Worldwide Subsidy Group, LLC v. Motion Picture Association of America, Inc. et al

Filing 1

Worldwide Subsidy Group, LLC v. Motion Picture Association of America, Inc. et al

Doc. 1

'FILED
KARIN G. PAGNANELLI ( SBN 174763) k msk.com C E. MAYER ( SBN 190969) mem@ms k. com MITCHELL SILBERBERG & KNUPP LLP 11377 West Ol Ric Boulevard Los Angeles, California 90064-1683 Telephone: [phone] Facsimile: (3103 312-3100 GREGORY 0.OLANIRAN (pro hac vice pending) LUCY HOLMES PLOVNICK (pro hac vice pending) STINSON MORRISON HECKER LLP 1150 18th Street NW, Suite 800 Washington, D.C. 20036-3816 Telephone: [phone] Facsimile: 2023 785-9163 Attorneys for Defendant MOTION PICTURE ASSOCIATION OF AMERICA, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

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WORLDWIDE SUBSIDY GROUP, LLC, a Texas Limited Liability Company dba INDEPENDENT PRODUCERS GROUP; WORLDWIDE SUBSIDY GROUP, LLC, a California Limited Liability Company, formerly named ARTIST COLLECTIONS GROUP, LLC, Plaintiffs, V. MOTION PICTURE ASSOCIATION OF AMERICA, INC., a New York Corporation doing business in Californi a; and DOES 1 through 10, inclusive, Defendants.

CASE

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NOTICE OF REMOVAL OF ACTION

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Dockets.Justia.com

PLEASE TAKE NOTICE that Defendant MOTION PICTURE ASSOCIATION OF AMERICA, INC. ("Defendant ") hereby removes to this Court the state court action described below. 1. On April 29, 2008 , Plaintiffs commenced an action in the Superior

Court of the State of California for the County of Los Angeles, entitled, "Worldwide Subsidy Group , LLC, dba Independent Producers Group, et al . , Plaintiffs, v. Motion Picture Association of America Inc.; and Does 1 through 10, inclusive , Defendants " as Case No. BC389895 ("State Court Action "). A true and correct copy of the Complaint is attached as Exhibit 1. A true and correct copy of the Summons is attached as Exhibit 2. 2. Defendant was served with a copy of the Complaint by personal

service on May 8, 2008. Defendant has not filed an Answer or any other responsive document. 3. To Defendant's knowledge, no other pleadings or documents have

been filed in the State Court Action. Accordingly, Exhibits 1 and 2 attached hereto constitute all of the process, pleadings, and orders received by Defendant in the State Court Action. See 28 U.S.C. § 1446(a). 4. This Notice of Removal is filed within thirty days of the date that the

Defendant was first served with process. Accordingly, Defendant's removal is timely pursuant to 28 U.S.C. § 1446(b) Murphy Bros., Inc.,'y. Michetti Pipe Stringing Co., 526 U.S. 344, 349, 119 S. Ct. 1322, 143 L. Ed. 2d 448 (1999). 5. The Complaint is a civil action of which this Court has original

jurisdiction under 28 U.S.C. § 1331 (federal question jurisdiction), and is one which maybe removed to this Court pursuant to 28 U.S.C. § 1441(b). The Los Angeles County Superior Court is located within the Central District of California. Accordingly, removal to the Central District of California Central Division is proper. See 28 U.S.C. § 1441(a).

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The Complaint purports to allege claims for a judicial declaration that

a three-party settlement agreement involving Plaintiffs, Defendant, and the United States Librarian of Congress ("Librarian") is void, and also for rescission of a portion of the agreement. See Exh. 1, Compl. ¶T 21-29 (the two part, three-party settlement agreement is hereinafter referred to as the "Contract"). Part 1 of the

6 1 Contract is between Plaintiffs and Defendant. Part 2 of the Contract is between 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Plaintiffs, Defendant, and the Librarian. Although Plaintiffs make reference to the Contract throughout the Complaint, see Exh. 1, Compl. 111-4, 12-16, 21-29, and attached a letter to the Complaint that discusses the Contract and all three parties

