Stan Lee Media, Inc. v. Walt Disney Co. , 774 F.3d 1292 ( 2014 )

FILED
United States Court of Appeals
Tenth Circuit
December 23, 2014
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
STAN LEE MEDIA, INC.,
Plaintiff - Appellant,
v. No. 13-1407
THE WALT DISNEY COMPANY,
Defendant - Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. NO. 1:12-CV-02663-WJM-KMT)
Robert S. Chapman, Eisner, Kahan, Gorry, Chapman, Ross & Jaffe (Jon-Jamison
Hill, Eisner, Kahan, Gorry, Chapman, Ross & Jaffe, and John V. McDermott and
Mark T. Barnes, Brownstein Hyatt Farber Schreck, LLP, Denver, Colorado, with
him on the briefs), Beverly Hills, California, for Appellant.
James W. Quinn, Weil, Gotshal & Manges LLP (R. Bruce Rich, Gregory Silbert,
Randi W. Singer, and Sabrina A. Perelman, Weil, Gotshal & Manges LLP, and
Frederick J. Baumann and Holly C. Ludwig, Lewis Roca Rothgerger LLP,
Denver, Colorado, with him on the briefs), New York, New York, for Appellee.
Before TYMKOVICH, EBEL, and PHILLIPS, Circuit Judges.
TYMKOVICH, Circuit Judge.
Over the course of the last three-quarters of a century, Marvel Enterprises
created a comic universe of unparalleled proportions. With comic-book legend
Stan Lee at the helm as editor-in-chief of its comic-book division, Marvel
constructed a fictional landscape of imaginative superheroes, elaborate narratives,
and overlapping storylines. During this time period, the commercial popularity of
these comic-book characters, including iconic figures like Spider-Man and the
Avengers, intensified, steadily gaining devoted followers eager to consume the
product. Eventually, Marvel, which is now indirectly owned by the Walt Disney
Company, parlayed the success of this comic universe into a multi-platform,
billion-dollar empire with blockbuster motion pictures, merchandising, and live
productions.
Not surprisingly, such success breeds litigation, sometimes a lot of it. And
rivaling the size and scope of Marvel’s make-believe universe is a burgeoning
mass of very real litigation over the ownership of the intellectual properties in the
many characters comprising the Marvel portfolio. A repeat participant in these
ownership disputes is Stan Lee Media, Inc.
Stan Lee Media claims to own intellectual-property rights in a number of
popular Marvel characters. Its claims derive from a 1998 contractual agreement
with Stan Lee, in which he transferred all of his ownership rights in characters he
created while working at Marvel to Stan Lee Media in exchange for salary and
other benefits. That ownership interest is the predicate for the claim of copyright
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infringement that Stan Lee Media brings here against Disney. Disney ended up
with the Marvel characters when it acquired Marvel’s parent company in 2009.
Disney disputes whether Stan Lee Media has any interest whatever in the Marvel
characters.
Although the ownership question might be complex, we need not consider
it here because the Ninth Circuit recently provided an answer in Stan Lee Media,
Inc. v. Lee, No. 12-56733, 2014 WL 5462400 (9th Cir. Oct. 29, 2014) (Stan Lee
Media v. Lee), finding that Stan Lee Media’s statement of ownership of the
copyrights to the pre-1998 characters failed to plausibly allege a claim for relief.
In other words, Stan Lee Media could not even allege any right to ownership of
the disputed properties. And under well-settled legal principles, the Ninth
Circuit’s decision on the ownership issue is entitled to collateral-estoppel effect
in subsequent cases involving claims for relief premised on that issue.
Thus, because Stan Lee Media is precluded from alleging ownership of the
at-issue intellectual properties, Stan Lee Media’s copyright-infringement claim
fails as a matter of law. We therefore AFFIRM the district court’s decision
granting Disney’s motion to dismiss.
