Hendricks & Lewis Pllc v. George Clinton , 766 F.3d 991 ( 2014 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
HENDRICKS & LEWIS PLLC, a No. 13-35010
Washington professional limited
liability company, D.C. No.
Plaintiff-Appellee, 2:12-cv-00841-
RSL
v.
GEORGE CLINTON, an individual, ORDER AND
Defendant-Appellant. AMENDED
OPINION
Appeal from the United States District Court
for the Western District of Washington
Robert S. Lasnik, District Judge, Presiding
Argued and Submitted
February 4, 2014—Seattle, Washington
Filed June 23, 2014
Amended August 26, 2014
Before: Raymond C. Fisher, Ronald M. Gould,
and Morgan Christen, Circuit Judges.
Order;
Opinion by Judge Christen
2 HENDRICKS & LEWIS PLLC V. CLINTON
SUMMARY*
Copyright
The panel filed an order amending its previous opinion,
and in the amended opinion the panel affirmed the district
court’s order appointing a receiver and authorizing the sale of
master sound recording copyrights in an action between
musician George Clinton and his former law firm Hendricks
& Lewis.
Hendricks & Lewis obtained judgments against Clinton
for past-due attorneys’ fees, and moved for an order
authorizing the sale of master recordings made by Clinton to
satisfy the judgments.
The panel held that under Washington law Clinton’s
copyrights in the masters were subject to execution to satisfy
judgments made against him. The panel also held that
§ 201(e) of the federal Copyright Act did not protect Clinton
from the involuntary transfer of his copyrighted works. The
panel further held that under Washington law the district
court did not abuse its discretion by appointing a receiver to
manage or sell ownership of the copyrights. The panel held
that Clinton may raise claims of fraud on the court and
judicial estoppel for the first time on appeal, but concluded
that both claims were meritless. Finally, the panel held that
Clinton failed to raise his preemption, Erie doctrine, and due
process arguments before the district court, and, therefore,
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
HENDRICKS & LEWIS PLLC V. CLINTON 3
they would generally not be considered, and in any event they
were without merit.
COUNSEL
Eric Michael Fong (argued), Fong Law, Port Orchard,
Washington, for Plaintiff-Appellee.
Katherine Hendricks (argued), Hendricks & Lewis, Seattle,
Washington, for Defendant-Appellant.
ORDER
The Opinion filed June 23, 2014 is hereby amended. The
amended opinion is filed concurrently with this Order.
With these amendments, the panel has unanimously voted
to deny the petition for rehearing. Judges Gould and Christen
have voted to deny the petition for rehearing en banc, and
Judge Fisher has so recommended. 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.
Defendant-Appellant’s petitions for rehearing and
rehearing en banc are DENIED. No additional petitions for
rehearing or rehearing en banc will be entertained.
4 HENDRICKS & LEWIS PLLC V. CLINTON
OPINION
CHRISTEN, Circuit Judge:
George Clinton appeals the district court’s order
appointing a receiver, assigning four master sound recording
copyrights to the receiver, and authorizing the receiver to use
the copyrights to the extent necessary to satisfy monetary
judgments a law firm obtained against him. Clinton also
raises several issues for the first time on appeal, including
fraud on the court and judicial estoppel. We have jurisdiction
under 28 U.S.C. § 1291 and we affirm.
I. FACTS
A. H&L’s Judgments Against Clinton
George Clinton is a musician, bandleader, and touring
performance artist. Hendricks & Lewis (H&L) is a law firm
that represented Clinton in various disputes from March 2005
to August 2008. H&L billed Clinton $3,341,650.32 for its
work, received $1,000,578.87 in payment, and wrote off
approximately $600,000 of the remaining balance. This left
$1,779,756.29 due. H&L initiated arbitration to secure
payment of the balance, and an arbitration panel issued an
award in favor of H&L. Clinton did not participate in the
arbitration proceedings. H&L petitioned the Western District
of Washington for an order confirming the arbitration award,
and, in May 2010, the district court entered judgment for
H&L against Clinton in the amount of $1,675,639.82, plus
interest. The court entered a second judgment awarding H&L
an additional $60,786.50 in attorneys’ fees and costs in July
2010.
