Rock River Communications, Inc. v. Universal Music Group, Inc. , 745 F.3d 343 ( 2014 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ROCK RIVER COMMUNICATIONS, No. 11-57168
INC.,
Plaintiff-Appellant, D.C. No.
2:08-cv-00635-
v. CAS-AJW
UNIVERSAL MUSIC GROUP, INC.;
UMG RECORDINGS, INC.;
UNIVERSAL MUSIC GROUP,
INTERNATIONAL, LTD.,
Defendants-Appellees.
ROCK RIVER COMMUNICATIONS, No. 12-55180
INC.,
Plaintiff-Appellee, D.C. No.
2:08-cv-00635-
v. CAS-AJW
UNIVERSAL MUSIC GROUP, INC.;
UMG RECORDINGS, INC.; ORDER AND
UNIVERSAL MUSIC GROUP, AMENDED
INTERNATIONAL, LTD., OPINION
Defendants-Appellants.
Appeal from the United States District Court
for the Central District of California
Christina A. Snyder, District Judge, Presiding
2 ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP
Argued and Submitted
May 9, 2013—Pasadena, California
Filed September 18, 2013
Amended January 22, 2014
Before: Harry Pregerson and Raymond C. Fisher, Circuit
Judges, and Wiley Y. Daniel, District Judge.*
Opinion by Judge Fisher
SUMMARY**
California Tort Law
The panel filed an order amending its opinion of
September 18, 2013, and denying petitions for panel
rehearing and rehearing en banc in a case concerning the
licensing rights for several musical recordings by Bob Marley
and the Wailers.
In its opinion, the panel affirmed in part and reversed in
part the district court’s judgment in favor of the defendants
and remanded the case for trial. The panel reversed the
district court’s grant of summary judgment on a claim for
intentional interference with prospective economic advantage
*
The Honorable Wiley Y. Daniel, Senior United States District Judge
for the District of Colorado, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP 3
under California law, alleging that the defendants
inappropriately blocked the plaintiff from distributing its
album of Marley remixes by wrongfully threatening to sue
the plaintiff’s distributors. The panel held that, although
there can be no liability for interfering with a business
expectancy that is invalid or illegal, the defendant has the
burden to prove the invalidity or illegality of the business
expectancy as an affirmative defense. The panel held that the
defendants could not obtain summary judgment based on
holes in the plaintiff’s claim to a valid license when the value
of the defendants’ own licensing rights was equally spotty.
The panel affirmed the district court’s holding that triable
issues of fact prevented summary adjudication of a Noerr-
Pennington defense, under which pre-litigation material is
immune from suit unless the threatened lawsuit was a
“sham.” The panel also affirmed the district court’s ruling
that the defendants did not implicitly waive privilege over
their attorney-client communications.
The panel amended the opinion by deleting footnote 6,
which addressed the factual record relevant to the Noerr-
Pennington issue.
4 ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP
COUNSEL
Donald Manwell Falk (argued), Mayer Brown, LLP, Palo
Alto, California; Maxwell Blecher and Courtney A. Palko,
Blecher & Collins, P.C., Los Angeles, California, for
Plaintiff/Appellant/Cross-Appellee.
Kelly M. Klaus (argued), David C. Dinielli and Benjamin J.
Maro, Munger, Tolles & Olson LLP, Los Angeles, California,
for Defendants/Appellees/Cross-Appellants.
ORDER
The opinion filed September 18, 2013, and appearing at
730 F.3d 1060, is amended as follows: delete footnote 6.
With this amendment, the panel has voted to deny the
petition for panel rehearing. Judge Pregerson has voted to
deny the petition for rehearing en banc and Judges Fisher and
Daniel recommended denying the petition for rehearing en
banc.
The full court has been advised of the petition for
rehearing en banc and no judge has requested a vote on
whether to rehear the matter en banc. Fed. R. App. P. 35.
The petition for panel rehearing and rehearing en banc,
filed October 9, 2013, is DENIED.
No further petitions for rehearing will be accepted.
ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP 5
OPINION
FISHER, Circuit Judge:
This case concerns the licensing rights for several early
musical recordings by reggae legends Bob Marley and the
Wailers. When the music was initially recorded in Jamaica
in the 1960s, record keeping was not a primary concern. The
absence of legal documentation has led to confusion in the
marketplace as to which entities own licensing rights for
these recordings.