I. Background
In October 1998, Stan Lee entered into a written employment agreement
(the 1998 Agreement) with a Colorado company he formed, Stan Lee
Entertainment, Inc., to create new comic-book characters. Stan Lee
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Entertainment is the predecessor to plaintiff, Stan Lee Media. The contract
explained that Lee assigned, conveyed, and granted “all right, title and interest
[Lee] may have or control” in his creations and intellectual properties. Aplt. App.
at 31. At the time, Marvel had employed Lee for approximately sixty years, and
the 1998 Agreement expressly recognized that Lee would continue to work part-
time for Marvel.
For reasons that are not apparent in the record, Lee entered into an
agreement with Marvel in November 1998. This time he assigned Marvel
essentially the same rights to the comic book characters Stan Lee Media claims he
granted to Stan Lee Entertainment through the 1998 Agreement.
In 2001, Stan Lee repudiated the 1998 Agreement, contending that Stan Lee
Media committed material breach. In the letter communicating as much, Lee’s
attorney indicated that “such material breaches expressly permit Stan to claim
rights and ownership in the properties such as defined in the agreement, which I
hereby do on his behalf, including the trademarks, copyrights, and . . . intellectual
Property of the company.” Aple. App. at 29. Over five years later, on November
28, 2006, Stan Lee Media recorded the 1998 Agreement with the United States
Copyright Office in Vol. 3544, Doc. No. 426. In a cover letter for this
recordation, Stan Lee Media asserted that the 1998 Agreement transferred
ownership rights from Lee to Stan Lee Media in many famous characters,
including Spider-Man and Iron Man.
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Throughout this time period, and carrying through to the present, Marvel
exploited its comic universe by, among other things, selling and licensing the film
rights to several characters and franchises to major production companies to
create, sell, and distribute motion pictures. These efforts have been enormously
profitable. Since its release in 2002, for example, the movie Spider-Man has
grossed over $800 million worldwide.
Despite the value of the Marvel franchises, it was not until 2007 that Stan
Lee Media started to assert ownership rights in the Marvel characters through
litigation, filing lawsuits across the country in an effort to cash in on this
financial success. To date, Stan Lee Media and related entities have filed
numerous lawsuits, and courts from coast to coast have weighed in on the
propriety of Stan Lee Media’s assertion of rights in the Marvel characters. See
Stan Lee Media Inc. v. Lee, No. 2:07-CV-00225, 2012 WL 4048871 (C.D. Cal.
Aug. 23, 2012) (Abadin II); Lee v. Marvel Enters., Inc., 765 F. Supp. 2d 440, 456
(S.D.N.Y. 2011) aff’d, 471 F. App’x 14 (2d Cir. 2012); Abadin v. Marvel Entm’t,
Inc., No. 09 Civ. 0715 (PAC), 2010 WL 1257519 (S.D.N.Y. Mar. 31, 2010)
(Abadin I); Stan Lee Media, Inc. v. Marvel Entm’t, Inc., No. 07 Civ. 2238 (PAC)
(S.D.N.Y. Mar. 15, 2007); QED Prods., LLC v. Nesfeiled, No. 07-CV-00225
(SVW) (SSX) (C.D. Cal. Jan. 8, 2007). And where there are numerous related
lawsuits, the spotlight often shines on which lawsuits take precedence over others.
Such is the case here, as many courts have singled out the Southern District of
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New York’s decision in Abadin I as a bar to relitigation of certain claims and
issues. See, e.g., Abadin II, 2012 WL 4048871, at *7; Lee v. Marvel Enters., Inc.,
765 F. Supp. 2d at 456.
In this respect, the district court’s decision is typical. Stan Lee Media filed
a complaint against Disney in the District of Colorado, alleging a single cause of
action for federal copyright infringement. It claimed that Disney’s production
and distribution of several movies, including X-Men: First Class and Marvel’s the
Avengers, as well as other revenue-generating projects, intentionally violated Stan
Lee Media’s exclusive rights to use and exploit the characters it purportedly owns
under the 1998 Agreement. The district court granted Disney’s motion to dismiss
in reliance on its view that Abadin I precluded the Colorado litigation. According
to the district court, Abadin I definitively decided that Stan Lee Media could not
assert ownership rights in the Marvel characters.
