HENDRICKS & LEWIS PLLC, a Washington professional limited liability company v. George CLINTON, an individual
No. 13-35010
United States Court of Appeals, Ninth Circuit
Filed June 23, 2014
Argued and Submitted Feb. 4, 2014. Amended Aug. 26, 2014.
761 F.3d 991
AFFIRMED.
Eric Michael Fong (argued), Fong Law, Port Orchard, WA, for Plaintiff-Appellee.
Katherine Hendricks (argued), Hendricks & Lewis, Seattle, WA, for Defendant-Appellant.
ORDER AND AMENDED OPINION
ORDER
The Opinion filed June 23, 2014 is hereby amended. The amended opinion is filed concurrently with this Order.
Defendant-Appellant‘s petitions for rehearing and rehearing en banc are DENIED. No additional petitions for rehearing or rehearing en banc will be entertained.
OPINION
CHRISTEN, Circuit Judge:
George Clinton appeals the district court‘s order appointing a receiver, assigning four master sound recording copyrights to the receiver, and authorizing the receiver to use the copyrights to the extent necessary to satisfy monetary judgments a law firm obtained against him. Clinton also raises several issues for the first time on appeal, including fraud on the court and judicial estoppel. We have jurisdiction under
I. FACTS
A. H & L‘s Judgments Against Clinton
George Clinton is a musician, bandleader, and touring performance artist. Hendricks & Lewis (H & L) is a law firm that represented Clinton in various disputes from March 2005 to August 2008. H & L billed Clinton $3,341,650.32 for its work, received $1,000,578.87 in payment, and wrote off approximately $600,000 of the remaining balance. This left $1,779,756.29 due. H & L initiated arbitration to secure payment of the balance, and an arbitration panel issued an award in favor of H & L. Clinton did not participate in the arbitration proceedings. H & L petitioned the Western District of Washington for an order confirming the arbitration award, and, in May 2010, the district court entered judgment for H & L against Clinton in the amount of $1,675,639.82, plus interest. The court entered a second judgment awarding H & L an additional $60,786.50 in attorneys’ fees and costs in July 2010.
B. H & L‘s Judgment Collection Efforts
H & L pursued a variety of judgment collection efforts, including garnishments, levies, and liens in several districts across the country. Clinton‘s attorney declared that these actions created a financial “stranglehold” so that Clinton “[c]an‘t pay his taxes. Can‘t pay his lawyers. Now, it is going to affect his touring and his ability to make a living at 72 years old.”
C. Ownership History of the Masters
In July 1975, Clinton, through his production company, Thang, Inc., entered into a recording contract with Warner Bros. Records in which Clinton agreed to make master recordings of his performances with the group Funkadelic (“the Masters“). Clinton had previously entered into a valid and binding agreement with Thang to render his services as a recording artist solely and exclusively for Thang.
The recording contract between Thang and Warner Bros. provided that Warner Bros.:
shall own in perpetuity throughout the world all right, title and interest in and to all the results and proceeds of [Thang‘s] and [Clinton‘s] services and performances hereunder, including the sole and exclusive ownership of any and all masters ..., the copyrights therein throughout the universe, and the right to extend or renew such copyrights, and
[Thang] and [Clinton] acknowledge that they shall at no time have any right, title or interest in the foregoing.
The agreement further provided that Thang:
acknowledges and agrees that [Warner Bros.] is and shall be the owner of all rights of copyright in records embodying the results and proceeds of [Clinton‘s] services ..., including the exclusive right to copyright same as “sound recordings” in the name of [Warner Bros.] to renew and extend such copyrights (it being agreed that for this purpose [Thang] and [Clinton] are deemed [Warner Bros.‘s] employees for hire) and to exercise all rights of the copyright/proprietor thereunder. To the extent, if any that [Thang] or [Clinton] may be deemed an “author” of such “sound recordings“, [Thang] and [Clinton] further grant to [Warner Bros.] a power of attorney, irrevocable and coupled with an interest for [Thang] and [Clinton] and in [Thang] and/or [Clinton‘s] name, to apply for and obtain and on obtaining same, to assign to [Warner Bros.], all such renewal copyrights.