1 thereto, Exh. 1, Compl. Exh. D at 1-2, Plaintiffs failed to identify the Librarian in
the Complaint as a party to the Contract. Defendants hereby attach a copy of the Contract hereto as Exhibit 3, which Plaintiffs also failed to attach to the Complaint.' 6.1 Defendant is a trade association that represents the interests of motion

picture, home video, and television industries domestically and worldwide. More pertinently, Defendant represents the interests of producers and distributors of syndicated series, specials, and movies broadcast on television stations which are entitled to receive compulsory license royalties paid by cable operators and satellite carriers and collected by the United States Copyright Office ("Office") pursuant to 17 U.S.C. §§ 111 and 119 ("Royalties"). Plaintiffs are limited liability

21 1 corporations organized pursuant to the laws of California and Texas, representing 22 the interests of entities asserting claims to a portion of the Royalties. 23 24 25 26 27 Mitchell 28
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6.2

The United States Library of Congress ("Library"), headed by the

Librarian, is an agency of the legislative branch of the United States government. The Office is a department within the Library. At all times relevant to this case,

1 administering the Royalties scheme, including authorizing distribution of the
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i For confidentiality purposes, Defendant has redacted the amount paid to Plaintiffs under the Contract.

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Royalties, fell within the jurisdiction of the Office. See 17 U.S.C. § 801 (1995). Pursuant to the statutory scheme in effect during the relevant period, when parties asserting a claim to the compulsory license royalty fund for a given year were unable to reach an agreement regarding the distribution of the royalty funds, the Office convened a Copyright Royalty Arbitration Panel ("CARP") to resolve the dispute . See id.; see also 17 U.S.C. § 802(c ) (1995). Upon petition by one of the parties to the distribution proceedings , the CARP' s decision was subject to review by the Librarian, who thereafter issued the final agency determination as to the royalty distribution . 17 U.S.C. § 802(f) (1995 ). Exclusive jurisdiction over any appeal of the Librarian' s decision was vested in the United States Court of Appeals for the District of Columbia Circuit. 17 U.S.C . § 802(g) (1995).2 6.3 On November 1, 2000 , the Office initiated a CARP proceeding to

arbitrate a dispute between the Plaintiffs and the Defendant regarding the distribution of cable royalties collected for the 1997 royalty year. See 65 Fed. Reg. 65335 (2000). The CARP' s initial findings, dated April 16, 2001, were rejected by the Librarian on June 53 2001 . See 66 Fed. Reg. 66433 , 66434 (2001). The CARP issued revised findings on June 20 , 2001, which the Librarian again rejected. The Librarian then remanded the proceeding for consideration by a new CARP in a final order dated December 26, 2001 ("Agency Determination "). See 66 Fed. Reg.

20 ` at 66434 . Both Plaintiffs and Defendant appealed the Agency Determination to the 21 22 23 24 25 26 2 Pursuant to the Copyright Royalty Distribution and Reform Act of 2004 ("CRDRA"), which was enacted on November 30, 2004, See P. L. 108-419 District of Columbia Circuit Court of Appeals: See Exh . 1, Compl. at ¶ 3, Compl. Exh. A at 1, Compl . Exh. D at 1 . The Librarian was named as the Respondent in both appellate cases.

(Nov. 30, 2004), authority to order distribution of the Royalties is currently vested 27 in the Copyright Royalty Judges, a newly-created independent entity within the Mitchell 28 Library. See 17 U.S.C. § 801 (2004). Silberberg &
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6.4

On March 31, 2004, following court-directed mediation, Plaintiffs,

Defendant, and the Librarian executed the Contract, in two parts, settling not only 3 the pending appellate cases, but also resolving all disputes between the parties as to

4 the 1997, 1998, and 1999 cable and satellite royalty funds.3 See Exh. 3. The 5 6 7 8 9 10 11 12 13 Complaint seeks a declaratory judgment that the Contract is void, and inexplicably seeks to rescind only Part 2 of the Contract. Exh. 1, Compl. at IT 21-29. 7. The United States Supreme Court has held that certain disputes

involving "uniquely federal interests" are so important to the federal government that "federal common law" related to those areas will supplant state law either partially or entirely. Boyle v. United Technologies Corp., 487 U.S. 500, 504, 108 S. Ct. 2510, 101.L. Ed. 2d 442 (1988). In such disputes federal common law replaces state law regardless of whether Congress has shown any intent to preempt the area. Id. When a cause of action arises under federal common law, federal

