Forest Park Pictures v. Universal Television Network, Inc. , 683 F.3d 424 ( 2012 )


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  •      11-2011-cv
    Forest Park Pictures v. Universal Television Network, Inc.
    1                        UNITED STATES COURT OF APPEALS
    2                            FOR THE SECOND CIRCUIT
    3
    4                                August Term 2011
    5          (Argued: November 14, 2011           Decided: June 26, 2012)
    6                             Docket No. 11-2011-cv
    7   -----------------------------------------------------x
    8
    9   FOREST PARK PICTURES, TOVE CHRISTENSEN, and HAYDEN
    10   CHRISTENSEN,
    11
    12               Plaintiffs-Appellants,
    13
    14                           -- v. --
    15
    16   UNIVERSAL TELEVISION NETWORK, INC.,
    17
    18               Defendant-Appellee.
    19
    20
    21   -----------------------------------------------------x
    22
    23   B e f o r e :     WALKER, RAGGI and LIVINGSTON, Circuit Judges.
    24          Plaintiffs-Appellants Forest Park Pictures, Tove
    25   Christensen, and Hayden Christensen appeal from an order of the
    26   United States District Court for the Southern District of New
    27   York (Colleen McMahon, Judge) granting Defendant-Appellee
    28   Universal Television Network’s motion to dismiss on the grounds
    29   that this breach of contract action is preempted by the Copyright
    30   Act.   We reach a different conclusion.         Plaintiffs-Appellants
    31   adequately alleged a contract that includes an implied promise to
    1
    1   pay.   Because this claim is based on rights that are not the
    2   equivalent of those protected by the Copyright Act, it is not
    3   preempted.   VACATED and REMANDED.
    4                                   DAVID MAREK (John R. Halter, on the
    5                                   brief), Liddle & Robinson, L.L.P.,
    6                                   New York, New York, for Plaintiffs-
    7                                   Appellants.
    8
    9                                   SUSAN WEINER, NBCUniversal Media,
    10                                   LLC, New York, New York (Robert
    11                                   Penchina and Amanda M. Leith,
    12                                   Levine Sullivan Koch & Schulz,
    13                                   L.L.P., New York, New York, on the
    14                                   brief), for Defendant-Appellee.
    15
    16   JOHN M. WALKER, JR., Circuit Judge:
    17          This dispute over the concept for a television show presents
    18   the question of the extent to which the Copyright Act, 17 U.S.C.
    19   § 101 et seq., preempts contract claims involving copyrightable
    20   property.    Plaintiffs-Appellants Forest Park Pictures, Hayden
    21   Christensen, and Tove Christensen (collectively, “Forest Park”)
    22   developed an idea for a television series and created a writing
    23   that embodied it, known in the industry as a “series treatment.”
    24   Forest Park submitted its idea, first by mail and then in person,
    25   to Defendant-Appellee USA Network, a division of Universal
    26   Television Network, Inc. (“USA Network”).   Forest Park alleges an
    27   implied promise by USA Network to pay reasonable compensation if
    28   the idea were used.   The District Court for the Southern District
    29   of New York (Colleen McMahon, Judge) held that the Copyright Act
    30   preempted a breach of contract claim based on idea submission,
    2
    1   and granted USA Network’s motion to dismiss.    We reach a
    2   different conclusion.    Forest Park adequately alleged the breach
    3   of a contract that included an implied promise to pay.    Because
    4   this claim is based on rights that are not the equivalent of
    5   those protected by the Copyright Act, it is not preempted.
    6
    7                                 BACKGROUND
    8   Facts
    9           Because Forest Park appeals from an order dismissing the
    10   complaint on the pleadings, we accept as true the facts alleged
    11   in the Third Amended Complaint (“Complaint”).    See Hutchison v.
    12   Deutsche Bank Sec. Inc., 
    647 F.3d 479
    , 481 (2d Cir. 2011).     In
    13   2005, Forest Park formulated a concept for a television show
    14   called “Housecall,” in which a doctor, after being expelled from
    15   the medical community for treating patients who could not pay,
    16   moved to Malibu, California, and became a “concierge” doctor to
    17   the rich and famous.    Forest Park created a written series
    18   treatment for the idea, including character biographies, themes,
    19   and storylines.    It mailed this written material to Alex Sepiol,
    20   who worked for USA Network.
    21           After sending the written materials, Forest Park requested a
    22   meeting between its representatives and Sepiol.    Sepiol scheduled
    23   the meeting “for the express purpose of hearing Plaintiffs pitch”
    24   their show.    Complaint ¶ 12.   At the time, Sepiol and USA Network
    3
    1   knew “that writer-creat[o]rs pitch creative ideas to prospective
