Was Not A Party To The Prior Litigation, Nor Did SLMI Have A Full And Fair Opportunity To Litigate The Issue Of Copyright Ownership In Abadin I....................................................... 27
III.
THE DISTRICT COURT PROPERLY EXERCISED JURISDICTION OVER DISNEY. ............................................................................................ 29
CONCLUSION ........................................................................................................ 30 STATEMENT CONCERNING ORAL ARGUMENT ........................................... 30 CERTIFICATE OF COMPLIANCE ....................................................................... 32 CERTIFICATION OF VIRUS SCANNING .......................................................... 33 CERTIFICATION CONCERNING PRIVACY ..................................................... 33 CERTIFICATION OF HARD COPY SUBMISSION ............................................ 33 PROOF OF SERVICE VIA ECF SYSTEM............................................................ 34 ADDENDUM .......................................................................................................... 35
iii
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TABLE OF AUTHORITIES Statutes And Rules 17 U.S.C. 204 .................................................................................................. 18, 25 17 U.S.C. 507 .................................................................................................. 20, 26 28 U.S.C. 1291 .........................................................................................................1 28 U.S.C. 1338 .........................................................................................................1 Cal. Labor Code 2855 ......................................................................... 22, 23, 24, 25 Fed. R. App. P. 4 ........................................................................................................1 Fed. R. Civ. P. 12 .......................................................................................................2 Cases Abadin v. Marvel Entertainment, Inc., 09-cv-0715 (PAC), 2010 WL 1257519 (S.D.N.Y. Mar. 31, 2010) ................................................ passim Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ...........................................12 Bushco v. Shurtleff, 729 F.3d 1294 (10th Cir. 2013) ....................................... 14, 25 Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984).........................................26 Carell v. Shubert Org., Inc., 104 F. Supp. 2d 236 (S.D.N.Y. 2000) ....................................................................................................... 21, 22 Cepeda v. Coughlin, 785 F. Supp. 385 (S.D.N.Y. 1992) ........................................18 Christy Sports, LLC v. Deer Valley Resord Co., Ltd., 555 F.3d 1188 (10th Cir. 2009) ....................................................................................12 Clark v. Haas Group, Inc., 953 F.3d 1235 (10th Cir. 1992) ....................................14 Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591 (1948) .............................................................................................................14 iv
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Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989) .............................................................................................................19 Costello v. United States, 365 U.S. 265 (1961) .......................................................16 DeHaviland v. Warner Bros. Pictures, 67 Cal. App. 2d 225 (1944) .............................................................................................................23 Ediciones Musicales v. San Martin, 582 F. Supp. 2d 1358 (S.D. Fla. 2008) ................................................................................................ 21, 22 Feist Publns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340 (1991) ............................18 Foxx v. Williams, 244 Cal. App. 2d 223 (1966) .....................................................23 In re Dunston, 146 B.R. 269 (D. Colo. 1992) ..........................................................13 In re Kelly, 182 B.R. 255 (B.A.P. 9th Cir. 1995) ....................................................13 In re Riggle, 389 B.R. 167 (D. Colo. 2007) .............................................................13 Jones v. Rath Packing Co., 430 U.S. 519 (1977).....................................................26 Kircher v. Putnam Funds Trust, 547 U.S. 633 (2006) .............................................29 Konigsberg Intern, Inc. v. Rice, 16 F.3d 355 (9th Cir. 1994)..................................19 Media Techs. Licensing, LLC v. Upper Deck Co., 334 F.3d 1366 (Fed. Cir. 2003)..............................................................................................16 Merchant v. Levy, 92 F.3d 51 (2d Cir. 1996) ................................................... 20, 21 Moss v. Kopp, 559 F.3d 1155 (10th Cir. 2009) ................................................ 12, 28 Murdock v. Ute Indian Tribe of Uintah and Ouray Reservation, 975 F.2d 683 (10th Cir. 1992) .......................................................................13 OHare v. General Marine Transport Corp., 534 F. Supp. 120 (S.D.N.Y. 1981) .............................................................................................18 Orson v. Miramax Film Corp., 189 F.3d 377 (3d Cir. 1999) ..................................26 Perkins v. Board of Trustees of Univ. of Illinois, 116 F. 3d 235 (7th Cir. 1997) ...............................................................................................17 v
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Ritchie v. Williams, 395 F.3d 283 (6th Cir. 2005) ..................................................19 Ruiz v. McDonnell, 299 F.3d 1173 (10th Cir. 2002), cert. denied 538 U.S. 999 (2003).................................................................................. 4, 10 S.E.C. v. Monarch Funding Corp., 192 F.3d 295 (2nd Cir. 1999) ..........................13 Stone v. Williams, 970 F.2d 1043 (2d Cir. 1992)....................................................21 Taylor v. Sturgell, 553 U.S. 880 (2008) ..................................................................13 Teigen v. Renfrow, 511 F.3d 1072 (10th Cir. 2007) ...............................................11 The Evergreens v. Nunan, 141 F.2d 927 (2nd Cir. 1944) .......................................13 The SCO Group, Inc. v. Novell, Inc., 578 F.3d 1201 (10th Cir. 2009) ..............................................................................................................19 Valley View Angus Ranch v. Duke Energy Field Services, Inc., 497 F.3d 1096 (10th Cir. 2007) .....................................................................13 Willner v. Budig, 848 F.2d 1032 (10th Cir.1988), cert. denied, 488 U.S. 1031 (1989) ....................................................................................14 Zuill v. Shanahan, 80 F.3d 1366 (9th Cir. 1996) ........................................ 20, 22, 26 Other Authorities RESTATEMENT (SECOND) OF JUDGMENTS, 28 (1982) .............................................29 S. Rep. 85-1014 (1957) ..................................................................................... 20, 26
vi
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JURISDICTION Appellant Stan Lee Media, Inc.s (SLMI) operative complaint pled a single claim for copyright infringement, over which the District Court had jurisdiction pursuant to 28 U.S.C. 1338(a). [Appellants Appendix (Aplt.
App.), Pages 22-24.] SLMI appeals from the District Courts Order Granting Defendants Motion To Dismiss, which was entered on September 5, 2013. [Aplt. App., 106-116.] That order resolved the entire proceeding before the District Court and is a final, appealable decision over which this Court has jurisdiction pursuant to 28 U.S.C. 1291. The District Court entered a final judgment in favor of defendant The Walt Disney Company (Disney) on September 16, 2013. [Aplt. App., 117.] Appellant filed a notice of appeal of the District Courts order and judgment on October 3, 2013. [Aplt. App., 118-119.] The notice of appeal was timely pursuant to Fed. R. App. P. 4(a)(1)(A).
