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Graham-Sult v. Clainos

United States Court of Appeals, Ninth Circuit

December 27, 2013

Alexander Graham-Sult; David Graham, Plaintiffs-Appellants,
v.
Nicholas P. Clainos; Richard L. Greene; Linda McCall; Greene Radovsky Maloney Share & Hennigh LLP, a limited liability partnership; Bill Graham Archives LLC, DBA Wolfgang's Vault; Norton LLC, a limited liability company; William E. Sagan, Defendants-Appellees. Alexander Graham-Sult; David Graham, Plaintiffs-Appellants,
v.
Nicholas P. Clainos; Richard L. Greene; Linda McCall; Greene Radovsky Maloney Share & Hennigh LLP, a limited liability partnership; Bill Graham Archives LLC, DBA Wolfgang's Vault; Norton LLC, a limited liability company; William E. Sagan, Defendants-Appellees.

Argued and Submitted April 18, 2013—San Francisco, California

Appeal from the United States District Court for the Northern District of California Claudia Wilken, Chief District Judge, Presiding D.C. No. 4:10-cv-04877-CW

James J. Brosnahan (argued) and Kevin A. Calia, Morrison & Foerster, San Francisco, California; Therese Y. Cannata, Carolyn A. Johnston and Rachel L. Kent, Cannata, Ching & O'Toole, San Francisco, California, for Plaintiffs-Appellants.

Nancy L. Tompkins (argued), James M. Wagstaffe and Ivo Labar, Kerr & Wagstaffe, San Francisco, California, for Defendant-Appellee Nicholas P. Clainos.

Jerome B. Falk, Jr. (argued) and Jonathan W. Hughes, Arnold & Porter, San Francisco, California; Ronald E. Mallen and Cassidy E. Chivers, Hinshaw & Culbertson, San Francisco, California, for Defendants-Appellees Richard L. Greene, Linda McCall, and Greene Radovsky Maloney Share & Hennigh LLP.

Thomas Patrick Lane (argued) and Michael S. Elkin, Winston & Strawn, New York, New York; Erin R. Ranahan and Drew A. Robertson, Winston & Strawn, Los Angeles, California, for Defendants-Appellees Bill Graham Archives LLC DBA Wolfgang's Vault, Norton LLC, and William Sagan.

Before: Alfred T. Goodwin, Diarmuid F. O'Scannlain, and N. Randy Smith, Circuit Judges.

SUMMARY [*]

Anti-SLAPP Statute / California Law

The panel affirmed in part and reversed in part the district court's judgment in an action brought by the sons of the late concert promoter Bill Graham, alleging that they were entitled to pro rata distributions of certain property owned by Graham's estate.

The panel reversed in part the district court's disposition of a special motion to strike under California's anti-SLAPP statute, holding that the district court erred in dismissing the plaintiffs' claims for conversion, unjust enrichment, and breach of fiduciary duty against Nicholas Clainos, the executor of Graham's estate.

The panel held that plaintiffs sufficiently alleged claims for conversion, copyright infringement, and declaratory relief against William Sagan, Norton LLC and Bill Graham Archives, LLC ("BGA Defendants"), and that the district court therefore erred in dismissing these claims.

Concerning the underlying awards of attorneys' fees, the panel vacated the post-motion-to-strike fee award to Clainos, as well as the post-motion-to-dismiss fee award of the BGA Defendants.

The panel affirmed the district court's decision in all other respects.

OPINION

N.R. SMITH, Circuit Judge

Plaintiffs Alexander Graham-Sult and David Graham appeal the district court's disposition of: (1) a motion to dismiss; (2) a special motion to strike under California's anti-SLAPP statute; and (3) related attorney's fees awards.

We affirm the disposition of the motion to strike in part and reverse in part. Striking Plaintiffs' conversion and unjust enrichment claims against Nicholas Clainos was erroneous, because: (a) taking possession of personal property, (b) preparing and executing an assignment of intellectual property following a probate court's final order, and (c) receiving consideration for stock sold after a probate court entered its final order, are not protected activities.

Striking Plaintiffs' breach of fiduciary duty claim against Clainos was also erroneous. Even though the conduct underlying this claim was protected activity, nothing in this record suggests Plaintiffs will not be successful on the merits when pursuing Clainos's alleged (a) self-dealing, (b) failure to exercise due care in handling probate estate assets, and (c) secret transfer of intellectual property to an entity defendant purchased.

We then turn to the district court's disposition of a motion to dismiss certain claims against William Sagan, Norton LLC, and Bill Graham Archives, LLC (collectively, the "BGA Defendants"). We conclude that Plaintiffs sufficiently alleged claims for conversion, copyright infringement, and declaratory relief against the BGA Defendants, and that dismissing those claims was erroneous.

Consistent with these conclusions, we consider the underlying awards of attorney's fees. We vacate the post-motion-to-strike fee award to Clainos, as well as the post-motion-to-dismiss fee award to the BGA Defendants.