Since the district court’s decision in this case, the Ninth Circuit has
weighed in with yet another decision involving the usual players in a case called
Stan Lee Media v. Lee. In that case, the court decided an appeal from the Central
District of California in which Stan Lee Media had sued Stan Lee, among others,
for a declaration regarding the intellectual-property rights subsumed in the 1998
Agreement. The district court dismissed the claims on res judicata grounds,
citing Abadin I’s preclusive barrier. On appeal, however, the Ninth Circuit
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affirmed on an alternative basis, concluding that Stan Lee Media could not assert
ownership in the disputed characters:
This appeal challenges the dismissal of Stan Lee Media,
Inc.’s (SLMI) claims that its intellectual property rights
in comic book characters were violated by the legendary
comic book creator Stan Lee. We affirm because SLMI
failed to satisfy pleading requirements. To survive a
motion to dismiss, a party must allege “enough facts to
state a claim to relief that is plausible on its face.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct.
1955, 167 L. Ed. 2d 929 (2007); see also Ashcroft v.
Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d
868 (2009). Accepting as true the allegations made by
SLMI in its complaint . . . the claims to the vast majority
of properties fall short of the pleading requirement
established in Iqbal–Twombly.
Stan Lee Media v. Lee, 2014 WL 5462400, at *1.
The Ninth Circuit rejected Stan Lee Media’s “central contention . . . that, in
October 1998, Stan Lee assigned [Stan Lee Media] rights to valuable comic book
characters, including Spider-Man, The X-Men, The Incredible Hulk, The Fantastic
Four, Iron Man, Thor, Daredevil, and others.” Id. According to the Ninth
Circuit, this proposition was “simply implausible” because Stan Lee Media “never
announced that it owned rights to these characters . . . , licensed the characters,
produced content related to the characters, or asserted or attempted to enforce its
ownership rights.” Id. Particularly because others continually generated revenue
from the characters and franchises in the years following the 1998 Agreement, the
Ninth Circuit reiterated, Stan Lee Media’s “failure to publicize, protect, or exploit
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its right to profit from the characters establishes that these claims are simply
implausible. . . .” Id.In short, the court found that Stan Lee Media’s claims of ownership failed
to plausibly state a claim for relief, and that any cause of action predicated on
ownership was therefore legally and factually deficient.
II. Analysis
We review de novo the district court’s grant of a motion to dismiss for
failure to state a claim. Teigen v. Renfrow, 511 F.3d 1072, 1078 (10th Cir. 2007).
We can affirm on any grounds supported by the record. Elwell v. Byers, 699 F.3d
1208, 1213 (10th Cir. 2012).
Under this standard, we conclude that Stan Lee Media cannot state a claim
for copyright infringement.
A. Collateral Estoppel
Collateral estoppel bars the successive litigation of any issue of law or fact
“once [it has] been determined by a valid and final judgment.” Ashe v. Swenson,
397 U.S. 436, 443 (1970). That is, the doctrine “prevents a party that has lost the
battle over an issue in one lawsuit from relitigating the same issue in another
lawsuit.” Melnor, Inc. v. Corey (In re Corey), 583 F.3d 1249, 1251 (10th Cir.
2009). In this way, collateral estoppel, frequently referred to as “issue
preclusion,” aims to promote judicial efficiency, encourage reliance on previously
adjudicated matters, and avoid inconsistent rules of decision. Nichols v. Bd. of
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Cnty. Comm’rs of Cnty. of La Plata, Colo., 506 F.3d 962, 967 (10th Cir. 2007).
Federal law governs the scope of the preclusive effect given to federal-court
decisions. See Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 500
(2001).