Clinton signed a substantially similar agreement with Warner Bros. in May 1979. Under these agreements, the Masters at issue in this appeal—“Hardcore Jollies,” “One Nation Under a Groove,” “Uncle Jam Wants You,” and “The Electric Spanking of War Babies“—were created, and Warner Bros. registered the copyrights in those recordings as “works made for hire” in its name as author.
In August 1982, to resolve a separate dispute involving Clinton, Warner Bros., and other parties, Clinton and Warner Bros. entered into a settlement agreement under which Warner Bros. agreed to “relinquish its ownership of the Clinton Masters” at issue in this appeal, if or when Clinton entered into an agreement with a third party to distribute and sell records produced from the Masters. Clinton‘s ownership of the Masters was eventually confirmed through litigation in 2005 when the Central District of California issued an order that Clinton “is the sole owner of [the Masters] and has been the sole owner of the Masters since 1993.” Clinton subsequently sued third parties for copyright infringement of the Masters.
II. PROCEDURAL HISTORY
In July 2011, approximately one year after H & L secured its judgments for past-due attorneys’ fees against Clinton, Clinton sued H & L in the Western District of Washington alleging various theories of legal malpractice. H & L asserted judgment collection counterclaims and moved for an order authorizing the sale of the Masters to satisfy the judgments it had secured against Clinton. In April 2012, H & L initiated a separate action in the Western District of Washington seeking an order for a judgment debtor examination of Clinton. H & L subsequently filed a motion in this separate action for the appointment of a receiver and for an order directing the assignment of the Masters to the receiver. H & L‘s counterclaims in the malpractice action were severed and consolidated with the action initiated by H & L, which is at issue here.1
In November 2012, the district court found that “[d]espite numerous efforts to enforce [the subject] judgments in this and other district[s], plaintiff has recovered less than $340,000.” The district court
shall have all of the rights, powers, duties, and authority vested in him under [applicable Washington law], including but not limited to authority and control over the Funkadelic master sound recordings “Hardcore Jollies,” “One Nation Under a Groove,” “Uncle Jam Wants You,” and “The Electric Spanking of War Babies,” in order to maximize the value of the sound recordings for the benefit of the parties and to make whole the judgment creditor, [H & L]. Receiver shall, to the greatest extent possible, maximize the income stream from the Funkadelic master sound recordings without selling or otherwise permanently disposing of the copyrights. Ideally, the Receiver will utilize the copyright and sound recordings over a one or two year period to satisfy the judgments and pay the expenses of the receivership before returning the copyrights and master sound recordings to [Clinton]. Notwithstanding the Court‘s preference for returning the recordings and copyrights to [Clinton] after his debts are satisfied, the Receiver has the authority to sell or permanently dispose of any or all of the master sound recordings.
(Emphasis added). The district court also ordered that it would have to pre-approve any sale of the Masters.2
In entering its order, the district court considered the text and legislative history of
Clinton appeals.
III. DISCUSSION
“We review de novo the district court‘s interpretations of the Copyright Act.” Rossi v. Motion Picture Ass‘n of Am. Inc., 391 F.3d 1000, 1002–03 (9th Cir. 2004). The appointment of a receiver is reviewed for abuse of discretion. See Cameron v. Groveland Improvement Co., 20 Wash. 169, 54 P. 1128, 1128 (1898); King Cnty. Dep‘t of Cmty. & Human Servs. v. Nw. Defenders Ass‘n, 118 Wash. App. 117, 75 P.3d 583, 586 (2003). “Because a court invokes judicial estoppel at its discretion, we review the application of judicial estoppel to the particular facts of a case for abuse of discretion.” Johnson v. Oregon, 141 F.3d 1361, 1364 (9th Cir.1998).
[t]he procedure on execution—and in proceedings supplementary to and in aid of a judgment or execution—must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies.