Defendants Universal Music Group, Inc., UMG
Recordings, Inc. and Universal Music Group International,
Ltd. (collectively, UMG) successfully invoked this lack of
documentation in the district court to obtain summary
judgment on plaintiff Rock River Communications, Inc.’s
(Rock River) claim for intentional interference with
prospective economic advantage. Rock River’s lawsuit
alleged that UMG inappropriately blocked Rock River from
distributing its album of Marley remixes by wrongfully
threatening to sue Rock River’s distributors. UMG persuaded
the district court that unless Rock River had proof that its
chain of licensing rights was valid – dating all the way back
to the initial musicians and producers – then UMG could not
be liable, because there is no liability for interference with an
invalid business expectancy.
UMG is only half right. Although there can be no
liability for interfering with a business expectancy that is
invalid or illegal, the defendant has the burden to prove the
invalidity or illegality of the business expectancy. UMG
cannot obtain summary judgment based on the holes in Rock
River’s claim to a valid license when the validity of UMG’s
6 ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP
own licensing rights is equally spotty. We therefore reverse
the grant of summary judgment and remand for trial. We also
reject UMG’s argument that we should affirm the district
court’s grant of summary judgment on the alternative basis of
Noerr-Pennington immunity.
I. Factual Background
Rock River is a producer, seller and distributor of music
records. In 2006, Rock River entered into a licensing
agreement with San Juan Music Group, Ltd. (San Juan),
whereby San Juan, in exchange for a licensing fee, granted
Rock River a nonexclusive license to “sample” or
“interpolate” 16 musical recordings (the Recordings)
performed by Bob Marley and the Wailers (Marley). San
Juan is a music licensing company that, since 1980, has been
licensing recordings by Marley through an agreement with
Lee Perry, the producer of many of Marley’s early
recordings.
Rock River invested its time and creativity into creating
new remixes of the Recordings (the Remixes), and it
registered copyrights for the Remixes. Rock River partnered
with an independent record label and created an album called
“Roots, Rock, Remixed” that included 12 of the Remixes.
Rock River secured digital distribution of the album on
iTunes and distribution of physical albums in stores. Rock
River also had plans with Relativity Media to use one of the
Remixes – a remix of the song “Lively Up Yourself” – in the
“Dear John” motion picture and soundtrack. At this time,
Rock River was unaware that San Juan’s authority to license
the Recordings was disputed by any entity.
ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP 7
In October 2007, however, UMG sent a cease-and-desist
letter to Rock River claiming that UMG owned exclusive
licensing rights to all the Recordings remixed on the album
“Roots, Rock, Remixed” and that Rock River therefore could
not release its album without a license from UMG. UMG, the
largest record company in the world, claimed to have
purchased the exclusive licensing rights from a company
called JAD Records in 2003. UMG also began calling and
sending letters to Rock River’s business partners asserting
that Rock River’s album violated UMG’s exclusive licensing
rights to the Recordings:
(1) UMG sent a letter to Apple requesting that Apple
remove the album from the iTunes store within seven
days. The letter referred to previous phone calls to
the same effect.
(2) UMG threatened to sue Relativity if it used Rock
River’s remix of “Lively Up Yourself” in the “Dear
John” film or soundtrack without licensing it from
UMG.
(3) UMG instructed Rock River’s distributer, Fontana (a
subsidiary of UMG), to stop distributing physical
copies of Rock River’s album.
(4) UMG urged EMI Music Group to withdraw from
negotiations with Rock River to distribute the album
outside of North America.
As a result of these letters and phone calls, Relativity decided
not to use “Lively Up Yourself” in the “Dear John” film and
soundtrack, Apple pulled “Roots, Rock, Remixed” from the
8 ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP
iTunes store and Rock River’s distributors ceased distribution
of the album.
II. Procedural Background
In January 2008, Rock River sued UMG for wrongfully
disrupting Rock River’s efforts to make money from its
album of Remixes by falsely claiming to own exclusive
licensing rights to the Recordings. The district court
dismissed Rock River’s first few pleading attempts under the
Noerr-Pennington doctrine,1 but after the district court
permitted limited discovery, Rock River was able to survive
UMG’s motions to dismiss.2 The operative complaint alleged
violations of the Sherman Act, 15 U.S.C. § 2, and the Clayton
Act, 15 U.S.C. § 18, intentional interference with contract,
intentional interference with prospective economic advantage
(IIPEA) and misrepresentation in violation of 17 U.S.C.
