U.S. v. King Features Entertainment, Inc.
| Decision Date | 04 April 1988 |
| Docket Number | 87-5944,Nos. 87-5747,s. 87-5747 |
| Parties | 1988 Copr.L.Dec. P 26,256, 6 U.S.P.Q.2d 1873 UNITED STATES of America, Plaintiff-Appellee, v. KING FEATURES ENTERTAINMENT, INC., Defendant-Cross/Defendant, and Salzburg Enterprises of California, Inc., and Milton J. Salzburg, Defendant-Cross/Claimant-Appellant. KING FEATURES ENTERTAINMENT INC., Plaintiff-Counter Claim-Defendant, v. SALZBURG ENTERPRISES OF CALIFORNIA, INC., Milton J. Salzburg, et al., Defendants-Cross-Claimants/Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Glen A. Smith, Los Angeles, Cal., for plaintiff-counter claim defendant.
Stephen D. Peterson, Asst. U.S. Atty., Los Angeles, Cal., for plaintiff-appellee.
Joseph F. Hart, Weinstein & Hart, Beverly Hills, Cal., for defendants-cross/claimants-appellants.
Appeal from the United States District Court for the Central District of California.
Before O'SCANNLAIN and LEAVY, Circuit Judges, and ORRICK, * District Judge.
FACTS
This case concerns the alleged copyright infringement of certain cartoon films entitled "Beatles," "Barney Googles," "Krazy Kat," "Popeye," "Flash Gordon," and "Cool McCool" (the cartoons). The appellee King Features Entertainment, Inc. (KFE) holds the copyright on the cartoons and the exclusive right to distribute them.
KFE and the appellants, Milton Salzburg and Salzburg Enterprises of California, Inc. (Salzburg), signed a letter agreement which granted Salzburg a one-year license to sell the cartoons. The pertinent parts of the letter agreement, dated May 4, 1983, are:
1. The half-hours [the cartoons] are for use by the U.S. Armed Forces, on military bases in the United States of America and its territories. It is our understanding that they will be shown free of charge and not on television or cable.
2. The license period is for one year, from July 1, 1983 through June 30, 1984. At the end of that time, prints must be returned to King Features Entertainment.
Salzburg committed to buy "212 half-hours of Various and Popeye, Total $90,612" with ten percent down and the balance on delivery. The parties agree that the May 4, 1983 letter was their final, binding agreement.
In 1981 and 1982, Salzburg had negotiated five separate contracts with the Armed Forces Radio and Television Service (AFRTS) to deliver the cartoons at issue for viewing on its closed-circuit television. The delivery dates were July through December of 1983. Each contract required Salzburg to grant to AFRTS:
[T]he right to electronically transfer the material to video tape and to distribute the tapes and/or transmit the material by satellite to authorized American Forces Television Outlets outside the contiguous United States for their non-commercial telecast of the program material.
AFRTS provides extensive worldwide television service to military bases, including ships at sea.
KFE learned of the negotiations between AFRTS and Salzburg when it attempted to sell films to AFRTS for television use. An AFRTS agent advised KFE that AFRTS was dealing with Salzburg, but repeatedly refused to confirm whether AFRTS and Salzburg had any contracts.
A sales manager for KFE, Steven Weiser, called Milton Salzburg in late May or early June 1983 to tell him that KFE's license agreement with Salzburg prohibited a sale of the cartoons to AFRTS. KFE interpreted the sentence "It is our understanding that [the cartoons] will be shown free of charge and not on television or cable" to limit their viewing to theatres and classrooms on the military bases specified by the agreement.
Salzburg told Weiser he did not agree with KFE's interpretation. He told Weiser he interpreted the agreement to allow AFRTS to show the cartoons because AFRTS is not commercial television, but rather a non-commercial, closed circuit outlet serving only the United States Armed Forces. Salzburg also told Weiser he interpreted the agreement to allow AFRTS to show the cartoons anywhere the United States flag flies, including foreign and domestic U.S. military bases and ships at sea.
Salzburg then informed Weiser that if KFE disagreed with Salzburg's interpretation, it should call off the deal and return his $10,000 deposit. Salzburg later informed another KFE representative, Chips Barrabee, that Salzburg was selling the cartoons to AFRTS and that Barrabee could cancel the deal if KFE disagreed with Salzburg's interpretation of the agreement. No one from KFE ever cancelled the deal, or returned Salzburg's $10,000 deposit.
However, KFE's vice-president reminded Salzburg of the agreement's geographic and use restrictions in a letter dated June 15, 1983.