14 N question jurisdiction is appropriate under 28 U.S.C. § 1331. See Arizona 15 16 17 18 19 20 21 22 23 .24 25 3 An agreement to settle a legal dispute is a contract . United States v. ITT 26 n C onti nental Banking Co ., 420 U.S. 223, 238, 95 S. Ct.926, 43 L. Ed. Zd 148 27 1(1975).
Mitchell 28 Silberberg & Knapp LLP 1858670.1 DB04n62224.0063/458563.3

Oddfellow-Rebekah Housing, Inc. v. U.S. Dept. of Housing and Urban Development, 125 F.3d 771, 774 n.4 (9th Cir. 1997); see also Patrickson v. Dole Food Company, 251 F.3d 795, 800 (9th Cir. 2001) (citing Illinois v. City of Milwaukee, 406 U. S. 91, 100, 92 S. Ct. 1385, 31 L. Ed. 2d 712 (1972)). 7.1 Courts utilize a two-part test for determining the applicability of

federal common law to a given case. First, the matter must involve a uniquely federal interest. Boyle, 487 U.S. at 507. Determination of whether a significant federal interest exists in a dispute requires the court to ascertain whether the dispute "`touches the rights and duties of the United States."' Id. at 506 (quoting Bank of America Nat. Trust & Sav. Ass'n v. Parnell, 352 U.S. 29, 33, 77 S. Ct.

119, 1 L. Ed. 2d 93 ( 1956)). Second, a "significant conflict" must exist between an 2 3 4 5 6 identifiable federal policy or interest and the effect of state law. Boyle, 487 U.S. at 507; see also Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 693, 126 S. Ct. 21219 165 L. Ed. 2d 131 (2006). As discussed in detail below, both Boyle factors are established in the instant matter, and afford subject matter jurisdiction over this matter in this Court pursuant to 28 U.S.C. § 1331. 7.2 8 9 10 11 12 13 14 15 16 17 18 19 Because uniquely federal interests are implicated when the

government is a party to a contract, federal common law governs the contract's interpretation. Bole, 487 U.S. at 504 ("The obligations and rights of the United States under its contracts are governed exclusively by federal law."); see also Clearfield Trust Co. v. United States, 318 U.S. 363, 366-67, 63 S. Ct. 573, 87 L.Ed. 838 (1943); Saavedra v. Donovan, 700 F.2d 496,498 (9th Cir. 1983); Wright v. Foreign Service Grievance Board, 503 F.Supp.2d 163, 173 (D.D.C. 2007). Even when a dispute over a government contract involves private parties, federal common law still displaces state law if the litigation directly affects a federal interest. Id. at 507; see also Almond v. Capital Properties, Inc., 212 F.3d 20, 23-24 (1 st Cir. 2000) (citing Price v. Pierce, 823 F.2d 1114, 1119-20 (7th Cir. 1987), cert. denied, 485 U.S. 960, 108 S. Ct. 1222, 99 L.Ed. 2d 422 (1988)). 7.3 Notwithstanding Plaintiffs' failure to name the Librarian as a party in

20 the Complaint, the Librarian is a party to the 'Contract. Therefore, uniquely federal 21 22 23 24 25 26
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interests are implicated. Indeed, the Librarian's rights and obligations - including all actions taken by the Librarian pursuant to and in reliance upon the Contract are directly affected by the two causes of action in the Complaint. 7.4 First, the instant action directly affects the Librarian's interest in

maintaining the resolution of the two appellate cases against him that were dismissed pursuant to the Contract. The Contract required Plaintiffs and
Defendant to dismiss their respective appellate cases that were pending against the Librarian in the District of Columbia Circuit Court of App eals. See Exh. 1,
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Compl. at 13; Exh. 3 at Part 2, p. 2 13. If the Contract is deemed void or 2 3 4 5 6 rescinded, the Librarian will be directly affected because Defendant (and perhaps Plaintiffs) could seek to reinstate the appellate cases against the Librarian. 7.5 Second, this action directly affects the action taken by the Librarian to

