Scott Bizar v. Jeffrey Dee

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT JUL 23 2015
MOLLY C. DWYER, CLERK
SCOTT BIZAR, dba Fantasy Games No. 12-17826 U.S. COURT OF APPEALS
Unlimited,
D.C. No. 2:11-cv-02036-MEA
Plaintiff - Appellee,
v. MEMORANDUM*
JEFFREY DEE; JACK HERMAN,
Defendants - Appellants.
SCOTT BIZAR, dba Fantasy Games No. 13-15361
Unlimited,
D.C. Nos. 2:11-cv-02036-MEA
Plaintiff - Appellant, 2:11-cv-02247-MEA
v.
JEFFREY DEE; JACK HERMAN,
Defendants - Appellees,
and
MONKEY HOUSE GAMES, INC.,
Defendant.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
SCOTT BIZAR, dba Fantasy Games No. 13-16126
Unlimited,
D.C. No. 2:11-cv-02036-MEA
Plaintiff - Appellee,
v.
JEFFREY DEE; JACK HERMAN;
MONKEY HOUSE GAMES, INC.,
Defendants - Appellants.
Appeals from the United States District Court
for the District of Arizona
Mark E. Aspey, Magistrate Judge, Presiding
Argued and Submitted July 7, 2015
San Francisco, California
Before: GRABER and WATFORD, Circuit Judges, and FRIEDMAN,** District
Judge.
In the 1970s, Jeffrey Dee and Jack Herman contracted with Fantasy Games
Unlimited, Inc. ("FGU, Inc."), to publish their fantasy role-playing game, Villains
and Vigilantes. FGU, Inc., dissolved in 1991, but the company’s co-founder and
former vice president, Scott Bizar, continued to sell Villains and Vigilantes and
related products. Over the years, the business relationship soured. In 2010, Dee
**
The Honorable Paul L. Friedman, United States District Judge for the
District of Columbia, sitting by designation.
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and Herman began publishing and selling Villains and Vigilantes and related
products.
In 2011, Dee and Herman filed an action ("Dee/Herman Action") in the
United States District Court for the Middle District of Florida against Bizar,
alleging copyright infringement. Three months later, Bizar filed an action ("Bizar
Action") in the United States District Court for the District of Arizona, alleging
defamation, commercial disparagement, trademark infringement in violation of
federal law, related violations of state law, and breach of contract. The Florida
action was transferred to Arizona, and the district court consolidated the cases.
The district court entered a default judgment against Dee and Herman on the
defamation and commercial disparagement claims, held a hearing, and awarded
Bizar $52,300 in damages. The district court granted summary judgment in favor
of Dee and Herman as to all other claims.
Bizar appeals the district court’s summary judgment order. Dee and Herman
cross-appeal the district court’s (1) denial of their motion to set aside default and
entry of default judgment on the defamation and commercial disparagement
claims, (2) damages award, and (3) denial of their motion to reopen the judgment
to address copyright infringement damages. We affirm in part, reverse in part, and
remand for further proceedings.
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1. The district court did not abuse its discretion in refusing to set aside the
default against Dee and Herman or in entering default judgment on two of Bizar’s
claims against them. See United States v. Signed Personal Check No. 730 (Mesle),
615 F.3d 1085, 1091 (9th Cir. 2010) (stating the standard of review for refusal to
set aside default); Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1391 (9th
Cir. 1988) (same for entry of default judgment). None of the defenses asserted by
Dee and Herman are meritorious, and the failure to assert a meritorious defense is
fatal to a defendant’s motion to set aside default and appeal from entry of default
judgment. United States v. Aguilar, 782 F.3d 1101, 1106 (9th Cir. 2015).
(a) Dee and Herman waived any objection to personal jurisdiction in the
Bizar Action by litigating the Dee/Herman Action in district court in Arizona,
because the claims in both actions arose from the same series of transactions and
occurrences. See Schnabel v. Lui, 302 F.3d 1023, 1038 (9th Cir. 2002) (holding
that "where all parties appeared as plaintiffs, and all claims arose from the same
transaction or occurrence, the district court properly exercised personal jurisdiction
over all parties"). Although Dee and Herman initially filed the Dee/Herman
Action in the Middle District of Florida, they did not oppose Bizar’s motion to
transfer that action to Arizona, and they never attempted to raise the issue of
personal jurisdiction in that action. Moreover, Dee and Herman moved to
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consolidate the two cases even before receiving a ruling on the personal
jurisdiction defense they had raised in their motion to set aside default in the Bizar
Action.
(b) Bizar’s assertion, in his complaint, that the statements on the website
were "malicious" necessarily includes an allegation that Dee and Herman knew
that the statements were false or were reckless as to their truth. N.Y. Times Co. v.
Sullivan, 376 U.S. 254, 279–80 (1964).
(c) Dee and Herman denied all of the allegations in Bizar’s complaint, but
this unsubstantiated general denial did not constitute a meritorious defense.
Cassidy v. Tenorio, 856 F.2d 1412, 1415 (9th Cir. 1988). And Dee and Herman
waived their opportunity to "present specific facts that would constitute a defense"
by failing to assert such facts in their briefing to this court. TCI Group Life Ins.