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INTRODUCTION There are six separate and independent reasons why the District Courts order for dismissal pursuant to Fed. R. Civ. P. 12(b)(6) must be reversed. Each reason by itself is sufficient to reverse the District Courts order. However, when combined, the necessity of reversal is overwhelming. First, for collateral estoppel to be a bar on a particular issue, the identical issue must have been considered and resolved in the prior case. Here, the District Court ruled that a copyright assignment in a contract was not enforceable. That issue was never considered or even addressed in the prior case, Abadin v. Marvel Entertainment, Inc. (Abadin I).1 Indeed, both SLMI and Disney informed the District Court that copyright ownership was not litigated or decided in Abadin I. Therefore, the District Courts collateral estoppel ruling is error. Second, the District Court confused res judicata and collateral estoppel. The District Court attempted to apply a prior statute of limitation ruling to issues that had never been considered in the prior case and concluded that a copyright ownership issue had been resolved and therefore could not be relitigated. As a matter of law, the issues underlying a cause of action barred by statute of limitations are not necessary to the resolution of the claim, and therefore cannot be
1
The full citation for this case is Abadin v. Marvel Entertainment, Inc., 09-cv0715 (PAC), 2010 WL 1257519 (S.D.N.Y. Mar. 31, 2010). 2
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the subject of collateral estoppel. The District Court actually, and incorrectly, applied res judicata principles in its application of collateral estoppel. Third, Abadin I was an unauthorized shareholder derivative suit in which that court found the shareholders lacked standing to sue or assert claims on behalf of SLMI. Accordingly, SLMI was not a party to that action, nor in privity with a party, and the application of collateral estoppel was error by the District Court. Fourth, it is settled that if a copyright infringement claim is barred by the statute of limitations, only the remedy of damages or injunctive relief is barred, not the substantive claim of ownership of the copyright. Nonetheless, the District Court below ruled that the substantive ownership issue had already been determined, even though it was never actually addressed (as Disney admitted to the District Court). Fifth, the copyright assignment in the employment contract satisfied all necessary federal standards for a copyright assignment. The District Court below appeared to rule that a state law statute of limitations concerning contract could somehow invalidate a federal copyright assignment. District Court is preempted by Federal law. Finally, the copyright ownership cases cited by Disney as grounds for its motion to dismiss have no applicability in a situation such as this where SLMI and That conclusion by the
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Disney are not purported co-owners and never had a contractual or any other close relationship. Appellant respectfully requests that this Court vacate the Judgment, reverse the District Courts Order and remand the matter to the District Court for further proceedings. STATEMENT OF ISSUES 1. Whether the District Court erred by granting The Walt Disney
Companys motion to dismiss. 2. Whether Stan Lee Media, Inc.s copyright infringement claim is
barred by collateral estoppel. STATEMENT OF FACTS I. Stan Lees Copyright Assigment And Disneys Use Of The Characters. Stan Lee created some of the best known comic book characters of all time, including Spider Man, Iron Man, The Incredible Hulk and The X-Men. [Aplt. App., 13.]2 In October 1998, Lee and Stan Lee Entertainment, Inc. (SLEI), a predecessor to SLMI, entered into a written employment Agreement titled This statement of facts contains a number of allegations from the Amended Complaint. This Court must accept all well-pleaded facts in the complaint as true for purposes of its review of the District Courts dismissal under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. See Ruiz v. McDonnell, 299 F.3d 1173, 1181 (10th Cir. 2002), cert. denied 538 U.S. 999 (2003). 4
2
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Employment
Agreement/Rights
Assignment
(the
1998
Employment
Agreement). [Aplt. App., 14.] Pursuant to the 1998 Employment Agreement, SLEI hired Lee as Chairman to perform services for it. The 1998 Employment Agreement also contained a copyright assignment which provided that Lee assigned to SLEI, forever, the copyrights and all other rights in the comic book characters that he had previously created or would create in the future. [Aplt. App., 14.] In October, 1999, Lee executed an amendment to the 1998
Employment Agreement that confirmed the copyright assignment. [Aplt. App., 15.] The assignment was later confirmed by SLMI and Lee in public filings in March, 2000 and other writings, and was eventually recorded with the United States Copyright Office, in Volume 3544, as Document No. 426. [Aplt. App., 15.] The 1998 Employment Agreement also contained a severability clause which provided that despite the invalidity of any provision or obligation, no party would be deprived of the advantages of any other provision. [Aplt. App., 32.] Oddly, in November 1998, Mr. Lee signed a written agreement with Marvel Enterprises, Inc. in which he purportedly assigned to Marvel the same rights to the Characters he had previously assigned to SLMIs predecessor. [Aplt. App., 15.] Disney purchased Marvel on December 31, 2009. [Aplt. App., 15.] Through its integrated operations, Disney directed the use and exploitation of the Characters in films and merchandising in Colorado and elsewhere. [Aplt. App., 16-19.] 5
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II.
Litigation Prior To SLMIs Lawsuit Against Disney. During the past decade, there have been a number of cases filed and
adjudicated involving Plaintiff, Stan Lee, Marvel and others. SLMI detailed these prior lawsuits for the District Court in its operative complaint. [Aplt. App., 19-22.] Relevant to this appeal is Abadin I, which was filed in the United States District Court for the Southern District of New York as 09 Civ. 0715 (PAC). [Aplt. App., 20.] That matter was an unauthorized shareholder derivative lawsuit filed on behalf of SLMI against Marvel Entertainment, Stan Lee and others.3 See Abadin, 2010 WL 1257519 at *1. The District Court below stated that Abadin I was, [t]he relevant case for the identicallity of issues analysis here . . .. [Aplt. App., 111.] The District Court below stated that . . . the Abadin I Court determined that Plaintiff was barred from exercising the copyrights conferred upon it in the 1998 Agreement [and therefore] the Court cannot allow Plaintiff to re-litigate the same issue in an attempt to revive its claim to ownership of those copyrights. [Aplt. App., 113.] The District Court also stated . . . this Court holds that Plaintiff is precluded from re-litigating the issue of its ownership of copyrights based on the 1998 Agreement which issue was decided against it in Abadin I. [Aplt. App., 113.] The District Court was wrong that the Abadin I court decided the issue of
3
At the time Abadin I was pending, SLMI was embroiled in a corporate governance fight in Colorado state courts. [Aplt. App., 19-20.] On May 27, 2010 the Colorado Court of Appeals installed a new board of directors for SLMI. [Aplt. 6
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ownership of copyrights. In fact, both parties, Disney and SLMI, had informed the Court in writing that the issue of SLMIs copyright ownership had not been litigated or decided in the Abadin I decision. [D. Ct. Docket No. 42, at 9, D. Ct. Docket No. 46, at 7.] The operative complaint in Abadin I alleged eight counts. See Abadin, 2010 WL 1257519 at *2. The First Count was solely against Stan Lee, for copyright infringement, unfair competition and declaratory relief. See id. The count was based upon Lees infringement of copyrights in three characters, the Drifter, the Accuser and Stans Evil Clone, all of which had been created after Lee had assigned all of his copyrights to SLMIS predecessor in 1998. [Aplt. App., 182183.] The Abadin I court ruled the copyright claim is barred by the statute of limitations and the doctrine of laches and estoppel. Abadin, 2010 WL 1257519 at *6. There was neither consideration of, nor decision about, any copyright
ownership issue. The Second Count was for violation of section 43(a) of the Lanham Act and was brought against Lee and Marvel. See id. at *2. The essence of the claim was an improper use of Stan Lees name and likeness and related trademarks. See id. at *6. The Abadin I court ruled that the claim was barred by the six year statute of limitations. See id. App., 19.] 7
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The Third Count was for breach of contract against Lee. See id. at *2. The contract was the 1998 Employment Agreement, which set forth the terms of Lees employment and which contained the copyright assignment from Lee to SLMIs predecessor. See id. at *6. Again, the Abadin I court ruled that the four year statute of limitations for breach of written contract had run and therefore the claim was barred. See id. The court had previously noted that California Labor Code 2855(a) limits personal services contracts to seven years, and therefore, the contract could not be enforced after 2005. The Fourth Count was for tortious breach of contract against Marvel and Arthur Lieberman for inducing Lee to breach the 1998 Employment Agreement. See id. at *2. The Abadin I court ruled that the three year statute of limitations barred the claim against Marvel, and dismissed as to Lieberman because its allegations were too vague and conclusory. See id. at *6. The Fifth Count was for breach of fiduciary duty against Lee. See id. at *2. The Abadin I court ruled that the statute of limitations for this claim was three years, and the limitations period had long since run. See id. at *7. The Sixth Count was against Lee, Marvel and Lieberman for aiding and abiding breach of fiduciary duty. See id. at *2. The Abadin I court ruled that that as to Marvel and Lieberman, the three year statute of limitations barred the claim.
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See id. at *7. As to Lee, the court also ruled that he could not aid and abet a breach of his own duty. See id. The Seventh and Eighth Counts were brought against all defendants for imposition of a constructive trust and an accounting. See id. at *2. The Abadin I court ruled that the counts must be dismissed because those legal theories are remedies, not independent causes of action, and since the court was dismissing the other counts upon which the relief hinged. See id. at *7. STATEMENT OF THE CASE SLMI filed this action in the District of Colorado on October 9, 2012. [Aplt. App., 3.] SLMI filed an Amended Complaint on December 26, 2012. [Aplt. App., 13-47.] The Amended Complaint pleads a single cause of action against Disney for copyright infringement. [Aplt. App., 22-24.] Disney moved to dismiss
pursuant to Fed. R. Civ. P. 12(b)(2) and 12(b)(6), and SLMI opposed. [Aplt. App., 6 (D. Ct. Docket Nos. 37 and 42).] On September 5, 2013, the District Court granted Disneys Motion To Dismiss, disposing of the entire case. [Aplt. App., 106-116.] The District Court entered a final judgment in Disneys favor on
September 16, 2013. [Aplt. App., 117.] This appeal ensued. [Aplt. App., 118119.]