HENDRICKS & LEWIS PLLC V. CLINTON 5
B. H&L’s Judgment Collection Efforts
H&L pursued a variety of judgment collection efforts,
including garnishments, levies, and liens in several districts
across the country. Clinton’s attorney declared that these
actions created a financial “stranglehold” so that Clinton
“[c]an’t pay his taxes. Can’t pay his lawyers. Now, it is
going to affect his touring and his ability to make a living at
72 years old.”
C. Ownership History of the Masters
In July 1975, Clinton, through his production company,
Thang, Inc., entered into a recording contract with Warner
Bros. Records in which Clinton agreed to make master
recordings of his performances with the group Funkadelic
(“the Masters”). Clinton had previously entered into a valid
and binding agreement with Thang to render his services as
a recording artist solely and exclusively for Thang.
The recording contract between Thang and Warner Bros.
provided that Warner Bros.:
shall own in perpetuity throughout the world
all right, title and interest in and to all the
results and proceeds of [Thang’s] and
[Clinton’s] services and performances
hereunder, including the sole and exclusive
ownership of any and all masters . . . , the
copyrights therein throughout the universe,
and the right to extend or renew such
copyrights, and [Thang] and [Clinton]
acknowledge that they shall at no time have
any right, title or interest in the foregoing.
6 HENDRICKS & LEWIS PLLC V. CLINTON
The agreement further provided that Thang:
acknowledges and agrees that [Warner Bros.]
is and shall be the owner of all rights of
copyright in records embodying the results
and proceeds of [Clinton’s] services . . . ,
including the exclusive right to copyright
same as “sound recordings” in the name of
[Warner Bros.] to renew and extend such
copyrights (it being agreed that for this
purpose [Thang] and [Clinton] are deemed
[Warner Bros.’s] employees for hire) and to
exercise all rights of the copyright/proprietor
thereunder. To the extent, if any that [Thang]
or [Clinton] may be deemed an “author” of
such “sound recordings”, [Thang] and
[Clinton] further grant to [Warner Bros.] a
power of attorney, irrevocable and coupled
with an interest for [Thang] and [Clinton] and
in [Thang] and/or [Clinton’s] name, to apply
for and obtain and on obtaining same, to
assign to [Warner Bros.], all such renewal
copyrights.
Clinton signed a substantially similar agreement with Warner
Bros. in May 1979. Under these agreements, the Masters at
issue in this appeal—“Hardcore Jollies,” “One Nation Under
a Groove,” “Uncle Jam Wants You,” and “The Electric
Spanking of War Babies”—were created, and Warner Bros.
registered the copyrights in those recordings as “works made
for hire” in its name as author.
In August 1982, to resolve a separate dispute involving
Clinton, Warner Bros., and other parties, Clinton and Warner
HENDRICKS & LEWIS PLLC V. CLINTON 7
Bros. entered into a settlement agreement under which
Warner Bros. agreed to “relinquish its ownership of the
Clinton Masters” at issue in this appeal, if or when Clinton
entered into an agreement with a third party to distribute and
sell records produced from the Masters. Clinton’s ownership
of the Masters was eventually confirmed through litigation in
2005 when the Central District of California issued an order
that Clinton “is the sole owner of [the Masters] and has been
the sole owner of the Masters since 1993.” Clinton
subsequently sued third parties for copyright infringement of
the Masters.
II. PROCEDURAL HISTORY
In July 2011, approximately one year after H&L secured
its judgments for past-due attorneys’ fees against Clinton,
Clinton sued H&L in the Western District of Washington
alleging various theories of legal malpractice. H&L asserted
judgment collection counterclaims and moved for an order
authorizing the sale of the Masters to satisfy the judgments it
had secured against Clinton. In April 2012, H&L initiated a
separate action in the Western District of Washington seeking
an order for a judgment debtor examination of Clinton. H&L
subsequently filed a motion in this separate action for the
appointment of a receiver and for an order directing the
assignment of the Masters to the receiver. H&L’s
counterclaims in the malpractice action were severed and
consolidated with the action initiated by H&L, which is at
issue here.1
1
The district court subsequently dismissed Clinton’s legal malpractice
claims, and this court affirmed that ruling. See Clinton v. Hendricks &
Lewis PLLC, No. 12-35791, 2014 U.S. App. LEXIS 3131 (9th Cir. Feb.
