Columbia Pictures Industries, Inc. v. Professional Real Estate Investors, Inc.

• Decision Date: 24 September 1991
• Docket Number: 90-55668,Nos. 90-55583,s. 90-55583
• Citation: 944 F.2d 1525
• Parties: 1991-2 Trade Cases P 69,594, 1991 Copr.L.Dec. P 26,803, 20 U.S.P.Q.2d 1771 COLUMBIA PICTURES INDUSTRIES, INC.; Embassy Pictures; Paramount Pictures Corporation; Twentieth Century Fox Film Corporation; Universal City Studios, Inc.; Walt Disney Productions; Warner Bros. Inc.; CBS, Inc., Plaintiffs-counter-defendants-Appellees, v. PROFESSIONAL REAL ESTATE INVESTORS, INC.; Kenneth F. Irwin, Defendants-counter-claimants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1525

944 F.2d 1525

1991-2 Trade Cases P 69,594, 1991 Copr.L.Dec.

P 26,803,

20 U.S.P.Q.2d 1771

COLUMBIA PICTURES INDUSTRIES, INC.; Embassy Pictures Paramount Pictures Corporation; Twentieth Century Fox Film Corporation; Universal City Studios, Inc.; Walt Disney Productions; Warner Bros. Inc.; CBS, Inc. Plaintiffs-counter-defendants-Appellees, v. PROFESSIONAL REAL ESTATE INVESTORS, INC.; Kenneth F. Irwin Defendants-counter-claimants-Appellants.

Nos. 90-55583, 90-55668.

United States Court of Appeals Ninth Circuit.

Argued June 5, 1991.

Decided Sept. 24, 1991.

Jeffrey W. King, Collier, Shannon & Scott, Washington, D.C., for defendants-counter-claimants-appellants.

Stephen A. Kroft, Rosenfeld, Meyer & Susman, Beverly Hills, Cal., for plaintiffs-counter-defendants-appellees.

Before FLETCHER and CANBY, Circuit Judges, and McNICHOLS, ^* District Judge.

CANBY, Circuit Judge:

Counterclaimants Professional Real Estate Investors and Kenneth Irwin (collectively "PRE") appeal from the entry of an order granting summary judgment in favor of the counterdefendants Columbia Pictures Industries and seven other movie studios (collectively "Columbia Pictures" or "Movie Studios"). ¹ This appeal involves the propriety of the summary judgment and the applicability of the Noerr- Pennington doctrine.

BACKGROUND

This case is before us for the second time. In Columbia Pictures Industries, Inc. v. Professional Real Estate Investors, Inc., 866 F.2d 278 (9th Cir.1989), we affirmed In April 1983, Columbia Pictures brought a copyright infringement action against PRE and Irwin, the operators of La Mancha Private Club and Villas, a resort hotel. Columbia Pictures alleged that PRE violated the Movie Studios' copyrights to certain motion pictures by renting videodiscs of those pictures to La Mancha's guests for viewing on videodisc players placed in the hotel rooms.

                the district court's grant of summary judgment in favor of PRE on Columbia Pictures' copyright infringement claim.   Because Columbia's infringement claim was largely the subject of PRE's counterclaims, we briefly review the facts regarding the original claim and the course of proceedings
                

PRE denied any wrongdoing ² and filed counterclaims charging that the Movie Studios had violated the Sherman Act and state antitrust and unfair competition laws. In support of its antitrust claims, PRE charged that the copyright infringement suit was a sham brought with the intent to monopolize and restrain trade. In addition, PRE alleged that the Movie Studios' concerted refusal to grant licenses to PRE to rent the videos, as well as other unspecified activities, constituted a pattern of anticompetitive conduct.

After a series of discovery disputes, the parties filed cross-motions for summary judgment on the copyright infringement claim. At the court's request, the parties postponed further discovery on the antitrust counterclaims pending resolution of the cross-motions. In January 1986, the district court entered summary judgment in favor of PRE and against Columbia Pictures. The court concluded that hotel rooms were not public, and that renting videodiscs for viewing in hotel rooms therefore did not constitute unauthorized public performances in violation of the Movie Studios' copyrights. The court entered its decision as a separate final judgment, and Columbia Pictures appealed.

Three months later, PRE filed a second motion to compel discovery. The district court denied the motion and stayed discovery on the counterclaims pending resolution of Columbia Pictures' appeal of the copyright claim. The court reasoned that the result of the appeal might affect the scope of discovery. Three years later, after numerous changes in the composition of the appellate panel, this court affirmed the summary dismissal of the copyright action. Columbia Pictures Industries, Inc. v. Professional Real Estate Investors, Inc., 866 F.2d 278 (9th Cir.1989).

Soon thereafter, PRE requested a scheduling conference limiting the time to complete discovery. As a result of the conference, Columbia Pictures agreed to produce certain documents by August 30, 1989. In September, Columbia Pictures delivered some of the requested documents to PRE.