Plan v. Knoebber, 244 F.3d 691, 700 (9th Cir. 2001), overruled on other grounds
by Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 147 (2001).
2. The district court’s award to Bizar of $52,300 in damages is not clearly
erroneous. See Fair Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002)
(stating the standard of review). The district court permissibly relied on Bizar’s
testimony about lost business opportunities and lost sales. See Rancho Pescado,
Inc. v. Nw. Mut. Life Ins. Co., 680 P.2d 1235, 1245 (Ariz. Ct. App. 1984) (holding
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that a finder of fact’s damages calculation must be guided by "some rational
standard").
3. We have jurisdiction to review the district court’s summary judgment
order because, when combined with the order denying Dee and Herman’s motion
to reopen the judgment to address damages, it is a final judgment that resolves all
remaining claims in the case. Schnabel, 302 F.3d at 1036. Reviewing de novo,
Lopez v. Smith, 203 F.3d 1122, 1131 (9th Cir. 2000) (en banc), we hold that
summary judgment in favor of Dee and Herman was proper on the copyright
claims. The 1979 contract granted to FGU, Inc., publication rights to the 1979
Villains and Vigilantes Rulebook. The parties’ course of conduct extended the
contract to apply to the 1982 Rulebook, as well. But the contract expressly
provided that the agreement would terminate by operation of law if FGU, Inc.,
ceased to do business for any reason. The agreement also prohibited the
assignment of any rights under the contract without the written consent of the other
parties. By the terms of the agreement, when FGU, Inc., was dissolved in 1991, all
rights to the 1979 and 1982 Rulebooks reverted to Dee and Herman. Accordingly,
all sales after the 1991 dissolution of FGU, Inc., of the 1979 or 1982 Rulebooks
were infringing acts.
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Laches does not bar the Dee/Herman Action because that defense is
unavailable in an action under the Copyright Act. Petrella v. Metro-Goldwyn-
Mayer, Inc., 134 S. Ct. 1962, 1972–73 (2014). And equitable estoppel does not
prevent Dee and Herman from bringing their copyright claims, because
they took prompt action to assert their rights soon after they learned, in 2010, that
FGU, Inc., had stopped doing business in 1991.
4. The district court clearly erred when it issued a final judgment without
addressing copyright damages and abused its discretion in refusing to reopen the
judgment for that purpose. See Sch. Dist. No. 1J v. ACandS, Inc., 5 F.3d 1255,
1262 (9th Cir. 1993) (stating the standard of review). Dee and Herman sought
actual and statutory damages in their complaint, and they did not seek summary
judgment as to damages. Although their motion to reopen the judgment did not
clearly articulate their damages argument, their reply sufficiently indicated what
damages they were seeking. We therefore reverse and remand for the district court
to address damages.
5. Neither party is entitled to summary judgment on the Lanham Act claims.
The record demonstrates that Bizar at one time owned the trademark, which was
not part of the copyright contract between the parties. But there remain genuine
issues of material fact as to whether Bizar abandoned the trademark within the
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meaning of 15 U.S.C. § 1127 and whether, even if he did, Bizar reacquired
ownership of the mark through subsequent exclusive use in commerce. Although
the statute creates a presumption of abandonment after three years of non-use, that
presumption may be rebutted by evidence of valid reasons for non-use or lack of
intent to abandon. Star-Kist Foods, Inc. v. P.J. Rhodes & Co., 769 F.2d 1393,
1396 (9th Cir. 1985). Because Bizar stated in his affidavits that he continuously
used the trademark and never intended to abandon it, summary judgment on these
claims was inappropriate. See Becker v. Williams, 777 F.3d 1035, 1041 (9th Cir.
2015) ("Summary judgment is notoriously inappropriate for determination of
claims in which issues of intent, good faith and other subjective feelings play
dominant roles." (internal quotation marks omitted)).
6. We also reverse the grant of summary judgment as to the unfair
competition and misappropriation claims, because the success of those state-law
claims is tied to whether Bizar owned the trademark at the time of Dee and
Herman’s alleged infringement. Reviewing de novo, Downing v. Abercrombie &
Fitch, 265 F.3d 994, 1005 (9th Cir. 2001), we conclude that the district court
should apply Arizona law to these state-law claims. Taking into consideration the
factors outlined in the Restatement, Arizona—the place where Bizar resided when
the alleged infringement took place—"has the most significant relationship
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between the occurrence and the parties." Restatement (Second) of Conflict of
Laws § 145(1) (1971); see Patton v. Cox, 276 F.3d 493, 495 (9th Cir. 2002)
(stating that Arizona follows the Restatement’s choice-of-law analysis). Dee and
Herman have not argued to this court that Bizar’s state-law claims are preempted
by federal law, but we note that the district court relied on precedent interpreting
federal copyright law, rather than federal trademark law, in its preemption analysis.
7. The district court properly granted summary judgment to Dee and
Herman on Bizar’s breach of contract claim. As we have explained, the contract
terminated in 1991, and the complaint identifies no actions taken by Dee or
Herman before 1991 that could have constituted a breach.
AFFIRMED in part, REVERSED and REMANDED in part. The parties
shall bear their own costs on appeal.
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