20, 2014).
8 HENDRICKS & LEWIS PLLC V. CLINTON
In November 2012, the district court found that “[d]espite
numerous efforts to enforce [the subject] judgments in this
and other district[s], plaintiff has recovered less than
$340,000.” The district court appointed a receiver in an order
specifying that the receiver:
shall have all of the rights, powers, duties, and
authority vested in him under [applicable
Washington law], including but not limited to
authority and control over the Funkadelic
master sound recordings “Hardcore Jollies,”
“One Nation Under a Groove,” “Uncle Jam
Wants You,” and “The Electric Spanking of
War Babies,” in order to maximize the value
of the sound recordings for the benefit of the
parties and to make whole the judgment
creditor, [H&L]. Receiver shall, to the
greatest extent possible, maximize the income
stream from the Funkadelic master sound
recordings without selling or otherwise
permanently disposing of the copyrights.
Ideally, the Receiver will utilize the copyright
and sound recordings over a one or two year
period to satisfy the judgments and pay the
expenses of the receivership before returning
the copyrights and master sound recordings to
[Clinton]. Notwithstanding the Court’s
preference for returning the recordings and
copyrights to [Clinton] after his debts are
satisfied, the Receiver has the authority to sell
or permanently dispose of any or all of the
master sound recordings.
HENDRICKS & LEWIS PLLC V. CLINTON 9
(Emphasis added). The district court also ordered that it
would have to pre-approve any sale of the Masters.2
In entering its order, the district court considered the text
and legislative history of Copyright Act § 201(e), which
protects individual authors from the involuntary transfer of
their copyrights. The district court ruled that Clinton was not
entitled to § 201(e) protection because he “is either an
assignee of the original author or he has previously
transferred the copyrights voluntarily.” The district court
noted that the initial agreements between Warner Bros. and
Clinton, and between Warner Bros. and Thang, specifically
granted the copyrights in the sound recordings to Warner
Bros. The court concluded that Warner Bros. was the original
“author” of the Masters under both the Copyright Act and the
parties’ contract, and that Clinton was not eligible for
protection under § 201(e) of the Copyright Act. The district
court reasoned that Clinton, who obtained ownership of the
Masters in 1993, is an assignee, not the author for purposes
of the Act. In the alternative, the court reasoned that even if
it found Clinton was the original author, he voluntarily
transferred the copyrights to Warner Bros., thus making
himself ineligible for protection under § 201(e). Finally, the
district court concluded that the Masters recording
copyrights, like any other species of non-exempt personal
property, are subject to judicial sale or assignment to satisfy
a judgment.
Clinton appeals.
2
Neither of the parties challenged the qualifications of the court-
appointed receiver.
10 HENDRICKS & LEWIS PLLC V. CLINTON
III. DISCUSSION
“We review de novo the district court’s interpretations of
the Copyright Act.” Rossi v. Motion Picture Ass’n of Am.
Inc., 391 F.3d 1000, 1002–03 (9th Cir. 2004). The
appointment of a receiver is reviewed for abuse of discretion.
See Cameron v. Groveland Improvement Co., 54 P. 1128,
1128 (Wash. 1898); King Cnty. Dep’t of Cmty. & Human
Servs. v. Nw. Defenders Ass’n, 75 P.3d 583, 586 (Wash. Ct.
App. 2003). “Because a court invokes judicial estoppel at its
discretion, we review the application of judicial estoppel to
the particular facts of a case for abuse of discretion.”
Johnson v. Oregon, 141 F.3d 1361, 1364 (9th Cir. 1998).
A. Clinton’s Copyrights in the Masters are Subject to
Execution to Satisfy Judgments Entered Against
Him.
Federal Rule of Civil Procedure 69(a) governs execution
proceedings. It provides:
[t]he procedure on execution—and in
proceedings supplementary to and in aid of a
judgment or execution—must accord with the
procedure of the state where the court is
located, but a federal statute governs to the
extent it applies.
