Kaffaga v. Estate of Steinbeck

Citation938 F.3d 1006
Decision Date09 September 2019
Docket NumberNo. 18-55336,18-55336
Parties Waverly Scott KAFFAGA, as Executrix of the Estate of Elaine Anderson Steinbeck, Plaintiff-Appellee, v. The ESTATE OF Thomas STEINBECK, Gail Knight Steinbeck, and The Palladin Group, Inc., Defendants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Matthew J. Dowd (argued), Dowd Scheffel PLLC, Washington, D.C.; Matthew I. Berger, Matthew I. Berger Law Group, Santa Barbara, California; for Defendants-Appellants.

Susan J. Kohlmann (argued), Alison I. Stein, and Brittany R. Lamb, Jenner & Block LLP, New York, New York; Andrew J. Thomas, Jenner & Block LLP, Los Angeles, California; for Plaintiff-Appellee.

Before: Richard C. Tallman, Sandra S. Ikuta, and N. Randy Smith, Circuit Judges.

TALLMAN, Circuit Judge:

PROLOGUE

"This ‘suit has, in course of time, become so complicated, that ... no two ... lawyers can talk about it for five minutes, without coming to a total disagreement as to all the premises. Innumerable children have been born into the cause: innumerable young people have married into it;’ and, sadly, the original parties ‘have died out of it.’ A ‘long procession of [judges] has come in and gone out’ during that time, and still the suit ‘drags its weary length before the Court.’ "

Stern v. Marshall , 564 U.S. 462, 468, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011) (Roberts, C.J.) (quoting Charles Dickens, Bleak House , in 1 Works of Charles Dickens 4–5 (1891)). "Those words were not written about this case ... but they could have been." Id .

Appellants Gail Knight Steinbeck ("Gail "), the Estate of Thomas Steinbeck (to which she is executrix), and The Palladin Group, Inc. ("Palladin ") (which she owns and controls) (collectively, "Defendants "), have vowed they will not stop litigating their interests in profiting from John Steinbeck’s literary works until Gail draws her "last breath." The parties (and their predecessors in interest) have been litigating over the bequests in John Steinbeck’s will and the changes in copyright laws as they impact on rights to his intellectual property for almost half of a century. Most notably, the parties have repeatedly disputed the meaning and validity of a 1983 settlement agreement (the "1983 Agreement ") entered between Elaine Steinbeck ("Elaine "), the widow of John Steinbeck, and Thomas Steinbeck ("Thom ") and John Steinbeck IV ("John IV ," collectively with Thom, his "Sons "), and their rights to control and profit from the various John Steinbeck books.

In this latest round, a federal jury in Los Angeles unanimously awarded Waverly Kaffaga ("Kaffaga " or "Plaintiff "), as executrix of Elaine’s estate, approximately $5.25 million in compensatory damages for slander of title, breach of contract, and tortious interference with economic advantage, and $7.9 million in punitive damages against Defendants. On appeal, Defendants argue, among other things, that (1) prior litigation related to the 1983 Agreement did not decide whether Defendants had termination rights under 1998 amendments to U.S. copyright laws, (2) the district court improperly excluded evidence relating to Defendants’ intent, which they raised as a defense to intentional interference with Kaffaga’s efforts to negotiate movie rights to Steinbeck works and punitive damages, (3) the punitive damages award was not supported by meaningful evidence of Gail’s financial condition and was excessive under California law, and (4) the compensatory damages awarded were duplicative and speculative.

We have jurisdiction under 28 U.S.C. § 1291. We affirm the compensatory damages award and vacate and remand with instructions to dismiss the punitive damages claims against Gail.

CHAPTER I

"There ain’t no sin and there ain’t no virtue. There’s just stuff people do. It’s all part of the same thing. And some of the things folks do is nice, and some ain’t nice, but that’s as far as any man got a right to say." John Steinbeck, The Grapes of Wrath 23 (2002).

During his lifetime, John Steinbeck registered and renewed the copyrights to his works, including The Grapes of Wrath , Of Mice and Men , East of Eden , and The Pearl , so that they were protected by the version of the Copyright Act in effect at the time. When John Steinbeck died in 1968, he left his interests in his works to his third wife, Elaine. The Sons, John’s by a previous marriage, each received a $50,000 gift in a trust, which, according to Gail, was "pretty substantial money for two boys just coming back from Vietnam."

The Sons later acquired an interest in some of Steinbeck’s later works1 when the interests had to be renewed. See 17 U.S.C. § 304(a)(1)(C). To try to resolve their competing interests Elaine and the Sons entered into an agreement in 1974 (the "1974 Agreement ") that provided Elaine would receive 50 percent of the domestic royalties to the works, and the Sons would each receive 25 percent.

