Opinion
B199541
9-3-2008
VIDEAL TV and FILM COPRODUKTIONS GMBH, Plaintiff and Appellant, v. COMERICA BANK, Defendant and Respondent.
Ervin, Cohen & Jessup, Kelly O. Scott, Heather L. McCloskey and Rodney C. Lee for Plaintiff and Appellant. Buchalter Nemer, Robert S. Addison, Jr. and Cheryl M. Lott for Defendant and Respondent.
Not to be Published
Plaintiff and appellant Videal TV Und Film Coproduktions GmbH (Videal) appeals a judgment following a grant of a motion for judgment on the pleadings filed by defendant and respondent Comerica Bank (Comerica).
The essential issue presented is whether the complaint, or any cause of action, is well pled.
Congress has conferred exclusive jurisdiction on federal courts for "any civil action arising under any Act of Congress relating to . . . copyrights . . . ." (28 U.S.C. § 1338(a).) It is undisputed the crux of Comericas alleged wrongdoing revolves around its alleged notice of Videals superior interest in certain copyrights. The viability of Videals claims is entirely dependent on title 17 United States Code section 205(d), pertaining to priority between conflicting transfers of copyright interests. Accordingly, all of Videals claims fall within the exclusive jurisdiction of the federal courts. The judgment is affirmed.
FACTUAL AND PROCEDURAL BACKGROUND
Videal is a film and television production company located in Hamburg, Germany. Between 1994 and April 2003, Videal entered into contracts with Promark Entertainment Group, Ltd. and Promark Entertainment Group, Inc. (collectively Promark) to invest in numerous Promark films (the films). Under the contracts, Videal would fund 50 percent of the production budget in exchange for, inter alia, a guaranteed return of 80 percent of that investment, a share of the license fees and revenues generated by each of the films, plus either a specified percentage interest in the copyright in each of the films or the transfer of a specified percentage interest in the film production company that produced each film.
Promark is not a party to this appeal.
Comerica was a creditor of Promark. Comerica is in the business of lending funds for the production and distribution of films. At some time prior to February 2002, Comerica agreed to provide financing to Promark in exchange for certain rights, including the right, upon the default of Promark, for Comerica to step into Promarks shoes to conduct Promarks business. Comerica also obtained copyright interests in the same films.
Comerica recorded its interest in all of the films copyrights with the United States Copyright Office. With respect to each of the films, Comerica was the first to record its interest. Videal had either an unrecorded or, in certain instances, a secondary recorded copyright interest, in the films.
The trial court took judicial notice of this fact.
In February 2005, Comerica took over Promarks business operations.
a. Pleadings.
On August 18, 2006, Videal filed the operative third amended complaint against Comerica, setting forth causes of action for conversion, intentional and negligent interference with contract, conspiracy to commit fraud and conversion, and unfair competition.
Videal alleged that upon taking control of Promarks business operations, Comerica improperly "paid to itself all incoming revenues from the films co-produced by Promark . . . when such revenues belonged to third parties, including Videal, who had superior interests to Comericas in such funds." (Italics added.) Videal pled that its copyright interest in each of the films (by virtue of the Videal/Promark contracts) predated any interest that Comerica may have obtained as a result of the various financing agreements it entered into with Promark. Videal also alleged that Comerica had "actual knowledge of Videals copyright interest" in each of the films. Therefore, according to Videal, its unrecorded or in certain instances, secondary recorded copyright interest, prevailed over Comericas earlier recorded copyright interest because Comerica took its interest with knowledge of the interest held by Videal in the same copyrights.
b. Demurrers to third amended complaint sustained in part without leave to amend and overruled in part.
Comerica demurred to the third amended complaint, contending, inter alia, "[s]ince Comerica is a perfected, secured creditor with regard to all films at issue, with an interest senior to Plaintiffs, Plaintiff cannot, as a matter of law, maintain any of its causes of action against Comerica."
The trial court sustained without leave Comericas demurrers to the causes of action for intentional and negligent interference with contract. The trial court ruled Videal failed to plead facts to support an intentional interference, and there was no showing of a duty of care owed by Comerica to Videal to support a cause of action for negligent interference. The trial court also sustained without leave Comericas demurrer to the cause of action for conspiracy to commit fraud or conversion, finding insufficient allegations to plead the necessary intent required to form a civil conspiracy.
The trial court overruled Comericas demurrer to Videals cause of action for conversion, finding Videal adequately alleged that Comerica had actual knowledge of Videals prior interest in the films, and a copyright transfer is not given legal effect against a prior unrecorded interest when a second party records with actual knowledge of the prior unrecorded interest. The trial court also overruled Comericas demurrer to Videals cause of action for unfair competition (Bus. & Prof. Code, § 17200), on the ground the cause of action for conversion was a sufficient predicate "unfair" act to support a cause of action for unfair competition.
c. Motion for judgment on the pleadings on the ground of federal preemption.
