Factors Etc., Inc. v. Pro Arts, Inc.

• Decision Date: 29 June 1981
• Docket Number: No. 503,D,503
• Citation: 652 F.2d 278
• Parties: , 7 Media L. Rep. 1617 FACTORS ETC., INC. and Boxcar Enterprises, Inc., Plaintiffs-Appellees, v. PRO ARTS, INC. and Stop and Shop Companies, Inc., Defendants-Appellants. ocket 80-7692.
• Court: U.S. Court of Appeals — Second Circuit

Page 278

652 F.2d 278

211 U.S.P.Q. 1, 7 Media L. Rep. 1617

FACTORS ETC., INC. and Boxcar Enterprises, Inc., Plaintiffs-Appellees, v. PRO ARTS, INC. and Stop and Shop Companies, Inc.,

Defendants-Appellants.

No. 503, Docket 80-7692.

United States Court of Appeals, Second Circuit.

Argued Dec. 15, 1980.

Decided June 29, 1981.

William J. Davis, New York City (Charlotte A. W. Pfahl, Alice B. Newman and

Schulman Berlin & Davis, P.C., New York City, on the brief), for appellants

Michael C. Silberberg, New York City (Donald F. Schneider and Golenbock & Barell, New York City, Arthur Fields and Ervin, Cohen & Jessup, Beverly Hills, Cal., on the brief), for appellees.

Before MANSFIELD and NEWMAN, Circuit Judges, and CARTER, ^* District Judge.

NEWMAN, Circuit Judge:

The merits of this appeal concern the interesting state law question whether a person has a protected interest in publicizing his name and likeness after his death, or, as the matter has been put, is there a descendible right of publicity? ¹ Despite the fascination of this question, what divides the members of this panel and forms the basis for the majority's disposition of this appeal is the more esoteric question, apparently of first impression, concerning the deference a federal court exercising diversity jurisdiction should give to a ruling by a court of appeals deciding the law of a state within its circuit. Believing that conclusive deference should be given, except in certain situations not applicable here, we reverse the judgment of this case.

FACTS

The facts are set forth in this Court's first encounter with this litigation, Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215 (2d Cir. 1978), cert. denied, 440 U.S. 908, 99 S.Ct. 1215, 59 L.Ed.2d 455 (1979) (Factors I), and need be recounted only briefly here. During his life, Elvis Presley, the well-known popular singer, formed a Tennessee corporation, Boxcar Enterprises, Inc., and assigned it exclusive ownership of all rights to use for commercial purposes his name and likeness. ² On August 18, 1977, two days after Presley's death, Boxcar granted to plaintiff-appellee Factors Etc., Inc., a Delaware corporation, an exclusive license for 18 months, renewable at the licensee's option for up to four years, to use Presley's name and likeness in connection with the manufacture and sale of any kind of merchandise. The licensee agreed to pay a royalty of 5% of sales, subject to a minimum royalty for the first 18 months of $150,000, and also subject to certain minimum royalties on specified items, for example $.08 for each poster.

On August 19, 1977, defendant-appellant Pro Arts, Inc., an Ohio corporation, published a poster displaying a photograph of Presley and the dates 1935-1977. Pro Arts had purchased the copyright in the photograph from the newspaper photographer who had taken it. Pro Arts marketed the poster through various retailers, including co-defendant-appellant Stop and Shop Companies, Inc., which sold the poster through its Bradlee Stores Division in the Southern District of New York. After communication between Boxcar, Factors, and Pro Arts, Factors brought this suit in the Southern District of New York and obtained a preliminary injunction restraining defendants from manufacturing, selling, or distributing the Presley poster and from making any commercial use of Presley's name or likeness. Factors Etc., Inc. v. Pro Arts, Inc., 444 F.Supp. 288 (S.D.N.Y.1977). We affirmed that injunction in Factors I.

Contemporaneously with the initiation of this suit, Factors found itself in litigation on another front. The Memphis Development Foundation, an organization formed Thereafter Factors moved for summary judgment in the New York litigation. Appellants (hereafter collectively "Pro Arts") brought to the District Court's attention the Sixth Circuit's reversal in Memphis Development, contending that Memphis Development collaterally estopped Factors from asserting that it possessed any exclusive publicity rights to the name and likeness of Presley after his death. Implicitly rejecting this contention, the District Court (Charles H. Tenney, Judge) granted Factors' motion and issued a permanent injunction, from which this appeal has been taken. 496 F.Supp. 1090 (S.D.N.Y.1980).