For an issue to be collaterally estopped, the party invoking the doctrine has
the burden of establishing four separate elements:
(1) the issue previously decided is identical with the one
presented in the action in question,
(2) the prior action has been finally adjudicated on the
merits,
(3) the party against whom the doctrine is invoked was a
party or in privity with a party to the prior adjudication,
and
(4) the party against whom the doctrine is raised had a
full and fair opportunity to litigate the issue in the prior
action.
Murdock v. Ute Indian Tribe of Uintah & Ouray Reservation, 975 F.2d 683, 687
(10th Cir. 1992) (emphasis added) (internal quotation marks and citation omitted);
(paragraph structure altered); see also Moss v. Kopp, 559 F.3d 1155, 1161 (10th
Cir. 2009). As long as the issues are identical, “issue preclusion bars a party
from relitigating an issue once it has suffered an adverse determination on the
issue, even if the issue arises when the party is pursuing or defending against a
different claim.” Park Lake Res. LLC v. U.S. Dep’t of Agr., 378 F.3d 1132, 1136
(10th Cir. 2004) (emphasis added).
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Our consideration of a party’s prior “full and fair opportunity to litigate an
issue ‘[o]ften . . . will focus on whether there were significant procedural
limitations in the prior proceeding, whether the party had the incentive to litigate
fully the issue, or whether effective litigation was limited by the nature or
relationship of the parties.’” Murdock, 975 F.2d at 689 (quoting Sil–Flo, Inc. v.
SFHC, Inc., 917 F.2d 1507, 1521 (10th Cir. 1990)). We have found a party
“cannot now complain that it did not have a full and fair opportunity to litigate
the issue [when] [i]t asked the [prior] court to decide the issue in its brief, and it
argued its position extensively” in the prior proceeding. Id. at 690.
The Supreme Court has also advised that the issue decided must be
“essential to the judgment.” Arizona v. California, 530 U.S. 392, 414 (2000); see
also In re Corey, 583 F.3d at 1251. That means that “issue preclusion will not
apply in the absence of a valid and final judgment to which resolution of a
particular issue was necessary.” C & M Props., L.L.C. v. Burbidge (In re C & M
Props., L.L.C.), 563 F.3d 1156, 1166 (10th Cir. 2009) (quotation marks omitted). 1
1
Where the prior court gave alternative rulings on a given issue, and
where each is sufficient to support the result, neither is typically given issue-
preclusive effect because “it cannot be said that either issue was actually and
necessarily decided.” Turney v. O’Toole, 898 F.2d 1470, 1472 n.1 (10th Cir.
1990); see also Restatement (Second) of Judgments § 27, cmt. I (1982) (“If a
judgment of a court of first instance is based on determinations of two issues,
either of which standing independently would be sufficient to support the result,
the judgment is not conclusive with respect to either issue standing alone.”).
Thus, even “if a decision could have been rationally grounded upon an issue other
than that which the defendant seeks to foreclose from consideration, relitigation
(continued...)
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Only where the party invoking the doctrine shows that all the elements are met
will collateral estoppel operate as a preclusive defense. Cf. Taylor v. Sturgell,
553 U.S. 880, 907 (2008) (finding the defendant has the burden of proving all
elements of an affirmative defense).
We have thoroughly reviewed the Ninth Circuit’s decision, the briefing in
both that court and the Central District of California, and the parties’
supplemental briefing on Stan Lee Media v. Lee in this case. That review yields
the firm conclusion that none of the elements of collateral estoppel can be
reasonably debated—each element is present here.
The first three elements are obviously met. First, the issue of Stan Lee
Media’s ownership interest in the pre-1998 Marvel characters, which include Iron
Man, the Avengers, and the X-Men, was clearly decided against Stan Lee Media
in Stan Lee Media v. Lee. That issue is substantively identical to the one we
consider here.
