Sosa v. Directv, Inc.

• Decision Date: 15 February 2006
• Docket Number: No. 04-55036.,04-55036.
• Citation: 437 F.3d 923
• Parties: Rod SOSA; Gary Whittaker; Rodney Bylsma, Plaintiffs-Appellants, v. DIRECTV, INC.; Hughes Electronics Corporation; General Motors Corporation; Yarmuth Wilsdon Calfo, PLLC; Greer, Herz & Adams, LLP; Stump, Storey, Callahan & Dietrich, PA; DIRECTV End User Development Group; DIRECTV End User Recovery Project, LLC; Secure Signals International; McGinnis Group International, LLC, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

437 F.3d 923

Rod SOSA; Gary Whittaker; Rodney Bylsma, Plaintiffs-Appellants, v. DIRECTV, INC.; Hughes Electronics Corporation; General Motors Corporation; Yarmuth Wilsdon Calfo, PLLC; Greer, Herz & Adams, LLP; Stump, Storey, Callahan & Dietrich, PA; DIRECTV End User Development Group; DIRECTV End User Recovery Project, LLC; Secure Signals International; McGinnis Group International, LLC, Defendants-Appellees.

No. 04-55036.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 14, 2005.

Filed February 15, 2006.

COPYRIGHT MATERIAL OMITTED

Jeffrey Willens, Esq., Yorba Linda, CA, for the plaintiffs-appellants.

Dale H. Oliver, Los Angeles, CA, argued the case for the defendants-appellees. Michael E. Williams and A. Eric Bjorgum, Los Angeles, CA, were on the briefs.

Appeal from the United States District Court for the Central District of California; A. Howard Matz, District Judge, Presiding. D.C. No. CV-03-05972-AHM.

Before FERNANDEZ and BERZON, Circuit Judges, and OWEN PANNER,^* District Judge.

BERZON, Circuit Judge.

DIRECTV, Inc., et al. ("DIRECTV") sent tens of thousands of demand letters alleging that the recipients had accessed DIRECTV's satellite television signal illegally and would be sued if they did not quickly settle DIRECTV's claims against them under the Federal Communications Act. Plaintiffs Rod Sosa, et al. ("Sosa") filed this class action lawsuit on behalf of themselves and a putative class of recipients of the letters who reached settlements with DIRECTV, claiming that DIRECTV violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, by mailing the presuit demand letters. The central question before us is whether DIRECTV is immune from liability under RICO, as interpreted in light of the Noerr-Pennington doctrine deriving from the Petition Clause of the First Amendment.

I.

DIRECTV broadcasts television signals via satellite to millions of consumers throughout the United States. The signals broadcast from the satellites are electronically scrambled. To receive the signals in an intelligible manner, the consumer needs to purchase special electronic equipment from third-party vendors, and also needs an access card, or "smart card," supplied by DIRECTV. By using specialized smart card programming equipment, an individual can gain unauthorized access to DIRECTV's signal, in violation of the Federal Communications Act of 1934, 47 U.S.C. § 605. Such equipment has a number of lawful applications as well, such as implementing secure access to computer networks or controlling physical access to buildings or rooms.

In the past several years, DIRECTV, suspicious that the problem of signal theft had become widespread, initiated litigation against several companies selling smart card programming technology. In the course of this litigation, DIRECTV obtained lists of the names and addresses of numerous individuals who had purchased such equipment. DIRECTV obtained no information on the uses to which these individuals were putting this equipment, nor does its satellite technology permit it to determine whether any particular individual is receiving its signal. Using these lists, DIRECTV sent letters to over 100,000 individual purchasers of smart card programming equipment, asserting that DIRECTV had records showing that the recipient had used the equipment to steal its signal, accusing the recipient of violating a federal criminal statute, and threatening civil legal action unless the recipient forfeited the equipment to DIRECTV and paid DIRECTV an unspecified sum to settle its claim.¹ When a number of recipients contacted DIRECTV by telephone to protest their innocence of the alleged conduct, DIRECTV repeated its accusations and threats to sue. Rather than incur the expense of engaging an attorney to respond, some allegedly innocent recipients, including the three named plaintiffs here, paid DIRECTV thousands of dollars to settle the claims.

Subsequently, a number of recipients, including all the plaintiffs in this action, initiated litigation against DIRECTV in California Superior Court in an action styled Blanchard v. DIRECTV, Inc., No. BC 284166 (Cal Super. Ct., Oct. 28, 2002), asserting, inter alia, that the letters constituted extortion and violated California's unfair business practices statute, Cal. Bus. & Prof.Code §§ 17200-17210. DIRECTV opposed the litigation by filing a motion to strike under California's anti-SLAPP² statute, Cal.Civ.Proc.Code § 425.16. The state court granted the anti-SLAPP motion, and Sosa appealed.