    2   purchasers with the object of selling those ideas for
    3   compensation” and “that it was standard in the entertainment
    4   industry for ideas to be pitched with the expectation of
    5   compensation in the event of use.”     Id. ¶ 9.    And, at the
    6   meeting, “[i]t was understood that Plaintiffs were pitching those
    7   ideas with the object of persuading USA Network to purchase those
    8   ideas for commercial development.”     Id. ¶ 13.   Sepiol said that
    9   prior to hearing the idea for “Housecall,” he had never heard of
    10   “concierge” doctors, or doctors who make house calls for wealthy
    11   patients, and “thought it was a fascinating concept for a
    12   television show.”    Id. ¶ 15.   Over the course of the following
    13   week, Sepiol and Forest Park exchanged further communications;
    14   however, discussions soon ceased and no further contact between
    15   the parties ensued.
    16        A little less than four years later, USA Network produced
    17   and aired a television show called “Royal Pains,” in which a
    18   doctor, after being expelled from the medical community for
    19   treating patients who could not pay, became a concierge doctor to
    20   the rich and famous in the Hamptons.    Forest Park had no prior
    21   knowledge of “Royal Pains,” did not consent to its production,
    22   and received no compensation from USA Network for the use of its
    23   idea for the show.
    24
    4
    1   Prior Proceedings
    2        Forest Park Pictures, located in California, and the
    3   Christensens, residents of California and Toronto, Canada,
    4   brought a diversity action against USA Network and Universal
    5   Television Network, a New York corporation, for breach of
    6   contract.   USA Network moved under Federal Rule of Civil
    7   Procedure 12(b)(6) to dismiss the Complaint on the grounds that
    8   the Copyright Act preempted the claim and that the contract was
    9   too vague to be enforced.   The district court held the claim
    10   preempted and dismissed the Complaint without addressing the
    11   vagueness argument.   Forest Park Pictures v. Universal Television
    12   Network, Inc., No. 10 Civ. 5168(CM), 
    2011 WL 1792587
    , at * 3,
    13   
    2011 U.S. Dist. LEXIS 50081
    , at *9 (S.D.N.Y. May 10, 2011).
    14   Forest Park timely appealed the dismissal.
    15
    16                               DISCUSSION
    17        This appeal presents two questions:     first, whether Forest
    18   Park’s breach of implied contract claim is preempted by the
    19   Copyright Act; and second, if such a claim is not preempted,
    20   whether Forest Park adequately pleaded a claim under state law.
    21   We hold that Forest Park’s claim is not preempted and that the
    22   Complaint pleads an enforceable contract under state law that
    23   survives a motion to dismiss.
    5
    1        We review de novo a district court’s dismissal of a
    2   complaint under Rule 12(b)(6), accepting all of the complaint’s
    3   factual allegations as true and drawing all reasonable inferences
    4   in the plaintiffs’ favor.   Interpharm, Inc. v. Wells Fargo Bank,
    5   Nat’l Ass’n, 
    655 F.3d 136
    , 141 (2d Cir. 2011).     The complaint
    6   must state a claim that is plausible on its face.    Bell Atl.
    7   Corp. v. Twombly, 
    550 U.S. 544
    , 570 (2007).   A claim has “facial
    8   plausibility when the plaintiff pleads factual content that
    9   allows the court to draw the reasonable inference that the
    10   defendant is liable for the misconduct alleged.”    Ashcroft v.
    11   Iqbal, 
    556 U.S. 662
    , 678 (2009).
    12   I.   Preemption
    13        We first turn to USA Network’s argument that Forest Park’s
    14   claim is preempted.   Section 301 of the Copyright Act expressly
    15   preempts a state law claim only if (i) the work at issue “come[s]
    16   within the subject matter of copyright” and (ii) the right being
    17   asserted is “equivalent to any of the exclusive rights within the
    18   general scope of copyright.”   
    17 U.S.C. § 301
    (b); see Barclays
    19   Capital Inc. v. Theflyonthewall.com, Inc., 
    650 F.3d 876
    , 892 (2d
    20   Cir. 2011).
    21        A. Subject Matter Requirement
    22        In order to be preempted, a claim must involve a work
    23   “within the subject matter of copyright.”   
    17 U.S.C. § 301
    (a).
    24   Copyright protection exists for “original works of authorship
    6
    1   fixed in any tangible medium of expression,” but does not extend
    2   to an “idea, . . . regardless of the form in which it is
    3   described, explained, illustrated, or embodied.”          17 U.S.C.
    4   § 102(a), (b).   We have held, however, that works may fall within
    5   the subject matter of copyright, and thus be subject to
    6   preemption, even if they contain material that is uncopyrightable
    7   under section 102.   See Barclays Capital, 
    650 F.3d at 892
    ; Nat’l
    8   Basketball Ass’n v. Motorola, Inc. (“NBA”), 
    105 F.3d 841
    , 849 (2d
    9   Cir. 1997); Harper & Row, Publishers, Inc. v. Nation Enters., 723
    