§ 512(f). On UMG’s first motion for summary judgment, the
district court dismissed all of Rock River’s claims except for
its IIPEA claim.
1
The Noerr-Pennington doctrine, originally derived from the decisions
in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc.,
365 U.S. 127 (1961), and United Mine Workers v. Pennington, 381 U.S.
657 (1965), provides that litigation activity (including pre-litigation cease-
and-desist letters) cannot form the basis of liability unless the litigation is
a “sham.” See Or. Natural Res. Council v. Mohla, 944 F.2d 531, 534 (9th
Cir. 1991); Sosa v. DIRECTV, Inc., 437 F.3d 923, 939–40 (9th Cir. 2006).
2
Based on the fruits of its limited discovery, Rock River alleged facts
specific enough to satisfy the district court that triable issues existed on
whether UMG sent its cease-and-desist letters in bad faith, such that the
litigation threatened by UMG in those letters was a “sham.”
ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP 9
As the parties prepared for trial on the one remaining
claim, UMG used its motions in limine to pursue the
following theory: (1) as part of its case-in-chief, Rock River
was required to prove that its business expectancy was
“valid” – in other words, Rock River had to prove it was
legally authorized to use all of the music on its album; (2) if
San Juan did not have the right to license one or more of the
Recordings, then its attempt to license such Recording to
Rock River was invalid; and (3) thus, if San Juan did not have
licensing rights for all the Recordings, then Rock River’s use
of the Recordings was unauthorized by law, Rock River had
no right to distribute its album, and Rock River lacked a
lawful business expectancy with which UMG could have
interfered. In short, UMG argued it cannot be held liable for
interfering with an illegal business expectancy, such as album
sales of an album that violates copyright law. The ingenuity
of this theory, although we ultimately reject it, is that it seeks
to allow UMG to prevail without requiring UMG to actually
establish that Rock River’s album infringed on anyone’s
licensing rights. Instead, it casts the licensing rights issue as
an essential part of Rock River’s case-in-chief.
For nine of the tracks on Rock River’s album, Rock River
proffered evidence directly supporting its claim that San Juan
obtained licensing rights from Lee Perry, the original
producer of the Recordings. For the other three tracks (the
“Three Tracks”), Rock River could not uncover any
documents directly illustrating how San Juan obtained the
right to license the Recordings. Rock River’s position is that
San Juan obtained a nonexclusive right to license the Three
Tracks through an oral licensing agreement between San Juan
and Lee Perry. But on UMG’s motion, the district court
excluded as hearsay the testimony of San Juan’s current
president, Michael Chernow, who planned to testify that his
10 ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP
father, now deceased, told him of a conversation with Lee
Perry where the oral license agreement took place.
With the exclusion of this evidence, the district court held
that Rock River had no evidence that San Juan was
authorized to license the Three Tracks; therefore, Rock River
had no evidence that it was legally authorized to distribute its
album as a whole; and thus, Rock River did not have a valid,
legal business expectancy with which UMG could have
tortiously interfered. The district court invited UMG to file
a second motion for summary judgment on this ground,
which the district court granted. Rock River filed a motion
for reconsideration, which the district court denied. The
district court then entered judgment for UMG, but exercised
its discretion not to award UMG its costs as prevailing party.
Both sides timely appealed.
III. Standard of Review
We review de novo the district court’s grant of summary
judgment. See Oswalt v. Resolute Indus., Inc., 642 F.3d 856,
859 (9th Cir. 2011).
IV. Discussion
A. Intentional Interference with Prospective Economic
Advantage
UMG moved for summary judgment on the theory that
Rock River lacked admissible evidence to support each
element of its IIPEA claim. The district court agreed and
granted summary judgment on this basis. Thus, our analysis
begins with a determination of what elements constitute an
IIPEA claim under California law.
ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP 11
To prevail on an IIPEA claim in California, the plaintiff
must prove the following elements:
1) The plaintiff and a third party were in an
economic relationship that probably
would have resulted in an economic
benefit to the plaintiff;
2) The defendant knew of the relationship;
3) The defendant intended to disrupt the
relationship;
4) The defendant engaged in wrongful
conduct;
5) The relationship was disrupted;
6) The plaintiff was harmed; and
7) The defendant’s wrongful conduct was a
substantial factor in causing the plaintiff’s
harm.
Judicial Council of California Civil Jury Instructions (CACI)
No. 2202. UMG argues that IIPEA claims also require proof
of an additional element: the validity or legality of the
plaintiff’s business expectancy. We hold that this is not an
element of an IIPEA claim. Rather, the illegality of the
expectancy is an affirmative defense that must be pled and
proved by the defendant.
Neither the California Supreme Court nor the California
Judicial Council nor the leading treatise on California law
12 ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP
requires a plaintiff to prove the validity of his expectancy as
part of his case-in-chief. See PG&E Co. v. Bear Stearns &
Co., 791 P.2d 587, 590 n.2 (Cal. 1990) (listing elements for
IIPEA claims in California); CACI No. 2202 (same); B.E.
Witkin, Summary of California Law, Torts § 742 (10th ed.
2012 supp.) (same). UMG’s argument for the additional
element relies primarily on Steinberg Moorad & Dunn, Inc.
v. Dunn, No. CV 01-07009, 2002 WL 31968234 (C.D. Cal.
Dec. 26, 2002). Steinberg, an unpublished district court
opinion, which discussed both an IIPEA claim and an
intentional interference with contract claim under California
law, stated that the interference claims required “[t]he
existence of a valid contract or economic relationship
between plaintiff and the third party.” 2002 WL 31968234,
at *24 (emphasis added). The court listed the elements from
Ramona Manor Convalescent Hospital v. Care Enterprises,
225 Cal. Rptr. 120, 124 (Ct. App. 1986), which also discussed
both IIPEA claims and intentional interference with contract
claims. For the contract claim, Ramona Manor noted that the
plaintiff had to establish a “valid” contract. See id. But
Ramona Manor did not require the plaintiff to prove a valid
or legal business expectancy for the IIPEA claim. See id.Therefore, Steinberg did not add an extra element. Rather,
discussing both IIPEA claims and intentional interference
with contract claims, it simply acknowledged that the contract
claim required a “valid contract” and the IIPEA claim
required an “economic relationship between plaintiff and the
third party.” 2002 WL 31968234, at *24. Thus, the
California state cases are in accord that the validity and
legality of the expectancy are not elements that must be
proved by the plaintiff.
To be clear, a plaintiff cannot prevail on an IIPEA claim
if its business expectancy is, in fact, unlawful. See
ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP 13
Restatement (Second) of Torts § 774 (1979) (“One who . . .
causes the nonperformance of an illegal agreement or an
agreement having a purpose or effect in violation of an
established public policy is not liable for pecuniary harm
resulting from the nonperformance.”). But the burden of
proving such unlawfulness rests on the party alleging
illegality. Both California and federal law assume that people
act lawfully unless proven otherwise. Federal Rule of Civil
Procedure 8 provides that illegality is an affirmative defense
to be pled in the defendant’s answer. See Fed. R. Civ. P. 8
(“In responding to a pleading, a party must affirmatively state
any avoidance or affirmative defense, including . . . illegality
. . . .”). And under California law, the validity, fairness and
legality of private transactions are maxims of jurisprudence.
See Cal. Civ. Code §§ 3545, 3548; see also Mason v. Peaslee,
343 P.2d 805, 808 (Cal. Ct. App. 1959) (holding that despite
some evidence that the contract was invalid, “the presumption
is that plaintiff acted lawfully . . . . [and] [t]he court . . . was
obligated to give plaintiff the benefit of these presumptions
and could not draw the inference that plaintiff’s work . . . was
done in contravention of [law]”).
In the analogous situation of contract disputes, the party
who asserts the illegality of a contract bears the burden of
proof on that point. See Wash. Capitols Basketball Club, Inc.
v. Barry, 419 F.2d 472, 477 (9th Cir. 1969) (applying
California law and holding that because the alleged illegality
of the contract was not evident from the face of the contract,
“illegality is an affirmative defense and defendants[] have the
burden of pleading and proof”); Morey v. Paladini, 203 P.