In late June and early July of 1983, KFE delivered prints of the cartoon films to Salzburg and cashed his check for $80,612. In July 1983 Salzburg delivered the prints to AFRTS. In August 1983 KFE's attorneys reiterated KFE's interpretation of the agreement and demanded that Salzburg stop negotiating with AFRTS to sell the cartoons. In January 1984 KFE confirmed Salzburg had contracts with AFRTS for television use of the cartoons.
KFE filed a complaint against Salzburg for copyright infringement, unfair competition, fraud, trespass, interference with business relations, and breach of contract. It sought injunctive relief and damages. On behalf of AFRTS, the United States filed a complaint against Salzburg alleging payment by mistake, unjust enrichment, violation of the False Claims Act, 31 U.S.C. Secs. 3729-31, fraud and conversion, and breach of contract. KFE was named a defendant for purposes of declaratory relief only.
Salzburg responded by filing a cross-claim against KFE for indemnity, breach of contract, and bad faith denial of contract. KFE then filed a counterclaim against Salzburg which restated the claims in its original complaint.
The United States moved for summary judgment on its breach of contract claim, asserting that Salzburg did not acquire the copyright license the AFRTS agreement required. The district court granted the motion, holding that Salzburg had no authority to convey to AFRTS the rights to televise the cartoons outside the contiguous United States.
KFE then filed a motion for partial summary judgment on its claim for copyright infringement, claiming the five Salzburg/AFRTS contracts exceeded the scope of its May 4, 1983 agreement with Salzburg. KFE maintained the five contracts violated its exclusive right to reproduce, distribute, and display the cartoon features under section 106 of the Copyright Act of 1976, 17 U.S.C. Sec. 106. It requested actual damages under 17 U.S.C. Sec. 504(b), claiming the proper measure of those damages was the $137,240 which AFRTS paid to Salzburg for the cartoons. The district court granted KFE's motion for partial summary judgment and awarded damages of $137,240.
The United States moved to dismiss the remaining claims in its action and for entry of final judgment. The district court dismissed the United States' claims, entered final judgment against Salzburg, and issued an order to show cause why Salzburg's cross-claims against KFE should not be dismissed.
KFE also moved to dismiss its remaining claims, its cross-complaint, and Salzburg's cross-claim against it. The district court dismissed all remaining claims and entered final judgment in KFE's favor.
Salzburg appeals all of the district court's orders.
Salzburg contends two genuine issues of material fact preclude summary judgment. The first is the scope of his license under the May 4, 1983 agreement. The second is whether KFE's conduct in not cancelling the deal and cashing Salzburg's $80,612 check constitutes a waiver or estoppel against KFE. Salzburg also contends the court erroneously awarded KFE damages on its copyright infringement claim, and that Salzburg's pendent cross-claims should not have been dismissed.
We review a grant of summary judgment de novo. Gabrielson v. Montgomery Ward & Co., 785 F.2d 762, 764 (9th Cir.1986). Viewing the evidence in the light most favorable to the non-moving party, we must determine whether there are any genuine issues of material fact and whether the district court correctly applied the relevant law. Ashton v. Cory, 780 F.2d 816, 818 (9th Cir.1986).
Salzburg contends the district court ignored facts in his declaration in opposition to KFE's motion for summary judgment when it determined the May 4, 1983 agreement was unambiguous and not amenable to Salzburg's interpretations. He insists the court ignored the legal standards for reviewing the evidence and for contract interpretation.
Summary judgment is appropriate when the contract terms are clear and unambiguous, even if the parties disagree as to their meaning. See International Union of Bricklayers v. Martin Jaska, Inc., 752 F.2d 1401, 1406 (9th Cir.1985). Interpretation of a contract is a matter of law, including whether the contract is ambiguous. Beck Park Apts. v. United States Dept. of Housing, 695 F.2d 366, 369 (9th Cir.1982).
Under California law, even if the written agreement of the parties is clear and unambiguous on its face, the trial judge must consider relevant extrinsic evidence that can prove a meaning to which the language of the contract is reasonably susceptible. Brobeck, Phleger & Harrison v. Telex Corp., 602 F.2d 866, 871 (9th Cir.1979), cert. denied, 444 U.S. 981, 100 S.Ct. 483, 62 L.Ed.2d 407 (1979); Union Bank v. Winnebago Indus., Inc., 528 F.2d 95, 98 (9th Cir.1975). However, if after considering extrinsic evidence the court finds the language of the contract is not reasonably susceptible to the asserted interpretation and is unambiguous, extrinsic evidence cannot be received for the purpose of varying the terms of the contract. Brobeck, 602 F.2d at 871.
Salzburg contends that the language "[the cartoons] will be shown free of charge and not on television or cable" is understood in the industry to mean the...
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