    10 F.2d 195
    , 200 (2d Cir. 1983), rev’d on other grounds, 
    471 U.S. 11
       539 (1985).   See generally 4 Melville B. Nimmer & David Nimmer,
    12   Nimmer on Copyright § 19D.03[A][2][b] (2011).      In Harper & Row,
    13   for example, the work at issue, President Ford’s memoirs,
    14   contained uncopyrightable facts.       723 F.2d at 200.    Nevertheless,
    15   we held that the factual content of the book did not remove the
    16   work as a whole (indisputably a literary work of authorship, see
    17   § 102(a)(1)) from the subject matter of copyright.         Harper & Row,
    18   723 F.2d at 200; see also Barclays Capital, 
    650 F.3d at 892, 902
    .
    19   Similarly, in Briarpatch Ltd. v. Phoenix Pictures, Inc., 
    373 F.3d 20
       296 (2d Cir. 2004), we held that a novel fell within “the broad
    21   ambit of the subject matter categories” listed in section 102(a)
    22   despite containing uncopyrightable ideas.      Id. at 306.      The scope
    23   of copyright for preemption purposes, then, extends beyond the
    24   scope of available copyright protection.
    7
    1          The reason for our broad interpretation of the scope of
    2   copyright preemption is that Congress, in enacting section 301,
    3   created a regime in which some types of works are copyrightable
    4   and others fall into the public domain.      See NBA, 
    105 F.3d at
    5   849.   In preempting certain state causes of action, Congress
    6   deprived the states of the power to “vest exclusive rights in
    7   material that Congress intended to be in the public domain.”
    8   Id.; see also Harper & Row, 723 F.2d at 200 (recognizing that it
    9   would “run directly afoul of one of the Act’s central purposes”
    10   to allow the states to expand copyright protection to works
    11   Congress deemed uncopyrightable).      Section 301’s preemption
    12   scheme functions properly only if the “‘subject matter of
    13   copyright’ includes all works of a type covered by sections 102
    14   and 103, even if federal law does not afford protection to them.”
    15   NBA, 
    105 F.3d at 850
     (quoting ProCD, Inc. v. Zeidenberg, 
    86 F.3d 16
       1447, 1453 (7th Cir. 1996)).
    17          The work at issue in this case is Forest Park’s idea for
    18   “Housecall,” manifested in the series treatment (comprising
    19   character biographies, themes, and storylines).       This treatment
    20   and associated written materials are “works of authorship that
    21   are fixed in a tangible medium.”       
    17 U.S.C. § 301
    (a).   Although
    22   Forest Park’s Complaint does not allege that USA Network took its
    23   actual scripts or biographies, the subject matter requirement is
    24   met because the Complaint alleges that USA Network used the ideas
    8
    1   embodied in those written works.       That the work contains within
    2   it some uncopyrightable ideas does not remove it from the subject
    3   matter of copyright.   See Briarpatch, 373 F.3d at 305.      Moreover,
    4   because the ideas that are the subject of the claim were fixed in
    5   writing—whether or not the writing itself is at issue—the claim
    6   is within the subject matter of copyright.      See NBA, 
    105 F.3d at
    7   849; see also Montz v. Pilgrim Films & Television, Inc., 
    649 F.3d 8
       975, 979 (9th Cir. 2011) (en banc) (holding that an idea for a
    9   television show, once fixed in a tangible medium, fell within the
    10   subject matter of copyright); Wrench LLC v. Taco Bell Corp., 256
    
    11 F.3d 446
    , 455 (6th Cir. 2001) (holding that an idea for a
    12   character, conveyed in storyboards, scripts, and drawings, was
    13   within the subject matter of copyright).      Therefore, the first
    14   requirement for preemption is met.
    15        B. Equivalency Requirement
    16        In order to establish preemption, USA Network must also
    17   demonstrate that the Complaint seeks to vindicate a “legal or
    18   equitable right[] that [is] equivalent to any of the exclusive
    19   rights within the general scope of copyright as specified by
    20   section 106.”   
    17 U.S.C. § 301
    (a).     Section 106 gives copyright
    21   owners the exclusive rights, among other things, to reproduce a
    22   copyrighted work, to prepare derivative works, to distribute
    23   copies of the work to the public, and to display the work
    24   publicly.   
    17 U.S.C. § 106
    .   A state law right is equivalent to
    9
    1   one of the exclusive rights of copyright if it “may be abridged
    2   by an act which, in and of itself, would infringe one of the
    3   exclusive rights.”   Harper & Row, 723 F.2d at 200.   “But if an
    4   extra element is required instead of or in addition to the acts
    5   of reproduction, performance, distribution or display, in order
    6   to constitute a state-created cause of action,” there is no
    7   preemption.   Computer Assocs. Int’l, Inc. v. Altai, Inc., 982
    