760, 762–63 (Cal. 1922) (“Any one sued upon a contract may
set up a defense that it is a violation of an act of Congress,
and if it is found to be so, that fact will constitute a good
defense to the action. The burden ordinarily rests upon the
14 ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP
party asserting the invalidity of the contract to show how and
why it is unlawful . . . .” (citation omitted)).3
Here, it is not at all clear that UMG (or any other entity)
holds exclusive rights to the Marley Recordings, such that
Rock River’s attempt to distribute and license its Remixes
would be an unlawful pursuit. Although the lack of
documentation may make it difficult for Rock River to
support its position that its chain of licensing rights (from Lee
Perry to San Juan to Rock River) is valid, its IIPEA claim
cannot be defeated based on the alleged illegality of the
expectancy unless UMG affirmatively establishes that
illegality.
We also disagree with UMG’s contention that Rock River
had no evidence that San Juan received a nonexclusive oral
license for the Three Tracks from Lee Perry.4 The district
3
If the illegality of the business expectancy is readily apparent from the
record or the undisputed facts, the proper placement of the burden will
typically be of little import. Indeed, in many of the cases UMG relies
upon, the unlawfulness of the expectancy was either apparent or
established. See Renaissance Realty, Inc. v. Soriano, 174 Cal. Rptr. 837,
839 (Cal. App. Dep’t Super. Ct. 1981) (holding that the trial record
established that the “economic relationship that was allegedly interfered
with [was] . . . fraudulently conceived,” and therefore could not form the
basis of an IIPEA claim); 24/7 Records, Inc. v. Sony Music Entm’t, Co.,
No. 03-CV-3204, 2004 WL 2093132, at *4 (S.D.N.Y. Sept. 20, 2004)
(granting summary judgment on an IIPEA claim because it was
“undisputed that [the plaintiff] did not have a negotiated license to use”
the music recording at issue), aff’d in part on other grounds and rev’d in
part, 429 F.3d 39 (2d Cir. 2005). Here, by contrast, the validity of San
Juan’s licensing rights is a hotly contested issue.
4
“[N]onexclusive licenses may be granted orally.” Foad Consulting
Grp., Inc. v. Musil Govan Azzalino, 270 F.3d 821, 828 (9th Cir. 2001).
ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP 15
court properly excluded as hearsay the proffered testimony of
San Juan president Michael Chernow. But the affidavits from
Lee Perry and San Juan’s long history of openly licensing the
Three Tracks provide at least some evidence that San Juan
was authorized to license all the Recordings used on Rock
River’s album. The Lee Perry affidavits attest to a licensing
agreement and a “good relationship” between Perry and San
Juan. Although the Perry affidavits do not include the Three
Tracks in their lists of recordings for which San Juan was
given a license, the affidavits refer to “other recordings with
Marley,” which, read in the light most favorable to Rock
River, could include the Three Tracks. And San Juan has
been openly licensing the Marley Recordings, including the
Three Tracks, for 30 years. During this time, San Juan has
licensed one of the disputed Three Tracks, “Trenchtown
Rock,” to roughly 40 companies, including to divisions of
UMG. San Juan has never been sued for licensing the Three
Tracks.
Between the Perry affidavits and San Juan’s uninterrupted
history of licensing the Three Tracks and accounting for them
to Perry, Rock River has produced evidence from which a
reasonable factfinder could conclude that Perry gave San Juan
nonexclusive licensing rights for the Three Tracks. Indeed,
in light of the somewhat muddied history of licensing rights
for the Recordings at issue, the history and course of conduct
of the relevant players could be the most reliable evidence,
particularly where the documents are inconclusive.
It has not yet been established that Rock River’s album
“Roots, Rock, Remixed” violated the exclusive licensing
rights of UMG or any other entity. And there remains a
triable issue as to whether San Juan has licensing rights to all
of the underlying Recordings or whether UMG has the
16 ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP
exclusive licensing rights to one or more of the Recordings.5
We therefore remand Rock River’s IIPEA claim for trial.
B. Noerr-Pennington Doctrine
In the alternative, UMG argues that we should affirm the
grant of summary judgment for a different reason: immunity
under the Noerr-Pennington doctrine. The district court,
however, found that triable issues of fact prevented summary
adjudication of the Noerr-Pennington defense, and we agree.