vacate the Agency Determination and to terminate the royalty distribution proceeding that gave rise to that Agency Determination. Exh. 3 at Part 2, p. 2 ¶ 4 and Appendix A. In compliance with the Contract, on April 2, 2004, the Librarian entered an order vacating the Agency Determination terminating the proceeding that.gave rise to the appellate cases. See Notice, 69 Fed. Reg. 2381, 23822 (2004). Further, in reliance on the terminated proceeding, the Librarian distributed all cable royalties held in reserve for 1997. See id. If the Contract is deemed void or rescinded, the Librarian has an interest in addressing the status of its April 2, 2004 order. Moreover, the Librarian has an interest in addressing the legality of full distribution of the 1997 cable royalties. 7.6 Third, this action raises the question of which department within the

Library would have jurisdiction over a new 1997 royalty distribution proceeding if the appellate cases were unsuccessful and the Agency Determination reinstated). As noted above, see ¶ 6.2, with the enactment of the CRDRA in 2004, Congress substantially modified the compulsory license statutory scheme that was in place at the time the Contract was negotiated. Following the enactment of the CRDRA, all cable and satellite compulsory license distribution proceedings must be commenced before the Copyright Royalty Judges. See 17 U.S.C. § 801 (2004). The CRDRA also contains transitional provisions which require the Librarian to retain jurisdiction over any cable or satellite distribution proceeding that commenced prior to the effective date of the CRDRA, and allow any appellate proceeding commenced prior to its effective date to continue until such matters can be terminated or resolved. See P. L. 108-419, Sec. 6(b) (Nov. 30, 2004). On
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August 10, 2007, the Librarian announced the end of the CRDRA transitional 6

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period by terminating all outstanding cable and satellite distribution proceedings and announcing that jurisdiction over any undistributed royalties would now vest in the Copyright Royalty Judges. See 72 Fed. Reg. 45071, 45071 (2007). Thus, pursuant to the intent of the CRDRA, it would appear the Librarian has relinquished its jurisdiction over cable and satellite royalty distribution proceedings. 7.7 However, each of the copyright royalty distribution proceedings

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referenced in the Contract (i.e., proceedings to resolve the distribution of the 1997, 1998, and 1999 cable and satellite royalty funds) commenced prior to the effective date of the CRDRA. Moreover, the appellate cases against the Librarian that were settled in the Contract also commenced prior to the CRDRA, and were seeking review of the Agency Determination under the pre-CRDRA statutory scheme. If the Contract is void or is rescinded, the Librarian will be forced to not only defend the Agency Determination in two pre-CRDRA appellate cases but also, depending on the outcome of those cases, exercise jurisdiction over a new 1997 cable royalty distribution proceeding brought under the pre-CRDRA statutory scheme. If there has to be a royalty distribution proceeding, there is a jurisdictional question as to whether the proceeding should be conducted by the Librarian through the Office, which oversaw the initial royalty distribution proceeding, or the Copyright Royalty Judges, who are currently authorized to do so under the CRDRA. The Librarian has an interest in determining the internal jurisdictional issues that would result from having to administer a royalty distribution proceeding. 7.8 Consequently, the possible reinstatement of the appellate cases, the

status of the Librarian's April 2, 2004 order vacating the Agency Determination, and internal jurisdictional issues within the Library constitute unique federal interests. 8..
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In addition to the clear implication of federal interests, a significant

conflict exists in this matter between federal interests and the effect of state law.
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See Boyle, 487 U.S. at 507. Plaintiffs seek to void or rescind a settlement 2 3 4 5 6 7 agreement with a federal agency pursuant to state law in a state forum . Exh. 1, Compl. at IT 21-29. As the United States Supreme Court has recognized, "dealings which may be `ordinary' or `local ' as between private citizens raise serious questions of national sovereignty when... transactions undertaken by the Federal Government are involved." See United States v. Little Lake Misere Land Co., Inc., 412 U.S. 580, 592, 93 S. Ct. 2389, 37 L. Ed. 2d 187 (1973). In such cases, state law must give way to federal law. See id. Moreover, as Boyle 9 1 recognized, the mere possibility of a conflict and any attendant damage to federal 10 1 interests is sufficient to allow federal common law to displace state law. Boyle, 11 12 13 14 15 16 17 18 19 20 2.1 22 23 487 U.S. at 507-08. Here, because the Librarian is a party to the Contract, significant federal interests are implicated to require the displacement of state law in favor of federal common law. 9. Because federal common law governs the Contract that Plaintiffs seek