    8 F.2d 693
    , 716 (2d Cir. 1992) (internal quotation marks omitted).
    9        Applying this “extra element” test, we have held numerous
    10   categories of claims to be not preempted, including trade secret
    11   claims, in which the plaintiff must show the defendant breached a
    12   duty of trust through improper disclosure of confidential
    13   material, id. at 717; certain “hot news” misappropriation claims,
    14   because the plaintiff must show time-sensitive factual
    15   information, free-riding by the defendant, and a threat to the
    16   very existence of the plaintiff’s product, NBA, 
    105 F.3d at 853
    ;
    17   and breach of confidential relationship, in which the plaintiff
    18   must show an obligation not to disclose ideas revealed in
    19   confidence, Smith v. Weinstein, 
    578 F. Supp. 1297
    , 1307 (S.D.N.Y.
    20   1984), aff’d without opinion, 
    738 F.2d 419
     (2d Cir. 1984).     See
    21   also Harper & Row, 723 F.2d at 201 (in dictum, suggesting that
    22   conversion based on physical possession and control of a
    23   copyrighted work may not be preempted because such a tort
    24   involves “acts . . . qualitatively different from those
    10
    1   proscribed by copyright law”).   By contrast, we have found a
    2   state law claim preempted when the extra element changes the
    3   scope but not the fundamental nature of the right.   See, e.g.,
    4   Briarpatch, 373 F.3d at 306-07 (holding an unjust enrichment
    5   claim preempted because, although plaintiff must prove
    6   “enrichment,” the essential nature of the claim remained the
    7   unauthorized use of a work); Fin. Info., Inc. v. Moody’s
    8   Investors Serv., Inc., 
    808 F.2d 204
    , 208 (2d Cir. 1986) (holding
    9   that a misappropriation claim was preempted because the element
    10   of commercial immorality did not change qualitative nature of the
    11   right); Harper & Row, 723 F.2d at 201 (holding that a claim of
    12   conversion based on unauthorized publication of a work was
    13   preempted because it is “coextensive with an exclusive right
    14   already safeguarded by the Act”).
    15        In this case, the issue is whether a particular breach of
    16   contract claim survives preemption.   More specifically, Forest
    17   Park alleges that it entered into an implied-in-fact agreement
    18   with USA Network that required USA Network to pay Forest Park for
    19   the use of its idea.   See Complaint ¶¶ 24-26.   There are several
    20   qualitative differences between such a contract claim and a
    21   copyright violation claim.   First, the Copyright Act does not
    22   provide an express right for the copyright owner to receive
    23   payment for the use of a work.   It simply gives the copyright
    24   owner the right to prevent distribution, copying, or the creation
    11
    1   of derivative works (though, of course, the copyright owner may
    2   cede or all part of these rights for payment).   See 17 U.S.C.
    3   § 106.   Second, a plaintiff suing for failure to pay under a
    4   contract must prove extra elements beyond use or copying,
    5   including mutual assent and valid consideration.   Third, a breach
    6   of contract claim asserts rights only against the contractual
    7   counterparty, not the public at large.    As the Seventh Circuit
    8   explained in ProCD, “A copyright is a right against the world.
    9   Contracts, by contrast, generally affect only their parties;
    10   strangers may do as they please, so contracts do not create
    11   ‘exclusive rights.’”   86 F.3d at 1454.
    12        A number of our sister circuits have accordingly concluded
    13   that at least some contract claims involving the subject matter
    14   of copyright do not contest rights that are the equivalent of
    15   rights under the Copyright Act, and thus are not preempted.     See
    16   Montz, 649 F.3d at 980-81 (implied-in-fact contract); Utopia
    17   Provider Sys., Inc. v. Pro-Med Clinical Sys., L.L.C., 
    596 F.3d 18
       1313, 1326-27 (11th Cir. 2010) (express contract); Bowers v.
    19   Baystate Techs., Inc., 
    320 F.3d 1317
    , 1324-26 (Fed. Cir. 2003)
    20   (applying First Circuit law to an express contract in a software
    21   license); Wrench, 256 F.3d at 456 (implied-in-fact contract);
    22   ProCD, 86 F.3d at 1454-55 (express contract in a software
    23   license); Nat’l Car Rental Sys., Inc. v. Computer Assocs. Int’l,
    24   Inc., 
    991 F.2d 426
    , 431 (8th Cir. 1993) (express licensing
    12
    1   agreement); Taquino v. Teledyne Monarch Rubber, 
    893 F.2d 1488
    ,
    2   1490, 1501 (5th Cir. 1990) (express contract); Acorn Structures,
    3   Inc. v. Swantz, 
    846 F.2d 923
    , 926 (4th Cir. 1988) (per curiam)
    4   (express contract); see also 4 Nimmer § 19D.03[C][2] (“As a
    5   general rule, contract claims require proof of a significant
    6   ‘extra element’: the existence of an actual agreement between
    7   plaintiff and defendant involving a promise to pay for use of
    8   disclosed ideas.   That conclusion is the same, regardless of