Fed. R. Civ. P. 69(a)(1). We therefore look to Washington
law, which generally allows money judgments to be enforced
by execution: “All property, real and personal, of the
judgment debtor that is not exempted by law is liable to
execution.” Wash. Rev. Code § 6.17.090. Washington law
does not specifically address whether copyrights, like other
HENDRICKS & LEWIS PLLC V. CLINTON 11
types of property, are subject to sale or assignment in order to
satisfy a judgment, but federal law establishes that copyrights
are alienable. 17 U.S.C. § 201(d)(1) provides that “[t]he
ownership of a copyright may be transferred in whole or in
part by any means of conveyance or by operation of law.”
We know of no federal statutory law directly addressing
whether copyrights are subject to execution to satisfy a
judgment. Both H&L and the district court relied on federal
common law, specifically Ager v. Murray, 105 U.S. 126(1881). The Ager court ruled that if a patent holder refused
to assign his patent to satisfy a judgment entered against him,
the trustee was authorized to execute the assignment on his
behalf. Id. at 132. Though Ager involved a patent rather than
a copyright, the district court’s analogy to patent law is rooted
in our case law. Our court has said that where copyright case
law is lacking, “it is appropriate to look for guidance to patent
law ‘because of the historic kinship between patent law and
copyright law.’” Harris v. Emus Records Corp., 734 F.2d
1329, 1333 (9th Cir. 1984) (quoting Sony Corp. of Am. v.
Universal City Studios, Inc., 464 U.S. 417, 439 (1984)).
Indeed, Ager itself discusses patents and copyrights in
tandem. See 105 U.S. at 127–28 (“[T]he provisions of the
patent and copyright acts, securing a sole and exclusive right
to the patentee, do not exonerate the right and property . . .
from liability to be subjected by suitable judicial proceedings
to the payment of his debts.”). The authority cited by the
district court is helpful, but Rule 69 requires that state law
controls execution proceedings absent express statutory
authority, not federal common law. See Fed. R. Civ. P.
69(a)(1).
Our court confronted an analogous issue in Office Depot,
Inc. v. Zuccarini, 596 F.3d 696 (9th Cir. 2010), where we
12 HENDRICKS & LEWIS PLLC V. CLINTON
considered whether internet domain names are subject to
execution in California. Consistent with Rule 69, in Office
Depot our court first looked to California law because there
is no specific federal statute addressing whether domain
names may be the subject of judgment execution efforts.
Because California law permits writs of execution against
intangible assets generally, and because domain names are
intangible personal property, we held that internet domain
names are subject to execution in California. Id. at 701–02.
Here, Rule 69 required that the district court look to
Washington law in the absence of a federal statute addressing
whether copyrights may be subject to execution procedures,
and Washington law provides that “all property, real and
personal,” is subject to execution. Johnson v. Dahlquist,
225 P. 817, 818 (Wash. 1924). This rule, known as the
“Johnson rule,” was first articulated when a previous version
of Wash. Rev. Code § 6.17.090 was in effect, but, subject to
narrow exceptions that are not applicable here, Washington
courts continue to follow it. See MP Med. Inc. v. Wegman,
213 P.3d 931, 935–36 (Wash. Ct. App. 2009). As Ager
recognizes, copyrights, like patents, are a form of intangible
personal property. 105 U.S. at 129–30. Therefore, unless an
exception or exemption applies, Washington law permits
H&L to execute against Clinton’s copyrights in the Masters.
Clinton challenges the district court’s reliance on
Washington’s admittedly broad and general execution statutes
and the district court’s analogy to patent law. He argues that
§ 201(e) of the Copyright Act precludes H&L’s execution
efforts. For the first time on appeal, he also argues that
§ 304(c) of the Copyright Act prohibits execution against his
copyrights because he enjoys the inalienable right to
HENDRICKS & LEWIS PLLC V. CLINTON 13
terminate the assignment of his copyrights to Warner Bros.3
As discussed below, both arguments fail.
B. Copyright Act § 201(e) Does Not Protect Clinton
from the Involuntary Transfer of His Copyrighted
Works.
Clinton argues that § 201(e) of the Copyright Act protects
the subject copyrights from H&L’s judgment collection
efforts. Neither the statute’s plain text nor its legislative
history supports Clinton’s argument.