We know of no federal statutory law directly addressing whether copyrights are subject to execution to satisfy a judgment. Both H & L and the district court relied on federal common law, specifically Ager v. Murray, 105 U.S. 126, 26 L.Ed. 942 (1881). The Ager court ruled that if a patent holder refused to assign his patent to satisfy a judgment entered against him, the trustee was authorized to execute the assignment on his behalf. Id. at 132. Though Ager involved a patent rather than a copyright, the district court‘s analogy to patent law is rooted in our case law. Our court has said that where copyright case law is lacking, “it is appropriate to look for guidance to patent law ‘because of the historic kinship between patent law and copyright law.‘” Harris v. Emus Records Corp., 734 F.2d 1329, 1333 (9th Cir.1984) (quoting Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 439, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984)). Indeed, Ager itself discusses patents and copyrights in tandem. See 105 U.S. at 127-28 (“[T]he provisions of the patent and copyright acts, securing a sole and exclusive right to the patentee, do not exonerate the right and property ... from liability to be subjected by suitable judicial proceedings to the payment of his debts.“). The authority cited by the district court is helpful, but Rule 69 requires that state law controls execution proceedings absent express statutory authority, not federal common law. See
Our court confronted an analogous issue in Office Depot, Inc. v. Zuccarini, 596 F.3d 696 (9th Cir.2010), where we considered whether internet domain names are subject to execution in California. Consistent with Rule 69, in Office Depot our court first looked to California law because there is no specific federal statute addressing whether domain names may be the subject of judgment execution efforts. Because California law permits writs of execution against intangible assets generally, and because domain names are intangible personal property, we held that internet domain names are subject to execution in California. Id. at 701-02.
Here, Rule 69 required that the district court look to Washington law in the absence of a federal statute addressing whether copyrights may be subject to execution procedures, and Washington law provides that “all property, real and personal,” is subject to execution. Johnson v. Dahlquist, 130 Wash. 29, 225 P. 817, 818 (1924). This rule, known as the “Johnson rule,” was first articulated when a previous version of
Clinton challenges the district court‘s reliance on Washington‘s admittedly broad and general execution statutes and the district court‘s analogy to patent law. He argues that § 201(e) of the Copyright Act precludes H & L‘s execution efforts. For the first time on appeal, he also argues that
B. Copyright Act § 201(e) Does Not Protect Clinton from the Involuntary Transfer of His Copyrighted Works.
Clinton argues that § 201(e) of the Copyright Act protects the subject copyrights from H & L‘s judgment collection efforts. Neither the statute‘s plain text nor its legislative history supports Clinton‘s argument.
We begin with the statutory language.
When an individual author‘s ownership of a copyright, or of any of the exclusive rights under a copyright, has not previously been transferred voluntarily by that individual author, no action by any governmental body or other official or organization purporting to seize, expropriate, transfer, or exercise rights of ownership with respect to the copyright, or any of the exclusive rights under a copyright, shall be given effect under this title, except as provided under title 11.
The stated purpose of this prohibition was to “protect foreign authors against laws and decrees purporting to divest them of their rights under the United States copyright statute, and would protect authors within the foreign country who choose to resist such covert pressures.” More particularly it was feared that the Soviet Union, by its accession to the Universal Copyright Convention on February 27, 1973, would be enabled to enforce censorship in the United States of the works of its dissident authors through the device of seizing the ownership of such works, and then by enforcing the American copyright therein, enjoin any public distribution within the United States.
3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 10.4 (footnote omitted). The legislative history of § 201(e) explains that “[t]he purpose of this subsection is to reaffirm the basic principle that the United States copyright of an individual author shall be secured to that author, and cannot be taken away by any involuntary transfer.” H.R. Rep. 94-1476, at 123 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5739.4
We need not resolve the authorship dispute here, however, because § 201(e) is of no help to Clinton whether or not he is the author of the Masters.
Relying on the contention that § 201(e) must be read in harmony with the termination provisions of
We decline to consider Clinton‘s § 304 argument, which he raised for the first time in his motion for reconsideration of the district court‘s order appointing a receiver. “A party does not properly preserve an issue for appeal by raising it for the first time in a motion for reconsideration.” Self-Realization Fellowship Church v. Ananda Church of Self-Realization, 59 F.3d 902, 912 (9th Cir.1995). The district court ruled that the motion for reconsideration was untimely, and it never considered the merits of the inalienable termination rights argument. Clinton does not argue that the district court abused its discretion in so ruling, and he identifies no exceptional circumstances that warrant our consideration of his argument for the first time on appeal. See Gieg v. DDR, Inc., 407 F.3d 1038, 1046 n. 10 (9th Cir.2005) (“An appellate court will not consider arguments not first raised
C. The District Court Did Not Abuse Its Discretion by Appointing a Receiver to Manage or Sell Ownership of These Copyrights.
