UMG Recordings, Inc. v. Global Eagle Entm't, Inc.

• Decision Date: 22 June 2015
• Docket Number: CASE NO. CV 14–3466 MMM (JPRx)
• Citation: 117 F.Supp.3d 1092
• Parties: UMG Recordings, Inc.; Capital Records, LLC; Universal Music Corp.; Songs of Universal, Inc.; Universal–Polygram International Publishing, Inc.; Universal–Polygram International Tunes, Inc.; Universal Music–MGA NA, LLC; Universal Music–Z Tunes LLC; Rondor Music International, Inc.; and Universal Musica, Inc., Plaintiffs, v. Global Eagle Entertainment, Inc.; Inflight Productions, Inflight Entertainment Alliance, and IFP; Inflight Productions USA Inc./Aaec Inc., for Itself and d/b/a Inflight Productions, Inflight Entertainment Alliance and IFP; Inflight Productions Ltd., an Entity of Unknown Form; and Does 1–20, Inclusive, Defendants.
• Court: U.S. District Court — Central District of California

117 F.Supp.3d 1092

UMG Recordings, Inc.; Capital Records, LLC; Universal Music Corp.; Songs of Universal, Inc.; Universal–Polygram International Publishing, Inc.; Universal–Polygram International Tunes, Inc.; Universal Music–MGA NA, LLC; Universal Music–Z Tunes LLC; Rondor Music International, Inc.; and Universal Musica, Inc., Plaintiffs,

v.Global Eagle Entertainment, Inc.; Inflight Productions, Inflight Entertainment Alliance, and IFP; Inflight Productions USA Inc./Aaec Inc., for Itself and d/b/a Inflight Productions, Inflight Entertainment Alliance and IFP; Inflight Productions Ltd., an Entity of Unknown Form; and Does 1–20, Inclusive, Defendants.

CASE NO. CV 14–3466 MMM (JPRx)

United States District Court, C.D. California.

Signed June 22, 2015

Brian M. Yates, Elizabeth Ann Culley, Talya Goldfinger, Jeffrey D. Goldman, Jeffer Mangels Butler and Mitchell LLP, Los Angeles, CA, for Plaintiff.

Dylan J. Price, Jay T. Ramsey, Martin D. Katz, Sheppard Mullin Richter and Hampton LLP, Los Angeles, CA, for Defendant.

ORDER GRANTING PLAINTIFFS' MOTION TO DISMISS COUNTERCOMPLAINT

MARGARET M. MORROW, UNITED STATES DISTRICT JUDGE

UMG Recordings, Inc., Capital Records, LLC, Universal Music Corp. (the "record company plaintiffs"), Songs of Universal, Inc., Universal–Polygram International Publishing, Inc., Universal–Polygram International Tunes, Inc., Universal Music–MGA NA, LLC, Universal Music–Tunes, LLC, and Rondor Music International, Inc., (the "music composer plaintiffs") (collectively, "plaintiffs") filed this action against Global Eagle Entertainment, Inc. ("Global Eagle"), d/b/a Inflight Productions, Inflight Entertainment Alliance, and IFP, Inflight Productions USA Inc./AAEC Inc., for itself and d/b/a Inflight Productions, Inflight Entertainment Alliance, and IFP, Inflight Productions Ltd., (collectively, "Inflight"), and certain fictitious defendants on May 5, 2014.¹ The complaint pleads claims for infringement of sound recordings and musical compositions under the Copyright Act of 1976, 17 U.S.C. § 101 et seq. ; state law copyright infringement under California Civil Code § 980(a)(2) ; violation of California's Unfair Competition Law ("UCL"), California Business & Professions Code § 17200 ; and common law unfair competition.²

On June 16, 2014, defendants moved to dismiss plaintiffs' third and fourth claims for state law copyright infringement and unfair competition.³ The court denied this motion on February 23, 2015.⁴ The same day, the court granted plaintiffs leave to file a first amended complaint,⁵ which they did on February 24, 2015.⁶ The amended complaint asserts the same claims as the original complaint, but adds Universal Musica, Inc. as a plaintiff and American Airlines, Inc. ("American Airlines") as a defendant. On May 15, 2015, plaintiffs filed a stipulation to dismiss American Airlines with prejudice; the court entered an order on the stipulation that day.⁷

On March 10, 2015, Global Eagle, Inflight, and Inflight Ltd. (collectively, "counterclaimants") filed counterclaims for intentional misrepresentation, fraudulent concealment, negligent misrepresentation, intentional interference with contractual relations, intentional interference with prospective business advantage, and negligent interference with prospective business advantage against all plaintiffs and also against Universal Music Group International Ltd.⁸ On April 3, 2015, plaintiffs filed a motion to dismiss the counterclaims.⁹