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STANDARD OF REVIEW This Court reviews de novo the District Courts dismissal under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. See Ruiz v. McDonnell, 299 F.3d 1173, 1181 (10th Cir. 2002), cert. denied 538 U.S. 999 (2003). SUMMARY OF ARGUMENT 1. For collateral estoppel to bar further litigation of a particular issue, the
identical issue must have been actually litigated and decided in the prior case. Here the District Court ruled that SLMIs copyright assignment in a contract was not enforceable. That issue was never considered or even addressed in the prior case, Abadin I. Indeed, both SLMI and Disney informed the District Court that the issue of SLMIs copyright ownership had not been litigated or decided in Abadin I. Therefore the District Courts collateral estoppel ruling is error. 2. Abadin I was an unauthorized shareholder derivative suit in which
that court found the shareholders lacked standing to represent SLMI. Accordingly, SLMI was not a party to that action and the District Courts application of collateral estoppel was error. 3. As a matter of law, the issues underlying a cause of action which is
dismissed on statute of limitations grounds are not necessary to the time-bar decision and therefore cannot be the subject of collateral estoppel. 10
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4.
It is settled that if a copyright infringement claim is barred by the
statute of limitations, only the remedy of damages or injunctive relief is barred, not the substantive claim of ownership of the copyright. Nonetheless, the District Court below ruled that the substantive ownership issue had been determined even though it was never addressed in Abadin I, as both parties told the Court. 5. The assignment in the employment contract satisfied all necessary
federal standards for a copyright assignment. The District Court below appeared to rule that a state law statute of limitations concerning contract could somehow invalidate a federal copyright assignment. That conclusion, by the District Court, is preempted by Federal law. 6. The copyright ownership cases cited by Disney as grounds for its
motion to dismiss have no applicability in a situation such as this where SLMI and Disney are not purported co-owners and never had a contractual or any other close relationship. LEGAL ARGUMENT I. STANDARDS ON APPEAL. This appeal stems from an order granting Disneys Motion To Dismiss. This Court reviews the District Courts grant of a Fed. R. Civ. P. 12(b)(6) motion to dismiss de novo. See Teigen v. Renfrow, 511 F.3d 1072, 1078 (10th Cir. 2007). In doing so, the Court ask[s] whether there is plausibility in [the] complaint. 11
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Christy Sports, LLC v. Deer Valley Resord Co., Ltd., 555 F.3d 1188, 1191 (10th Cir. 2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)). Here, the District Court looked at only one aspect of SLMIs Amended Complaint, specifically, whether SLMI was collaterally estopped from bringing its sole claim against Disney, because the issue of copyright ownership was previously litigated in Abadin I. To reach its conclusion, the District Court
misconstrued the facts, made errors of law and ignored the statements by SLMI and Disney that copyright ownership had not been litigated or decided in Abadin I. II. SLMIS COPYRIGHT INFRINGMENT CLAIM IS NOT BARRED BY COLLATERAL ESTOPPEL. The District Courts order dismissing the Amended Complaint is rooted in the doctrine of collateral estoppel. For collateral estoppel to apply, four elements must be met: (1) the issue previously decided is identical with the one presented in the action in question, (2) the prior action has been finally adjudicated on the merits, (3) the party against whom the doctrine is invoked was a party or in privity with a party to the prior adjudication, and (4) the party against whom the doctrine is raised had a full and fair opportunity to litigate the issue in the prior action. Moss v. Kopp, 559 F.3d 1155, 1161 (10th Cir. 2009). The issue must also have been necessary to the adjudication of the prior claim. As one court explained, the necessity finding ensures that the issue was truly analyzed in the initial litigation. See S.E.C. v. Monarch Funding Corp., 192 F.3d 295, 307 (2nd Cir. 12
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1999) (quoting The Evergreens v. Nunan, 141 F.2d 927, 929 (2nd Cir. 1944)); Murdock v. Ute Indian Tribe of Uintah and Ouray Reservation, 975 F.2d 683, 687 (10th Cir. 1992). Disney, as the party seeking to shield itself through the doctrine, bore the burden of establishing all elements of this affirmative defense. See Taylor v. Sturgell, 553 U.S. 880, 907 (2008). Disney failed to meet its burden to establish several key elements of collateral estoppel, and the District Court erred by finding Disney had.4
One issue the District Court brushed aside is Disneys failure to provide the court with adequate portions of Abadin Is underlying record to make a full analysis of the factual and legal issues presented. Disney had the evidentiary burden to provide enough of the underlying record to allow the District Court to determine that the issue of copyright ownership was actually litigated and necessarily determined. Simply providing the underlying ruling does not satisfy that burden. See Valley View Angus Ranch v. Duke Energy Field Services, Inc., 497 F.3d 1096, 1106-1107 (10th Cir. 2007); see also In re Riggle, 389 B.R. 167, 175-176 (D. Colo. 2007) (finding that party asserting the defense must provide an adequate portion of the prior record); In re Dunston, 146 B.R. 269, 277 (D. Colo. 1992) (explaining that trial court should look at entire record, not just a judgment, to determine if collateral estoppel applies); In re Kelly, 182 B.R. 255, 258 (B.A.P. 9th Cir. 1995). The Distrct Courts failure to review any more than Abadin Is final ruling likely led to many of the improper inferences and unsubstantiated findings outlined in this brief. 13
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A.
Abadin I Did Not Decide The Issue Of SLMIs Copyright Ownership Or The Validity Of Stan Lees Assignment to SLMI.
Collateral estoppel applies only to issues that have been actually and necessarily decided.5 See Willner v. Budig, 848 F.2d 1032, 1034 (10th Cir.1988), cert. denied, 488 U.S. 1031 (1989). Indeed, the doctrine narrowly applies to situations where the matter raised in the second suit is identical in all respects with that decided in the first proceeding and where the controlling facts and applicable legal rules remain unchanged. Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 599-600 (1948); see also Bushco v. Shurtleff, 729 F.3d 1294, 1301 (10th Cir. 2013) (refusing to employ collateral estoppel where issue previously decided is not identical with the one presented in this action). The fundamental errors the District Court made are reflected in its conclusions that Abadin I somehow decided both the issue of SLMIs copyright ownership and the validity of Lees copyright assignment to SLMI contained in the 1998 Employment Agreement. The District Court stated that the Abadin
plaintiffs were barred from exercising their rights to Lees characters. [Aplt. App., 112.] It further concluded that the Abadin I court determined that Plaintiff The District Court determined that the relevant inquiry here was collateral estoppel (issue preclusion), and not res judicata (claim preclusion). [Aplt. App., 110-114.] This is an important distinction, because res judicata is broader in its reach, covering issues that could have been litigated, but were not actually decided by the court. See Clark v. Haas Group, Inc., 953 F.3d 1235, 1238 (10th Cir. 1992). 14
5
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was barred from exercising the copyrights conferred upon it in the 1998 agreement. [Aplt. App., 113.] The District Courts ruling culminated in its belief that Abadin I, and other cases, all involve the issue of whether the 1998 agreement gave plaintiff ownership of the copyrights to comic book characters created by Stan Lee. [Aplt. App., 114.] The District Courts conclusions are wrong as a matter of law and fact. What is particularly odd about these conclusions by the District Court is that both sides in this litigation, SLMI and Disney, informed the court in writing that no such ownership issue was resolved in Abadin I. In its reply papers, Disney
explained It is not that Plaintiffs ownership of the copyrights at issue in this action was litigated in Abadin I and other prior litigations . . .. [D. Ct. Docket No. 46, at 7.] Disney was specifically referring to the same point made in SLMIs opposition papers. Yet, the District Court below held that Abadin I decided the issue of ownership after both sides had informed the Court that no such ownership issue had ever been decided. Abadin I never analyzed the copyright assignment contained in the 1998 Employment Agreement. The Abadin I court never analyzed the assignments validity or determined who owned the copyrights at issue.6 For that reason alone, The District Court did acknowledge the parties dispute about the survivability of the assignment, but it never attempted to further address the issue. [Aplt. App., 107 at fn.1.] 15
6
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Abadin I cannot be said to have actually decided the identical issue the District Court relied upon to establish collateral estoppel, i.e. ownership of the copyrights. Instead, Abadin I dismissed SLMIs claims against Lee on three grounds, finding that: (1) the plaintiffs lacked standing to sue derivatively on SLMIs behalf; (2) plaintiffs claims were barred by the statute of limitations; and (3) the 1998 Employment Agreement expired after seven years pursuant to Cal. Labor Code 2855.7 See Abadin, 2010 WL 1257519 at *5-6. None of these bases involved a litigated determination of SLMIs copyright ownership or any issue identical to those in the instant case which would invoke the doctrine of collateral estoppel.8 And quite simply, the issue of copyright ownership certainly was not necessary to determinations of standing, statutes of limitations or California Labor Code violations, making the application of collateral estoppel improper here. The Abadin I court never addressed the issue of whether a termination of the 1998 Employment Agreement impacted the copyright assignment provision in any way. See Section II(A)(3), infra, at pp. 22-25. Standing, as a threshold issue, could not be an issue presented in this action, because unlike Abadin I, SLMI is bringing its own claims on its own behalf. Thus, Abadin Is standing issue does not invoke collateral estoppel here. See Media Techs. Licensing, LLC v. Upper Deck Co., 334 F.3d 1366, 1370 (Fed. Cir. 2003) (holding that the district court erred in giving preclusive effect to the [earlier] judgment because its dismissal of [the earlier] complaint for lack of standing was not a final adjudication of the merits); see also Costello v. United States, 365 U.S. 265, 285-288 (1961) (confirming that dismissal for failure to satisfy a precondition to suit should not bar a subsequent suit in which the defect has been cured). 16
8 7
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1.