The Washington Act Relating to Receiverships conveys broad authority to judges to appoint receivers. A receiver may be appointed if the court “determines that the appointment of a receiver is reasonably necessary and that other available remedies either are not available or are inadequate.”
Washington appellate courts have acknowledged that trial courts have broad discretion to appoint receivers, but this discretion “should be exercised with caution in view of all the facts and circumstances of the particular case.” Nw. Defenders Ass‘n, 75 P.3d at 586; see Mony Life Ins. Co. v. Cissne Family L.L.C., 135 Wash.App. 948, 148 P.3d 1065, 1067 (2006) (“A trial court abuses its discretion when its decision is manifestly unreasonable, or exercised on untenable grounds, or for untenable reasons.” (internal quotation marks and citation omitted)). The district court cited § 7.60 generally, and found that “[a] receivership is necessary to ensure justice to the parties and to preserve [the Masters] for the benefit of the parties and to make whole the judgment creditor,” H & L. Without citing authority, Clinton argues that the district court‘s “generic, conclusory” statement that a receivership is necessary was inadequate, and that the court was required make specific findings to justify appointing a receiver. This argument is not persuasive.
The record shows that the district court heard the parties’ arguments and was fully aware of Clinton‘s claim that the sale of the Masters would be a hardship for him. It recognized that H & L had valid judgments against Clinton, and that H & L had only recovered a portion of Clinton‘s total debt. The district court was concerned that Clinton would not be able to satisfy this debt in a reasonable amount of time. It also knew that Clinton needed some income to support himself. The court‘s clear goal was to have a receiver manage these assets so that Clinton could satisfy the judgment and have control of the assets returned to him, if possible. It was well aware that the parties had discussed various proposals allowing them to share the royalties generated by the Masters,
D. Clinton May Raise Claims of Fraud on the Court and Judicial Estoppel for the First Time on Appeal, But Both Claims are Meritless.
1. Fraud on the Court
Clinton argues for the first time on appeal that H & L perpetrated fraud on the district court. H & L argues that because this issue was not raised below, it should not be considered on appeal, citing Weisman v. Charles E. Smith Mgmt., Inc., 829 F.2d 511, 514 (4th Cir.1987) (“We believe that the district court is the proper forum to determine in the first instance whether there is sufficient basis to overturn the judgments on the grounds raised. That court is in the best position to decide whether any fraud was perpetrated upon it or other untoward action occurred....“).
“Courts have inherent equity power to vacate judgments obtained by fraud.” United States v. Estate of Stonehill, 660 F.3d 415, 443 (9th Cir.2011) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 44, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991)); see also Dixon v. Comm‘r, 316 F.3d 1041, 1046 (9th Cir.2003) (“Courts possess the inherent power to vacate or amend a judgment obtained by fraud on the court.“). We have held that “[w]hen we conclude that the integrity of the judicial process has been harmed ... and the fraud rises to the level of ‘an unconscionable plan or scheme which is designed to improperly influence the court in its decisions,’ we not only can act, we should.” Dixon, 316 F.3d at 1046 (quoting England v. Doyle, 281 F.2d 304, 309 (9th Cir.1960)).
Though we are free to consider this argument for the first time on appeal, Clinton‘s claim that H & L perpetrated an “unconscionable scheme” is without merit. Clinton first alleges that H & L “fabricated an image” that Clinton refused to pay his debts. He cites H & L‘s statement to the district court that “Clinton has not voluntarily paid any amounts due,” and attempts to rebut it by noting that “in fact, Mr. Clinton voluntarily paid $106,453.” But Clinton fails to mention that H & L had to serve separate levies on entities that were believed to owe Clinton royalties in order to satisfy this much of its judgment. These payments were not “voluntary,” and Clinton‘s accusation to the contrary is unsupported.