    9   whether the particular claim at issue is labeled express contract
    10   [or] implied-in-fact contract . . . .” (footnotes omitted)).    Of
    11   course, preemption cannot be avoided simply by labeling a claim
    12   “breach of contract.”   A plaintiff must actually allege the
    13   elements of an enforceable contract (whether express or implied-
    14   in-fact), including offer, acceptance, and consideration, in
    15   addition to adequately alleging the defendant’s breach of the
    16   contract.
    17        As long as the elements of a contract are properly pleaded,
    18   there is no difference for preemption purposes between an express
    19   contract and an implied-in-fact contract.   See, e.g., Leibowitz
    20   v. Cornell Univ., 
    584 F.3d 487
    , 507 (2d Cir. 2009) (under New
    21   York law, proof of an implied-in-fact contract requires proof of
    22   the same elements as an express contract); Warner Bros. Int’l
    23   Television Distribution v. Golden Channels & Co., 
    522 F.3d 1060
    ,
    24   1069 (9th Cir. 2008) (same under California law).   There is,
    13
    1   however, a significant difference for preemption purposes between
    2   contracts implied-in-fact and contracts implied-in-law.    Theories
    3   of implied-in-law contract, quasi-contract, or unjust enrichment
    4   differ significantly from breach of contract because the
    5   plaintiff need not allege the existence of an actual agreement
    6   between the parties.    See 1-1 Corbin on Contracts § 1.20 (“A
    7   contract ‘implied in law’ is a fictitious contract. . . . A
    8   contract ‘implied in fact’ is a true contract that arises from
    9   the tacit agreement of the parties.”).    Under these quasi-
    10   contractual theories, the plaintiff need only prove that the
    11   defendant was unjustly enriched through the use of her idea or
    12   work.    Such a claim is not materially different from a claim for
    13   copyright infringement that requires a plaintiff to prove that
    14   the defendant used, reproduced, copied, or displayed a
    15   copyrighted work.    See Briarpatch, 373 F.3d at 306 (finding no
    16   extra element in an unjust enrichment claim); see also Wrench,
    17   256 F.3d at 459 (noting that there is “a crucial difference”
    18   between implied-in-fact contracts and implied-in-law contracts
    19   because the latter “depend[] on nothing more than the
    20   unauthorized use of the work”); 4 Nimmer §§ 19D.03[B][6], [7]
    21   (unjust enrichment and quasi-contract preempted).
    22           In this case, we need not address whether preemption is
    23   precluded whenever there is a contract claim, or only when the
    24   contract claim includes a promise to pay.    Compare Montz, 649
    14
    1   F.3d at 980-81 (holding that the element of mutual assent in a
    2   contract claim can by itself provide the “extra element”), with
    3   Wrench, 256 F.3d at 457-58 (holding that the promise of payment
    4   in a contract claim provides the “extra element”).   See also 4
    5   Nimmer § 19D.03[C][2] (suggesting that a contract that “does not
    6   purport to give [the plaintiff] any protection beyond that
    7   provided . . . by copyright law itself” would be preempted).
    8   Here the Complaint specifically alleges that the contract
    9   includes by implication a promise to pay for the use of Forest
    10   Park’s idea.   See Complaint ¶ 11 (alleging that it was understood
    11   when Forest Park met with Sepiol they were “pitching . . . ideas
    12   with the object of persuading USA Network to purchase those ideas
    13   for commercial development) (emphasis added); id. ¶ 25 (“USA
    14   Network voluntarily accepted Plaintiffs’ ideas knowing full well
    15   that Plaintiffs had submitted those ideas in confidence and for
    16   economic gain, and with the clear expectation of payment in the
    17   event those ideas were utilized by USA Network. . . .”) (emphasis
    18   added).   The alleged contract does not simply require USA Network
    19   to honor Forest Park’s exclusive rights under the Copyright Act
    20   (assuming the material at issue to be copyrightable); it requires
    21   USA Network to pay for the use of Forest Park’s ideas.   A claim
    22   for breach of a contract including a promise to pay is
    15
    1   qualitatively different from a suit to vindicate a right included
    2   in the Copyright Act and is not subject to preemption.1
    3   II.   Breach of Contract
    4         The next question we must consider is whether the Complaint
    5   actually pleads an enforceable implied-in-fact contract
    6   containing a promise to pay.    USA Network argues that the
    7   Complaint falls short because there was no meeting of the minds
    8   over the price term.     The district court decided (erroneously, in
    9   our view) that contract claims based on the submission of works
    10   or ideas were preempted, and thus it did not reach this issue.
    11   See Forest Park Pictures, 
    2011 WL 1792587
    , at *3, 2011 U.S. Dist.
    