Abadin Is Finding That The Claims Are Barred By Applicable Statutes Of Limitations Does Not Equate To A Determination Of Copyright Ownership.
The issue of copyright ownership was never, and could never have been, reached in Abadin I, because the court ruled that the statute of limitations barred the plaintiffs copyright infringement claim. Use of a limitations defense to bar a claim in a prior action does not prevent litigation of the underlying factual elements or issues of that claim in later lawsuits. The reason is, of course, that the underlying factual elements of the claim are not actually litigated when the statute of limitations bars the claim. See Perkins v. Board of Trustees of Univ. of Illinois, 116 F. 3d 235, 237 (7th Cir. 1997) (finding that dismissal based on statute of limitations did not rely on any theory common to the two cases and vacating judgment based on finding that collateral estoppel barred later claims).9 As one court succinctly stated,
where an entire claim is dismissed on statute of limitations grounds prior to any litigation whatsoever, it cannot possibly be said that resolution of any issue was essential to the decision, actually Unlike collateral estoppel, dismissal based on statute of limitations is a merits ruling for purposes of res judicata and bars relitigation of the dismissed claims. See Murphy v. Klein Tools, Inc., 935 F.2d 1127, 1128-1129 (10th Cir. 1991). Recognizing this difference between res judicata and collateral estoppel, the Perkins court commented that [s]sometimes lawyers and judges use the phrase res judicata to mean issue preclusion (collateral estoppel) as well as claim preclusion. Perkins, 116 F.3d at 237. This may help explain the District Courts confusion when determining the appliability of collateral estoppel here. 17
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decided, actually litigated and resolved in the prior proceeding or anything of the like.
Cepeda v. Coughlin, 785 F. Supp. 385, 390 (S.D.N.Y. 1992); see also OHare v. General Marine Transport Corp., 534 F. Supp. 120, 124 (S.D.N.Y. 1981) (finding that while issues of contract validity and repudiation were litigated in prior action, plaintiff was not collaterally estopped from raising them in later suit because such issues were not necessary to or addressed in earlier suits dismissal on statute of limitations grounds). This caselaw highlights the illogical, and legally improper, leap the District Court made below. True, the Abadin I plaintiffs claims for copyright
infringement implicated ownership, because copyright ownership is always an element of any copyright infringement claim. See Feist Publns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991) (noting that infringement claims require proof of ownership of a valid copyright). It does not follow, however, that copyright ownership was decided in Abadin I, as the District Court found. Dismissal based on the statute of limitations decided the merits of the infringement claim, not the ownership issue, and therefore, SLMIs present claim for copyright infringement against Disney cannot be barred by Abadin I on the basis of collateral estoppel.10 The Copyright Act provides the sole method for copyright ownership transfer. 17 U.S.C. 204(a) provides that A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or a 18
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2.
As A Matter Of Law, Neither Abadin I, Nor This Case, Is A Copyright Ownership Case.
Disney argued below that SLMIs claim in this matter amounted to a copyright ownership claim, rather than a cause of action for copyright infringement. Therefore, Disney said, SLMIs infringement claim accrued no later than 2004. Disney tied this argument, in part, to its assertion that SLMIs claim was collaterally estopped by Abadin I. Disney was wrong legally and factually. The cases Disney cited below do not stand for anything close to the proposition Disney argued. Unlike here, each of the cited cases involved disputes between putative co-owners or parties in a contractual relationship regarding copyright ownership. As the Ninth Circuit explained in the seminal case Zuill v. Shanahan, claims of co-ownership11, as distinct from claims of infringement, memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owners duly authorized agent. Section 204 enhances predictability and certainty of ownership Congresss paramount goal when it revised the [Copyright] Act in 1976. The SCO Group, Inc. v. Novell, Inc., 578 F.3d 1201, 1211 (10th Cir. 2009); see also Konigsberg Intern, Inc. v. Rice, 16 F.3d 355, 357 (9th Cir. 1994) (quoting Community for Creative Non-Violence v. Reid, 490 U.S. 730, 739 (1989)). Accordingly, any position taken that Abadin I somehow transferred copyright ownership by operation of a state law statute of limitations or because of a delay by SLMI or its predecessor in enforcing its copyright ownership rights would run directly contrary to Section 204(a) and would not be valid as a copyright transfer. Since Zuill, the cases concerning copyright ownership claims have been expanded from the co-ownership context to claims between parties in close relationships, such as those in a contractual relationship regarding the copyright. See Ritchie v. Williams, 395 F.3d 283, 288, fn.5 (6th Cir. 2005). Nevertheless, these cases do not apply to infringement claims against a third party. Id. (rule that 19
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accrue when plain and express repudiation of co-ownership is communicated to the claimant. Zuill, 80 F.3d 1366, 1369 (9th Cir. 1996) (emphasis added). This distinction is consistent with the purpose of the Copyright Acts statute of limitations, 17 U.S.C. 507(b), which is to limit a plaintiffs remedies (such as damages), but not limit his substantive rights (such as ownership). Id. at 1369, fn.1 (citing S. Rep. 85-1014, p. 1963 (1957) (The committee wishes to emphasize that it is the committees intention that the statute of limitations, contained in this bill, is to extend to the remedy of the person affected thereby, and not to his substantive rights)). In the copyright co-ownership context, a putative co-owners sole
remedy is a declaration of ownership. That is the only situation in which the statute of limitations can deprive a plaintiff of substantive rights, because the remedy is ownership itself. Id. In Merchant v. Levy, the Second Circuit emphasized the key distinction drawn by Zuill. There, the court held that plaintiffs claiming to be co-authors were time-barred from seeking a declaration of copyright co-ownership rights. Merchant, 92 F.3d 51, 56 (2d Cir. 1996). Significantly, however, the court stressed that [o]ur holding here does not disturb our previous rulings that a copyright
each new infringing act causes a new three-year statutory period to begin does apply to causes of action by an owner against an unknown third party) (emphasis added). 20
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owners suit for infringement is timely if instituted within three years of each infringing act for which relief is sought Id. at 57, fn.8. SLMI and Disney are not now and have never been, co-owners of, or coparties to a contract regarding, the subject copyrights. Rather, SLMI is the sole and exclusive owner of the copyrights, and has been since October 1998. [Aplt. App., 14-15]. Even if SLMI was barred from claiming co-ownership with some party other than Disney, this would not bar SLMIs infringement claim. In Carell v. Shubert Org., Inc., 104 F. Supp. 2d 236 (S.D.N.Y. 2000), the court held that, even though plaintiffs copyright ownership claim was time-barred, her copyright infringement claim could proceed. Id. at 252. The court reasoned that while a dismissal of an ownership claim as time-barred bars certain remedies associated with ownership, it does not extinguish the right of a copyright owner to sue for infringement. Id. Plaintiffs alleged ownership interest may therefore serve as the basis for plaintiffs infringement claims even if plaintiff is barred from seeking a formal declaration of ownership rights. Id. at 255; see also Stone v. Williams, 970 F.2d 1043, 1051 (2d Cir. 1992) (Merely because [copyright holder] could have brought suit in 1979 does not prevent her suit (only some of the relief sought) in 1985. To hold otherwise would be to ignore the long established rule that statutes of limitations bar remedies, not the assertion of rights); Ediciones Musicales v. San Martin, 582 F. Supp. 2d 1358, 1360-1361 (S.D. Fla. 2008) 21
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(copyright infringement claim could proceed even if copyright ownership claim was time-barred). Even if SLMI was barred from disputing ownership by Abadin I, because it did not bring its claims within the requisite limitations period, dismissal of those earlier claims would not bar SLMIs infringement claim against Disney in this case. See Zuill, 80 F.3d at 1369 (recognizing distinction between infringement and ownership claims); Carell, 104 F. Supp. 2d at 252 (allowing infringement claim to proceed, despite ownership claim being time-barred); Ediciones Musicales, 582 F. Supp. 2d. at 1360-1361 (same). 3. Abadin Is Determination That The 1998 Employment Agreement Implicated Californias Seven Year Rule Is Not A Determination Of Copyright Ownership.