In all other respects, the district court's decision is affirmed.

FACTS & PROCEDURAL HISTORY

I. Background

The late Bill Graham ("Graham") successfully promoted rock and roll concerts in the San Francisco Bay Area and internationally. Graham died testate in 1991 when the helicopter (in which he was riding) crashed into a utility tower. Graham's will created individual trusts for his sons, Alexander Graham-Sult ("Alex") and David Graham ("David"), who were 14 and 23 years old respectively at the time of Graham's death. The will appointed Graham's friend and business partner, Nicholas Clainos, as the trustee of those trusts and the executor of the estate.[1] Richard Greene, through his law firm, provided Clainos legal counsel in his capacity as both executor of the estate and trustee of the trusts.

II. Procedural History

Graham's substantial estate was in probate for several years, but, on August 8, 1995, the probate court entered its final order of distribution. On October 27, 2010, Alex and David filed the instant lawsuit against: (1) Clainos; (2) the BGA Defendants; and (3) Greene and related individuals and entities, including Greene Radovsky Maloney Share & Hennigh LLP (Greene's law firm), and Linda McCall (another attorney with Greene's firm) (collectively, the "Greene Defendants").

Plaintiffs claim that at the time of Graham's death, his estate owned: (1) intellectual property (copyrights to posters registered in Bill Graham's name and the trademark for the name "The Fillmore"), (2) ten "scrapbooks" containing posters, and (3) 100 complete series of original posters.[2]Plaintiffs claim they were entitled to pro rata distributions of this property, and brought twelve causes of action, including claims for fraud, concealment, breach of fiduciary duty, conversion, and unjust enrichment.

III. The Property at Issue

At the time of his death, Graham owned all the shares of Bill Graham Enterprises, Inc. ("BGE"). Therefore, these shares became assets of the estate.

Graham also had registered the copyrights to many posters used by BGE and the trademark "The Fillmore" (collectively, the "intellectual property") in his own name. Therefore, in the course of Greene's work on the Graham estate, he investigated whether this intellectual property belonged to the estate or to BGE. During the investigation, on December 9, 1991, Greene met with one of BGE's key employees, Steve Welkom, and one of BGE's Vice Presidents, Jerry Pompili. At this meeting, Greene learned that "(1) Pompili had filed copyrights for most posters and the Fillmore trademark in the name of William Graham, (2) BGE paid for all application and registration fees, [and] (3) BGE received all revenues from the sales and licensing of the intellectual property." Based on these facts, Greene formed "the legal opinion that BGE owned the intellectual property registered in the name of William Graham."

A. Sale of BGE

In 1992, when Clainos began negotiating the sale of BGE on behalf of the Graham estate, BGE's key employees threatened to leave if they were not given the opportunity to purchase the company. According to Clainos, losing the key employees would cause BGE's value to drop significantly. With the probate court's encouragement, Clainos structured a sale to the key employees. In 1993, when Clainos filed a Petition for Confirmation of Sale, two beneficiaries objected to the sale. Consequently, Clainos petitioned the court to distribute the BGE shares to the Graham estate beneficiaries. On January 25, 1994, the probate court granted this petition.

After this distribution of shares, the beneficiaries sold their shares in BGE to the key employees. To consummate the transaction, a new entity, Bill Graham Presents, Inc. ("BGP"), was formed; BGP then acquired all of the BGE shares from the beneficiaries. As part of the transaction, Plaintiffs also obtained a right of first refusal to the "Archives"[3] BGE held. Accordingly, if BGE or the Archives were ever sold, Plaintiffs retained the right to purchase them. (Because this transaction occurred after the shares had been distributed from the estate, the probate court did not approve the terms of the sale.) After the sale, Clainos held a thirteen percent (13%) stake in BGP, Alex and David each held a ten percent (10%) stake, and the key employees held the remaining shares.

B. Preparation of the Assignment of Intellectual Property

On August 31, 1995, three weeks after the probate court had entered its final order, an attorney representing BGE wrote to Greene to ask if Greene "[c]ould please clarify. . . how the transfer / assignment of copyrights and trademarks was handled in the sale of [BGE] to the key employees?" After receiving the letter, Greene's firm prepared an Assignment, with the stated purpose of "confirm[ing] BGE's ownership of [the intellectual property]." The Assignment provided in pertinent part that "Assignor hereby assigns, transfers and conveys to BGE ('Assignee') any and all right, title and interest of the Decedent in any and all copyrights, tradenames, trademarks and servicemarks claimed by or registered in the name of the Decedent." The Assignment was backdated to August 1, 1995—seven days before the probate court entered its final order of distribution.[4] Clainos executed this Assignment in his capacity as executor of Graham's estate and sent it to BGE on September 1, 1995. On July 29, 1996, BGE recorded the Assignment in the United States Copyright Office.