We begin with the statutory language. Section 201(e)
provides:
When an individual author’s ownership of a
copyright, or of any of the exclusive rights
under a copyright, has not previously been
transferred voluntarily by that individual
author, no action by any governmental body
or other official or organization purporting to
seize, expropriate, transfer, or exercise rights
of ownership with respect to the copyright, or
any of the exclusive rights under a copyright,
shall be given effect under this title, except as
provided under title 11.
17 U.S.C. § 201(e) (emphases added). A leading authority on
copyright law explains:
3
17 U.S.C. § 304(c) sets out the conditions under which transfers and
licenses to copyrights are subject to termination.
14 HENDRICKS & LEWIS PLLC V. CLINTON
The stated purpose of this prohibition was to
“protect foreign authors against laws and
decrees purporting to divest them of their
rights under the United States copyright
statute, and would protect authors within the
foreign country who choose to resist such
covert pressures.” More particularly it was
feared that the Soviet Union, by its accession
to the Universal Copyright Convention on
February 27, 1973, would be enabled to
enforce censorship in the United States of the
works of its dissident authors through the
device of seizing the ownership of such
works, and then by enforcing the American
copyright therein, enjoin any public
distribution within the United States.
3 Melville B. Nimmer & David Nimmer, Nimmer on
Copyright § 10.4 (footnote omitted). The legislative history
of § 201(e) explains that “[t]he purpose of this subsection is
to reaffirm the basic principle that the United States copyright
of an individual author shall be secured to that author, and
cannot be taken away by any involuntary transfer.” H.R.
Rep. 94-1476, at 123 (1976), reprinted in 1976 U.S.C.C.A.N.
5659, 5739.4
4
The statute permits court ordered transfers to pay off creditors in Title
11 bankruptcy proceedings. Neither party argues that this affects the
outcome of the appeal, but it is consistent with our general ruling that, at
least in circumstances where special exemptions or protections do not
apply, copyrights are intangible property subject to judgment collection
efforts.
HENDRICKS & LEWIS PLLC V. CLINTON 15
The parties dispute whether Clinton, Thang, or Warner
Bros. was the “author” of the Masters within the meaning of
the Copyright Act. If the Masters were “works made for
hire” under 17 U.S.C. § 101,5 then Warner Bros. would be the
author of the works, not Clinton. See 17 U.S.C. § 201(b) (“In
the case of a work made for hire, the employer or other
person for whom the work was prepared is considered the
author for purposes of [the Copyright Act], and, unless the
parties have expressly agreed otherwise in a written
instrument signed by them, owns all of the rights comprised
in the copyright.”). If Warner Bros. is the author of the
Masters, the protection afforded by § 201(e) is plainly
unavailable to Clinton.
We need not resolve the authorship dispute here,
however, because § 201(e) is of no help to Clinton whether or
not he is the author of the Masters. Section 201(e) protection
does not apply where a copyright was previously “transferred
voluntarily by that individual author.” There is no question
that Clinton transferred any interest that he had in the Masters
5
The Copyright Act defines a work made for hire as:
(1) a work prepared by an employee within the scope of
his or her employment; or
(2) a work specially ordered or commissioned for use as
a contribution to a collective work, as a part of a motion
picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation, as an
instructional text, as a test, as answer material for a test,
or as an atlas, if the parties expressly agree in a written
instrument signed by them that the work shall be
considered a work made for hire.
17 U.S.C. § 101.
16 HENDRICKS & LEWIS PLLC V. CLINTON
to Warner Bros., and, as part of a settlement arising from
unrelated litigation, Warner Bros. subsequently agreed to
transfer ownership back to Clinton. These voluntary transfers
are a sufficient basis for rejecting Clinton’s argument that he
enjoys § 201(e) protection as the author of the master sound
recordings.
Relying on the contention that § 201(e) must be read in
harmony with the termination provisions of § 304(c) of the
Copyright Act, Clinton also argues that his voluntary transfer
of the Masters was an unenforceable legal fiction. We
understand this argument to be that these provisions enable
authors to reclaim transferred copyrights, without limitation,
to protect them from unequal bargaining positions caused by
the impossibility of determining a work’s value until it has
been exploited. Clinton implies that the termination
provisions in § 304 should be applied to void his original
agreement to transfer his copyrights to Warner Bros.
