Welles v. Turner Entertainment Co.

• Decision Date: 30 May 2007
• Docket Number: No. 05-55742.,05-55742.
• Citation: 503 F.3d 728
• Parties: Beatrice WELLES, Plaintiff-Appellant, v. TURNER ENTERTAINMENT COMPANY; Entertainment Acquisition Company, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

503 F.3d 728

Beatrice WELLES, Plaintiff-Appellant, v. TURNER ENTERTAINMENT COMPANY; Entertainment Acquisition Company, Inc., Defendants-Appellees.

No. 05-55742.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 16, 2007.

Filed May 30, 2007.

Amended September 11, 2007.

Steven Ames Brown, San Francisco, CA, for plaintiff-appellant Beatrice Welles.

David W. Quinto, Daryl M. Crone, Quinn Emanuel Urquhart Oliver & Hedges LLP, Los Angeles, CA, for defendants-appellees Turner Entertainment Co. and Entertainment Acquisition Co.

Appeal from the United States District Court for the Central District of California John F. Walter, District Judge, Presiding. D.C. No. CV-04-03077-JFW.

Before: JEROME FARRIS and RONALD M. GOULD, Circuit Judges, and KEVIN THOMAS DUFFY,^* District Judge.

ORDER

The opinion filed May 30, 2007 is amended as follows:

On page 6443 of the slip opinion, after the sentence "We hold that the contract is ambiguous regarding which party owns the right to exploit the Citizen Kane screenplay on home video," insert a footnote containing the following text:

In so holding, we do not adopt a presumption against applying a grant of rights in "motion pictures" to new technologies. Instead, we simply interpret the written contract of the parties in this case, as our precedent instructs. See Maljack Prods., Inc. v. GoodTimes Home Video Corp., 81 F.3d 881, 885 (9th Cir.1996); Cohen, 845 F.2d at 854; see also Boosey & Hawkes Music Publishers v. Walt Disney Co., 145 F.3d 481, 487 (2d Cir.1998) (holding that "new-use analysis should rely on neutral principles of contract interpretation" and that "the language of the contract" governs). In some cases, a contract might permit the licensee to exploit the work in a new medium without a future technologies clause. For example, in Maljack Productions, we held that a licensee obtained the right to exploit certain music in a motion picture in a new medium when the license had no future technologies clause but granted the licensee "any and all worldwide rights under copyright and otherwise . . . to the music and musical composition recorded or contained upon the sound track of the Picture." 81 F.3d at 884-85 (alteration in original, internal quotation marks omitted). However, in this case, the Production Agreement, in addition to having no future technologies clause, granted RKO only motion picture and television rights in the Citizen Kane screenplay while granting Mercury broad, residual rights in the screenplay. It is thus not clear to us to whom the parties would have intended to grant the right to exploit the screenplay in new mediums.

With these amendments, the petition for rehearing is DENIED. No judge has requested a vote on the petition for rehearing en banc. The petition for rehearing en banc is DENIED. No further petitions will be entertained.

OPINION

GOULD, Circuit Judge.

Beatrice Welles, the daughter of screenwriter, filmmaker, and actor Orson Welles, filed suit against Turner Entertainment Co., Entertainment Acquisition Co., and other persons not parties to this appeal (collectively, "the defendants"), seeking a declaratory judgment that Beatrice Welles owns the copyright and home video rights to the motion picture Citizen Kane and seeking an accounting of the royalties she alleges she is owed from the profits of the motion picture. The district court granted summary judgment for the defendants. Because there are triable issues of fact, we vacate in part and remand.

I

The district court disposed of this case by summary judgment, so we consider the facts in the light most favorable to Beatrice Welles. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

A

Several separate contracts between Orson Welles, Mercury Productions, Inc. (a production company owned by Orson Welles), and RKO Radio Pictures, Inc. are integral to this case.¹

On July 22, 1939, Orson Welles, Mercury, and RKO signed two agreements. The first agreement, between Mercury and RKO (the "Production Agreement"), provided that "[RKO] hereby engages [Mercury] to produce, direct and write the screenplay for the two (2) motion pictures hereinafter described, which are herein referred to as `the Pictures.'"

