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Happy Monday, I’m Eriq Gardner.
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Welcome back to The Rainmaker, my private newsletter focused on the legal intrigues of Hollywood, Silicon Valley, Washington, and Wall Street.
For those who enjoyed my column last month about test cases designed to force the American legal system to confront the impact of A.I. on intellectual property, I’ll be speaking on June 15 at the UCLA Entertainment Symposium on a panel entitled, “AI, Avatars and Deep Fakes: Ethical and Legal Issues for the Entertainment Industry.” More info here. Oh, and that lawsuit I said would be coming over the Copyright Office’s refusal to register a work authored by a machine? It’s been filed.
In today’s column, I spotlight America’s pastime: baseball. OK, make that suing over baseball. This past week marked the centennial of Major League Baseball’s antitrust exemption, and it’s freshly relevant. I also cover Harvey Weinstein, Michael Avenatti, and on the brighter side, free PACER searches! Finally, a nod to an assault trial next month for a Hollywood actor. I’ll give you a hint about the defendant: His name rhymes with Lonny Tepp.
But first…
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Let’s Meat in Divorce Court |
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If you’re expecting me to discuss the Johnny Depp verdict, there are podcasts! The Town. And The Powers That Be. Also check out my list of appellate options for Amber Heard. Sure, I thought about doing more. Aquaman 2 morals clause, anyone? But instead, let’s talk about another California decoupling that has evolved into deliciously disgusting mudslinging. I’m referring, of course, to the breakup of Beyond Burger and Don Lee Farms.
Five years ago, the two were riding high together. Beyond Burger was selling a plant-based meat substitute that was earning raves from eco-conscious consumers. Don Lee Farms was the exclusive co-manufacturer of these veggie burgers. But in 2017, citing health and safety issues at Don Lee’s facilities, Beyond Burger terminated a five-year supply agreement. That caused Don Lee to file suit for breach of contract, fraudulent inducement, and theft of trade secrets. In turn, after Don Lee released a “Better than Beef Burger” product that was sold to Chipotle and other establishments, Beyond Burger filed counterclaims alleging misappropriation of proprietary information.
Thus far, Beyond Burger is faring a bit better in this case. A Los Angeles judge has dismissed Don Lee’s trade secrets claim while allowing Beyond Burger’s. A trial is scheduled for September on all remaining claims.
In the meantime, Don Lee is attempting a different way to exert pressure on its partner-turned-rival. On June 2, the company filed a false advertising and unfair competition suit in federal court against Beyond Burger. Celebrities like Zooey Deschanel and Octavia Spencer have hyped BB’s product as having the “same micronutrient profile as a burger” and doing so “without the use of synthetic ingredients”; Don Lee alleges this is false. “[I]n truth, Beyond Meat’s Beyond Burgers contain ‘methylcellulose,’” states the complaint—“a synthetic ingredient that is commonly used as a laxative, a filler in cosmetic products, or as a binding agent in hotdogs.”
A laxative in the burger? Now that’s nasty. Both sides have top-notch, high-profile lawyers in their respective corners. Don Lee is repped by John Hueston while Beyond Burger is handled by Marvin Putnam.
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When Lawyers Break the Law |
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From omnipresence to incarceration, Michael Avenatti has been sentenced to four years in prison on crimes of wire fraud and aggravated identity theft for stealing nearly $300,000 in book money from former client Stormy Daniels. He’ll probably lose his law license, too, just as another once-prominent attorney, Tom Girardi, lost his license this past week. Girardi, formerly a powerhouse on the personal injury front (it was his firm portrayed in Erin Brokovich), and estranged husband of Real Housewives of Beverly Hills star Erika Girardi, has thus far got off easier—he was disbarred for stealing millions from clients and has been ordered to pay $2,292,507 in restitution, plus interest. (There are ongoing civil and bankruptcy cases, too.) |
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Baseball is a slow game. So is litigation. But this season, something unusual is happening. Four minor league baseball teams are attempting to get to the Supreme Court as quickly as the judicial system will allow. That means that these four teams have invited a federal judge to reject a lawsuit they filed late last year against Major League Baseball. No oral hearing requested. Go ahead and dismiss our claims because you must, they recently told the judge. Afterwards, these four teams will take their case to the 2nd Circuit Court of Appeals, but only because that’s a necessary pit stop. The teams don’t have expectations to win there either. Indeed, it might be like the 1989 Charlie Sheen classic, Major League, where the team’s owner purposely engineers a losing effort. Only after defeat at the intermediate appellate level will the real action begin.