to rescind in its Complaint, Plaintiffs' cause of action arises under federal common law. Therefore, jurisdiction is appropriate in this Court under 28 U.S.C. § 1331. See Arizona Oddfellow-Rebekah Housing, Inc. v. U.S. Dept. of Housing and Urban Development , 125 F.3d 771, 774 n.4 (9th Cir. 1997); see also Patrickson v. Dole Food Company, 251 F.3d 795, 800 (9th Cir. 2001) (citing Illinois v. City of Milwaukee , 406 U.S. 91, 100, 92 S. Ct. 1.385 , 31 L. Ed. 2d 712 (1972)). 10 . Plaintiffs cannot escape the preemption of federal common law by the

"artful pleading" of state law contract claims. See Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 474, 118 S. Ct. 921, 139 L. Ed. 2d 912 (1998). This is

24 true even though the Complaint omits reference to the fact that the Librarian is a 25 26 27
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party to the Contract and purports to base claims only on state law. Id.; see Laws v. Calmat, 852 F.2d 430,432 (9th Cir. 1988), overruled in part Cramer v. Consols Frei twUs, 255 F.3d 683 (9th Cir. 2001) (the "artful pleading" doctrine requires

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re-characterizin g the alleged state law claims as arising under federal law); see g )^

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generally Schroeder v. Trans World Airlines, Inc., 702 F.2d 189, 191 (9th Cir. 1983) ("Artful pleading by the Plaintiff will not be allowed to conceal the true nature of a complaint," when a plaintiff has attempted to avoid a federal claim by relying solely on state law in the complaint). 11. This Court need not and should not, at this time, determine the

underlying merits of Plaintiffs' claims. This Court need and should determine only that resolving these claims requires an interpretation of a federal government contract, and thus arise under federal common law. Such a determination suffices to establish subject matter jurisdiction under 28 U.S.C. § 1331. See Arizona Oddfellow-Rebekah Housing, Inc., supra, 125 F.3d at 774, n.4. 12. Should the Court determine that it has subject matter jurisdiction over

only one count of the Complaint, Plaintiffs' other cause of action is also removable. The two claims in the Complaint arise out of the same common 14 15 nucleus of operative facts, and thus if one claim is preempted, both claims are removable pursuant to 28 U.S.C. § 1367. Moreover, considerations of judicial economy, convenience and fairness to the litigants require that all of the claims alleged in the Complaint be tried in one forum. See United Mine Workers v. Gibbs, 383 U.S. 715, 725-26, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966) (pendent jurisdiction exists if the state and federal claims "derive from a common nucleus of operative facts". or are such that a plaintiff "would ordinarily be expected to try them all in one judicial proceeding"). 13. Written notice of the filing of this Notice of Removal and of the

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removal of the State Court Action is being delivered to all parties through their counsel of record. A copy of this Notice of Removal will be filed promptly with the Clerk of the Superior Court, County of Los Angeles, California. 14. The undersigned has read this Notice of Removal, and, to the best of

the undersigned's knowledge, information and belief, formed after reasonable inquiry, it is well-grounded in fact, is warranted by existing law, and is not
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interposed for any improper purpose, such as to harass, to cause unnecessary delay, 2 1 or needlessly to increase the cost of litigation. Therefore, Defendant hereby removes the State Court Action from the 4 5 Superior Court of the State of California for the County of Los Angeles to this Court.

DATED: June 6, 2008

GREGORY O. OLANIRAN LUCY HOLMES PLOVNICK STINSON MORRISON BECKER LLP KARIN G. PAGNANELLI MARC E. MAYER MITCHELL SILBERBERG & KNUPP LLP

MARC JZ' AYER Attorneys for Defendant MOTION PICTURE ASSOCIATION OF AMERICA, INC.

Mitchell 28 Silberberg & KnUpp LLP 358670.1 DB04 /762224. 0063/458563.3 10