    12 LEXIS 50081
    , at *5.
    13         A. Choice of Law
    14         Determining whether Forest Park pleaded an enforceable
    15   implied-in-fact contract requires us to examine state law and,
    16   because it matters, we must decide which state’s law applies.
    17   Forest Park contends that California law governs the contract;
    18   USA Network argues for New York law.    Neither party suggests that
    19   the choice of law can be determined from the implied contract
    20   itself.
    1
    We need not here consider whether even a promise to pay may be
    insufficient to avoid preemption in circumstances where, through
    contracts of adhesion or similar instruments, a plaintiff uses
    such promises to create a de facto monopoly at odds with federal
    copyright policy. See Arthur R. Miller, Common Law Protection
    for Products of the Mind: An “Idea” Whose Time Has Come, 
    119 Harv. L. Rev. 703
    , 768-74 (2006). That is not this case.
    16
    1        A federal court sitting in diversity jurisdiction applies
    2   the choice of law rules of the forum state.   See Klaxon Co. v.
    3   Stentor Elec. Mfg. Co., 
    313 U.S. 487
    , 496-97 (1941); GlobalNet
    4   Financial.com, Inc. v. Frank Crystal & Co., 
    449 F.3d 377
    , 382 (2d
    5   Cir. 2006).   Under the law of New York, the forum state, the
    6   first step in a choice of law analysis is to determine whether an
    7   actual conflict exists between the laws of the jurisdictions
    8   involved.   In re Allstate Ins. Co. (Stolarz), 
    81 N.Y.2d 219
    , 223
    9   (1993); see also GlobalNet Financial.com, 
    449 F.3d at 382
    .      If
    10   there is such a conflict, New York law looks to the “center of
    11   gravity” of a contract to determine choice of law.   Stolarz, 81
    12   N.Y.2d at 226.   Under the “center of gravity” approach, a court
    13   may consider a number of significant contacts, including the
    14   place of contracting, the place of performance, the physical
    15   location of property that is the subject matter of the contract,
    16   and the domiciles or places of business of the contracting
    17   parties.    Id. at 227; see also Lazard Freres & Co. v. Protective
    18   Life Ins. Co., 
    108 F.3d 1531
    , 1539 (2d Cir. 1997).   The place of
    19   contracting and place of performance are given the greatest
    20   weight.    Stolarz, 81 N.Y.2d at 226.
    21        While neither New York nor California law is absolutely
    22   clear, there does appear to be at least one conflict between the
    23   two states that is relevant to Forest Park’s claim: the question
    24   of whether a contract can be enforced without a definite price
    17
    1   term.    Under California law, an implied-in-fact contract can have
    2   an open price term to be filled in by industry standards.    See,
    3   e.g., Whitfield v. Lear, 
    751 F.2d 90
    , 93 (2d Cir. 1984)
    4   (declining to dismiss a claim under California law when the
    5   plaintiff alleged that a television studio voluntarily accepted a
    6   script and also that industry custom indicated a promise to pay);
    7   Montz, 649 F.3d at 979.    Whether New York law follows the same
    8   rule is not clear.    In Lapine v. Seinfeld, 
    918 N.Y.S.2d 313
     (N.Y.
    9   Sup. Ct. 2011), a New York court found a lack of mutual assent,
    10   but also noted that “price is an essential element of a
    11   contract.”    Id. at 318; see also Marraccini v. Bertelsmann Music
    12   Grp., Inc., 
    644 N.Y.S.2d 875
    , 877 (N.Y. App. Div. 3d Dep’t 1996)
    13   (dismissing an implied-in-fact contract claim on the pleadings
    14   because there were open-ended terms, and industry standards that
    15   plaintiff claimed could fill them were not identified).    But see
    16   Nadel v. Play-By-Play Toys & Novelties, Inc., 
    208 F.3d 368
    , 376 &
    17   n.5 (2d Cir. 2000) (noting that an implied-in-fact contract must
    18   have mutual assent, but that it can be inferred from “the
    19   specific conduct of the parties, industry custom, and course of
    20   dealing”) (citing Maas v. Cornell Univ., 
    94 N.Y.2d 87
    , 94
    21   (1999)).
    22           Given the opacity of New York law, we cannot confidently say
    23   that there is no divergence between California and New York law.
    24   Therefore, we next must determine the “center of gravity” of the
    18
    1   contract.   Here, almost all of the significant contacts are with
    2   California: the sole face-to-face meeting between Forest Park and
    3   USA Network was in California; at least part of the performance
    4   (Forest Park’s disclosure in writing and orally of its idea) took
    5   place there; the written series treatment was physically located
    6   there; two out of the three plaintiffs are California residents;
    7   and, while Universal Television Network’s principal place of
    8   business is in New York, all of the activity related to this
    9   contract took place in USA Network’s California offices.    See,
    10   e.g., Tri-State Emp’t Servs., Inc. v. Mountbatten Sur. Co., 295
    