On February 1, 2007, Comerica filed a motion for judgment on the pleadings, contending the superior court lacked subject matter jurisdiction over Videals two remaining causes of action, conversion and unfair competition, because Congress has assigned exclusive jurisdiction to the federal courts over any action arising under the copyright laws (28 U.S.C. § 1338(a)), and Videals claim it has a superior interest in the films copyrights requires application of the federal Copyright Acts priority scheme for conflicting transfers of interests in copyrights. (17 U.S.C. § 205(d).)
In opposition, Videal argued the mere existence of copyrights associated with each film at issue does not give rise to federal subject matter jurisdiction. Further, there was no allegation of copyright infringement. Rather, this action was merely a dispute concerning ownership of the subject copyrights and the revenues generated from those films. "[T]he issue of ownership turns on the interpretation of the Promark/Videal Contracts and Comericas knowledge of the rights granted to Videal therein." (Italics added.) Therefore, according to Videal, this action did not require an interpretation of the Copyright Act.
d. Trial courts ruling.
On March 7, 2007, the trial court granted Comericas motion for judgment on the pleadings. The trial court rejected Videals attempt to characterize this case as purely involving issues of contract interpretation. The trial court ruled the fact that Videals copyright interests in the films stemmed from Videals contracts with Promark had no bearing on Videals claims against Comerica. "Rather, [Videals] right to assert any ownership interest in the films, and therefore any `wrongful appropriation by [Comerica] of any such interest, stems from the validity of its recorded interest in them. As this court recognized in [its earlier] ruling on demurrer, the validity of the recordation is dependent entirely on an analysis of the recordation provisions of the Copyright Act at 17 U.S.C. § 205. It is this claim in `ownership that [Videal] recognizes is determinative when pleading that Promarks assignment of the films copyrights was a matter of public record at the time when Comerica recorded its copyright interests in the films."
The trial court concluded the causes of action for conversion and unfair competition were entirely dependent on the construction and application of the federal Copyright Act, and as a result, the superior court lacked subject matter jurisdiction over these claims pursuant to title 28 United States Code section 1338.
On May 31, 2007, Videal filed a timely notice of appeal from the judgment.
CONTENTIONS
Videal contends the trial court erred in sustaining demurrers to its causes of action for intentional and negligent interference with contract, as well as conspiracy to commit fraud or conversion. Further, the trial court erred in granting judgment on the pleadings as to the remaining causes of action, i.e., conversion and unfair business practices, because Videals claims are not preempted by the federal Copyright Act.
Comerica contends Videal failed to plead sufficient facts to support any of its causes of action, and in any event the entire action falls within the exclusive jurisdiction of the federal courts.
DISCUSSION
1. Standard of appellate review.
A defendants motion for judgment on the pleadings "is equivalent to a belated general demurrer to a plaintiffs complaint and is governed by the same standard of appellate review that applies to such a demurrer. [Citation.]" (Sprague v. County of San Diego (2003) 106 Cal.App.4th 119, 127.)
2. Superior court lacks subject matter jurisdiction over all of Videals claims against Comerica.
a. General principles; exclusive jurisdiction of federal courts in civil actions arising under federal copyright law.
Congress has conferred exclusive jurisdiction on the federal courts for any civil action arising under federal law relating to copyrights. Title 28 United States Code section 1338 provides in relevant part: "(a) The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to . . . copyrights . . . . Such jurisdiction shall be exclusive of the courts of the states in . . . copyright cases. [¶] (b) The district courts shall have original jurisdiction of any civil action asserting a claim of unfair competition when joined with a substantial and related claim under the copyright . . . laws."
b. The issue of subject matter jurisdiction as to all causes of action against Comerica is properly before this court.
Comerica, in its respondents brief on appeal, contends the trial court properly granted judgment on the pleadings because all of Videals causes of action are preempted by the federal Copyright Act and fall within the exclusive jurisdiction of the federal courts.
We note Comericas motion for judgment on the pleadings on the ground of federal preemption, was directed solely at the two remaining causes of action of the third amended complaint, namely, conversion and unfair competition (Bus. & Prof. Code, § 17200). The other causes of action were eliminated earlier when the trial court sustained demurrers to those causes of action without leave to amend.
Therefore, the scope of Comericas argument, with respect to subject matter jurisdiction, is broader on appeal than it was in the trial court. Nonetheless, the issue of subject matter jurisdiction is a pure question of law, and "[t]he very nature of subject matter jurisdiction . . . indicates that it cannot be conferred by consent, waiver or estoppel." (2 Witkin, Cal. Procedure (4th ed. 1996) Jurisdiction, § 12, p. 556.) Further, Videal has had the opportunity in its reply brief to respond to Comericas arguments in this regard.