We decline to consider Clinton’s § 304 argument, which
he raised for the first time in his motion for reconsideration
of the district court’s order appointing a receiver. “A party
does not properly preserve an issue for appeal by raising it for
the first time in a motion for reconsideration.” Self-
Realization Fellowship Church v. Ananda Church of Self-
Realization, 59 F.3d 902, 912 (9th Cir. 1995). The district
court ruled that the motion for reconsideration was untimely,
and it never considered the merits of the inalienable
termination rights argument. Clinton does not argue that the
district court abused its discretion in so ruling, and he
identifies no exceptional circumstances that warrant our
consideration of his argument for the first time on appeal.
See Gieg v. DDR, Inc., 407 F.3d 1038, 1046 n.10 (9th Cir.
2005) (“An appellate court will not consider arguments not
HENDRICKS & LEWIS PLLC V. CLINTON 17
first raised before the district court unless there are
exceptional circumstances.”).
C. The District Court Did Not Abuse Its Discretion
by Appointing a Receiver to Manage or Sell
Ownership of These Copyrights.
Federal Rule of Civil Procedure 66 governs the
appointment of receivers in federal court. We acknowledged
in Office Depot that the federal rules qualify as federal
statutes for purposes of Rule 69(a). 596 F.3d at 701. While
Rule 66 prevails over state law to the extent it applies, it does
not provide a different standard for the appointment of a
receiver than the one found under Washington law.
Therefore, we consider Washington law when reviewing the
district court’s order appointing a receiver.
The Washington Act Relating to Receiverships conveys
broad authority to judges to appoint receivers. A receiver
may be appointed if the court “determines that the
appointment of a receiver is reasonably necessary and that
other available remedies either are not available or are
inadequate.” Wash. Rev. Code § 7.60.025(1). This statute
provides that a receiver may be appointed, in relevant part:
“[a]fter judgment, in order to give effect to the judgment,” id.§ 7.60.025(1)(c); “[t]o the extent that property is not exempt
from execution, at the instance of a judgment creditor either
before or after the issuance of any execution, to preserve or
protect it, or prevent its transfer,” id. § 7.60.025(1)(e); upon
attachment of personal property “when the court determines
that the nature of the property or the exigency of the case
otherwise provides cause for the appointment of a receiver,”
id. § 7.60.025(1)(g); and “as may be provided for by law, or
18 HENDRICKS & LEWIS PLLC V. CLINTON
when, in the discretion of the court, it may be necessary to
secure ample justice to the parties,” id. § 7.60.025(1)(nn).
Washington appellate courts have acknowledged that trial
courts have broad discretion to appoint receivers, but this
discretion “should be exercised with caution in view of all the
facts and circumstances of the particular case.” Nw.
Defenders Ass’n, 75 P.3d at 586; see MONY Life Ins. Co. v.
Cissne Family L.L.C., 148 P.3d 1065, 1067 (Wash. Ct. App.
2006) (“A trial court abuses its discretion when its decision
is manifestly unreasonable, or exercised on untenable
grounds, or for untenable reasons.” (internal quotation marks
and citation omitted)). The district court cited § 7.60
generally, and found that “[a] receivership is necessary to
ensure justice to the parties and to preserve [the Masters] for
the benefit of the parties and to make whole the judgment
creditor,” H&L. Without citing authority, Clinton argues that
the district court’s “generic, conclusory” statement that a
receivership is necessary was inadequate, and that the court
was required make specific findings to justify appointing a
receiver. This argument is not persuasive.
The record shows that the district court heard the parties’
arguments and was fully aware of Clinton’s claim that the
sale of the Masters would be a hardship for him. It
recognized that H&L had valid judgments against Clinton,
and that H&L had only recovered a portion of Clinton’s total
debt. The district court was concerned that Clinton would not
be able to satisfy this debt in a reasonable amount of time. It
also knew that Clinton needed some income to support
himself. The court’s clear goal was to have a receiver
manage these assets so that Clinton could satisfy the
judgment and have control of the assets returned to him, if
possible. It was well aware that the parties had discussed
HENDRICKS & LEWIS PLLC V. CLINTON 19
various proposals allowing them to share the royalties
generated by the Masters, but that after years of fighting over
the debt in multiple fora, they had failed to come to such an
agreement. In short, the district court balanced the equities,
and did not abuse its discretion in determining that appointing
a receiver was “necessary to secure ample justice to the
parties.” Wash. Rev. Code § 7.60.025(1)(nn).6
D. Clinton May Raise Claims of Fraud on the Court
and Judicial Estoppel for the First Time on
Appeal, But Both Claims are Meritless.
