Close v. Sotheby's, Inc.

• Decision Date: 03 December 2018
• Docket Number: No. 16-56252,No. 16-56234, No. 16-56235,16-56234
• Citation: 909 F.3d 1204
• Parties: Chuck CLOSE; Laddie John Dill, Individually and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants, v. SOTHEBY’S, INC., a New York Corporation, Defendant-Appellee. The Sam Francis Foundation; Chuck Close, Individually and on Behalf of All Others Similarly Situated; Laddie John Dill, Individually and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants, v. Christie’s, Inc., a New York Corporation, Defendant-Appellee. The Sam Francis Foundation; Chuck Close, Individually and on Behalf of All Others Similarly Situated; Laddie John Dill, Individually and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants, v. eBay Inc., a Delaware Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

909 F.3d 1204

Chuck CLOSE; Laddie John Dill, Individually and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants,

v.SOTHEBY’S, INC., a New York Corporation, Defendant-Appellee.

The Sam Francis Foundation; Chuck Close, Individually and on Behalf of All Others Similarly Situated; Laddie John Dill, Individually and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants,

v.Christie’s, Inc., a New York Corporation, Defendant-Appellee.

The Sam Francis Foundation; Chuck Close, Individually and on Behalf of All Others Similarly Situated; Laddie John Dill, Individually and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants,

v.eBay Inc., a Delaware Corporation, Defendant-Appellee.

No. 16-56234

No. 16-56235

No. 16-56252

United States Court of Appeals, Ninth Circuit.

Filed December 3, 2018

ORDER

In Close v. Sotheby’s, Inc. , 894 F.3d 1061 (9th Cir. 2018), we held that plaintiffs’ claims for resale royalties under the California Resale Royalties Act ("CRRA") are expressly preempted by the 1976 Copyright Act. We thus affirmed the district court’s dismissal of plaintiffs’ claims that involved any art sales postdating the Copyright Act’s effective date of January 1, 1978. We reversed, however, the district court’s dismissal of plaintiffs’ CRRA claims to the extent they involved sales occurring before January 1, 1978 (but after the CRRA’s effective date of January 1, 1977), because those claims are not preempted by federal copyright law.

Defendants Sotheby’s and eBay have filed applications for attorneys’ fees pursuant to Ninth Circuit Rule 39-1.6. They seek fees under the CRRA fee-shifting provision, which mandates a fee award to the "prevailing party in any action brought under" the CRRA. Cal. Civ. Code § 986(a)(3). Plaintiffs argue that fees are not available under the CRRA because the effect of our decision was to void the CRRA, including its fee-shifting provision. We disagree. We hold that Sotheby’s and eBay are entitled to fees under the CRRA fee-shifting provision and refer the applications to the Appellate Commissioner to calculate the amount of fees to be awarded.

I. BACKGROUND

The background of this case is detailed in the panel’s opinion. In brief, the California Resale Royalties Act of 1976 ("CRRA") required the seller of a work of fine art or the seller’s agent to withhold 5% of the sale price and pay it to the artist. Cal. Civ. Code § 986(a). Artists could bring an action to enforce this requirement under the following provision:

If a seller or the seller’s agent fails to pay an artist the amount equal to 5 percent of the sale of a work of fine art by the artist or fails to transfer such amount to the Arts Council, the artist may bring an action for damages within three years after the date of sale or one year after the discovery of the sale, whichever is longer. The prevailing party in any action brought under this paragraph shall be entitled to reasonable attorney fees, in an amount as determined by the court.

Id. § 986(a)(3).

Plaintiffs filed this action against Sotheby’s, Christie’s, and eBay seeking royalties for resales of artwork dating back to the CRRA’s January 1, 1977 effective date. After claims involving out-of-state sales were filtered out on dormant Commerce Clause grounds, see Sam Francis Found. v. Christies, Inc. , 784 F.3d 1320, 1322 (9th Cir. 2015) (en banc), the parties litigated the claims involving in-state sales. The district court granted defendants’ motion to dismiss those claims on two grounds: (1) the CRRA claims were preempted, and (2) eBay was not a seller subject to the CRRA.

On appeal, we affirmed in part, reversed in part, and remanded. Close , 894 F.3d at 1076. We held that all CRRA claims that involved sales after the effective date of the 1976 Copyright Act—January 1, 1978—were expressly preempted by the Copyright Act’s preemption provision, 17 U.S.C. § 301(a). Close , 894 F.3d at 1068–72. We thus affirmed the district court’s dismissal of those claims. Because this holding disposed of all claims against eBay, we declined to rule on eBay’s alternative argument that it was not subject to the CRRA. Id. at 1068 n.6.

We further held that any CRRA claims that involved sales before the 1976 Act’s effective date, to the extent they exist, are not expressly preempted, because the operative federal law at the time of these sales—the 1909 Copyright Act—did not contain an express preemption provision. Id. at 1072. Nor are such claims barred by conflict preemption. Id. at 1072–74 (discussing Morseburg v. Balyon , 621 F.2d 972, 977–78 (9th Cir. 1980) ). We thus reversed the district court’s dismissal of any claims involving sales between the CRRA’s effective date of January 1, 1977 and the 1976 Act’s effective date of January 1, 1978—i.e., sales that occurred in 1977. Id. at 1074.

