Starz Entm't, LLC v. MGM Domestic Television Distribution, LLC
| Decision Date | 05 January 2021 |
| Docket Number | CV 20-4085-DMG (KSx) |
| Parties | STARZ ENTERTAINMENT, LLC v. MGM DOMESTIC TELEVISION DISTRIBUTION, LLC |
| Court | U.S. District Court — Central District of California |
Steven M. Goldberg, Jeremy Tsvi Katz, Markun Zusman Freniere Compton LLP, Santa Ana, CA, Evan R. Chesler, Pro Hac Vice, Molly M. Jamison, Pro Hac Vice, Wes Earnhardt, Pro Hac Vice, Cravath Swaine and Moore LLP, New York, NY, Robert N. Klieger, Hueston Hennigan LLP, Los Angeles, CA, for Starz Entertainment, LLC.
Jagannathan P. Srinivasan, Jonathan Nima Soleimani, Minae Yu, Gibson Dunn and Crutcher LLP, Los Angeles, CA, Orin S. Snyder, Pro Hac Vice, Gibson Dunn and Crutcher LLP, New York, NY, for MGM Domestic Television Distribution, LLC.
Proceedings: IN CHAMBERS—ORDER RE DEFENDANT MGM DOMESTIC TELEVISION DISTRIBUTION, LLC'S MOTION TO DISMISS [24]
On May 4, 2020, Plaintiff Starz Entertainment, LLC ("Starz") filed a Complaint alleging 340 counts each of direct, contributory, and vicarious copyright infringement, as well as claims for breach of contract and breach of the covenant of good faith and fair dealing, against Defendant MGM Domestic Television Distribution, LLC ("MGM") based upon MGM's alleged breach of exclusive licensing agreements it had with Starz for 340 movies and television episodes. [Doc. # 1.]
On July 6, 2020, MGM filed a Motion to Dismiss ("MTD"). [Doc. # 24.] MGM asserts that the copyright claims for 126 of the titles1 at issue are barred by the Copyright Act's three-year statute of limitations, based on the time periods of their exclusive licenses. Id. at 2.2 MGM further claims that six of those titles are also barred from forming the basis of the contract claims by California's four-year statute of limitations for such causes of action. Id. at 3.
The motion is fully briefed. [Doc. ## 35, 36.] For the reasons set forth below, the MTD is DENIED .
MGM requests that the Court take judicial notice of its 2013 and 2015 "Library Agreements" with Starz, which are referenced throughout the Complaint but are not attached to it. See Request for Judicial Notice ("RJN") [Doc. # 26 ], Ex. A and B [Doc. ## 26-2 and 26-3],3 see also Compl. ¶¶ 2, 27-36. In ruling on a Rule 12(b)(6) motion, a court may consider extrinsic evidence on which the complaint "necessarily relies" if: "(1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion." Marder v. Lopez , 450 F.3d 445, 448 (9th Cir. 2006). Because Starz referred to and relied upon the Library Agreements in the Complaint, and because Starz does not dispute their authenticity or otherwise object, the Court GRANTS the RJN of the two Agreements.
MGM also requests that the Court take judicial notice of a March 24, 2020 tolling agreement between the parties, which Starz also does not oppose. The RJN of the tolling agreement is therefore also GRANTED . See Chinese Hosp. Ass'n v. Jacobs Eng'g Grp., Inc. , 2018 WL 6069169, at *4 (N.D. Cal. Nov. 20, 2018) ().
On July 26, 2013, Starz, a subscription video provider, entered into a licensing agreement with MGM for the exclusive right to exhibit 421 movies and television episodes that MGM controls. Compl. ¶ 27; RJN, Ex. A ("2013 Agreement"). MGM agreed that it would not exhibit or authorize others to exhibit the titles covered by the Agreement on any other television platform during the license period. Compl. ¶ 29; 2013 Agreement ¶ 10. On May 7, 2015, Starz and MGM entered into another licensing agreement for 540 titles with the same exclusivity language. Compl. ¶¶ 33-34; RJN, Ex. B ("2015 Agreement") ¶ 10.
Although the parties only entered into two agreements at issue here, they negotiated separate, individual license periods for each title within the agreements. See 2013 Agreement, Ex. A; 2015 Agreement, Ex. A. The license periods range from a few months to a few years, and began as early as 2013 and end as late as 2023. See id.