Rock River’s IIPEA claim seeks to hold UMG liable
based on the cease-and-desist letters and threats of litigation
UMG made to Rock River’s business partners. Under the
Noerr-Pennington doctrine, such pre-litigation material is
immune from suit unless the threatened lawsuit was a
“sham.” See Or. Natural Res. Council v. Mohla, 944 F.2d
531, 534 (9th Cir. 1991); Sosa v. DIRECTV, Inc., 437 F.3d
923, 939–40 (9th Cir. 2006). A “sham” lawsuit is one where
the suit is both “objectively baseless in the sense that no
reasonable litigant could realistically expect success on the
merits” and “an attempt to interfere directly with the business
relationship of a competitor through the use of the
5
We agree with UMG, however, that if the factfinder concludes that
Rock River lacked proper authorization for the Three Tracks, it cannot
recover a prorated amount for the remaining nine tracks. The complaint
does not allege, and Rock River has never presented evidence (even on
summary judgment or in its motion for reconsideration), that if
distribution of the complete album were blocked, it would have attempted
to distribute the remaining portion of the album. The only evidence that
Rock River had a business expectancy in one song independent of the
others is the evidence of the plans to use one of the Remixes in the movie
and soundtrack for “Dear John.” But that song – “Lively Up Yourself” –
is one of the Three Tracks.
ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP 17
governmental process – as opposed to the outcome of that
process.” Prof’l Real Estate Investors, Inc. v. Columbia
Pictures Indus., Inc., 508 U.S. 49, 60–61 (1993) (alteration,
citation and internal quotation marks omitted).
UMG contends that its cease-and-desist communications
were made in good faith because UMG honestly believed it
held exclusive licensing rights to the Recordings. For
support, it relies on its 2003 contract with JAD Records
(JAD). JAD, a record label that had an exclusive recording
contract with Bob Marley in 1968, represented to UMG that
it owned the rights to over 200 recordings by Bob Marley,
including many of the same recordings to which Lee Perry
claims ownership. The 2003 contract purports to assign
UMG exclusive licensing rights to JAD’s music catalogue,
including 10 of the Recordings used by Rock River on its
album. Thus, the 2003 contract arguably provides a good
faith basis for UMG to believe that it held exclusive licensing
rights to the Recordings. If this were the only information
known to UMG at the time it sent the cease-and-desist letters,
Noerr-Pennington would shield the communications and
threats of litigation.
During discovery, however, Rock River uncovered
evidence that JAD’s claim to exclusive ownership is tenuous
and that UMG was acutely aware of the significant holes in
its own chain of title both at the time of the 2003 deal and
when it sent the cease-and-desist letters. During the due
diligence process leading to the execution of the 2003
contract, UMG consistently demanded, but was never
provided, a chain of title evidencing JAD’s claim of exclusive
ownership to the Marley recordings. At the same time UMG
was doing due diligence on the 2003 contract, another UMG
unit – Universal Music Canada – entered into two separate
18 ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP
licensing agreements with San Juan to license tracks over
which JAD claimed exclusive rights, and UMG continued to
account to San Juan for these licenses until 2008. Perhaps
most importantly, UMG knew of Lee Perry’s competing
claim to the recordings and acknowledged that the issue was
unresolved. An internal UMG email before the 2003 contract
was finalized noted:
Danny Simms [from JAD] . . . has approached
us to do a deal for the JAD catalogue[,] the
most substantive part of which is the 200 or so
Marley titles. . . . The complications are as
follows: . . . Lee Scratch Perry claims title to
some of the recordings and has assigned them
to Trojan and San Juan . . . . Danny claims to
have full right and title to deal with these
recordings . . . . However, I suspect there are
competing interests and claims and that would
have to be resolved before any deal for this
catalogue could be viable.
The district court correctly determined that a reasonable
jury, taking all the evidence in the light most favorable to
Rock River, could conclude that when UMG sent the cease-
and-desist letters, it knew it did not have exclusive licensing
rights to the Recordings. If so, UMG’s litigation position was
objectively baseless, satisfying the first prong of the “sham”
exception to the Noerr-Pennington doctrine. See Clipper
Exxpress v. Rocky Mountain Motor Tariff Bureau, Inc.,
690 F.2d 1240, 1253–54 (9th Cir. 1982) (noting that whether
the sham exception to the Noerr-Pennington doctrine applies
is a question of fact and summary judgment on the defense is
not appropriate where the facts are disputed).
ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP 19
Significantly, despite San Juan’s long history of openly
licensing the Marley Recordings, neither JAD nor UMG has
ever sued San Juan or its licensees for infringement. To this
day, UMG has still not initiated such a lawsuit, although
several albums containing the tracks to which UMG claims
exclusive rights remain available in the marketplace. Viewed
in the light most favorable to Rock River, UMG’s
transmission of cease-and-desist letters but failure to initiate
litigation suggests that UMG is hoping to enforce its claim to
exclusive licensing rights through the threat of litigation
rather than through actual litigation. A reasonable jury could
therefore conclude that UMG is attempting to achieve its aim
through the litigation process rather than through the result of
that process, satisfying the second criterion for the sham
exception. See Prof’l Real Estate Investors, 508 U.S. at60–61.
Because a reasonable jury could conclude that UMG’s
cease-and-desist communications satisfy both criteria of the
sham exception, we cannot affirm the district court’s grant of
summary judgment to UMG on the alternative basis of Noerr-
Pennington immunity. At trial, UMG can attempt to develop
the facts necessary to support its Noerr-Pennington defense,
but it has not done so for the purpose of summary judgment.
C. Privilege
Rock River contends that UMG unjustifiably claimed
attorney-client privilege over roughly 200 documents and that
the district court should have either compelled their
disclosure or at least conducted an in camera review to make
an independent privilege determination. We review de novo
the district court’s rulings on UMG’s claims of attorney-
client privilege, see United States v. Gonzalez, 669 F.3d 974,
20 ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP
977 (9th Cir. 2012), and we review for abuse of discretion the
district court’s decision not to conduct an in camera review
of the documents, see In re Grand Jury Subpoena 92-1,
31 F.3d 826, 829 (9th Cir. 1994).
Rock River’s belief that the documents are not privileged
appears to be based on little more than unfounded suspicion,
and the district court correctly concluded that Rock River had
not made the requisite factual showing to justify an in camera
review. See In re Grand Jury Investigation, 974 F.2d 1068,
1075 (9th Cir. 1992) (requiring a “factual basis sufficient to
support a reasonable, good faith belief that in camera
inspection may reveal evidence that information in the
materials is not privileged”). The failure to conduct an in
camera review was therefore not an abuse of discretion.
Rock River also claims that even if the documents were
initially privileged, UMG implicitly waived the privilege by
asserting a Noerr-Pennington defense. A party who
affirmatively places its attorney-client communications at
issue in a litigation implicitly waives the privilege. The
attorney client privilege “may not be used both as a sword
and shield.” Chevron Corp. v. Penzoil Co., 974 F.2d 1156,
1162 (9th Cir. 1992) (holding that the defendant implicitly
waived the attorney-client privilege because it relied on an
advice-of-counsel defense). But a Noerr-Pennington defense
does not necessarily place the attorney-client communications
at issue. UMG has asserted the Noerr-Pennington defense,
but it is Rock River that has alleged the sham exception. It is
only the sham exception that requires an inquiry into whether
UMG sent the cease-and-desist letters in good faith. We
therefore agree with the Fifth Circuit that a Noerr-Pennington
defense, unlike an advice-of-counsel defense, does not
implicitly waive privilege. See In re Burlington Northern,
ROCK RIVER COMMC’N V. UNIVERSAL MUSIC GROUP 21
Inc., 822 F.2d 518, 533 (5th Cir. 1987) (“We cannot accept
the proposition that a defendant . . . who relies on the
protection afforded by Noerr-Pennington necessarily gives up
the right to keep his communications with his attorney
confidential.”). We affirm the district court’s ruling that
UMG did not implicitly waive privilege over its attorney-
client communications.
V. Discretionary Denial of Costs
Because we reverse the district court’s grant of summary
judgment and remand for trial, we need not address UMG’s
cross-appeal contending that the district court’s denial of
costs was an abuse of discretion.
Rock River is awarded its costs on appeal.
AFFIRMED IN PART, REVERSED IN PART and
REMANDED.