In 1976, Congress amended the Copyright Act. One of the amendments created termination rights2 for certain heirs with respect to certain categories of works. See Copyright Act of 1976, Pub. L. No. 94-553, 90 Stat. 2541 (effective 1978). If the work is subject to termination under the Copyright Act, § 304(c)(5) indicates that termination "may be effected notwithstanding any agreement to the contrary." 17 U.S.C. § 304(c)(5) ; see also 17 U.S.C. § 304(d)(1) (providing for termination under the same circumstances).

In 1981, following the amendments to the Copyright Act, the Sons sued Elaine in the United States District Court for the Southern District of New York contesting the 1974 Agreement and accusing Elaine of fraud. John Steinbeck, IV and Thom Steinbeck v. Elaine Steinbeck , No. 81 Civ. 6105 (S.D.N.Y. Dec. 8, 1982). The parties entered into the 1983 Agreement to settle the dispute.

The 1983 Agreement provided that the Sons would receive an increased share of the royalties from the works—one third each, rather than a quarter. In exchange, Elaine received "complete power and authority to negotiate, authorize and take action with respect to the exploitation and/or termination of rights" in the works.

In 1995, Thom married Gail. The couple thereafter formed Palladin, a management and production company in Los Angeles.3 In 2003, Elaine passed away. Pursuant to the 1983 Agreement, her daughter, Waverly Kaffaga, as executrix of Elaine’s estate, stepped into Elaine’s shoes as successor under the 1983 Agreement.

In 1998, Congress again amended the Copyright Act. These amendments added an additional termination right, exercisable during a five-year window opening 75 years after the first publication of a copyrighted work. See Pub. L. No. 105-298, 112 Stat. 2827 (1998).

In 2004, Thom and Blake sued Kaffaga and others involved in publishing the works in the Southern District of New York (and Kaffaga and the publishers countersued), which resulted in numerous decisions by both the district court there and the United States Court of Appeals for the Second Circuit (the "New York Litigation "). The parties (and others) have been litigating their rights under the 1983 Agreement ever since. See, e.g. , Steinbeck v. McIntosh & Otis, Inc. , 433 F. Supp. 2d 395 (S.D.N.Y. 2006), rev’d sub nom. Penguin Grp. (USA) Inc. v. Steinbeck , 537 F.3d 193 (2d Cir. 2008) ; Steinbeck v. McIntosh & Otis, Inc. , No. 04 CV 5497 (GBD), 2009 WL 928189 (S.D.N.Y. Mar. 31, 2009), aff’d sub nom. Steinbeck v. Steinbeck Heritage Found. , 400 F. App'x 572 (2d Cir. 2010), cert. denied , 564 U.S. 1012, 131 S.Ct. 2991, 180 L.Ed.2d 836 (2011). Relevant here, the Second Circuit concluded that the 1983 Agreement was a valid and enforceable agreement, which "forecloses any argument that the parties intended the [Sons] to retain control over Elaine[’s] exercise of the authority conferred upon her." 400 F. App'x at 575.

Despite their losses at the Second Circuit, the plain language of the 1983 Agreement, and a stipulated judgment they signed forgoing all further litigation, Thom and Blake continued spending time and treasure asserting rights courts had already told them they did not have. In 2014, they sued Kaffaga and others in the United States District Court for the Central District of California seeking, among other things, a declaration that the 1983 Agreement was an "agreement to the contrary" under 17 U.S.C. §§ 304(c) and (d) and therefore could not prevent them from exercising termination rights.

The district court in Los Angeles (Hon. Terry Hatter) dismissed Thom and Blake’s case in 2015, holding that their claims were precluded by the doctrine of collateral estoppel because the Second Circuit had conclusively determined that the 1983 Agreement was valid and enforceable.

In November 2017, we affirmed the district court’s 2015 ruling in Thom and Blake’s case, holding in no uncertain terms that all issues presented on appeal were barred by collateral estoppel. Steinbeck v. Kaffaga , 702 F. App'x 618, 619–20 (9th Cir. 2017). We concluded that the Second Circuit "squarely held" that the 1983 Agreement is valid and enforceable, and "[t]he district court correctly concluded that the Sons already have fully litigated whether they have a right to issue and exploit copyright terminations of Steinbeck’s works, and that the prior litigation held that the Sons do not have those rights." Id. Thus, Thom and Blake’s arguments to the contrary were precluded. See id.

CHAPTER II

"An unbelieved truth can hurt a man much more than a lie." John Steinbeck, East of Eden 264 (1992).

In 2014, after Thom and Blake brought their action that was dismissed in 2015 and affirmed on appeal, Kaffaga countersued by filing this case in the Central District of California. She alleged breaches of the 1983 Agreement, slander of title, and tortious interference with economic advantage in the time since the New York Litigation had ended, and she sought punitive damages. Among other things, Kaffaga alleged that Defendants had continued to attempt to assert various...

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