1. Fraud on the Court
Clinton argues for the first time on appeal that H&L
perpetrated fraud on the district court. H&L argues that
because this issue was not raised below, it should not be
considered on appeal, citing Weisman v. Charles E. Smith
Mgmt., Inc., 829 F.2d 511, 514 (4th Cir. 1987) (“We believe
that the district court is the proper forum to determine in the
first instance whether there is sufficient basis to overturn the
judgments on the grounds raised. That court is in the best
position to decide whether any fraud was perpetrated upon it
or other untoward action occurred . . . .”).
“Courts have inherent equity power to vacate judgments
obtained by fraud.” United States v. Estate of Stonehill,
660 F.3d 415, 443 (9th Cir. 2011) (citing Chambers v.
NASCO, Inc., 501 U.S. 32, 44 (1991)); see also Dixon v.
Comm’r, 316 F.3d 1041, 1046 (9th Cir. 2003) (“Courts
6
We express no view as to whether a receiver will remain necessary if
other income streams, not contemplated at the time the district court
appointed a receiver, become available to satisfy H&L’s judgment.
20 HENDRICKS & LEWIS PLLC V. CLINTON
possess the inherent power to vacate or amend a judgment
obtained by fraud on the court.”). We have held that “[w]hen
we conclude that the integrity of the judicial process has been
harmed . . . and the fraud rises to the level of ‘an
unconscionable plan or scheme which is designed to
improperly influence the court in its decisions,’ we not only
can act, we should.” Dixon, 316 F.3d at 1046 (quoting
England v. Doyle, 281 F.2d 304, 309 (9th Cir. 1960)).
Though we are free to consider this argument for the first
time on appeal, Clinton’s claim that H&L perpetrated an
“unconscionable scheme” is without merit. Clinton first
alleges that H&L “fabricated an image” that Clinton refused
to pay his debts. He cites H&L’s statement to the district
court that “Clinton has not voluntarily paid any amounts
due,” and attempts to rebut it by noting that “in fact, Mr.
Clinton voluntarily paid $106,453.” But Clinton fails to
mention that H&L had to serve separate levies on entities that
were believed to owe Clinton royalties in order to satisfy this
much of its judgment. These payments were not “voluntary,”
and Clinton’s accusation to the contrary is unsupported.
Clinton also argues that H&L’s alleged
misrepresentations were “intentional” and “designed to
defraud the court by painting an image of hopelessness and
utter failure in its attempt to get paid.” This argument is
belied by the record. H&L repeatedly described its judgment
collection efforts in detail to the district court, including
successes, failures, and inconclusive outcomes. For instance,
H&L filed a status report with the district court in which it
spent eighteen pages detailing its various judgment collection
efforts and summarizing the amount of money it had
recovered as of the date of the report. In his reply brief for
HENDRICKS & LEWIS PLLC V. CLINTON 21
this appeal, Clinton admits that H&L’s “accounting is
correct.”
Clinton also argues that H&L falsely represented to the
district court that Clinton refused to negotiate. Clinton seems
to rely on H&L’s assertion that “Clinton refused to engage in
such discussions” from 2008 until H&L sought arbitration on
the debt, and H&L’s representation that Clinton “refus[ed] to
participate” in the arbitration proceedings. This argument is
unpersuasive because Clinton did not participate in the
arbitration proceedings, and it is unclear how an alleged
failure to negotiate before arbitration is relevant now.
Finally, Clinton argues that H&L did not convey accurate
information to the district court when, at oral argument on
H&L’s motion to authorize sale of the Masters, H&L’s
attorney responded to the court’s question about whether the
Masters were also at issue in related California proceedings.