    11 F.3d 256
    , 261 (2d Cir. 2002) (applying New York law where the
    12   parties were either incorporated in New York or had their
    13   principal places of business there, where the oral contract was
    14   negotiated in New York, and where performance took place in part
    15   in New York); Twentieth Century Fox Film Corp. v. Marvel Enters.,
    16   Inc., 
    155 F. Supp. 2d 1
    , 13 (S.D.N.Y. 2001) (applying California
    17   law to a contract negotiated entirely in California, and
    18   performed in both New York and California).   We therefore hold
    19   that California law applies.   The remaining question before us
    20   thus becomes whether Forest Park has alleged an enforceable
    21   contract under California contract law.
    22        B. Implied-in-Fact Contract
    23        California has long recognized that an implied-in-fact
    24   contract may be created where the plaintiff submits an idea (the
    19
    1   offer) that the defendant subsequently uses (the acceptance)
    2   without compensating the plaintiff (the breach).     In Desny v.
    3   Wilder, 
    46 Cal. 2d 715
     (1956) (en banc), the plaintiff, Desny,
    4   telephoned Billy Wilder, then a producer and writer for Paramount
    5   Pictures, and told Wilder’s secretary that he had an idea for a
    6   film.    
    Id. at 726
    .   At the secretary’s request, Desny forwarded
    7   to Wilder a brief synopsis of the movie idea and stated that, if
    8   the idea were used, he expected to be paid.     
    Id. at 726-27
    .
    9   Faced with the enforceability of such an agreement, the
    10   California Supreme Court held that a contract claim based on the
    11   submission of an idea could succeed either if the plaintiff
    12   received “an express promise to pay” or if “the circumstances
    13   preceding and attending disclosure, together with the conduct of
    14   the offeree acting with knowledge of the circumstances, show a
    15   promise of the type usually referred to as ‘implied’ or ‘implied-
    16   in-fact.’”    
    Id. at 738
    .   For almost six decades following Desny,
    17   California courts have continued to recognize contract claims
    18   under the authority of that case.      See Montz, 649 F.3d at 976-77.
    19           A plaintiff in a Desny action can prevail by proving that an
    20   idea was submitted with an understanding by the plaintiff
    21   amounting to a condition that the plaintiff would be paid for use
    22   of the idea and that the defendant knew or should have known of
    23   the condition.    See Benay v. Warner Bros. Entm’t, Inc., 
    607 F.3d 24
       620, 629 (9th Cir. 2010); see also Grosso v. Miramax Film Corp.,
    20
    1   
    383 F.3d 965
    , 967 (9th Cir. 2004) (a Desny claim requires that
    2   the offeree voluntarily accepted the idea knowing that use was
    3   conditioned on payment, looking to all the circumstances
    4   attending disclosure).   An express condition or promise of
    5   payment is not required.   See Gunther-Wahl Prods., Inc. v.
    6   Mattel, Inc., 
    128 Cal. Rptr. 2d 50
    , 57-59, 63 (Cal. Ct. App.
    7   2002).   Industry custom may establish an implied promise by the
    8   offeree to pay the offeror if the idea is used under the
    9   circumstances of a particular transaction.   Whitfield, 
    751 F.2d 10
       at 93; Gunther-Wahl, 
    128 Cal. Rptr. 2d at 53-61
    .
    11        Here, although Forest Park does not allege that it expressly
    12   conditioned disclosure on a promise of payment, the Complaint
    13   alleges facts that, if proven, would establish that USA Network
    14   knew or should have known such a condition was implied.    Forest
    15   Park alleges that it pitched its ideas to USA Network “with the
    16   object of persuading USA Network to purchase those ideas for
    17   commercial development,” and that USA Network and its agent
    18   Sepiol “at all relevant times knew (a) that writer-creators pitch
    19   creative ideas to prospective purchasers with the object of
    20   selling those ideas for compensation; and (b) that it was
    21   standard in the entertainment industry for ideas to be pitched
    22   with the expectation of compensation in the event of use.”
    23   Complaint ¶¶ 9, 13.   Moreover, the Complaint alleges that USA
    24   Network accepted Forest Park’s idea when it knew or should have
    21
    1   known of that condition by keeping the series treatment Forest
    2   Park submitted, scheduling a meeting with Forest Park, allowing
    3   Forest Park to pitch its idea uninterrupted, and communicating
    4   with Forest Park after the meeting.   See Whitfield, 752 F.2d at
    5   93 (noting that, by opening and reviewing a submitted script, a
    6   producer might implicitly promise to pay for ideas if he uses
    7   them, assuming the existence of an industry custom of returning
    8   unwanted submissions unopened); Gunther-Wahl, 
    128 Cal. Rptr. 2d 9
       at 53-54 (describing plaintiff’s evidence of industry custom to
    10   cut off a pitch if the offeree meant to reject an idea).    These
    11   allegations are sufficient to plead a Desny claim under
    12   California law.
    13        USA Network argues that even if Forest Park did allege an
    14   implied-in-fact agreement, the agreement would not be enforceable
    15   because it lacks a definite price term.   California courts,
    16   however, enforce contracts without exact price terms as long as
    17   the parties’ intentions can be ascertained.   See, e.g., Cal.
    18   Lettuce Growers, Inc. v. Union Sugar Co., 
    45 Cal. 2d 474
    , 482
    19   (1955) (en banc).   And California permits custom and usage (among
    20   other extrinsic evidence) to supply absent terms.   Whitfield, 751
    21   F.2d at 93; Cal. Lettuce Growers, 
    45 Cal. 2d at 482
    .   In Desny
    22   itself, an enforceable contract was found even though the
    23   plaintiff stated he expected to be paid “the reasonable value” of
    24   his idea.   
    46 Cal. 2d at 727
    .
    22
    1        Forest Park alleges that it agreed with USA Network to be
    2   paid the industry standard for its idea, which is enough under
    3   California law to survive a motion to dismiss.   At trial, Forest
    4   Park will have to prove that such an industry standard price
    5   exists and that both parties implicitly agreed to it.   That
    6   Forest Park might fail to prove its claim, however, does not
    7   render the contract unenforceable as a matter of law at the
    8   pleading stage.   Because Forest Park has alleged an enforceable
    9   implied-in-fact contract including a promise of payment for the
    10   disclosure of its idea, its claim is not preempted by the
    11   Copyright Act and therefore the district court erred in
    12   dismissing the Complaint.
    13
    14                               CONCLUSION
    15        For the foregoing reasons, we VACATE the district court’s
    16   judgment dismissing Forest Park’s complaint and REMAND for
    17   further proceedings.
    23
    