To reach its conclusion that Abadin I decided copyright ownership, the District Court also looked to Abadin Is findings concerning Californias sevenyear rule for employment agreements, codified as Cal. Labor Code 2855. [Aplt. App., 112.] The District Courts conclusion that the issues in Abadin I and the current case are identical, because . . . based upon the statutory expiration of the 1998 Agreement . . ., the Abadin plaintiffs were barred from exercising their rights to Lees characters, misapprehends both the facts and the law. [Aplt. App., 112.] Cal. Labor Code 2855(a) states in relevant part that a contract to render personal service . . . may not be enforced against the employee beyond seven years 22
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from the commencement of service under it. While the statute may serve to terminate an employment agreement, it does not bar enforcement during the first seven years. It also does not bar later attempts to sue for breaches that occurred prior to termination. As Cal. Labor Code 2855(a) explains, a contract, otherwise valid, to perform or render service . . . may nevertheless be enforced against the person contracting to render the service, for a term not to exceed seven years from the commencement of service under it. Accordingly, the Abadin I courts finding that, due to Section 2855, Lees obligations were statutorily terminated in 2005,12 does not bear on issues of copyright ownership or the validity of the copyright assignment for several reasons. First, Cal. Labor Code 2855 implicates only the services and employment aspects of the 1998 Employment Agreement, rendering them unenforceable by the employer after seven years.13 The statute does not purport to bear on other discrete or severable provisions in an agreement. Indeed, in one case that found an artists agreement terminable under Cal. Labor Code 2855, the court did not terminate non-employment provisions contained in the agreement based on the seven year rule. See Foxx v. Williams, 244 Cal. App. 2d 223, 243 (1966) (refusing to declare
12 13
See Abadin, 2010 WL 1257519 at *6.
The purpose of a policy behind Section 2855 is to protect the health and welfare of employees by allowing them to change their employers or occupations. See DeHaviland v. Warner Bros. Pictures, 67 Cal. App. 2d 225, 235 (1944). 23
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unenforceable contract provision prohibiting artist from reusing material created during the contract period). Here, the 1998 Employment Agreement contained an express severability clause. That provision reads in relevant part, [t]he invalidity of any provision or part hereof or obligation hereunder, or the contravention thereby of any law . . . shall not . . . deprive any party of advantages of any other provision of this Agreement. [Aplt. App., 32.] The Abadin I court never mentioned and certainly never ruled upon the impact of the severability clause on any alleged contract termination. Moreover, the Abadin I court did not analyze the effect that Section 2855 had on specific aspects of the 1998 Employment Agreement, specifically the copyright assignment. The Court most certainly made no explicit findings as to the assignment that constitutes a factual finding that SLMI did not own the copyrights at issue.14 Second, Cal. Labor Code 2855 at most terminates the contract after seven years; it does not void or invalidate it, nor does it render that portion of the contract related to the first seven years unenforceable. [cite] The copyright assignment took effect immediately and contemplated that it was forever and would survive any termination of the 1998 Employment Agreement. It reads in relevant part,
Notably, the characters at issue in Abadin I are not the same as those at issue in this case. [Aplt. App., 15; 182-183.] 24
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[Lee] assign[s], convey[s] and grant[s] to [SLMI] forever, all right, title and interest [he] may have or control, now or in the future, in . . . characters . . . an any copyrights. [Aplt. App., 31.] The 1998 Employment Agreement contains nothing that gave Lee the right to divest SLMI of ownership of any copyright if the contract terminates. Again, while the Abadin I court may have determined the 1998 Employment Agreement terminated after seven years, that does not equate to a factual finding that the termination reverted ownership in any copyrights back to Lee or otherwise rested ownership with someone other than SLMI.15 4. The District Courts Ruling That The State Statute Of Limitations Deprived SLMI Of Its Right To Use Its Copyrights Is Subject To Preemption.
The District Courts ruling that . . . based upon the statutory expiration of the 1998 Agreement and the statute of limitations, the Abadin I plaintiffs were
15
The court in Abadin I ruled that by reason of the seven-year rule in Cal. Labor Code 2855, the copyright owner, SLMI, somehow either lost its copyright or could no longer enforce its copyright. The Abadin I ruling implicates two separate statutes, Cal. Labor Code 2855 and the United States Copyright Act. As set forth above, the purpose and policy behind Cal. Labor Code 2855 is to protect the health and welfare of employees. Also as set forth above, the purpose and policy behind 17 U.S.C. 204(a) is to regulate and give certainty concerning copyright transfers, which was a paramount purpose that Congress had in passing the Copyright Act. It is settled that when a prior case makes a determination based upon one statute, that determination is not collateral estoppel in a subsequent case involving a different statute. See Buscho v. Shurtleff, 729 F.3d 1294, 1301 (10th Cir. 2013). Accordingly, the Abadin I decision concerning Cal. Labor Code 2855 is not, as a matter of law identical to the issue in this case concerning copyright infringement. 25
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barred from exercising their rights to Lees characters16 is subject to conflict preemption. The ruling directly conflicts with Copyright Act, and the full purposes and objectives Congress had in enacting the Act. The Copyright Act contains its own statute of limitations, 17 U.S.C. 507(b), which sets a three year limitation on bringing a claim for copyright infringement. However, Congress was quite clear that the copyright statute of limitations express purpose is to limit the remedies of copyright holders but not their substantive rights. See Zuill, 80 F.3d at 1369, fn.1 (citing S. Rep. 85-1014, p. 1963 (1957)). Conflict preemption applies when a state law or ruling stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. See Jones v. Rath Packing Co., 430 U.S. 519, 525-526 (1977); Orson v. Miramax Film Corp., 189 F.3d 377, 381-382 (3d Cir. 1999). For example, in Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984), the Supreme Court invalidated an Oklahoma state law which banned advertising of alcoholic beverages by cable operators, because the Oklahoma law conflicted with the exercise of a federally created copyright right which in that case was compulsory copyright licensing. See id. at 710-711. The District Court in this matter decided that, by reason of the passage of time, the substantive right of SLMIs copyright ownership was terminated. This
16
[Aplt. App., 112.] 26
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ruling is in direct conflict with the express purpose of Congress concerning the copyright statute of limitations. It interferes with SLMIs right to enforce its copyright and therefore runs directly afoul of copyright conflict preemption principles as established by the United States Supreme Court. Under the Copyright Act, SLMI has the exclusive right to use the characters it owns during the full term of its copyrights, and the District Court has interfered with those rights. Accordingly, either under the express preemption of 17 U.S.C. 301 or conflict preemption, the District Courts ruling must be reversed. B. SLMI Was Not A Party To The Prior Litigation, Nor Did SLMI Have A Full And Fair Opportunity To Litigate The Issue Of Copyright Ownership In Abadin I.