Therefore, irrespective of how this issue was framed below, we examine the allegations of Videals operative third amended complaint to determine whether the action, or any portion thereof, arises under federal copyright law.
c. The complaint, on its face, discloses that all causes of action against Comerica arise under federal copyright law.
The third amended complaint, at paragraph 23, alleges in relevant part: "Comerica had actual knowledge of Videals investment and interest in each of the Promark/Videal Films prior to Comericas investment therein. Further, . . . consistent with Comericas policies and those commonly accepted in the film financing industry, prior to providing any funding for specific films to Promark, Comerica confirmed the interest held by each and any third parties in the production, including copyright interests. Thus, and by virtue of Videals recordation of certain of its copyright interests in the Promark/Videal Films, Comerica had actual knowledge of Videals copyright interest in each of the Promark/Videal Films." (Italics added.)
The third amended complaint, at paragraph 24, further alleges: "Videal is informed and believes that, in or around February of 2005, Comerica stepped into the shoes of Promark and took over Promarks business operations, including the collection and distribution of revenues generated by various Promark co-produced films, including the Promark/Videal films. Videal is further informed and believes that, upon taking control of Promarks accounts, Comerica paid to itself all incoming revenues from the films co-produced by Promark, including the Promark/Videal films, when such revenues belonged to third parties, including Videal, who had superior interests to Comerica in such funds." (Italics added.)
These allegations were realleged and incorporated by reference into all of Videals causes of action against Comerica.
In essence, in the above allegations Videal pled it held a superior copyright interest in the Promark films, and that Comerica had actual knowledge of Videals interest before Comerica extended financing to Promark.
Videal does not dispute this characterization of its pleadings. In its opposition to Comericas demurrer to the third amended complaint, Videal asserted: "Comerica stands liable for converting revenues which should have been paid to Videal, for interfering with the Promark/Videal Contracts, for conspiracy to commit fraud and conversion with the Promark Defendants and for unfair competition pursuant to Business and Professions Code section 17200. Because the crux of Comericas wrongdoing revolves around its notice of Videals superior interest, each of the above-mentioned causes of action states facts sufficient to constitute a cause of action." (Italics added.)
The problem for Videal is its theory that Comerica is liable because it had notice of Videals superior interest falls squarely within federal copyright law.
Title 17 United States Code section 205(d) relates to priority between conflicting transfers of copyright interests. It provides: "As between two conflicting transfers, the one executed first prevails if it is recorded, in the manner required to give constructive notice under subsection (c), within one month after its execution in the United States or within two months after its execution outside the United States, or at any time before recordation in such manner of the later transfer. Otherwise the later transfer prevails if recorded first in such manner, and if taken in good faith, for valuable consideration or on the basis of a binding promise to pay royalties, and without notice of the earlier transfer." (17 U.S.C., § 205(d), italics added.)
We conclude all of Videals causes of action are entirely dependent on the construction and application of federal copyright law, specifically, title17 United States Code section 205(d). Therefore, exclusive jurisdiction lies with the federal courts pursuant to title 28 United States Code section 1338.
d. Videals arguments without merit.
The federal statute pertaining to priority between conflicting transfers (17 U.S.C. § 205(d)) was the basis of the trial courts grant of judgment on the pleadings. The statute is also central to Comericas position, in its respondents brief, that Videals action, which requires a determination as to whether Videal or Comerica holds a senior copyright interest, arises under federal copyright law. However, Videal has ignored the statute. Neither its opening brief nor its reply brief makes any mention of title 17 United States Code section 205(d).
Instead, Videal contends the ground for federal preemption must appear on the face of the complaint and the instant complaint fails to meet that requirement. (Caterpillar, Inc. v. Williams (1987) 482 U.S. 386, 392 .) The argument is unavailing. As discussed above, the complaint on its face discloses the applicability of federal copyright law because Videal pled it held superior copyright interests in the Promark films and that Comerica had actual knowledge thereof. (17 U.S.C. § 205(d).)
Videal also argues this is merely a contractual dispute to determine which party has the right to revenues from the films. However, as the trial court recognized, the fact Videals copyright interests in the films stem from contracts with Promark is immaterial. Videals claim it has a superior interest in the copyrights is governed by the statutory provision relating to priority between conflicting transfers (17 U.S.C. § 205(d)), not by contract law.
3. Other issues not reached.
In view of our determination the superior court lacks subject matter jurisdiction over Videals claims against Comerica, it is unnecessary to address Videals contention that the trial court erred in sustaining demurrers to Videals causes of action for interference with contract and conspiracy, or any other issues.
DISPOSITION
The judgment is affirmed. Comerica shall recover its costs on appeal.
We concur:
CROSKEY, J.
KITCHING, J.