Clinton quotes H&L’s attorney as telling the district court
that “[t]here is nothing that relates to the same property [in
the California proceedings] . . . . While [the Masters] weren’t
part of the motion [in the California proceedings], I’m not
sure they were ever even mentioned except in the very limited
context that is referred to in the briefs.” The language
Clinton quotes is a selective representation of the exchange
between H&L’s counsel and the district court. A more
complete reading of the transcript shows that H&L’s counsel
explained that the royalty streams at issue in California do not
pertain to the Masters but to other works. She also explained
that the California action did not involve transfer of
copyrights. We find no merit to the argument that H&L
perpetrated a fraud on the court.
22 HENDRICKS & LEWIS PLLC V. CLINTON
2. Judicial Estoppel
Clinton also argues that the district court improperly
allowed H&L to take a position inconsistent with arguments
it made in the California proceedings regarding its knowledge
of Clinton’s assets and his willingness to pay the judgments
against him. H&L correctly notes that Clinton raises a
different judicial estoppel theory on appeal than he did in the
district court, but a “court invokes judicial estoppel at its
discretion” and we consider Clinton’s argument on appeal.7
Yanez v. United States, 989 F.2d 323, 326 (9th Cir. 1993).
The Supreme Court observed in New Hampshire v.
Maine, 532 U.S. 742, 743 (2001), that “[c]ourts have
recognized that the circumstances under which judicial
estoppel may appropriately be invoked are not reducible to
any general formulation,” and that “[a]dditional
considerations may inform the doctrine’s application in
specific factual contexts.” The Court listed the following
factors for consideration:
First, a party’s later position must be clearly
inconsistent with its earlier position. Second,
courts regularly inquire whether the party has
succeeded in persuading a court to accept that
party’s earlier position, so that judicial
acceptance of an inconsistent position in a
7
In the district court, Clinton argued that H&L previously relied on
California law regarding obligations flowing from prior attorney/client
relationships and that, in the Washington action, H&L relied on
Washington law. On appeal, Clinton’s judicial estoppel argument is based
on H&L’s alleged change of position regarding its knowledge of Clinton’s
assets and his willingness to satisfy H&L’s judgments.
HENDRICKS & LEWIS PLLC V. CLINTON 23
later proceeding would create the perception
that either the first or the second court was
misled. Third, courts ask whether the party
seeking to assert an inconsistent position
would derive an unfair advantage or impose
unfair detriment on the opposing party if not
estopped.
Id.Clinton’s argument does not satisfy the first New
Hampshire factor; he has not shown that H&L took clearly
inconsistent positions with respect to its knowledge of
Clinton’s assets. H&L never asserted, as Clinton suggests,
that it has “no idea or way of knowing what Mr. Clinton’s
assets” are. H&L’s statement that it lacks knowledge and
information to identify “other assets” and “continues to
search for assets and possible avenues of collection” is
consistent with its assertion that it “proceeded against known
assets but continues to search for ‘other’ assets.”
E. Clinton Failed to Raise His Preemption, Erie
Doctrine, and Due Process Arguments in the
District Court.
On appeal, Clinton’s brief suggests a preemption
argument, an argument based on the Erie doctrine, and an
alleged due process violation. As we have observed, an
appellate court generally “will not consider arguments not
first raised before the district court unless there are
exceptional circumstances.” Gieg, 407 F.3d at 1046 n.10.
Clinton did not argue that there are exceptional circumstances
for considering these issues, but in any case we find them to
be without merit.
24 HENDRICKS & LEWIS PLLC V. CLINTON
Clinton claimed at oral argument before our court that he
raised a preemption argument in opposition to H&L’s motion
for sale of the copyrights. The brief to which Clinton refers
only makes a general reference to the U.S. Constitution’s
Supremacy Clause. Clinton conceded at oral argument that
he did not raise his Erie argument in the district court. On
appeal, this part of his brief urges our court to certify to the
Washington state supreme court the question whether a
copyright is subject to execution to satisfy a judgment, but he
cites no authority for the implied contention that we are
obligated to certify this question. In re Complaint of McLinn,
744 F.2d 677, 681 (9th Cir. 1984) (“Use of certification rests
in the sound discretion of this court.”). Clinton did not raise
his due process argument before the district court. In any
case, this portion of his appellate brief merely repeats his
contention that the district court abused its discretion by
appointing a receiver. We have already rejected this
argument.
CONCLUSION
The district court’s order appointing a receiver and
authorizing the sale of copyrights is AFFIRMED.