The District Court below, in an attempt to apply collateral estoppel, sidestepped analysis of necessary elements of the doctrine. For example, the District Court stated that Plaintiff does not contest that it was a party to the case Defendant claims is preclusive. [Aplt. App., 111.] SLMI most certainly did contest that issue. In Paragraph 27 of the First Amended Complaint, SLMI explained that the Abadin I case was an unauthorized shareholder derivative lawsuit. [Aplt. App., I:20.] In the same paragraph SLMI stated that Abadin I, found that the derivative plaintiffs did not have standing to bring the claims and were not authorized to sue on behalf of SLMI. [Aplt. App., 20.] SLMIs opposition to the motion to dismiss 27
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restated both of these issues. SLMI again pointed the District Court to the fact that Abadin I was an unauthorized derivative action by two purported shareholders of SLMI . . .. [D. Ct. Docket No. 42, at 12.] SLMIs complaints that it was not a party, or in privity with any party, in Abadin I are borne out by the Abadin I courts findings. The Abadin I court specifically found that the plaintiffs lacked standing to bring suit on behalf of SLMI. See Abadin, 2010 WL 1257519 at *5. The Abadin I court determined that the plaintiffs did not own SLMI stock at the time the alleged wrongdoing occurred, a prerequisite for derivative standing and a fact that prevented them from ever proceeding with these claims. See id. The court went further, commenting [i]t is doubtful whether the two named Plaintiffs can be said to fairly and adequately represent the interests of absent shareholders, which is another necessary criterion for derivative standing. Id. Based on these express findings, SLMI cannot be said to have participated in Abadin I, been in privity with a party to the lawsuit, or have had a full and fair opportunity to litigate the issues in that case, all of which are necessary for collateral estoppel to apply. See Moss v. Kopp, 559 F.3d 1155, 1161 (10th Cir. 2009). Also supporting the conclusion that SLMI was not a party or in privity with one is SLMIs inability to seek appellate review of any determinations made in Abadin I. Courts reject application of the collateral estoppel doctrine where a 28
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person had no appellate recourse in connection with an earlier proceeding. See Kircher v. Putnam Funds Trust, 547 U.S. 633, 647 (2006) (recognizing that collateral estoppel should not apply where litigant was prevented from appealing the prior decision.); RESTATEMENT (SECOND) OF JUDGMENTS, 28 (1982) (collateral estoppel does not apply when [t]he party against whom preclusion is sought, could not, as a matter of law, have obtained review of the judgment in the initial action.). SLMI had no ability to itself challenge Abadin I on appeal, and because it could not challenge the merits of any ruling, it would be improper to bar SLMI from litigating issues relevant to the instant lawsuit, even if they were litigated in Abadin I. Because SLMI was neither a party to, nor in privity with any party in, Abadin I, the District Court erred in finding that any issues litigated in Abadin I bar SLMI from litigating any aspect of its copyright infringement claim against Disney. III. THE DISTRICT COURT PROPERLY EXERCISED JURISDICTION OVER DISNEY. Although the District Courts dismissal of SLMIs claims was based solely on its ruling that SLMIs copyright infringement action was collaterally estopped by Abadin I, the District Court also found that Disney is subject to personal jurisdiction in Colorado. [Aplt. App., 109-110.] The District Court properly decided the jurisdiction question. [Aplt. App., 110.] As the District Court noted in 29
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its order, SLMI provided facts to establish an alter ego and agency theory of personal jurisdiction against Disney. [Aplt. App., 109.] In addition, SLMI offered specific facts demonstrating Disneys direct control over the infringing activities [Aplt. App., 18.], and SLMI provided the District Court with other judicially noticeable statements concerning Disneys direct acts of infringement. [Aplt.
App., 7 (D. Ct. Docket No. 43).] These statements provided a separate basis for the District Court to find that it had jurisdiction over Disney in this matter. The District Courts ruling was correct, and there is no reason to revisit or disturb it on appeal. CONCLUSION The District Court erred when it found that Appellant Stan Lee Media, Inc.s copyright infringement claim against The Walt Disney Company was barred by the doctrine of collateral estoppel. Based on the arguments set forth above, Appellant respectfully requests that this Court vacate the Judgment, reverse the District Courts Order and remand the matter to the District Court for further proceedings. STATEMENT CONCERNING ORAL ARGUMENT Appellant Stan Lee Media, Inc. requests oral argument in this matter. Oral argument will be beneficial for the court and is necessary in this appeal because of the complexity of the factual and legal issues involved in analysis of The Walt 30
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Disney Companys collateral estoppel defense, which was the basis for the District Courts dismissal of the action.
By:
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CERTIFICATE OF COMPLIANCE The briefs type size and type face comply with Fed. R. App. P. 32(a)(5) and Fed. R. App. P. 32(a)(6) because the brief has been prepared in a proportionally spaced typeface using Microsoft Word 2007, Times New Roman 14 point font. This brief is 6,208 words, excluding the portions exempted by Fed. R. App. P. 32(a)(7)(B)(iii).
By:
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CERTIFICATION OF VIRUS SCANNING This APPELLANTS OPENING BRIEF has been submitted in PDF format to the Tenth Circuits CM/ECF electronic filing system, and the digital submission has been scanned for viruses with the Symantec Endpoint Protection software program (last updated January 14, 2014). According to that software program, the document is free of viruses. CERTIFICATION CONCERNING PRIVACY This APPELLANTS OPENING BRIEF has been submitted in PDF format to the Tenth Circuits CM/ECF electronic filing system, and all required privacy redactions have been made. CERTIFICATION OF HARD COPY SUBMISSION The hard copies of this APPELLANTS OPENING BRIEF submitted to the clerks office are exact copies of the ECF filing.
By:
/s/ Robert S. Chapman Robert S. Chapman Attorneys for Appellant Stan Lee Media, Inc. 33
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PROOF OF SERVICE VIA ECF SYSTEM Pursuant to Fed. R. App. P. 25 and Tenth Circuit Rule 25.3, I certify that on January 15, 2014, I caused the foregoing APPELLANTS OPENING BRIEF to be filed with the Court through the use of the Tenth Circuit CM/ECF electronic filing system and served on the following counsel of record who are registered CM/ECF users will be served by the appellate CM/ECF system:
Mark T. Barnes Frederick James Baumann Robert Steven Chapman Jon-Jamison Hill Holly C. Ludwig John V. McDermott James W. Quinn R. Bruce Rich Gregory Silbert Randi W. Singer
mbarnes@bhfs.com fbaumann@lrrlaw.com rchapman@eisnerlaw.com jhill@eisnerlaw.com hludwig@lrrlaw.com jmcdermott@bhfs.com james.quinn@weil.com bruce.rich@weil.com gregory.silbert@weil.com randi.singer@weil.com
Executed on January 15, 2014, at Los Angeles, California.
/s/ Robert S. Chapman Robert S. Chapman EISNER, KAHAN GORRY, CHAPMAN ROSS & JAFFE Attorneys for Appellant Stan Lee Media, Inc.
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ADDENDUM The following documents are attached to Appellants Opening Brief pursuant to Tenth Circuit Rule 28.2(A)(1): Attachment 1: Attachment 2: Order Granting Defendants Motion To Dismiss Final Judgment
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ATTACHMENT 1
Order Granting Defendants Motion To Dismiss
Case 1:12-cv-02663-WJM-KMT Document 64 Filed 09/05/13 USDC Colorado Page 1 of 11 Appellate Case: 13-1407 Document: 01019186870 Date Filed: 01/15/2014 Page: 44
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Judge William J. Martnez Civil Action No. 12-cv-2663-WJM-KMT STAN LEE MEDIA, INC., Plaintiff, v. THE WALT DISNEY COMPANY, Defendant.