Clinton also argues that H & L‘s alleged misrepresentations were “intentional” and “designed to defraud the court by painting an image of hopelessness and utter failure in its attempt to get paid.” This argument is belied by the record. H & L repeatedly described its judgment collection efforts in detail to the district court, including successes, failures, and inconclusive outcomes. For instance, H & L filed a status report with the district court in which it spent eighteen pages detailing its various judgment collection efforts and summarizing the amount of money it had recovered as of the date of the report. In his reply brief for this appeal, Clinton admits that H & L‘s “accounting is correct.”
Clinton also argues that H & L falsely represented to the district court that Clinton refused to negotiate. Clinton seems to rely on H & L‘s assertion that “Clinton
Finally, Clinton argues that H & L did not convey accurate information to the district court when, at oral argument on H & L‘s motion to authorize sale of the Masters, H & L‘s attorney responded to the court‘s question about whether the Masters were also at issue in related California proceedings. Clinton quotes H & L‘s attorney as telling the district court that “[t]here is nothing that relates to the same property [in the California proceedings].... While [the Masters] weren‘t part of the motion [in the California proceedings], I‘m not sure they were ever even mentioned except in the very limited context that is referred to in the briefs.” The language Clinton quotes is a selective representation of the exchange between H & L‘s counsel and the district court. A more complete reading of the transcript shows that H & L‘s counsel explained that the royalty streams at issue in California do not pertain to the Masters but to other works. She also explained that the California action did not involve transfer of copyrights. We find no merit to the argument that H & L perpetrated a fraud on the court.
2. Judicial Estoppel
Clinton also argues that the district court improperly allowed H & L to take a position inconsistent with arguments it made in the California proceedings regarding its knowledge of Clinton‘s assets and his willingness to pay the judgments against him. H & L correctly notes that Clinton raises a different judicial estoppel theory on appeal than he did in the district court, but a “court invokes judicial estoppel at its discretion” and we consider Clinton‘s argument on appeal.7 Yanez v. United States, 989 F.2d 323, 326 (9th Cir.1993).
The Supreme Court observed in New Hampshire v. Maine, 532 U.S. 742, 743, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001), that “[c]ourts have recognized that the circumstances under which judicial estoppel may appropriately be invoked are not reducible to any general formulation,” and that “[a]dditional considerations may inform the doctrine‘s application in specific factual contexts.” The Court listed the following factors for consideration:
First, a party‘s later position must be clearly inconsistent with its earlier position. Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party‘s earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled. Third, courts ask whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose unfair detriment on the opposing party if not estopped.
Id.
Clinton‘s argument does not satisfy the first New Hampshire factor; he has
E. Clinton Failed to Raise His Preemption, Erie Doctrine, and Due Process Arguments in the District Court.
On appeal, Clinton‘s brief suggests a preemption argument, an argument based on the Erie doctrine, and an alleged due process violation. As we have observed, an appellate court generally “will not consider arguments not first raised before the district court unless there are exceptional circumstances.” Gieg, 407 F.3d at 1046 n. 10. Clinton did not argue that there are exceptional circumstances for considering these issues, but in any case we find them to be without merit.
Clinton claimed at oral argument before our court that he raised a preemption argument in opposition to H & L‘s motion for sale of the copyrights. The brief to which Clinton refers only makes a general reference to the U.S. Constitution‘s Supremacy Clause. Clinton conceded at oral argument that he did not raise his Erie argument in the district court. On appeal, this part of his brief urges our court to certify to the Washington state supreme court the question whether a copyright is subject to execution to satisfy a judgment, but he cites no authority for the implied contention that we are obligated to certify this question. In re Complaint of McLinn, 744 F.2d 677, 681 (9th Cir.1984) (“Use of certification rests in the sound discretion of this court.“). Clinton did not raise his due process argument before the district court. In any case, this portion of his appellate brief merely repeats his contention that the district court abused its discretion by appointing a receiver. We have already rejected this argument.
CONCLUSION
The district court‘s order appointing a receiver and authorizing the sale of copyrights is AFFIRMED.
MORGAN CHRISTEN
UNITED STATES CIRCUIT JUDGE
Notes
(1) a work prepared by an employee within the scope of his or her employment; or
(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.