Counterclaimants oppose the motion.¹⁰

I. FACTUAL BACKGROUND

A. Facts Alleged in the Complaint

Plaintiffs are various record companies and music publishers.¹¹ They contend that defendants provide "various airlines" with sound recordings and music videos that the airlines publicly perform for the benefit of their passengers.¹² Defendants allegedly have no license or other authorization to perform the copyrighted sound recordings, music videos, and musical compositions publicly, but have nonetheless reproduced, distributed, publicly performed, imported, and unlawfully advertised and promoted the sound recordings, musical compositions, and music videos "for the entertainment of airline passengers."¹³ In this way, plaintiffs assert, defendants have infringed and otherwise misused their intellectual property, which has had a material adverse impact on their revenues and profits.¹⁴

The record company plaintiffs allegedly hold copyrights in numerous sound recordings identified on an exhibit attached to the complaint.¹⁵ The music publisher plaintiffs allegedly hold copyrights in certain musical compositions identified on a separate exhibit attached to the complaint.¹⁶ Plaintiffs assert that defendants have willfully reproduced, distributed, publicly performed, and imported these and "hundreds, if not thousands, of additional copyrighted sound recordings, as well as copyrighted music videos" plaintiffs own in violation of 17 U.S.C. §§ 106 and 602.¹⁷

Alternately, they contend that, with actual or constructive knowledge of the infringing nature of the activity, defendants induced, caused, or materially contributed to infringement by others, and derived financial benefit from it.¹⁸ They seek statutory damages under the Copyright Act, punitive damages, injunctive relief, and attorneys' fees and costs.¹⁹

The record company plaintiffs also allege they possess exclusive ownership interests in thousands of other sound recordings under California Civil Code § 980(a)(2).²⁰ They assert, on information and belief, that defendants have reproduced, distributed, and publicly performed these recordings without permission, and seek injunctive relief and compensatory and punitive damages in an amount to be proved at trial.²¹ Finally, the record company plaintiffs assert an unfair competition claim under the UCL and common law.²² They contend that defendants' unlawful appropriation of their property rights constitutes unfair competition, and ask that the court order defendants to account for all profits and compensation obtained through their unlawful conduct and permanently enjoin any further infringement of their exclusive rights in and to the music compositions, sound recordings, and music videos.²³ They also seek punitive damages.²⁴

B. Facts Alleged in the Counterclaims

Counterclaimants allege that Inflight has contracts with various domestic and international airlines to provide in-flight audio entertainment for airline passengers.²⁵ As part of its service, Inflight uses music produced by plaintiffs.²⁶ In 2009, Infight allegedly contacted plaintiffs via Rightscom (an IP rights consultant in the United Kingdom), seeking a license to correct Inflight's "licensing gaps" in the United States.²⁷ Plaintiffs purportedly agreed to the terms of a negotiated license agreement with Inflight, and promised to transmit contracts to it documenting the agreement.²⁸ They assured Inflight, allegedly in bad faith, that until such time as it received the contract, its continued, unlicensed reproduction and distribution of plaintiffs' works in the United States was acceptable.²⁹ Plaintiffs purportedly continued to make this representation to Inflight throughout 2010 and 2011.³⁰ Counterclaimants contend that plaintiffs' representations were false,³¹ and made intentionally and in wanton disregard of their rights;³² that plaintiffs concealed their intention to seek to hold counterclaimants liable for Inflight's unlicensed use of plaintiffs' works in the United States;³³ and that, if such misrepresentations were not intentional, they were negligent.³⁴ Counterclaimants argue that they reasonably relied on plaintiffs' promises and that, as a direct and proximate result of such promises, they have suffered damage.³⁵

Counterclaimants also assert that plaintiffs interfered with Inflight's current contractual relationships with airlines, as well as its prospective business relationships.³⁶ In November 2013, plaintiffs allegedly sent a cease-and-desist communication to Inflight.³⁷ The counterclaims allege that after the cease-and-desist communication was sent and suit was filed, plaintiffs communicated directly with the domestic and international airlines Inflight serves, and sought to negotiate agreements directly with them.³⁸ Consequently, Inflight was forced to discontinue its audio reproduction and distribution of plaintiffs' works in the United States and had to move all operations abroad where it has valid licenses. This purportedly led to severe damages.³⁹ Inflight contends that plaintiffs' interference was intentional and in wanton disregard of its rights.⁴⁰ To the extent the interference was not intentional, it asserts, it was negligent.⁴¹

II. DISCUSSION

A. Legal Standard Governing Motions to Dismiss Under Rule 12(b)(6)

A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. A Rule 12(b)(6) dismissal is proper only where there is either a "lack of a cognizable legal theory," or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir.1988). The court must accept all factual allegations pleaded in the complaint as true, and construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir.1996) ; Mier v. Owens, 57 F.3d 747, 750 (9th Cir.1995).

The court need not, however, accept as true unreasonable inferences or conclusory legal allegations cast in the form of factual allegations. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ("While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do"). Thus, a plaintiff's complaint must "contain sufficient factual matter, accepted as true, to ...