Second, the Ninth Circuit’s dismissal for failure to plead a viable cause of
action is a decision on the merits under that circuit’s (and every other circuit’s)
law. Stewart v. U.S. Bancorp, 297 F.3d 953, 957 (9th Cir. 2002) (“[A] dismissal
for failure to state a claim under Rule 12(b)(6) is a ‘judgment on the merits’ to
which res judicata applies.”); see also Hagans v. Lavine, 415 U.S. 528, 542
1
(...continued)
of the issue is not precluded under the doctrine of issue preclusion, because the
issue was not necessary or essential to the judgment.” 21A Fed. Proc. § 51:261.
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(1974) (“[I]t is well settled that the failure to state a proper cause of action calls
for a judgment on the merits.”); Restatement (Second) of Judgments § 19 cmt. d
(1982). Furthermore, the issues decided within that decision, even though it was
not submitted for publication, are clearly collaterally binding. 9th Cir. R. 36-3
(“Unpublished dispositions and orders of this Court are not precedent, except
when relevant under the doctrine of law of the case or rules of claim preclusion or
issue preclusion.”).
Third, Stan Lee Media concedes that it was a party to the Ninth Circuit’s
decision.
Only the fourth factor is seriously contested. Stan Lee Media alleges that it
did not have a full and fair opportunity to litigate the ownership issue in Stan Lee
Media v. Lee. To this end, it claims (1) the parties did not raise or litigate the
plausibility standard in the prior proceedings, and (2) the fact that Stan Lee Media
could potentially amend its complaint prevents the application of issue preclusion.
We are not persuaded. The defendants in Stan Lee Media v. Lee alleged
that the ownership aspect of Stan Lee Media’s declaratory judgment claim was
insufficiently plausible to meet the pleading standard in a motion to dismiss
before the district court. 2 Stan Lee Media responded in its opposition, devoting
2
We take judicial notice of the pleadings and other documents of public
record filed in the Ninth Circuit and the Central District of California in Stan Lee
Media v. Lee. Fed. R. Evid. 201(b)(2) (explaining that the court can take judicial
notice of a fact “that is not subject to reasonable dispute because it . . . can be
(continued...)
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five full pages to explaining why its copyright infringement claims met the
required pleading standard under Twombly, Iqbal, and Rule 8 of the Federal Rules
of Civil Procedure. Although the district court dismissed the complaint on other
grounds, the issue was properly preserved for appeal. And defendants raised, and
again Stan Lee Media responded, to the plausibility argument on appeal to the
Ninth Circuit. The Ninth Circuit, based on the briefing before it, found the
plausibility argument to be the most persuasive, concluding that Stan Lee Media
could not satisfy the federal pleading standard on its request for a declaration of
ownership rights. This is a full and fair opportunity to litigate the issue by any
standard.
Nor are we convinced that the possibility of an amendment to Stan Lee
Media’s complaint in federal court in California—to the extent it is even
available 3—bars the application of collateral estoppel. Dismissals for failure to
state a claim are presumptively with prejudice because they fully dispose of the
2
(...continued)
accurately and readily determined from sources whose accuracy cannot be
reasonably questioned.”); see also Estate of McMorris v. C.I.R., 243 F.3d 1254,
1258 n.8 (10th Cir. 2001) (explaining that we can take judicial notice of
documents and docket materials filed in other courts).
3
Stan Lee Media’s conclusory allegations that it has additional facts that
would transform its implausible claim of ownership into a viable cause of action
are untenable. Indeed, considering the nature of the claims brought against Stan
Lee in that case, it presses the limits of reasonableness to suggest that these
alleged facts were withheld from the complaint and subsequent briefing in both
the district court in California and the Ninth Circuit. See Sheldon v. Vermonty,
269 F.3d 1202, 1207 n.5 (10th Cir. 2001).
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case. See Fed. R. Civ. P. 41(b); see also Brereton v. Bountiful City Corp., 434
F.3d 1213, 1219 (10th Cir. 2006). By affirming on an alternative merits-based
ground, the Ninth Circuit did not alter the substance of the district court’s
judgment or enlarge defendants’ rights—under either analysis, the end result was
a granting of the motion to dismiss with prejudice. And given the Ninth Circuit’s
determination of the ownership issue, which will henceforth carry issue-
preclusive effect, it is clear that any attempts to amend would be futile because all
new claims predicated on copyright ownership would likewise be subject to
dismissal. See Anderson v. Suiters, 499 F.3d 1228, 1238 (10th Cir. 2007). Stan
Lee Media points to no case dictating an alternative conclusion.