Document Info

Docket Number: Docket 11-2011-cv

Citation Numbers: 683 F.3d 424, 103 U.S.P.Q. 2d (BNA) 1122, 40 Media L. Rep. (BNA) 1985, 2012 U.S. App. LEXIS 13068, 2012 WL 2382528

Judges: Walker, Raggi, Livingston

Filed Date: 6/26/2012

Precedential Status: Precedential

Modified Date: 10/19/2024

Authorities (26)

Hutchison v. Deutsche Bank Securities Inc. , 647 F.3d 479 ( 2011 )

Lazard Freres & Co., Plaintiff-Counter-Defendant-Appellee v.... , 108 F.3d 1531 ( 1997 )

Klaxon Co. v. Stentor Electric Manufacturing Co. , 61 S. Ct. 1020 ( 1941 )

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Maas v. Cornell University , 94 N.Y.2d 87 ( 1999 )

Leibowitz v. Cornell University , 584 F.3d 487 ( 2009 )

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Ashcroft v. Iqbal , 129 S. Ct. 1937 ( 2009 )

Interpharm, Inc. v. Wells Fargo Bank, National Association , 655 F.3d 136 ( 2011 )

Smith v. Weinstein , 738 F.2d 419 ( 1984 )

Thurman v. Whitfield v. Norman Lear, Tandem Productions, ... , 751 F.2d 90 ( 1984 )

the-national-basketball-association-and-nba-properties-inc , 105 F.3d 841 ( 1997 )

National Car Rental System, Inc. v. Computer Associates ... , 991 F.2d 426 ( 1993 )

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Financial Information, Inc. v. Moody's Investors Service, ... , 88 A.L.R. Fed. 141 ( 1986 )

Barclays Capital Inc. v. Theflyonthewall. Com, Inc. , 650 F.3d 876 ( 2011 )

Marraccini v. Bertelsmann , 644 N.Y.S.2d 875 ( 1996 )

Smith v. Weinstein , 578 F. Supp. 1297 ( 1984 )

Globalnet financial.com, Inc. v. Frank Crystal & Co., Inc., ... , 449 F.3d 377 ( 2006 )

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