Opinion
Case No.: CV 19-08420-CJC(Ex)
2020-05-06
RUMBLE, INC., Plaintiff, v. The DAILY MAIL AND GENERAL TRUST PLC, et al., Defendants.
Robert W. Dickerson, Jr., Burke Williams and Sorensen LLP, Los Angeles, CA, for Plaintiff. Brendan Nathaniel Charney, Kelli L. Sager, Davis Wright Tremaine LLP, Los Angeles, CA, Eric J. Feder, Pro Hac Vice, Davis Wright Tremaine LLP, Washington, DC, for Defendant Associated Newspapers Ltd..
Robert W. Dickerson, Jr., Burke Williams and Sorensen LLP, Los Angeles, CA, for Plaintiff.
Brendan Nathaniel Charney, Kelli L. Sager, Davis Wright Tremaine LLP, Los Angeles, CA, Eric J. Feder, Pro Hac Vice, Davis Wright Tremaine LLP, Washington, DC, for Defendant Associated Newspapers Ltd..
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS [Dkt. 46]
CORMAC J. CARNEY, UNITED STATES DISTRICT JUDGE
I. INTRODUCTION
Plaintiff Rumble, Inc. ("Rumble") brings this action against Defendants Associated Newspapers Ltd. ("ANL"); The Daily Mail and General Trust PLC; DMG Media, LTD; Mailonline; and Dimple Mistry. (Dkt. 45 [Third Amended Complaint, hereinafter "TAC"].) Before the Court is ANL's motion to dismiss several of Rumble's claims. (Dkt. 46 [hereinafter "Mot."].) For the following reasons, that motion is GRANTED IN PART AND DENIED IN PART .
Having read and considered the papers presented by the parties, the Court finds this matter appropriate for disposition without a hearing. See Fed. R. Civ. P. 78 ; Local Rule 7-15. Accordingly, the hearing set for May 11, 2020, at 1:30 p.m. is hereby vacated and off calendar.
II. BACKGROUND
The Court previously summarized the facts leading to the instant dispute in its Order Granting ANL's motion to dismiss the Rumble's Second Amended Complaint ("SAC"). (Dkt. 40 [hereinafter "SAC Order"].) For the sake of clarity, the Court will repeat much of that summary below.
Rumble's TAC alleges the following facts. On August 12, 2019, Rebecca Stout took a video of a seagull eating a small shark on a New Jersey beach and posted it on the internet. (TAC ¶ 59.) Stout's homemade video of this anomalous natural event went viral. (Id. ) Soon after Stout posted her video, Rumble contacted her about a potential licensing arrangement which would allow her to monetize its republication. (Id. )
Rumble is a company that assists "little guy/gal videographers" monetize their viral videos. (Id. ¶ 54.) Specifically, Rumble reaches agreements with "content-creators" like Stout. Per these agreements, Rumble becomes exclusive licensee of the content-creators’ videos. (Id. ) Rumble then licenses the videos to third parties for a fee, and shares a portion of that fee with the original content-creator. (Id. ) According to Rumble, this arrangement allows individuals like Stout to capitalize on viral video content that is "enjoyed by millions" but "monetized by few." (Id. ¶ 54.) In this case, Rumble reached an agreement with Stout and became the exclusive licensee of her shark video. (Id. ¶ 59.) Rumble subsequently registered the video with the United States Copyright Office. (Id. ¶ 72.)
At some point after Rumble became the exclusive licensee of the shark video, Defendant Dimple Mistry, a senior video syndication editor for MailOnline, contacted Stout over Facebook. (Id. ¶ 65.) Mistry asked Stout for her permission to publish the shark video, but Stout responded that she had already signed an agreement with Rumble. (Id. ) Mistry responded:
Hi RebeccaThanks for replying to my comment.Unfortunately, we don't work with Rumble. It's the only agency we don't work with. Would you consider allowing us to pay you directly for the use?Thank you
(Id. ) Stout never gave Mistry or anyone else at ANL permission to publish the video. (Id. ¶ 66.)
However, on August 21, 2019, MailOnline—a news website which is published by ANL—published an online news story entitled "Shocking moment a seagull swallows a small SHARK while strutting along a New jersey beach." (Id. at Ex. 3.) Even though ANL never licensed Stout's video from Stout or Rumble, it was embedded in ANL's story. (Id. ¶ 60.) Rumble alleges that ANL's use of the clip in their news story constitutes willful copyright infringement. (Id. )
Rumble also alleges that ANL breached a settlement agreement that the parties signed in 2018. (Id. ¶ 86.) Rumble sued ANL for copyright infringement in 2017 after it discovered that ANL had included over 50 Rumble videos in its news stories without permission. (Id. ¶ 14.) The parties settled the case and entered into a settlement agreement. (Id. ¶ 26.) One provision of the settlement agreement provides that ANL "shall in the future make reasonable efforts to avoid violating the United States Copyright Act ... with respect to any video as to which Rumble has the exclusive right to license." (Id. ¶ 88.) Rumble alleges that it specifically bargained for this "reasonable efforts" provision, but ANL breached it by failing to take reasonable steps to guard against future acts of infringement. (Id. ¶¶ 92–93.)
