Joan Lee v. Pow Entertainment, Inc. ( 2021 )

FILED
NOT FOR PUBLICATION
DEC 6 2021
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JOAN CELIA LEE; FREUND LEGAL No. 20-55928
LLP; JONATHAN FREUND,
D.C. No.
Plaintiffs - Appellants, 2:19-cv-08353-ODW-FFM
v.
POW ENTERTAINMENT, INC., MEMORANDUM*
Defendant - Appellee.
Appeal from the United States District Court
for the Central District of California
Otis D. Wright, II, District Judge, Presiding
Argued and Submitted November 15, 2021
Pasadena, California
Before: BERZON and RAWLINSON, Circuit Judges, and ANTOON,** District
Judge.
Appellants Joan Celia Lee (Lee) and her trial counsel, Jonathan D. Freund
and Freund Legal LLP (collectively, Freund), appeal the dismissal of her claims
under the doctrine of res judicata and imposition of sanctions under Federal Rule
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable John Antoon, II, Sr., United States District Judge for
the Middle District of Florida, sitting by designation.
of Civil Procedure 11 (Rule 11). Lee sought declaratory judgments and injunctive
relief against Appellee POW! Entertainment, Inc. (POW) concerning the name and
likeness of her famous late father, comic book artist Stan Lee. The district court
dismissed Lee’s claims because prior cases had deemed an assignment agreement
(the SLE Agreement) between Stan Lee and his eponymous company, Stan Lee
Entertainment, Inc. (SLE), unenforceable. The district court also sanctioned Lee $1
million and adjudged Freund jointly and severally liable for 25 percent of the
sanction. We have jurisdiction under 28 U.S.C. § 1291, and we affirm in part and
reverse in part.
1. We agree with the district court that Lee’s claims are barred by res
judicata. See V.V.V. & Sons Edible Oils Ltd. v. Meenakshi Overseas, LLC, 946
F.3d 542, 545 (9th Cir. 2019) (stating that res judicata applies where there is “(1)
an identity of claims, (2) a final judgment on the merits, and (3) privity between
parties.”).
Lee’s amended complaint depends on the enforceability of the SLE
Agreement which was previously found to be unenforceable. See Abadin v. Marvel
Entertainment, Inc. No. 09-cv-0715-PAC, 2010 WL 1257519 (S.D.N.Y. Mar. 31,
2010); see also Lee v. Marvel Enterprises, Inc., 765 F. Supp. 2d 440, 456
(S.D.N.Y. 2011); Stan Lee Media Inc. v. Lee, No. 07-cv-00225-SVW, 2012 WL
2
4048871, at *1–7 (C.D. Cal. Aug. 23, 2012); Stan Lee Media, Inc. v. Walt Disney
Co., No. 12-cv-2663-WJM-KMT, 2013 WL 4776026, at *4 (D. Colo. Sept. 5,
2013), aff’d, 774 F.3d 1292 (10th Cir. 2014), all of which are final judgments.
Privity between parties is also present. “Even when the parties are not
identical, privity may exist if there is substantial identity between parties, that is,
when there is sufficient commonality of interest.” Tahoe-Sierra Pres. Council, Inc.
v. Tahoe Reg’l Plan. Agency, 322 F.3d 1064, 1081 (9th Cir. 2003) (internal
quotation marks omitted). Lee describes herself as a “successor in interest” and
“assignor and grantor of all rights and obligations relating to the October 15, 1998
transfer of title agreement to Stan Lee’s name and likeness and creator rights.” Res
judicata bars her claims as successor in interest or assignee under that agreement.
See In re Lindsay, 59 F.3d 942, 952 (9th Cir. 1995) (“Res judicata bars the claims
of the successors in interest.”).
2. Although we affirm the dismissal of Lee’s claims as barred by res
judicata, the district court abused its discretion when it imposed sanctions on Lee
and Freund. See Sneller v. City of Bainbridge Island, 606 F.3d 636, 638 (9th Cir.
2010) (internal citation omitted) (noting that a district court abuses its discretion
when it “applies the incorrect legal standard or bases its ruling ‘on a clearly
erroneous assessment of the evidence.’”).
3
Rule 11 sanctions are reserved for the “rare and exceptional case[s] where
the action is clearly frivolous, legally unreasonable or without legal foundation, or
brought for an improper purpose.” Operating Eng’rs Pension Trust v. A-C Co., 859
F.2d 1336, 1344 (9th Cir. 1988). Because awarding sanctions is “an extraordinary
remedy,” id. at 1345, it is best reserved for the most egregious cases–for example,
when a case involves repeat litigants. See, e.g., Roundtree v. United States, 40 F.3d
1036 (9th Cir. 1994); Buster v. Greisen, 104 F.3d 1186 (9th Cir. 1997).
This record does not support a finding that Lee’s filing was clearly frivolous,
legally unreasonable, or brought for an improper purpose. Lee was not a party to
the Abadin litigation.2 See Abadin, 2010 WL 1257519 at *1. Nor was she a party to
any of the subsequent litigation regarding enforceability of the SLE Agreement.
See Marvel Enterprises, 765 F. Supp. 2d 440 at 456; Stan Lee Media Inc., 2012
WL 4048871 at *1–7; Walt Disney Co., 2013 WL 4776026, at *4. Although we
conclude that Lee was in privity with SLE, the privity had not been litigated
previously, and there are at least some allegations in the complaint–although they
are not pleaded distinctly enough to establish a plausible claim–which suggest an
attempt to establish a claim independent of any connection to SLE.
2
The record does not suggest that Lee had an interest in Stan Lee Media,
Inc. during any period relevant to the decision in Abadin or any of the other cases.
4
Finally, we do not agree that Lee filed this action for an improper purpose.
The existence of a single article reporting the filing of the action was insufficient
evidence of “fuel[ing] the media fire.” Cf. Irvin v. Dowd, 366 U.S. 717, 725 (1961)
(describing the “unleash[ing]” of “a barrage of newspaper headlines, articles,
cartoons and pictures” against a defendant). Therefore, we AFFIRM the district
court’s dismissal of this action as barred by res judicata and REVERSE the
imposition of sanctions.
AFFIRMED IN PART AND REVERSED IN PART.3
3
Because we reverse the award of sanctions, we do not address the sanctions
amount, or whether POW satisfied the safe harbor provisions of Rule 11.
5