ORDER GRANTING DEFENDANTS MOTION TO DISMISS
Plaintiff Stan Lee Media, Inc. (Plaintiff) has brought this copyright infringement action against Defendant The Walt Disney Company (Defendant or Disney), alleging that Defendant copied and exploited comic book characters owned by Plaintiff. (Am. Compl. (ECF No. 25).) This matter is before the Court on Defendants Motion to Dismiss the Amended Complaint Pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6) (Motion). (ECF No. 37.) For the reasons set forth below, Defendants Motion is granted. I. BACKGROUND The relevant facts, as pleaded in the Amended Complaint, are as follows. Plaintiff is a Colorado corporation that entered into an agreement in 1998 (1998 Agreement) with Stan Lee, a comic book artist who created several well-known comic book characters while employed at Marvel Comics. (Am. Compl. 2, 4 & Ex. A.) In the 1998 Agreement, Lee assigned to Plaintiff the copyrights in the comic book
characters that he had previously created, and those that he would create in the future. (Id. 4.) Lee subsequently sent a letter to Plaintiff purporting to terminate the 1998 Agreement because Plaintiff had materially breached it,1 and assigned the same copyrights to Marvel, leading to several legal disputes involving Plaintiff, Lee, Marvel, and others. (Id. 10; ECF No. 37 at 9.) Among other claims, these disputes involved Plaintiffs attempt to enforce its ownership of the copyrights to Lees characters conferred upon it in the 1998 Agreement. (Am. Compl. 27-35.) In 2009, Disney purchased Marvel and turned it into a wholly-owned subsidiary. (Am. Compl. 11.) Marvel and other Disney subsidiaries have since used copyrighted characters created by Lee without Plaintiffs consent in distributing movies, selling merchandise, and in creating and distributing print media. (Id. 19-21.) On October 9, 2012, Plaintiff filed a Complaint alleging that Defendant infringed the copyrights it holds by virtue of the 1998 Agreement. (ECF No. 1.) An Amended Complaint was filed on December 26, 2012. (ECF No. 25.) On January 14, 2013, Defendant filed the instant Motion. (ECF No. 37.) Plaintiff filed a Response on February 7, 2013 (ECF No. 42), and Defendant filed a Reply on February 25, 2013 (ECF No. 46). II. LEGAL STANDARD2 The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the
The parties dispute whether the assignment of rights in the 1998 Agreement survived this letter. (See ECF No. 37 at 3; Am. Compl. 10.) Although Defendants Motion is filed pursuant to both Rules 12(b)(2) and 12(b)(6), the Court addresses herein only Rule 12(b)(6) because it is dispositive of the Motion.
2
sufficiency of the allegations within the four corners of the complaint after taking those allegations as true. Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir. 1994). To survive a Rule 12(b)(6) motion, [t]he complaint must plead sufficient facts, taken as true, to provide plausible grounds that discovery will reveal evidence to support the plaintiffs allegations. Shero v. City of Grove, Okla., 510 F.3d 1196, 1200 (10th Cir. 2007) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). The allegations must be enough that, if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief. Robbins v. Oklahoma, 519 F.3d 1242, 1247-48 (10th Cir. 2008). This requirement of plausibility serves not only to weed out claims that do not have a reasonable prospect of success, [but also to] provide fair notice to defendants of the actual grounds of the claim against them. Id. The courts function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiffs complaint alone is legally sufficient to state a claim for which relief may be granted. Sutton v. Utah State Sch. for the Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir. 1999) (citation omitted). III. ANALYSIS Defendants Motion makes four arguments as to why the Court should dismiss Plaintiffs claims: (1) the Court lacks personal jurisdiction over Defendant; (2) Plaintiff cannot prove its ownership of the copyrights because it is barred from re-litigating that issue due to issue preclusion; (3) Plaintiffs copyright infringement claim is barred by the statute of limitations; and (4) Plaintiffs Amended Complaint fails to plead sufficient facts
to state a claim for copyright infringement. (ECF No. 37 at 5-15.) Because the Court finds that Plaintiffs claim fails due to issue preclusion, the Court will review that issue after briefly discussing the issue of jurisdiction. A. Personal Jurisdiction Defendant first argues that Plaintiffs claim against it must be dismissed because the Court lacks personal jurisdiction over Defendant. (ECF No. 37 at 5-9.) A plaintiff bears the burden of making a prima facie showing to establish personal jurisdiction over the defendant by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant. OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1091 (10th Cir. 1998). However, only the well pled facts of [the] plaintiffs complaint, as distinguished from mere conclusory allegations, must be accepted as true for the purposes of determining jurisdiction. Mitchell v. King, 537 F.2d 385, 386 (10th Cir. 1976). Plaintiff alleges personal jurisdiction over Defendant based on an agency or alter ego theory, under which the acts of Defendants subsidiaries in Colorado are attributable to Disney itself. (Am. Compl. 13-21.) The Court has some doubts as to whether Plaintiffs allegations here contain sufficiently well pled facts to establish personal jurisdiction under this theory. See Mitchell, 537 F.2d at 386; cf. Quarles v. Fuqua Indus., Inc., 504 F.2d 1358, 1362 (10th Cir. 1974) (a holding or parent company has a separate corporate existence and is treated separately from the subsidiary in the absence of circumstances justifying disregard of the corporate entity, such as if separation of the two entities has not been maintained and injustice would occur to third
parties if the separate entity were recognized.). However, because the Court ultimately finds that dismissal is warranted based upon issue preclusion, the Court will take Plaintiffs jurisdictional allegations as true and assume that personal jurisdiction exists for the purposes of this Motion only. B. Issue Preclusion Defendant argues that Plaintiff is precluded from re-litigating the issue of its ownership of the copyrighted comic book characters based on the 1998 Agreement, because that issue has been decided against Plaintiff in several prior cases. (ECF No. 37 at 10-12.) Defendant points to a decision in the Southern District of New York in which Plaintiffs attempt to exercise its asserted rights under the 1998 Agreement was held to be barred by the statute of limitations, and two subsequent decisions finding that the first decision precluded Plaintiff from re-litigating the same alleged copyright ownership claim. (See id. at 10-11); Abadin v. Marvel Entmt, Inc., 2010 WL 1257519, at *7 (S.D.N.Y. Mar. 31, 2010); Lee v. Marvel Enters., 765 F. Supp. 2d 440, 456 (S.D.N.Y. 2011), affd, 471 F. Appx 14 (2d Cir. 2012); Stan Lee Media, Inc. v. Lee, 2012 WL 4048871, at *7 (C.D. Cal. Aug. 23, 2012). As a result, Defendant contends, Plaintiffs infringement claim fails because Plaintiff cannot assert copyright ownership. (Id. at 12.) Collateral estoppel, or, as it is often known, issue preclusion, bars a party from re-litigating an issue once it has suffered an adverse determination on the issue, even if the issue arises when the party is pursuing or defending against a different claim. Burrell v. Armijo, 456 F.3d 1159, 1172 (10th Cir. 2006) (internal quotation marks
omitted). Because the decisions alleged to invoke issue preclusion here are decisions made by federal courts, federal law applies to the preclusion analysis. See Semtek Intl Inc. v. Lockheed Martin Corp., 531 U.S. 497, 507 (2001); Dodge v. Cotter Corp., 203 F.3d 1190, 1197 (10th Cir. 2000). The Tenth Circuit has established four elements that must be satisfied before issue preclusion applies: (1) the issue previously decided is identical with the one presented in the action in question, (2) the prior action has been finally adjudicated on the merits, (3) the party against whom the doctrine is invoked was a party, or in privity with a party, to the prior adjudication, and (4) the party against whom the doctrine is raised had a full and fair opportunity to litigate the issue in the prior action. Dodge, 203 F.3d 1198. Plaintiff does not contest that it was a party to the case Defendant claims is preclusive, that that case was finally adjudicated on the merits, or that Plaintiff had a full and fair opportunity to litigate the issue in the prior case. (See ECF No. 42 at 12-13.) Rather, Plaintiff argues that the issue previously litigated was not identical to the issue here.3 (Id.) The relevant case for the identicality of issues analysis here is Abadin v. Marvel Entertainment, Inc., which was a shareholder derivative suit on behalf of Stan Lee Media, Inc., the Plaintiff here, against Lee and Marvel. See 2010 WL 1257519, at *7.
Plaintiff also argues that because Defendant did not attach documents from the court record in the prior case it alleges to have preclusive effect, Defendant failed to carry its burden of proving the elements of issue preclusion. (ECF No. 42 at 12.) The Court is not persuaded by Plaintiffs argument on this point. Defendants Motion accurately cited and quoted from the relevant decisions it claims are preclusive, giving notice of Defendants preclusion argument to both Plaintiff and the Court and arguing all four required elements. (See ECF No. 37 at 3-4.) Furthermore, none of the cases Plaintiff cites provide any support for its argument that Defendant is required to attach court opinions from the preclusive cases. (See ECF No. 42 at 12.)