Finally, the Ninth Circuit’s rationale for dismissal is singular and readily
discernible: Stan Lee Media’s ownership claim deriving from the 1998 Agreement
is “simply implausible.” In all events, this issue was essential to the judgment,
and there are no alternative holdings or other obstacles to the application of
collateral estoppel.
In sum, Disney has met its burden to establish all of the elements of issue
preclusion with respect to whether Stan Lee Media can enforce ownership rights
in the Marvel properties.
B. Copyright Infringement Action
With the issue of copyright ownership conclusively decided against it, Stan
Lee Media’s claim for copyright infringement necessarily fails as a matter of law.
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To state a claim for copyright infringement, a plaintiff must show “(1) ownership
of a valid copyright and (2) ‘copying of constituent elements of the work that are
original.’” TransWestern Publ’g Co. v. Multimedia Mktg. Assocs., 133 F.3d 773,
775 (10th Cir. 1998) (quoting Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S.
340, 361 (1991)). As with any cause of action, a plaintiff’s failure to sufficiently
plead a required element necessitates dismissal for failing to state a claim. See
Ellis ex rel. Estate of Ellis v. Ogden City, 589 F.3d 1099, 1104 (10th Cir. 2009).
Stan Lee Media pleaded a single count of copyright infringement against
Disney premised on Stan Lee Media’s claimed ownership of the Marvel
characters. This cause of action sought damages for Disney’s alleged infringing
use within the past three years, including for producing and distributing Marvel’s
the Avengers and other works. 4 Viewed from any angle, the Ninth Circuit’s
decision precludes Stan Lee Media’s argument that it owns the copyrights to the
4
By limiting its challenge to Disney’s alleged infringing activities within
the past three years, Stan Lee Media sought to satisfy the Copyright Act’s three-
year statute of limitations. See 17 U.S.C. § 507(b). But because Stan Lee
Media’s claim of a copyright ownership interest stems from a contractual
assignment, its infringement cause of action accrued in 2001 when Stan Lee
expressly repudiated the 1998 Agreement. See Ritchie v. Williams, 395 F.3d 283,
288 n.5 (6th Cir. 2005); see also Seven Arts Filmed Entm’t Ltd. v. Content Media
Corp., 733 F.3d 1251, 1256–57 (9th Cir. 2013). Where ownership is the basis of
the copyright dispute, this “accrual-upon-express-repudiation” rule prohibits
infringement actions when the freestanding ownership action would be time-
barred. Kwan v. Schlein, 634 F.3d 224, 230 (2d Cir. 2011). Put simply, Stan Lee
Media should have brought any copyright infringement action within three years
of January 30, 2001, when Stan Lee unambiguously terminated Stan Lee Media’s
intellectual-property rights under the 1998 Agreement.
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Marvel properties forming the basis for this complaint. Accordingly, Stan Lee
Media cannot state a claim for copyright infringement against Disney, and the
district court correctly granted Disney’s motion to dismiss.
C. Alternative Grounds
Although our reasoning differs from the district court’s, the preceding
analysis is sufficient to affirm the district court’s decision. Elwell v. Byers, 699
F.3d 1208, 1213 (10th Cir. 2012). We need not, therefore, rule on the extent to
which Abadin I is entitled to issue-preclusive effect regarding Stan Lee Media’s
alleged ownership interest in the copyrights involved in this case. Nor do we take
up the other issues raised by Disney, including a lack of personal jurisdiction in
the District of Colorado, as alternative grounds to affirm the decision below.
III. Conclusion
The district court’s decision dismissing Stan Lee Media’s complaint for
failure to state a claim is AFFIRMED.
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