Subsequently, Sosa filed the present action in the U.S. District Court for the Central District of California, asserting violations of RICO and alleging, inter alia, extortion and mail and wire fraud as predicate acts. DIRECTV filed a motion to dismiss under Fed. Rule Civ. P. 12(b)(6), asserting that Sosa had failed to state a claim under RICO and that Sosa's claims were barred by various abstention doctrines and the Noerr-Pennington doctrine. The district court granted the motion, basing its ruling solely on the Noerr-Pennington doctrine. Sosa then filed this appeal. After the federal action was dismissed but before the hearing on Sosa's appeal, the California Court of Appeal affirmed the anti-SLAPP ruling in the Blanchard case, and the California Supreme Court denied review.

We review de novo the district court's dismissal for failure to state a claim under Rule 12(b)(6). Madison v. Graham, 316 F.3d 867, 869 (9th Cir. 2002).

II.

On appeal, DIRECTV urges that we need not address the merits of the district court's decision because, under the doctrine of res judicata, the state court decision in the Blanchard case precludes the case at bar. To determine the preclusive effect of the state court judgment in Blanchard, we look to state law. Manufactured Home Cmtys. Inc. v. City of San Jose, 420 F.3d 1022, 1031 (9th Cir. 2005). In California, "[r]es judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them." Mycogen Corp. v. Monsanto Co., 28 Cal.4th 888, 896, 123 Cal.Rptr.2d 432, 51 P.3d 297 (2002).

Like the federal courts, California courts recognize the rule that where parallel litigation is pending in different tribunals, the first case to reach final judgment is accorded preclusive effect, regardless of the order in which the cases were filed. Compare Domestic & Foreign Petroleum Co. v. Long, 4 Cal.2d 547, 562, 51 P.2d 73 (1935) (California rule), with Americana Fabrics, Inc. v. L & L Textiles, Inc., 754 F.2d 1524, 1529 (9th Cir. 1985) (federal rule). California and federal law differ, however, with respect to when a judgment rendered by a trial court becomes a "final judgment" for res judicata purposes. "Under California law, ... a judgment is not final for purposes of res judicata during the pendency of and until the resolution of an appeal." Eichman v. Fotomat Corp., 759 F.2d 1434, 1439 (9th Cir. 1985) (citing Agarwal v. Johnson, 25 Cal.3d 932, 954 n. 11, 160 Cal.Rptr. 141, 603 P.2d 58 (1979), disapproved on other grounds by White v. Ultramar, Inc., 21 Cal.4th 563, 571, 88 Cal.Rptr.2d 19, 981 P.2d 944 (1999), and Cal.Civ.Proc.Code § 1049). The judgment in the Blanchard litigation is now final, because there has been a decision on appeal as well as denial of review by the California Supreme Court.

In contrast, "[i]n federal courts, a district court judgment is `final' for purposes of res judicata." Orion Tire Corp. v. Goodyear Tire & Rubber Co., 268 F.3d 1133, 1135 n. 2 (9th Cir. 2001). This is so even during the pendency of an appeal. Eichman, 759 F.2d at 1439. Moreover, "[a] federal [district court] judgment is as final in California courts as it would be in federal courts." Calhoun v. Franchise Tax Bd., 20 Cal.3d 881, 887, 143 Cal.Rptr. 692, 574 P.2d 763 (1978).

Assuming, without deciding, that the Blanchard action and the instant case involve the same cause of action and the same parties, the judgment of the California Court of Appeal cannot be given preclusive effect in the present litigation. The Blanchard case was filed on October 28, 2002, and dismissed by the Los Angeles County Superior Court on April 1, 2003, several months before the federal litigation was filed. The district court, however, reached the merits and entered judgment before the Blanchard plaintiffs had exhausted their appeals. So, because of the differing rules governing the finality of state and federal judgments, the federal case was the first to reach final judgment. Accordingly, "the [Blanchard judgment] can scarcely constitute a bar to the instant action, decided below on an earlier date." Flood v. Harrington, 532 F.2d 1248, 1250 (9th Cir. 1976); see also Freeman United Coal Mining Co. v. Office of Workers' Comp. Program, 20 F.3d 289, 294 (7th Cir. 1994) (later rendered state industrial commission finding not preclusive in appeal of earlier decided federal disability claim). We therefore proceed to the merits of the district court's decision.³

III.

The district court dismissed Sosa's suit on the basis that DIRECTV's sending of the demand letters was conduct immunized from RICO liability under the Noerr-Pennington doctrine. We review de novo the district court's dismissal on the ground of Noerr-Pennington immunity. Or. Natural Res. Council v. Mohla, 944 F.2d 531, 533 (9th Cir. 1991).

A.

The Noerr-Pennington doctrine derives from the First Amendment's guarantee of "the right of the people ... to petition the Government for a redress of grievances." U.S. Const. amend. I. Under the Noerr-Pennington doctrine, those who petition any department of the government for redress are generally immune from statutory liability for their petitioning conduct. Empress LLC v. City & County of S.F., 419 F.3d 1052, 1056 (9th Cir. 2005) (citing Manistee Town Ctr. v. City of Glendale, 227 F.3d 1090, 1092 (9th Cir. 2000)).

The Noerr-Pennington...