On September 30, 2019, Rumble filed this suit against Defendants based on ANL's posting of the video as well as Mistry's exchange with Stout. Rumble's operative TAC asserts four claims for (1) willful copyright infringement, (2) breach of contract, (3) trade libel, and (4) intentional interference with prospective business advantage. (See generally TAC.) ANL contends that the latter three claims fail as a matter of law. (Mot.)
III. LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. The issue on a motion to dismiss for failure to state a claim is not whether the claimant will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims asserted. Gilligan v. Jamco Dev. Corp. , 108 F.3d 246, 249 (9th Cir. 1997). Rule 12(b)(6) is read in conjunction with Rule 8(a), which requires only a short and plain statement of the claim showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2). When evaluating a Rule 12(b)(6) motion, the district court must accept all material allegations in the complaint as true and construe them in the light most favorable to the non-moving party. Moyo v. Gomez , 32 F.3d 1382, 1384 (9th Cir. 1994). The district court may also consider additional facts in materials of which the district court may take judicial notice, Barron v. Reich , 13 F.3d 1370, 1377 (9th Cir. 1994), as well as "documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading," Branch v. Tunnell , 14 F.3d 449, 454 (9th Cir. 1994), overruled in part on other grounds by Galbraith v. Cty. of Santa Clara , 307 F.3d 1119 (9th Cir. 2002).
However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; see also Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (stating that while a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, courts "are not bound to accept as true a legal conclusion couched as a factual allegation" (citations and quotes omitted)). Dismissal of a complaint for failure to state a claim is not proper where a plaintiff has alleged "enough facts to state a claim to relief that is plausible on its face." Twombly , 550 U.S. at 570, 127 S.Ct. 1955. In keeping with this liberal pleading standard, the district court should grant the plaintiff leave to amend if the complaint can possibly be cured by additional factual allegations. Doe v. United States , 58 F.3d 494, 497 (9th Cir. 1995).
IV. ANALYSIS
A. Breach of Contract Claim
Rumble's breach of contract claim alleges that ANL breached the "reasonable efforts" provision of parties’ 2018 settlement agreement. ANL contends that this claim is preempted by the Copyright Act. The Court disagrees.
The Copyright Act provides that "all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright ... are governed exclusively by this title." 17 U.S.C. § 301. The Ninth Circuit employs a two-part test to determine whether the Copyright Act preempts a particular state law claim. Preemption occurs if: (1) the work at issue comes within the subject matter of copyright; and (2) the rights that the plaintiff asserts under state law are equivalent to those protected by the Act. See Kodadek v. MTV Networks, Inc. , 152 F.3d 1209, 1212 (9th Cir. 1998).
1. Subject Matter of Copyright
The first prong of the preemption analysis—whether the works at issue come within the subject matter of copyright—is met in this case. Rumble's breach of contract claim concerns ANL's alleged misappropriation of Rumble videos. These videos are "original works ... fixed in [a] tangible medium of expression" and therefore plainly come within the subject matter of copyright. See 17 U.S.C. § 102 (listing "motion pictures and other audiovisual works" as works of authorship subject to copyright protection); L.A. News Serv. v. Tullo , 973 F.2d 791, 794 (9th Cir. 1992) (holding that "raw videotapes" of newsworthy events were original works of authorship and entitled to copyright protection). 2. Equivalence to Copyright
The parties primarily dispute the second prong of the preemption analysis: whether the rights Rumble asserts through its breach of contract claim are equivalent to those protected by the Copyright Act. Under the second prong, "[t]o survive preemption, the state cause of action must protect rights that are qualitatively different from the rights protected by copyright." Grosso v. Miramax Film Corp. , 383 F.3d 965, 968 (9th Cir. 2004). This means that "[t]he state claim must have an ‘extra element’ which changes the nature of the action." See Del Madera Props. v. Rhodes and Gardner, Inc. , 820 F.2d 973, 977 (9th Cir. 1987).
