Montz v. Pilgrim Films & Television Inc.

• Decision Date: 04 May 2011
• Docket Number: No. 08–56954.,08–56954.
• Citation: 2011 Daily Journal D.A.R. 6309,2011 Copr.L.Dec. P 30070,649 F.3d 975,11 Cal. Daily Op. Serv. 5287,98 U.S.P.Q.2d 1569
• Parties: Larry MONTZ; Daena Smoller, Plaintiffs–Appellants,v.PILGRIM FILMS & TELEVISION, INC.; NBC Universal, Inc.; Craig Piligian; Jason Conrad Hawes; Universal Television Networks, Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

649 F.3d 975

2011 Copr.L.Dec. P 30,070

98 U.S.P.Q.2d 1569

11 Cal. Daily Op. Serv. 5287

2011 Daily Journal D.A.R. 6309

Larry MONTZ; Daena Smoller, Plaintiffs–Appellants,

v.PILGRIM FILMS & TELEVISION, INC.; NBC Universal, Inc.; Craig Piligian; Jason Conrad Hawes; Universal Television Networks, Defendants–Appellees.

No. 08–56954.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 16, 2010.Filed May 4, 2011.

Howard B. Miller (argued), Graham B. LippSmith and Joseph C. Gjonola, Los Angeles, CA, and Martin N. Buchanan, San Diego, CA, for plaintiffs-appellants, Larry Montz and Daena Smoller.Gail Migdal Title (argued), Joel R. Weiner and Gloria C. Franke, Los Angeles, CA, for defendants-appellees, Pilgrim Films & Television, Inc., et al.David Aronoff, Los Angeles, CA, for amici curiae, Reveille LLC et al.Lee S. Brenner and Allison S. Brehm, Los Angeles, CA, for amici curiae, American Broadcasting Companies, Inc., et al.Robert H. Rotstein and Andrew Spitser, Los Angeles, CA, for amicus curiae, The Motion Picture Association of America, Inc.Appeal from the United States District Court for the Central District of California, Florence–Marie Cooper, District Judge, Presiding. D.C. No. 2:06–cv–07174–FMC–MAN.Before: ALEX KOZINSKI, Chief Judge, MARY M. SCHROEDER, STEPHEN REINHARDT, DIARMUID F. O'SCANNLAIN, SIDNEY R. THOMAS, KIM McLANE WARDLAW, RONALD M. GOULD, RICHARD A. PAEZ, RICHARD C. TALLMAN, CARLOS T. BEA, and MILAN D. SMITH, JR., Circuit Judges.Opinion by Judge SCHROEDER; Dissent by Judge O'SCANNLAIN; Dissent by Judge GOULD.

OPINION

SCHROEDER, Circuit Judge:

In Hollywood, writers commonly submit copyrighted scripts to producers with the understanding that if the script is used, the producer must compensate the writer for the use of the copyrighted material. But what happens when the producer uses the idea or concept embodied in the script, but doesn't pay? The Supreme Court of California, in 1956, answered this question by recognizing an implied contractual right to compensation when a writer submits material to a producer with the understanding that the writer will be paid if the producer uses the concept. Desny v. Wilder, 46 Cal.2d 715, 299 P.2d 257 (1956).

A so-called “ Desny claim” has remained viable under California law for over fifty years. See Gunther–Wahl Productions, Inc. v. Mattel, Inc., 104 Cal.App.4th 27, 128 Cal.Rptr.2d 50 (2002). This court applied that California law in Grosso v. Miramax Film Corp., 383 F.3d 965 (9th Cir.2004), amended 400 F.3d 658 (9th Cir.2005), cert. denied 546 U.S. 824, 126 S.Ct. 361, 163 L.Ed.2d 68 (2005), where we held that such an implied contractual claim is not preempted by federal copyright law. We explained that the contractual claim requires that there be an expectation on both sides that use of the idea requires compensation, and that such bilateral understanding of payment constitutes an additional element that transforms a claim from one asserting a right exclusively protected by federal copyright law, to a contractual claim that is not preempted by copyright law. Grosso has firm roots in our federal law as well as in the California law. Earlier, we recognized that a claim for unjust enrichment is essentially equivalent to a claim of copyright infringement and is therefore preempted. See Del Madera Props. v. Rhodes & Gardner, Inc., 820 F.2d 973, 977 (9th Cir.1987), overruled on other grounds by Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994). Yet we had also recognized a claim for breach of contract that was not preempted where the plaintiff establishes he had a reasonable expectation of payment for use. Landsberg v. Scrabble Crossword Game Players, Inc., 802 F.2d 1193, 1196–97 (9th Cir.1986).

We recently followed Grosso in Benay v. Warner Bros. Entm't, Inc., 607 F.3d 620 (9th Cir.2010), and held a contractual claim was not preempted. We said that “[c]ontract law, whether through express or implied-in-fact contracts, is the most significant remaining state-law protection for literary or artistic ideas.” Id. at 629. The three judge panel in this case, however, found a similar claim preempted.