Section 13 of the Production Agreement determines who owns the fruits of the RKO-Mercury Production Agreement. That section begins:

[RKO] shall own the negative and positive prints of each of the Pictures and all rights of every kind and nature in and to each Picture, and all parts thereof and all material, tangible and intangible, used therein, as soon as such rights come into existence, including, but not being limited to, the exclusive rights of distribution, exploitation, manufacture, recordation, broadcasting, televising (other than in connection with the advertising or exploitation of a commercial product or service), and reproduction by any art or method, and the literary, dramatic, musical and other works included in such Picture. . . . [Mercury] agrees that it will have no interest of any kind in either of the Pictures, except as in this agreement expressly provided.

Section 13 concludes with what the parties call the "original story" provision. The provision states:

In case of any original story written by [Mercury] or any of its employees and used as the basis of either Picture, however, [RKO] shall acquire the motion picture and television rights in such story for such Picture only. [RKO] shall not remake any such Picture unless [Mercury] produces or directs the same or unless [RKO] buys the remake rights from[Mercury] at a price satisfactory to both parties. [Mercury] shall own the publication, radio, dramatic and other rights in any such story but shall not use the same in any way to compete with or injure the distribution of the Picture based on such story.

The second agreement entered into on July 22, 1939, between Orson Welles and RKO (the "Actor Agreement"), provided that Orson Welles would play the leading male role in the two motion pictures produced pursuant to the Production Agreement and that Orson Welles would receive compensation of $30,000 plus a percentage of the net profits of the two motion pictures.

On December 26, 1939, Orson Welles and RKO amended the Actor Agreement by providing that Orson Welles would act in a third film in addition to the two pictures already agreed upon. On January 14, 1941, Mercury and RKO entered into another supplemental agreement, providing that the first motion picture Orson Welles and Mercury would make for RKO would be "based upon an original story, tentatively entitled `Citizen Kane.'"

RKO released Citizen Kane on May 1, 1941. By December 15, 1944, Citizen Kane had not turned a profit, the second film produced under the Production Agreement, entitled It's All True, was not finished, and production had not commenced on the third film described in the supplemental agreement. To end their business relationship, Mercury, Orson Welles, and RKO entered into an agreement that terminated the Production and Actor Agreements and their amendments (the "Exit Agreement").

Signed on December 15, 1944, the Exit Agreement first outlined the prior agreements between the parties. It then stated:

All fixed compensation payable to Mercury or Welles for services in connection with the first two motion pictures has been paid in full. Welles under the agreements of the parties is entitled, as contingent compensation, to twenty per cent (20%) of the net profits of the first two pictures as a unit. No net profits resulted from the sale and distribution of the first picture produced under the title "CITIZEN KANE", and accordingly Welles is entitled to no contingent compensation.

It is now the mutual desire of the parties to terminate and cancel each and all of the existing agreements between [RKO] and Mercury and between [RKO] and Welles, and to mutually release and discharge each party to each of said agreements from all rights, duties, liabilities and obligations thereunder and from all claims, demands and causes of action of every kind and nature of each party as against the other party.

The Exit Agreement also gave Orson Welles the option to purchase from RKO for $200,000 all of the film recorded for It's All True.

B

Beatrice Welles's complaint in this case asserted four claims. The first claim, seeking declaratory relief, alleged that the Exit Agreement restored to Orson Welles the copyright to the Citizen Kane² motion picture and that, even if the Exit Agreement did not restore all of Orson Welles's rights to Citizen Kane, the Production Agreement did not provide the defendants with the right to reproduce and distribute Citizen Kane on home video. The second claim, also seeking declaratory relief, asserted that the Exit Agreement only extinguished Orson Welles's past claims against the defendants and did not extinguish Orson Welles's right to collect 20% of the profits from Citizen Kane in the future, and, alternatively, that the parties subsequently entered into a new agreement to share the income from Citizen Kane. The third and fourth claims sought damages for breach of contract and unfair business practices, respectively.

On December 6, 2004, the district court granted the defendants' motion for summary judgment on Beatrice Welles's first, second, and fourth claims, and for partial summary judgment on the third claim. On appeal, Beatrice Welles only argues that the district court erred in granting summary judgment on her first claim — seeking a declaratory judgment that she owns the copyright and home video rights to the motion picture Citizen Kane — and on her second claim — seeking an accounting.

II

We review de novo the district court's decision to grant summary judgment. Olympic Pipe Line Co. v. City of Seattle, 437 F.3d 872, 877 n. 11 (9th Cir. 2006). Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is...