This case features the Staten Island Yankees, the Norwich Sea Unicorns, the Salem-Keiser Volcanoes, and the Tri-City Valleycats taking on Major League Baseball and Commissioner Rob Manfred after the teams’ affiliations with big-league clubs were eliminated as part of a 2020 restructuring of the minors. Now represented by the prestigious law firm of Weil, Gotshal & Manges, along with former players’ union attorney James Quinn, the plaintiffs allege that M.L.B.’s decision to “artificially reduce” the number of major-minor affiliations “in order to cut expenses” is “nothing less than a naked, horizontal agreement to cement M.L.B.’s dominance over all professional baseball.”
In response to the suit, M.L.B. argues these teams don’t have any antitrust standing and haven’t plausibly made a case that the 30 big league clubs (such as the Los Angeles Dodgers and St. Louis Cardinals) truly conspired to “boycott” them. “Of course Plaintiffs have standing,” replied plaintiffs’ attorneys in a May 27 memorandum. Then, in the very next paragraph, the plaintiffs pitch a fat fastball down the middle for the judge to crush: “M.L.B.’s only real defense in this case is an ill-conceived antitrust exemption that is long past its expiration date. Plaintiffs recognize that the Court is currently bound by that exemption and will need to dismiss on that basis.”
Thus sets the stage for a decision that will awkwardly celebrate the 100th anniversary of one of the most obviously stupid decisions in Supreme Court history. That would be Federal Baseball Club v. National League, the 1922 opinion that many legal observers ridicule today but, quite amazingly, has never been overturned. The absurd argument from the otherwise legendary Justice Oliver Wendell Holmes was that, despite the fact that baseball players from around the nation travel from state to state to play each other for money, the business of exhibiting baseball is “purely state affairs,” that the transportation is incidental, and so there’s really no “interstate commerce” for purposes of the Sherman Antitrust Act. Fortunately, Holmes’ unpersuasive reasoning hasn’t been adopted elsewhere. It’s been M.L.B.’s antitrust exemption to enjoy—and M.L.B.’s alone.
As for why it’s lasted so long, well, that’s a crucial part of this story that often goes overlooked. And it mostly comes down to inertia. Lawmakers have looked to the courts to unwind what they wrought; courts, in turn, have waited for lawmakers. While politicians sometimes talk a big game about repealing the exemption—Ted Cruz, for example, yelled that it would happen when “woke” M.L.B. pulled the 2021 All Star game from Atlanta over a G.O.P. election reform bill—those efforts for legislative change have predictably failed.
Indeed, should M.L.B. again have to trot to the Supreme Court to defend itself from antitrust scrutiny, the league will point to Federal Baseball and two follow-up events. First, Toolson v. New York Yankees, in which the high court had its first opportunity, in 1953, to reverse its Babe Ruth-era mistake, but instead passed the buck to lawmakers. “Congress has had the ruling,” the court stated, pointing to three decades of legislative torpidity. “[T]hus, it can be said that Congress had no intention of including the business of baseball within the scope of the federal antitrust laws.” And second, I expect the league to point to the passage of the 1998 Curt Flood Act, Congress’s one successful endeavor to at least carve out labor matters from M.L.B.’s hallowed antitrust exemption. M.L.B. will argue this means lawmakers recognized and preserved the antitrust exemption for everything else. (M.L.B.’s glovework is foreshadowed in early briefings in the case over the restructuring of the minor leagues.)
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Unfortunately for Rob Manfred and the M.L.B. owners, there’s good reason to believe that circular arguments about what has and hasn’t happened in the past century won’t work at the Supreme Court this time around. Why not?
Well, for starters, look at what happened last year when the N.C.A.A. took a shot at scoring its own antitrust exemption. In NCAA v. Alston, the collegiate sports league held up its “revered tradition of amateurism” to explain away its cap on student-athlete academic benefits. All nine justices unanimously rejected the N.C.A.A.’s argument, with the opinion from Justice Neil Gorsuch highlighting M.L.B.’s success a century ago. “But this Court has refused to extend Federal Baseball’s reasoning to other sports leagues—and has even acknowledged criticisms of the decision as ‘unrealistic’ and ‘inconsistent” and ‘aberration[al],’” he wrote.
That caused antitrust lawyers to sit up and recognize a veiled invitation to bring a good case that would challenge M.L.B.’s antitrust exemption. The attorneys at Weil, Gotshal who are now pressing the lawsuit over M.L.B.’s minor league affiliations are forthright about the impact that Gorsuch’s words had on their latest endeavor and make no secret of their wish to get their case to the Supreme Court as quickly as judicially possible. (I spoke to them in advance of writing this.)