On September 22, 1989, Columbia Pictures moved for summary judgment on PRE's antitrust counterclaims. PRE filed an opposition to the motion, in which it asserted the right to take further discovery. The only evidence offered by PRE in support of its opposition was a declaration by Irwin. PRE did not submit any of the documents that the Movie Studios had produced in discovery. ³

The district court granted the Movie Studios' motion for summary judgment. The court held that the copyright infringement [I]t was clear from the manner in which the case was presented that the plaintiff was seeking and expecting a favorable judgment. Although I decided against the plaintiff, the case was far from easy to resolve, and it was evident from the opinion affirming my order that the court of appeals had trouble with it as well. I find that there was probable cause for bringing the action....

                action was not a "sham", and that, as a result, the Movie Studios' bringing of that action was immune from antitrust liability under the Noerr- Pennington doctrine.   In support of its conclusion, the court stated:
                

On the basis of its finding that the action was not a sham, the court also held that further discovery was not required. Finally, the court dismissed PRE's pendent state law claims.

ANALYSIS

PRE asserts that summary judgment in favor of Columbia Pictures was improper because: (1) the court focused only on the lawsuit and failed to consider PRE's other allegations of anticompetitive conduct; (2) the copyright infringement action was a sham; and (3) the court should have permitted PRE additional discovery to prove that the copyright lawsuit was a sham. PRE also argues that the district court abused its discretion in dismissing the pendent state law claims. We address these arguments in turn.

1. Anticompetitive conduct

PRE argues that the summary judgment was improper because the district court failed to consider PRE's other allegations of anticompetitive conduct. In addition to the copyright suit, PRE alleged that the Movie Studios: (1) concertedly refused to grant licenses to PRE to rent videodiscs to its guests; (2) filed or threatened to file similar copyright suits to intimidate other hotels and resorts from adopting similar video rental programs; (3) entered restrictive distribution agreements prohibiting the rentals of videos except for home use; (4) attached misleading copyright labels to their videos stating that viewing of the video was restricted to home use; and (5) published threatening advertisements in hotel trade journals warning hotels not to rent or use the plaintiffs' copyrighted videos for viewing in guest rooms. Although the court did not address these additional allegations, ⁴ we conclude that reversal is not required.

PRE's first allegation--the concerted refusal to deal--relates to PRE's attempts, after Columbia Pictures instituted the copyright infringement action, to obtain licenses from the Movie Studios to use and install in-room videodisc systems in the guest rooms. On the facts of this case, PRE's request for licensing amounted to an offer to settle the lawsuit. If Columbia Pictures agreed to license PRE, the lawsuit would be moot.

A decision to accept or reject an offer of settlement is conduct incidental to the prosecution of the suit and not a separate and distinct activity which might form the basis for antitrust liability. Consequently, PRE's ability to establish that the Movie Studios' refusal to deal violated the Sherman Act depends on its success or failure in showing that the copyright infringement action is actionable under the federal antitrust laws. See generally Aircapital Cablevision, Inc. v. Starlink Communications Group, Inc., 634 F.Supp. 316, 326 (D.Kan.1986) (where underlying litigation is not a sham, attendant publicity is protected by Noerr- Pennington doctrine). This issue is discussed in section 2, infra.

The four remaining allegations do not establish a violation of either section 1 or section 2 of the Sherman Act because PRE failed to demonstrate that the alleged conduct caused antitrust injury. See Rickards v. Canine Eye Registration Foundation, Inc., 783 F.2d 1329, 1332, 1335 (9th Cir.), cert. denied, 479 U.S. 851, 107 S.Ct. 180, 93 L.Ed.2d 115 (1986) (to establish a violation of Sherman Act sections 1 or 2, an antitrust plaintiff must establish the element of "causal antitrust injury"). PRE neither pleaded nor presented evidence that the La Mancha Resort's videodisc rental service had been interrupted, that the Resort lost a single guest, or that the Movie Studios' conduct prevented Irwin from marketing the Resort's video viewing system to other hotels. We note that PRE did not need formal discovery procedures to establish resulting antitrust injury to the resort or to ascertain the basis for other hotels' rejection of Irwin's video system.

We reject PRE's argument that Kenneth Irwin's declaration provides an initial showing of the injury element. Irwin's affidavit does not satisfy the requirements of Fed.R.Civ.P. 56(e). ⁵ The affidavit states in relevant part:

I had attempted to develop a market for the sale and installation of video disc player equipment to other hotels for private, in-room, movie viewing. As an RCA representative, I had contacted other hotels in an attempt to install video disc player equipment using the in-room video technology employed at our La Mancha facility. I believe that hotels were reluctant to invest in in-room video viewing systems out of fear of litigation with the counterdefendant movie studios. I believe further that larger chains, in particular, were reluctant to make a substantial investment in video technology absent a license from the movie studios.

Because Irwin's...