August 2012: Entertainment Litigation Update

by Quinn Emanuel Urquhart & Sullivan, LLP
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Quirk v. Sony Pictures: On July 5, 2012, a federal court in California denied Sony Pictures’s motion to dismiss writer Joe Quirk’s beach of implied contract claim relating to the upcoming film, Premium Rush. Quirk v. Sony Pictures Entm’t Inc., No. C 11-3773 RS (N.D. Cal. July 5, 2012). Quirk alleged that Premium Rush is derived from his 1998 novel, Ultimate Rush, and that Sony breached an implied contract to compensate him for the use of his material. Although the court noted that Quirk’s theory of liability stretches California’s law of idea theft to its “breaking point” (id. at 6), Quirk’s claim was found to meet the low “facially plausible” standard required to survive a motion to dismiss.

Notably, Quirk failed to allege that Sony received a copy of Ultimate Rush directly from him or his agents. Instead, Quirk theorized that a copy of his novel “passed through one or more routes between those to whom his agent directly submitted the novel” and Sony. This distinction is important because, while there is significant precedent for implied contract claims when an author submits a literary work directly to a producer on the implied condition that the producer will pay if it uses the work, see, e.g., Desny v. Wilder, 46 Cal. 2d 715 (1956), there is no previous authority to support such an implied contract without direct contact.

The court explicitly stated that its decision to deny the motion was a “close call” and it applied an extremely fact-specific analysis. Nonetheless, the fact that Quirk’s claims were allowed to proceed may impact the landscape of implied contract and idea theft cases in California.

FCC v. CBS: Eight years after the 2004 Super Bowl’s infamous halftime “wardrobe malfunction,” the legal battle between the FCC and CBS has finally concluded. In response to the musical halftime performance, which included 9/16ths of a second of nudity broadcast to 90 million viewers, the FCC fined CBS $550,000—the largest fine ever levied against a broadcaster. On June 29, 2012, the Supreme Court declined to hear an appeal from the Third Circuit’s decision reversing the fine, thereby making the Third Circuit’s ruling the final word.

In CBS Corp. v. FCC, 663 F.3d 122, 151 (3d Cir. 2011), the Third Circuit held that the FCC’s fine was arbitrary and capricious, relying on the FCC’s previous treatment of “fleeting words”:

[T]he balance of the evidence weighs heavily against the FCC’s contention that its restrained enforcement policy for fleeting material extended only to fleeting words and not to fleeting images. As detailed, the Commission’s entire regulatory scheme treated broadcasted images and words interchangeably for purposes of determining indecency. Therefore, it follows that the Commission’s exception for fleeting material under that regulatory scheme likewise treated images and words alike.

Although the Supreme Court denied certiorari, Chief Justice Roberts issued a concurrence indicating that future FCC fines may not be treated in the same way because the FCC has clarified its rules on fleeting images and words since the 2004 Super Bowl:

[T]he FCC no longer adheres to the fleeting expletive policy. It is now clear that the brevity of an indecent broadcast—be it word or image—cannot immunize it from FCC censure. See, e.g., In re Young Broadcasting of San Francisco, Inc., 19 FCC Rcd. 1751 (2004) (censuring a broadcast despite the “fleeting” nature of the nudity involved). Any future “wardrobe malfunctions” will not be protected on the ground relied on by the court below.

Federal Commc’ns Comm’n v. CBS Corp., 567 U.S. __ (2012) (Roberts, C. J., concurring).

Dish Network v. ABC: On July 9, 2012, a federal district court in New York dismissed Dish Network’s copyright and contract claims against Twentieth Century Fox and its copyright claims against CBS and NBC, based on improper venue. Dish Network, LLC v. ABC, No. 12 Civ. 4155 (LTS) (S.D.N.Y. July 9, 2012). Dish’s claims stem from its “Auto Hop” feature, also known as an “ad zapper,” which allows Dish subscribers to skip over commercials on programs saved to their DVRs. Venue had been at issue in the case since Dish filed a lawsuit in New York the same day that Fox and other television networks filed in California.

The court ruled these claims would best be litigated in California. Rejecting Dish’s argument that it had won the race to the courthouse, the court found that Dish’s New York lawsuit “was motivated by a fear of imminent legal action by the networks and was, thus, improperly anticipatory.” Dish had filed suit in New York on May 24, just hours before the television networks filed suit in Los Angeles and less than 24 hours after a Hollywood Reporter article “conveyed the unmistakable impression that a legal showdown was inevitable.”

However, the court allowed Dish’s contract claims against CBS and NBC to remain in New York because those networks have yet to assert contract claims in California. In addition, because ABC has not yet filed suit against Dish, Dish’s claims against ABC will remain in New York for the time being.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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