We again hold that copyright law does not preempt a contract claim where plaintiff alleges a bilateral expectation that he would be compensated for use of the idea, the essential element of a Desny claim that separates it from preempted claims for the use of copyrighted material. We see no meaningful difference between the conditioning of use on payment in Grosso and conditioning use in this case on the granting of a partnership interest in the proceeds of the production. Montz, as did the plaintiffs in Desny and Grosso, has alleged he revealed his concept to defendants reasonably expecting to be compensated, if his concept was used. We conclude that the district court's judgment dismissing the contractual claim as preempted must be reversed.

Plaintiffs' complaint also alleged a claim under California law for breach of confidence. The district court dismissed it as preempted, as well, and the panel affirmed. We also reverse the judgment dismissing that claim and remand both for further proceedings.

I. Factual Background

In 1981, Plaintiff Larry Montz, a parapsychologist, conceived of an idea for a television show that would follow a team of paranormal investigators conducting field investigations. As envisioned, each episode would follow the team to different real-world locations, where they would use magnetometers, infrared cameras, and other devices to investigate reports of paranormal activity. According to the complaint, from 1996 to 2003, Montz and Plaintiff Daena Smoller, a publicist and a producer, pitched Montz's idea to television studios, producers, and their representatives, including representatives of NBC and the Sci–Fi channel. A number of meetings and discussions took place, and Montz and Smoller presented screenplays, videos, and other materials relating to their proposed show. Ultimately, the studios indicated that they were not interested.

Three years later, in November 2006, Montz and Smoller filed a complaint against Pilgrim Films & Television, Inc., NBC Universal Inc., Craig Piligian, Jason Conrad Hawes, and ten unknown defendants in federal district court, alleging copyright infringement, breach of implied contract, breach of confidence, and several other causes of action. According to the complaint, after the meetings with Montz and Smoller, NBC partnered with Piligian and Pilgrim to produce a series on the Sci–Fi Channel based on the plaintiffs' materials. The show, called Ghost Hunters, starred Hawes as the leader of a team of investigators who travel across the country to study paranormal activity.

Plaintiffs' complaint specifically alleged that defendants breached an implied-in-fact contract. The complaint described the terms of the agreement:

Plaintiffs communicated their ideas and creative concepts for the “Ghost Hunters” Concept to the Defendants, pursuant to the standard custom and practice in the industry with respect to the exchange of creative ideas, under the following terms:

a. that Plaintiffs' disclosure of their ideas and concepts was strictly confidential;

b. that the Defendants would not disclose, divulge or exploit the Plaintiffs' ideas and concepts without compensation and without obtaining the Plaintiffs' consent; and

c. that, by accepting the Plaintiffs' disclosure of its concept, the Defendants accepted and agreed to abide by the foregoing terms.

Compl. at ¶ 46. The complaint further alleged that plaintiffs presented the concept on the express condition that they made the presentation as an offer to partner with the defendants and that plaintiffs justifiably expected to receive a share of the profits derived from any use of the idea:

The Plaintiffs presented their ideas for the “Ghost Hunter” Concept to the Defendants' [sic] in confidence, pursuant to the custom and practice of the entertainment industry, for the express purpose of offering to partner with the Defendants in the production, broadcast and distribution of the Concept. Accordingly, the Plaintiffs justifiably expected to receive a share of any profits and credit that might be derived from the exploitation of its ideas and concepts for the Concept.

Id. at ¶ 47. The dissent appears to overlook these clear allegations that compensation was expected in accord with industry practice.

Plaintiffs also alleged that defendants breached their confidential relationship “by taking Plaintiffs' novel ideas and concepts, exploiting those ideas and concepts, and profiting therefrom to the Plaintiffs' exclusion....” Id. at ¶ 59. The complaint therefore alleged a claim under California law of breach of confidence.

II. Procedural Background

Defendants moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. The district court granted in part and denied in part the defendants' motion. The court concluded that the complaint alleged facts sufficient to state a federal copyright claim, but that federal copyright law preempted the plaintiffs' state-law claims. The court dismissed the state-law claims with prejudice and without leave to amend.

Plaintiffs amended their copyright claim and added Universal Television Networks as a defendant. Subsequently, the parties stipulated to the voluntary dismissal of the amended copyright claim with prejudice. With no remaining claims to be adjudicated, the district court entered final judgment in favor of the defendants. The plaintiffs timely appealed the dismissal of their breach of implied contract and breach of confidence claims.

On June 3, 2010, the three-judge panel affirmed, holding both claims preempted by federal copyright law. Montz v. Pilgrim Films & Television, Inc., 606 F.3d 1153, 1158 (9th Cir.2010). We ordered a rehearing of this case en banc pursuant to a vote of the majority of active judges. See ...