When determining whether a breach of contract claim is preempted by copyright, the Court must look to the rights actually created by the contract, and then analyze whether any of those rights differ from the prohibition of unauthorized reproduction, performance, distribution, or display of work protected under copyright law. See, e.g., Selby v. New Line Cinema Corp. , 96 F. Supp. 2d 1053, 1061 (C.D. Cal. 2000). "Contract claims generally survive [copyright] preemption because they require proof of [ ] an extra element." Montz v. Pilgrim Films & TV, Inc. , 649 F.3d 975, 980 (9th Cir. 2011) ; see also ProCD, Inc. v. Zeidenberg , 86 F.3d 1447, 1454 (7th Cir. 1996) ("[C]ourts usually read preemption clauses to leave private contracts unaffected."). However, when a contract does no more than promise not to infringe on copyrighted works, claims stemming from its breach are preempted. See Del Madera Props. , 820 F.2d at 977 (finding that a contractual "promise not to use or copy materials within the subject matter of copyright is equivalent to the protection provided by section 106 of the Copyright Act"); Wrench LLC v. Taco Bell Corp. , 256 F.3d 446, 457 (6th Cir. 2001) ("If the [contractual] promise amounts only to a promise to refrain from reproducing, performing, distributing or displaying the work, then the contract claim is preempted.").
In this case, Rumble's contract claim is premised upon ANL's alleged breach of the parties’ 2018 settlement agreement. The parties principally dispute whether the settlement agreement contains more than just a promise not to infringe. The agreement provides in relevant part:
Defendant [ANL] ... shall in the future make reasonable efforts to avoid violating the United States Copyright Act on any website, social media platform, or other forum with respect to any video as to which Rumble has the exclusive right to license and/or enforce the copyright in the video.
(TAC ¶ 88.) In Rumble's view, this provision is more than just a promise not to infringe because it obligates ANL to undertake "reasonable efforts" to prevent future instances of infringement. Rumble explains that it intentionally bargained for this provision during settlement negotiations in hopes that ANL would adopt prophylactic measures—such as periodically reminding employees that they cannot publish Rumble videos without authorization—aimed at stopping future infringement. (Id. ¶ 90.) Meanwhile, ANL contends that the Settlement Agreement is merely a promise to refrain from future acts of infringement. On this point, the Court agrees with Rumble.
When construed in a light most favorable to Rumble and viewed in the context of the parties’ previous dispute, the plain language of the "reasonable efforts" clause constitutes more than just a promise not to infringe on Rumble's copyrights. See Lukens v. Broder/Kurland Agency , 2000 WL 35892340, at *2 (C.D. Cal. Sept. 14, 2000) (holding that breach of contract claim was not preempted because the contract in question was "not merely one to prohibit unauthorized copying; it is one in which [Defendant] promise[d] ... to ‘use its best efforts to advance plaintiff's interests’ "). Rather, it was designed to obligate ANL to adopt certain preventative measures designed to guard against future instances of infringement. This promise is separate and distinct from a simple promise not to infringe on Rumble's intellectual property. Compare Craigslist Inc. v. 3Taps Inc. , 942 F. Supp. 2d 962, 977 (N.D. Cal. 2013) (breach of contract claim was not preempted when "[t]he relevant provisions of the [contract] do not merely prohibit copying or reusing content") with Endemol Entm't B.V. v. Twentieth TV Inc. , 1998 WL 785300, at *6 (C.D. Cal. Sept. 29, 1998) (dismissing plaintiff's breach of contract claim as preempted because the contract contained "no additional rights other than promising not to benefit from the copyrighted work"). Accordingly, the Court finds that Rumble has asserted breach of contract claim against ANL that, while certainly related to copyrighted works, is not equivalent to a right protected by copyright law. ANL's motion to dismiss this claim as preempted is DENIED.
B. Trade Libel
ANL next moves to dismiss Rumble's trade libel claim under Rule 12(b)(6). This claim is premised on the exchange that Dimple Mistry had with Rebecca Stout in August 2019 after Rumble became the exclusive licensee of Stout's video. Rumble alleges that Mistry engaged in trade libel when she told Stout over Facebook messenger that "[u]nfortunately, we don't work with Rumble. It's the only agency we don't work with." (TAC ¶ 65.) The Court previously dismissed this claim after finding that "this innocuous statement cannot form the basis of a trade libel claim." (SAC Order at 9.) It gave Rumble leave to amend so that Rumble could have the opportunity to allege other potentially disparaging statements. (Id. ) But the TAC does not identify any additional statements—the trade libel remains entirely based on Mistry's "it's the only agency we don't work with" comment. (TAC ¶ 116.) Accordingly, Rumble's trade libel claim fails for substantially the same reasons the Court gave in its prior order.