C. Transfers to the BGA Defendants

The BGA Defendants came to own part of the disputed property through a sequence of transactions following the close of the Graham estate. In 1997, SFX Entertainment, Inc. ("SFX") acquired BGP.[5] Plaintiffs were represented by attorney Philip Feldman ("Feldman") during this sale. Prior to closing this transaction, Greene sent Feldman a copy of Section 3.18 of the sales agreement, which addressed the sale of intellectual property. The parties do not dispute that Feldman received this letter.

Section 3.18 provided that "Schedule 3.18 attached hereto contains, to each Selling Shareholder's Knowledge, a true and complete list of all . . . trademarks . . . copyrights . . . owned or used by [BGP] or material to the conduct of [BGP]'s business." Schedule 3.18, in turn, included a copy of the Assignment and the Copyright office registration. Although Section 3.18 incorporated Schedule 3.18 by reference, Greene did not attach a copy of Schedule 3.18 or the Assignment to the letter he sent Feldman.

Clear Channel Communications then bought SFX. Clear Channel transferred most of the archives (except for a few unspecified items and the "Fillmore" trademark) to Bill Graham Archives LLC. In 2002, defendant Norton, LLC (owned and controlled by defendant Sagan) purchased BGA from Clear Channel. Allegedly, Clainos, as a paid consultant to BGA, "conducted significant research and interviews concerning the Archives, tracing the history and confirming what Sagan was actually purchasing."

D. Plaintiffs' Investigation and Subsequent Actions

In late 2008, Plaintiffs discovered fifty boxes of documents at BGE's former headquarters. When Plaintiffs reviewed those documents in February 2009, they discovered the Assignment. Suspicious, David and Alex proceeded to investigate the extent of their father's intellectual property registrations. Their research led them to the United States Copyright Office, where they discovered that Graham had "over 300 poster copyrights" registered in his name at the time of his death. Through further research, they discovered that the trademark for "The Fillmore" had also been registered to their father.

In January 2010, nearly one year later, David and Alex discovered that Sagan and / or BGA had possession of ten of Graham's allegedly personal scrapbooks. That same year, they brought the instant lawsuit.

DISCUSSION

I. Anti-SLAPP

California's anti-SLAPP statute authorizes defendants to file a "special motion to strike" any "cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States Constitution . . . in connection with a public issue." Cal. Civ. Proc. Code § 425.16(b)(1) (emphasis added). Acts in furtherance of the right of petition include "any written or oral statement or writing made in connection with an issue under consideration or review by a . . . judicial body." Id. § 425.16(e)(2). An anti-SLAPP motion is available to defendants in federal court. See Thomas v. Fry's Elecs., Inc., 400 F.3d 1206, 1206-07 (9th Cir. 2005) (per curiam).

We review the district court's grant of a special motion to strike de novo. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1102 (9th Cir. 2003). We conduct this review in two steps. Preliminarily, we ask whether the defendant showed that the plaintiff's causes of action "arise[] from an act in furtherance of the defendant's rights of petition or free speech." Mindys Cosmetics, Inc. v. Dakar, 611 F.3d 590, 595 (9th Cir. 2010) (internal quotation marks omitted); see Hylton v. Frank E. Rogozienski, Inc., 99 Cal.Rptr.3d 805, 809 (Ct. App. 2009). If the defendant makes that showing, then we ask whether the plaintiff can show that it has "a reasonable probability of prevailing in its claims for those claims to survive dismissal." Mindys, 611 F.3d at 598 (internal quotation marks omitted). We address each prong in turn.

A. Arising from Protected Activity

The district court concluded that all of Plaintiffs' claims against Clainos and the Greene Defendants arise from protected activity, because the "gravamen" of all causes of action involved Clainos's performance of his duties as the executor of Graham's estate. We disagree with the district court's characterization of Plaintiffs' complaint. Close scrutiny demonstrates that Plaintiffs' causes of action arise from different types of conduct, requiring a more-particularized analysis under the anti-SLAPP statute.

For purposes of the anti-SLAPP statute, a cause of action "arises from" conduct that it is "based on." Copenbarger v. Morris Cerullo World Evangelism, 156 Cal.Rptr.3d 70, 74–75 (Ct. App. 2013). Thus, we first ask what activities form the basis for each of Plaintiffs' causes of action. We then ask whether those activities are "protected, " bringing the cause of action within the scope of the anti-SLAPP statute. See Wallace v. McCubbin, 128 Cal.Rptr.3d 205, 218 (Ct. App. 2011). "Where a cause of action is based on both protected activity and unprotected activity, it is subject to [the anti-SLAPP statute] unless the protected conduct is merely incidental to the unprotected conduct." Id. (emphasis added) (internal quotation marks omitted). Protected activity is not "merely incidental" to unprotected activity if the alleged activity "underl[ies] the cause of action." Salma v. Capon, 74 Cal.Rptr.3d 873, 884 (Ct. App. 2008).

Reviewing Plaintiffs' complaint under this standard, we conclude that only six of Plaintiffs' causes of action arise from protected activity. Because the remaining causes of action do not arise from protected activity, they ...


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