Among other claims, the Abadin plaintiffs alleged that, as a result of the 1998 Agreement, Plaintiff owned copyrights in comic book characters created by Lee, that Lee infringed on those copyrights when he filed an assignment with the Copyright Office for three characters, and that Lee thereby breached the 1998 Agreement. Id.; (ECF No. 42 at 12.) The Abadin court, applying California law, held that because California law limits personal service contracts to 7 years (Cal. Labor Code 2855a)[,] Lees obligations [under the 1998 Agreement] were statutorily terminated in 2005. There can be no attempt to enforce this contract beyond the statutory term. Abadin, 2010 WL 1257519, at *6. The court then noted that Plaintiffs claim against Lee for his use of the characters, allegedly in breach of the 1998 Agreement, is governed by the California statute of limitations, which is 4 years. The statute ran as of 2005, well before this lawsuit was commenced. . . . Plaintiffs cannot wait a decade to enforce their rights. The copyright claim is barred by the statute of limitations and the doctrine of laches and estoppel. Id. Thus, based upon the statutory expiration of the 1998 Agreement and the statute of limitations, the Abadin plaintiffs were barred from exercising their rights to Lees characters. Two subsequent decisions by District Courts found that after Abadin, Plaintiff was precluded from asserting its alleged ownership of copyrights under the 1998 Agreement. See Lee v. Marvel Enters., 765 F. Supp. 2d at 456; Stan Lee Media, Inc. v. Lee, 2012 WL 4048871, at *7. In the latter case, the Central District of California found that Plaintiff was asserting the same claims based on the 1998 Agreement that were
asserted in Abadin, and that Plaintiff did not suggest in its briefing that any new evidence exists which would give rise to claims that could not have been brought in Abadin . . . . Accordingly, substantially the same evidence is at issue in both cases and res judicata applied to preclude the claims. Stan Lee Media, Inc. v. Lee, 2012 WL 4048871, at *7 (internal quotation omitted). Plaintiff attempts to distinguish its claims in the instant case from Abadin, arguing that the gravamen of [its] claims against Lee was breach of contract rather than copyright infringement4, and that its claim here is against Disney, a third party, rather than against Lee. (ECF No. 42 at 13.) Plaintiff also argues that the Abadin courts reference to the doctrine of laches and estoppel is inconsistent with Defendants position here that it now owns the copyrights. (Id.) Plaintiffs argument, relying largely upon differences in the details of the claims asserted in the instant case as compared to Abadin, confuses issue preclusion with claim preclusion; only the former is asserted here. It is therefore of no moment that Disney was not a party to the Abadin litigation, that contract claims as well as infringement were asserted, or that laches and estoppel also barred Plaintiffs claims against Lee. Rather, after the Abadin court determined that Plaintiff was barred from exercising the copyrights conferred upon it in the 1998 Agreement, the Court cannot allow Plaintiff to re-litigate the same issue in an attempt to revive its claim to ownership of those copyrights. (ECF No. 37 at 10-13.) While the claims asserted in Abadin and
Contrary to Plaintiffs characterization of the gravamen of its claims in Abadin, its complaint in that case did in fact claim copyright infringement against Lee, and the Abadin court specifically held that the copyright claim was barred for the reasons discussed above. See 2010 WL 1257519, at *2, *6.
the other prior cases differ from the copyright infringement claimed here, all involve the issue of whether the 1998 Agreement gave Plaintiff ownership of the copyrights to comic book characters created by Lee. Plaintiff has tried time and again to claim ownership of those copyrights; the litigation history arising out of the 1998 Agreement stretches over more than a decade and at least six courts. (See Am. Compl. pp. 7-10.) Taking its cue from the Southern District of New York and the Central District of California, this Court holds that Plaintiff is precluded from re-litigating the issue of its ownership of copyrights based on the 1998 Agreement, which issue was decided against it in Abadin. Consequently, Plaintiff cannot state a claim for copyright infringement, because such a claim first requires ownership of a valid copyright. See Feist Publns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). Plaintiff has relied solely on the 1998 Agreement to establish its ownership of the copyrights at issue here, and has made no allegation of any other basis for that ownership other than its public filings and records based on the same 1998 Agreement. (See Am. Compl. 4-12.) Accordingly, Plaintiffs claim for copyright infringement fails to state a claim upon which relief can be granted. Because the claim must be dismissed on this basis, the Court need not review Defendants remaining arguments for dismissal. C. Further Amendment In its Response, Plaintiff argues that if the Court finds that it has failed to state a claim, it should be granted leave to amend its complaint a second time to cure any deficiencies. (ECF No. 42 at 15.) As required by the Federal Rules of Civil Procedure,
it is this Courts practice to permit such amendments when justice so requires. Fed. R. Civ. Pro. 15(a)(2). Nevertheless, the Tenth Circuit has held that the Court may dismiss without granting leave to amend when it would be futile to allow the plaintiff an opportunity to amend his complaint. Brereton v. Bountiful City Corp., 434 F.3d 1213, 1219 (10th Cir. 2006). A refusal to grant leave to amend is discretionary, and where the denial rests on articulated reasons such as failure to cure deficiencies by previous amendments or futility of amendment, the district courts decision shall stand. TV Commcns Network, Inc., v. Turner Network Television, Inc., 964 F.2d 1022, 1028 (10th Cir. 1992). The Court finds that amendment would be futile in the instant case. Unlike an attempt to cure technical errors or otherwise amend the complaint when doing so would yield a meritorious claim, Plaintiff here cannot successfully state a claim for infringement when its theory of ownership of the allegedly infringed copyrights is precluded. See Curley v. Perry, 246 F.3d 1278, 1284 (10th Cir. 2001). Therefore, the Court declines to grant Plaintiff leave to amend, as such an amendment in these circumstances would be futile. IV. CONCLUSION For the reasons set forth above, the Court ORDERS as follows: 1. Defendants Motion to Dismiss the Amended Complaint Pursuant to Rule 12(b)(6) (ECF No. 37) is GRANTED; 2. 3. Plaintiffs Amended Complaint is DISMISSED WITH PREJUDICE in its entirety; and Judgment shall be entered in favor of Defendant. Defendant shall have its costs.
10
Dated this 5th day of September, 2013. BY THE COURT:
William J. Martnez United States District Judge
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Document: 01019186870
Page: 55
ATTACHMENT 2
Final Judgment
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Judge William J. Martnez Civil Action No. 12-cv-02663-WJM-KMT STAN LEE MEDIA, INC., Plaintiff, v. THE WALT DISNEY COMPANY, Defendant.
FINAL JUDGMENT
Pursuant to and in accordance with Fed. R. Civ. P. 58(a), all previous Orders entered in this case and the Order Granting Defendants Motion to Dismiss, entered by the Honorable William J. Martnez, United States District Judge, on September 5, 2013, IT IS ORDERED that the Defendants Motion to Dismiss the Amended Complaint Pursuant to Rule 12(b)(6) (ECF No. 37) is GRANTED. IT IS FURTHER ORDERED that Final Judgment is hereby entered for Defendant and against Plaintiff and the Plaintiffs Amended Complaint is DISMISSED WITH PREJUDICE in its entirety. IT IS FURTHER ORDERED that Defendant is awarded its costs in accordance with the procedures set forth in Fed. R. Civ. P. 54(d)(1) and D.C.COLO.LCivR 54.1 and the filing of a Bill of Costs in this case within fourteen days entry of judgment. Dated at Denver, Colorado this 16th day of September, 2013. BY THE COURT: JEFFREY P. COLWELL, CLERK By: s/ Edward P. Butler Edward P. Butler, Deputy Clerk

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Appellate Case: 13-1407

Date Filed: 01/15/2014

ORAL ARGUMENT IS REQUESTED

Appellate Case: 13-1407

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Dated: January 15, 2014

EISNER, KAHAN GORRY, CHAPMAN ROSS & JAFFE

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THE DISTRICT COURT PROPERLY EXERCISED JURISDICTION OVER DISNEY. ............................................................................................ 29

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It is settled that if a copyright infringement claim is barred by the

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Date Filed: 01/15/2014