If M.L.B.’s exemption were to be overturned, it’d be big news for the sport. Such a development might complicate efforts by the league to transfer teams from one city to another—the Oakland Athletics to Las Vegas, for example, or the Tampa Bay Rays to Montreal. It could also create a headache on the broadcasting and streaming fronts too. The N.F.L. is currently contending with an antitrust lawsuit over how it coordinates teams’ rights and then licenses a package of out-of-market football games, and surely, M.L.B. could expect to defend similar litigation over its own deals and rules propping up a TV empire.
But even if the Supreme Court decides to torch M.L.B.’s exemption just as Congress is heeding tech lobbyists and failing to enact a much-teased larger antitrust reform package, this story is more than about the rules we have (or lack) ensuring fair competition.
This is also a narrative concerning the way our judicial sphere revisits the past. The specter of a reversal for Roe v. Wade looms over much of what’s coming in courts. Once these justices become free to no longer pretend that stare decisis matters, what comes next? How will the system deal with the fallout? Will there be more and more cases brought—some good, others terrible—with hopes of enticing justices suddenly dripping with scorn for precedent? I’m not sure of the answer, but I do know that the game is changing.
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The Depp verdict got all the attention, but it was a development in the Harvey Weinstein case that may be more impactful for the future of #MeToo litigation. On June 2, a New York appeals court upheld the conviction of the disgraced movie mogul, who was convicted in 2020 of a criminal sexual act in the first degree and a rape in the third degree. Based on the tenor of the appellate hearing, however, the outcome was hardly assured. Indeed, there was a real question as to how the appellate judges would regard accusers who took the witness stand at Weinstein’s trial. Of the six women who testified against him, only three of their alleged attacks were part of the prosecutors’ case. Did evidence of non-charged crimes prejudice the jury?
Last week, the appellate judges answered that the trial court acted reasonably in allowing evidence that demonstrated Weinstein’s intent and knowledge of non-consent. They also concluded that the judge’s decision to limit the number of women whose accusations weren’t charged, and to carefully deal with such testimony in jury instructions, was the right call. Here’s the full ruling.
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Could Paramount Lose ‘Top Gun’? |
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Paramount Pictures has been hit with a potentially headache-inducing lawsuit claiming that the studio had already lost its rights to Top Gun and that the latest sequel represents a copyright infringement. The suit, filed today in California federal court, comes from Shosh and Yuval Yonay, heirs of the writer Ehud Yonay, whose story in the April, 1983 issue of California magazine, entitled “Top Guns,” was source material for the original 1980s Tom Cruise classic. His story focused on pilots and their personal experiences, including a hotshot pilot “Yogi” and his radio intercept officer. According to the suit, Paramount licensed the magazine article within weeks of the story’s publication.
The Yonays are exploiting a provision of copyright law that allows authors and their heirs to reclaim rights granted to publishers and studios after waiting 35 years. According to the suit, as well as copyright records I’ve reviewed, a termination notice claims to have recovered rights to the “Top Gun” story on Jan. 24, 2020.
The Yonays, now represented by copyright termination heavyweight Marc Toberoff—who is also representing comic book heirs looking to terminate Disney’s full right to Marvel characters—allege in the complaint that Paramount “deliberately ignored [the copyright termination], thumbing its nose at the statute.” The case, Toberoff contends, “arises out of Paramount’s conscious failure to re-acquire the requisite film and ancillary rights to the Yonays’ copyrighted Story prior to the completion and release of their derivative 2022 Sequel.” (Paramount responded in a statement, “These claims are without merit, and we will defend ourselves vigorously.”)
The legal issues here could get thorny, and unlike other copyright nuisance suits, I wouldn’t be so quick to assume that Paramount will simply pay to make it go away, rather than fight it out in court. It’s worth noting that in the original registration for Top Gun, the 1986 movie is listed as a “work made for hire,” with new material including portions of the screenplay, remaining musical compositions, other soundtrack and cinematographic material. Works for hire—meaning the employer is deemed the “author”—aren’t eligible for copyright termination, although obviously, the Yonays will soon fight Paramount’s expected contention that the Top Gun story is a work of corporate authorship. The Yonays will also have to pinpoint what’s specifically protectable in the magazine story. Paramount will likely emphasize that facts aren’t entitled to copyright. It might not ultimately matter that the studio once licensed a factual depiction of the Top Gun fighter pilot school. Perhaps anticipating this defense, the plaintiffs emphasize Yonay’s “evocative prose and narrative,” with a list of alleged similarities between the original story and 2022 sequel in a 19-page exhibit to the complaint.