After we denied a petition for rehearing, Sotheby’s and eBay filed timely applications for attorneys’ fees pursuant to Ninth Circuit Rule 39-1.6, seeking fees under the CRRA fee-shifting provision, Cal. Civ. Code § 986(a)(3). Plaintiffs oppose these applications, arguing that the CRRA fee-shifting provision is preempted by federal law and that Sotheby’s is not a prevailing party. Because this is a diversity case, state law governs both "the right to fees" and "the method of calculating the fees." Mangold v. Cal. Pub. Utils. Comm’n , 67 F.3d 1470, 1478 (9th Cir. 1995). The preemptive effect of a federal statute is a question of federal law. See Allis-Chalmers Corp. v. Lueck , 471 U.S. 202, 214, 105 S.Ct. 1904, 85 L.Ed.2d 206 (1985).

II. ANALYSIS

The CRRA fee-shifting provision provides: "The prevailing party in any action brought under this paragraph shall be entitled to reasonable attorney fees, in an amount as determined by the court." Cal. Civ. Code § 986(a)(3). Three features of this provision are significant. First, by using the phrase "prevailing party," this provision grants defendants as well as plaintiffs the opportunity for a fee award. See Jankey v. Lee , 55 Cal.4th 1038, 150 Cal.Rptr.3d 191, 290 P.3d 187, 191 (2012). Second, by using the phrase "shall be entitled," fee-shifting under this provision is mandatory. See id., 55 Cal.4th 1038, 150 Cal.Rptr.3d 191, 290 P.3d at 192 ; Hsu v. Abbara , 9 Cal.4th 863, 39 Cal.Rptr.2d 824, 891 P.2d 804, 809 (1995) (explaining that "[t]he words ‘shall be entitled’ " mean that the court is "obligated to award attorney fees[ ] whenever the statutory conditions have been satisfied"). And third, the fee-shifting provision was added to the CRRA in 1982, see 1982 Cal. Stat. 6434, and it applies only to claims involving sales of art that occurred on or after January 1, 1983, see Cal. Civ. Code § 986(f). Thus, the only claims that remain pending on remand—those involving sales in 1977—do not fall within the fee-shifting provision.

Plaintiffs oppose the fee applications on two grounds, arguing that the CRRA fee-shifting provision is unenforceable because it is preempted, and that Sotheby’s is not a prevailing party. We address each argument in turn.

A. Preemption

Plaintiffs contend that the CRRA fee-shifting provision is preempted and unenforceable. They raise two arguments: first, that our opinion in this case rendered the CRRA "null and void" and thus there is no surviving attorneys’ fees provision to apply; and second, that the 1976 Copyright Act itself preempts the attorneys’ fees provision of the CRRA. We disagree with both arguments.

1. The CRRA fee-shifting provision is not "null and void"

According to plaintiffs, our decision in this case means that, as of January 1, 1978 (the effective date of the 1976 Copyright Act), "the CRRA was null and void and could not thereafter be enforced" and, accordingly, the 1982 amendments to the CRRA are ineffectual because "a nonexistent statute cannot be amended." This argument misapprehends the effect of our decision.

The Supremacy Clause of the U.S. Constitution provides that the "Constitution, and the Laws of the United States which shall be made in Pursuance thereof ... shall be the supreme Law of the Land." U.S. Const. art. VI, cl. 2. As a consequence, "Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." Id. When we adjudge a state law preempted under this provision, we do not render the law null and void in some ultimate sense, such as a presidential veto; rather, our judgment renders the law unenforceable in the case before us. We, as judges, cannot enforce the state law because the "Laws of the United States" are "supreme" and displace the "Laws of any State to the Contrary." Id.

The doctrine of preemption therefore provides "a rule of decision" that "instructs courts what to do when state and federal law clash." Armstrong v. Exceptional Child Ctr., Inc. , ––– U.S. ––––, 135 S.Ct. 1378, 1383, 191 L.Ed.2d 471 (2015) ; see also Gilchrist v. Jim Slemons Imports, Inc. , 803 F.2d 1488, 1497 (9th Cir. 1986) (describing preemption as "a choice-of-law question"). When a state law, "in [its] application to [a particular] case, come[s] into collision with an act of Congress," the state law "must yield to the law of Congress." Gibbons v. Ogden , 22 U.S. (9 Wheat.) 1, 210, 6 L.Ed. 23 (1824) ; cf. Massachusetts v. Mellon , 262 U.S. 447, 488, 43 S.Ct. 597, 67 L.Ed. 1078 (1923) (describing the power "to review and annul" a statute as "little more than the negative power to disregard an unconstitutional enactment, which otherwise would stand in the way of the enforcement of a legal right"); Marbury v. Madison , 5 U.S. (1 Cranch) 137, 178, 2 L.Ed. 60 (1803) (explaining that when "both [a state] law and [federal law] apply to a particular case, ... the court must determine which of these conflicting rules governs the case," enforcing the "superior" law and "disregarding" the inferior law). The effect of our judgment is to render the preempted state law inoperative with respect to the claims before us. See Trollinger v. Tyson Foods, Inc....