In August 2019, a Starz employee discovered that the film Bill and Ted's Excellent Adventure was available to view on Amazon's video streaming service, despite being subject to an exclusive license with Starz at the time. Compl. ¶ 44. On August 13, 2019, MGM admitted to licensing the film to Amazon in breach of its exclusivity with Starz. Id. at ¶ 45. Starz quickly discovered that 22 titles that should have been exclusive to Starz were available on Amazon. Id. at ¶ 46. MGM admitted the error and assured Starz that it would correct the problem. Id. at ¶ 47. After further pressing from Starz, on November 1, 2019 MGM admitted that it had improperly licensed 244 titles to third parties during Starz exclusive license periods. Id. at ¶ 50. Starz then conducted its own investigation, discovering that breaches had "been happening since at least 2015 without STARZ's knowledge," and included nearly 100 additional violations beyond those that MGM admitted to. Id. at ¶¶ 51-52.
In total, the Complaint identifies 340 titles for which MGM allegedly breached its exclusivity agreement with Starz. See id. , Ex. A. These breaches began, "[u]nbeknownst to Starz, by at least 2015 (and potentially earlier)." Id. at ¶ 8.
Pursuant to Federal Rule of Civil Procedure 12(b)(6), a defendant may seek to dismiss a complaint for failure to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion, a complaint must articulate "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Although a pleading need not contain "detailed factual allegations," it must contain "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Id. at 555, 127 S.Ct. 1955 (citing Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). In evaluating the sufficiency of a complaint, courts must accept all factual allegations as true. Id. (citing Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ). Legal conclusions, in contrast, are not entitled to the assumption of truth. Id.
MGM argues that the Copyright Act's three-year statute of limitations, see 17 U.S.C. § 507(b), bars infringement claims for 126 of the 340 titles as a matter of law because, per the Library Agreements, their exclusive license periods expired more than three years prior to March 24, 2020, the date the parties entered into their tolling agreement.4 MGM also adds that, independent of the statute of limitations, the Supreme Court's decision in Petrella v. Metro-Goldwyn-Mayer, Inc. , 572 U.S. 663, 134 S.Ct. 1962, 188 L.Ed.2d 979 (2014), imposes a strict bar to collecting any damages for copyright infringements that occur more than three years prior to the filing of the complaint. Because of this damages bar, according to MGM, Starz has no remedy for any infringements of the 126 titles—which could not have occurred within three years of the operative filing date—and so the claims must be dismissed.
For its part, Starz argues that its claims are saved from the statute of limitations and any other damages bar by the "discovery rule," because it did not discover the infringements until August 2019. MGM counters that Starz reasonably should have discovered the infringements contemporaneously, and in any case, Petrella bars any damages outside the three-year lookback window regardless of the application of the discovery rule.
As a preliminary matter, this case warrants some background discussion on the state of the law regarding the statute of limitations for copyright infringement claims.
The Copyright Act's statute of limitations is set forth in 17 U.S.C. section 507(b), which states: "No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued." Out of this statute, two separate but intertwined doctrinal strains have developed, each involving a split in authority. See generally 3 Nimmer on Copyright § 12.05 (2020). One is the accrual rule—when a claim is said to have "accrued." Some courts apply the "discovery rule," under which the claim does not accrue—and so the three-year clock does not start—until "the plaintiff discovers, or with due diligence should have discovered," the infringement. William A. Graham Co. v. Haughey , 568 F.3d 425, 433 (3d Cir. 2009). Others instead apply the "injury rule," meaning that a claim accrues on the date the infringement occurred, regardless of the plaintiff's knowledge at the time or when the infringement was ultimately discovered. See Auscape Int'l v. Nat'l Geographic Soc'y , 409 F. Supp. 2d 235, 247 (S.D.N.Y. 2004). If the injury rule applies, a claim must be brought within three years of the date of the infringement, or else it is time-barred.
The second question introduced by Section 507(b) is how to handle cases of "continuing infringement"—that is, infringements that are ongoing for some extended period of time. See Nimmer § 12.05[B][1]. For example, how does the three-year statute of limitations apply to a Broadway show with an uninterrupted five-year theatrical run, or a book in publication for a decade straight? Some courts, applying the "continuing wrong" theory, have held that so long as the wrong continues into the three-year period, the defendant is liable for the entire duration of the infringement, reaching back to include those damages incurred before the three-year...
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