Under California law, "trade libel is an intentional disparagement of the quality of property, which results in pecuniary damage." Films of Distinction, Inc. v. Allegro Film Prod., Inc. , 12 F. Supp. 2d 1068, 1081 (C.D. Cal. 1998). To state a claim for trade libel, a plaintiff must show "(1) a statement that (2) was false, (3) disparaging, (4) published to others in writing, (5) induced others not to deal with it, and (6) caused special damages." TYR Sport, Inc. v. Warnaco Swimwear, Inc. , 679 F. Supp. 2d 1120, 1140 (C.D. Cal. 2009). The Supreme Court of California has recognized that construing these elements too broadly would lead to "vexatious lawsuits over perceived slights" between competitors. See Hartford Cas. Ins. Co. v. Swift Distrib., Inc. , 59 Cal. 4th 277, 294, 172 Cal.Rptr.3d 653, 326 P.3d 253 (2014) (internal quotations omitted). As a result, certain elements of trade libel claims require specific allegations. For example, to meet the "disparaging" element, a plaintiff must allege "a false or misleading statement that ... clearly derogates [plaintiff's] product or business." Id. at 284, 172 Cal.Rptr.3d 653, 326 P.3d 253.
Rumble contends that Mistry statement that Rumble was the "only" agency that ANL did not work with was derogatory because it implies that something must be wrong with Rumble. The Court disagrees. "Disparagement by ‘reasonable implication’ requires more than a statement that may conceivably or plausibly be construed as derogatory." Id. at 295, 172 Cal.Rptr.3d 653, 326 P.3d 253. Instead, it requires an inference that is "clear or necessary." Id. The inference that Rumble asks the Court to draw from Mistry's statement does not meet this heightened standard. See Nestle USA, Inc. v. Crest Foods, Inc. , 2019 WL 2619635, at *10 (C.D. Cal. Mar. 8, 2019) (dismissing trade libel claim after finding that alleged communications "presented subtle, implied comments that were not clearly disparaging"); see also Forsher v. Bugliosi , 26 Cal. 3d 792, 803, 163 Cal.Rptr. 628, 608 P.2d 716 (1980) (cautioning courts against "scrutinizing what is not said to find a defamatory meaning which the [statement] does not convey to a lay reader" (internal quotation omitted)).
As the Court explained in its prior order, there are a number of reasons why companies might not work together that are unrelated to the allegedly defamed company's quality of service. For example, the companies’ higher-ups may not get along, or one company may have an exclusive arrangement with a competitor of the other. Therefore, Mistry's statement—which did not directly derogate Rumble's services in any way—does not carry a clear and necessary implication that something must be wrong with Rumble. And the fact that Stout may have interpreted Mistry's statement as derogatory does not make it actionable. See Forsher , 26 Cal. 3d at 805–806, 163 Cal.Rptr. 628, 608 P.2d 716 ("The fact that some person might, with extra sensitive perception, understand such a [defamatory] meaning cannot compel this court to establish liability at so low a threshold."). Allowing such an inoffensive statement to serve as the basis for a trade libel claim would open the door to vexatious lawsuits between competitors. See Hartford , 59 Cal. 4th at 294, 172 Cal.Rptr.3d 653, 326 P.3d 253. Rumble cannot based a successful trade libel claim on this statement.
If a Rule 12(b)(6) motion is granted, a "district court should grant leave to amend ... unless it determines that the pleading could not possibly be cured by the allegation of other facts" such that granting leave would be futile. See Lopez v. Smith , 203 F.3d 1122, 1127 (9th Cir. 2000) (internal quotation omitted). This is the second time that ANL has successfully moved to dismiss Rumble's trade libel claim. Despite providing Plaintiff with opportunity to cure the deficiencies this claim and instructions regarding the relevant pleading standard, Rumble has once again failed to adequately allege that Mistry's conversation with Stout constitutes trade libel. The Court finds that granting Rumble another opportunity to amend this claim would be futile. See Salameh v. Tarsadia Hotel , 726 F.3d 1124, 1133 (9th Cir. 2013) (holding that the district court did not abuse its discretion by denying leave to amend where the plaintiffs "had ample opportunity to properly plead a case and have failed to do so" and "the district court gave [the plaintiffs] specific instructions on how to amend the complaint, and [the plaintiffs] did not comply"). Accordingly, Rumble's trade libel claim is DISMISSED WITH PREJUDICE.
C. Intentional Interference with a Prospective Business Advantage
Finally, ANL moves to dismiss Rumble's claim for intentional interference with prospective business advantage. The parties agree that the success of this claim rises and falls with Rumble's trade libel claim. See Contemporary Servs. Corp. v. Staff Pro Inc. , 152 Cal. App. 4th 1043, 1060, 61 Cal.Rptr.3d 434 (2007). Because Rumble failed to state a claim for trade libel, its intentional interference with prospective business advantage claim is also DISMISSED WITH PREJUDICE. V. CONCLUSION
For the foregoing reasons, ANL's motion to dismiss is GRANTED IN PART AND DENIED IN PART. It is DENIED as to Rumble's breach of contract claim. Rumble's trade libel and intentional interference with a prospective business advantage claims are DISMISSED WITH PREJUDICE .