Production on Top Gun: Maverick was completed in 2019, and the film was originally slated to hit theaters in 2021, before the Covid pandemic delayed the release. The timing may also become important as the lawsuit plays out thanks to what’s known as the “derivative works exception,” which permits owners of copyright to create new sequels and remakes “prepared” before termination and then continue to use those works even after termination. (It’s one of the reasons why there are so many Stephen King movie remakes these days.) The nuances of this exception haven’t been litigated much, though, leaving some ambiguity in how a court might deal with last-minute sequels and delayed openings. Regardless, a successful suit would also mean that Paramount loses the ability to make more sequels. Top Gun: Maverick has already grossed nearly $550 million worldwide and spurred talk of revitalizing the franchise.
The Yonays, who are also represented by former 9th Circuit Court of Appeals chief Alex Kozinski, are pushing for an injunction, which could complicate this blockbuster’s continued dominance in movie theaters and eventually on streaming. On the other hand, this suit could have surely been brought earlier so a judge would be unlikely to order the film out of theaters.
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- Federal prosecutors in New York are pursuing the first ever digital asset insider trading case. According to an indictment, Nathaniel Chastain used his position as a product manager at the N.F.T. marketplace OpenSea to purchase dozens of digital tokens knowing they’d soon be featured on the company’s home page.
- A follow-up of sorts on my story last week about stolen N.F.T.s: In one of the negligence cases that OpenSea is currently facing, it argues that it has no duty to protect N.F.T. buyers and that the consequences of forcing it to police its platform for stolen goods would be “severe.”
- Months after Sarah Palin lost at trial to The New York Times over an anti-gun op-ed that she claimed libeled her, U.S. District Court Judge Jed Rakoff has denied her post-trial motion to set aside the verdict and disqualify himself. She lacked evidence of actual malice, he writes. An appeal will now proceed.
- In denying a summary judgment motion, a federal judge has set the stage for what could be the first copyright trial over a tattoo. The defendant is celebrity tattooist Kat Von D, who used Jeffrey Sedlik’s photograph of jazz musician Miles Davis as a reference when inking a customer. Is the resulting tattoo fair use? A jury will decide.
- It’s been 20 years since Congress passed the E-Government Act with the vision of making public records available. Since then, the Judiciary has stubbornly refused to do much about the 20th century architecture that houses filings. PACER (Public Access to Court Electronic Records) has remained, for those who use it, an ugly beast—and an expensive one, too (10 cents per page). Now, under continued jawboning from Congress in the form of the Open Courts Act, the Judicial Conference has at least endorsed making searches of federal court records free if not risking the money pot by no longer charging for downloading documents. It’s a start, at least.
- In my story about artificial intelligence and intellectual property a few weeks ago, I mentioned a hearing at the Federal Circuit concerning whether an inventor must be a “natural person.” That hearing in Thaler v. Vidal is today, and hopefully, a recording of the arguments will be available soon here.
- It’s somewhat hard to believe this will actually happen, but assuming no delays nor settlement, Johnny Depp is also scheduled to go to trial on July 25 for allegedly assaulting Gregg “Rocky” Brooks. The plaintiff was the location manager on City of Lies, a 2018 film about the LAPD’s investigation of the Tupac Shakur and Notorious B.I.G. murder investigations. On April 13, 2017, Brooks says that he was trying to comply with permit requirements and tell everyone that the production needed to shut down for the night when Depp reacted particularly aggressively. “Who the fuck are you?” Depp allegedly screamed. “You have no right to tell me what to do.” The confrontation escalated to Depp allegedly punching Brooks twice, and when the crew member supposedly didn’t fight back, Depp yelled, “I will give you one hundred thousand dollars to punch me in the face right now.” A complaint states that Depp’s bodyguards removed the actor from the scene, and that Brooks “noticed that Depp’s breath reeked of alcohol.” Brooks also alleges being fired after refusing to sign a waiver.
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FOUR STORIES WE’RE TALKING ABOUT |
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Biden’s Vibe Shift |
Jon Kelly joins Peter to discuss Biden’s new media strategy. |
PETER HAMBY |
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Sink or Stream |
Insights from the frontlines of the content wars. |
MATTHEW BELLONI |
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Corporate Referen-duh |
Wall Street gossips are already speculating about Jamie and Sheryl’s next moves. |
WILLIAM D. COHAN |
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The Rick Carushow |
On the L.A. billionaire mayoral candidate with a deceptively conventional political message. |
PETER HAMBY |
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