in Memphis, Tennessee, to construct a bronze statue of Presley in downtown Memphis, sued Factors in the District Court for the Western District of Tennessee to prevent Factors from interfering with the Foundation's efforts to raise funds by selling eight-inch pewter replicas of the proposed Presley statue priced at $25. Factors counterclaimed for an injunction to restrain the Foundation's distribution of the statuettes and secured a preliminary injunction, Memphis Development Foundation v. Factors, Etc., Inc., 441 F.Supp. 1323 (W.D.Tenn.1977), aff'd without opinion 578 F.2d 1381 (6th Cir. 1978). On motion for summary judgment in the Tennessee litigation, Factors obtained a permanent injunction in the District Court. However, the Sixth Circuit reversed, holding that Presley's right of publicity did not survive his death. Memphis Development Foundation v. Factors Etc., Inc., 616 F.2d 956 (6th Cir.), cert. denied, 449 U.S. 953, 101 S.Ct. 358, 66 L.Ed.2d 217 (1980).

DISCUSSION

The District Court, exercising its diversity jurisdiction, 28 U.S.C. § 1332 (1976), was obliged to apply the substantive law of the state to which the forum state, New York, would have turned had the suit been filed in state court. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Curiously, the choice of law issue had received no attention from the parties in this litigation prior to the Sixth Circuit's reversal in Memphis Development. Perhaps assuming that the law governing this infringement action was the law of the place of the wrong, as appellees now explicitly contend on this appeal, the parties did not refer to choice of law rules on the prior appeal, and this Court, without discussion, simply observed that the issue of the duration of the right of publicity is "one of state law, more specifically the law of the State of New York," 579 F.2d at 220. That choice of law ruling, made in the course of affirming the preliminary injunction, does not preclude our reexamination of the point on this appeal from a final adjudication of the case, see Diversified Mortgage Investors v. U.S. Life Title Insurance Co., 544 F.2d 571, 576 (2d Cir. 1976), especially now that the parties have put the choice of law issue in dispute. ³

Factors not only contends that New York law is applicable as the law of the place of the wrong, citing Cousins v. Instrument Flyers, Inc., 44 N.Y.2d 698, 699, 405 N.Y.S.2d 441, 442, 376 N.E.2d 914, 915 (1978) (per curiam), but also asserts that even if a "significant contacts" test were applied, see Babcock v. Jackson, 12 N.Y.2d 473, 240 N.Y.S.2d 743, 191 N.E.2d 279 (1963), the significant contacts of this dispute, i. e., those that "relate to the purpose of the particular law in conflict," Miller v. Miller, 22 N.Y.2d 12 15-16, 290 N.Y.S.2d 734, 737, 237 N.E.2d 877, 879 (1968), are with New York. Factors points not only to the sale of the infringing poster, which occurred in New York, but also to the fact that New York, as a center of communications and the locale where the publicity value of many personas has developed, has an interest in ensuring against misappropriation of a celebrity's right of publicity. Against this rather sparse showing, Pro Arts points out that Tennessee is where Presley was domiciled, Boxcar was incorporated, and the agreement between Boxcar and Factors was made. Moreover, the latter agreement specifically provides that it is to be construed in accordance with Tennessee law. We think it likely that these facts would persuade a New York court to look to the law of Tennessee. But even if a New York court would apply New York law in considering some elements of Factors'claim, such as the occurrence of an infringement, we feel certain that Tennessee law would be referred to in deciding whether Boxcar had a right of publicity in Presley's name and likeness, after his death, that was capable of being contracted for by Factors. Cf. Restatement (2d) of Conflict of Laws (1971) § 147, Comment (i), noting that tort conflicts rules apply to issue of conversion of property, but property conflicts rules apply to whether plaintiff has title to property allegedly converted.

All members of the panel agree that we should turn to Tennessee law to determine what rights the Boxcar-Factors contract conveyed to Factors. We find, as the Sixth Circuit concluded in Memphis Development, that Tennessee statutory and decisional law affords no answer to the question. We are thus brought to the issue that divides the panel: whether deference should be accorded to the decision in Memphis Development.

Somewhat to our surprise, there has been hardly a mention in the appellate reports of the appropriate deference a court of appeals should give to a decision made by the court of appeals of another circuit on the law of a state within that other circuit. It has frequently been observed that a court of appeals should give considerable weight to state law rulings made by district judges, within the circuit, who possess familiarity with the law of the state in which their district is located. See 1A Moore's Federal Practice P 0.309(2), at 3125 n.28 (collecting cases). The Supreme Court has expressed similar views concerning state law interpretations by a panel of circuit judges whose circuit includes the relevant state. MacGregor v. State Mutual Life Assurance Co., 315 U.S. 280, 62 S.Ct. 607, 86 L.Ed. 846 (1942). But no case appears to have turned on whether one court of appeals should defer to another circuit as to the law of a state within that circuit. ⁴

In deciding Memphis Development, the Sixth Circuit was expounding Tennessee's version of the common law. It makes no difference that the...