July 19, 2019

Tenth Circuit: Collateral Estoppel Bars Relitigation of Claims Decided in Other Federal Courts

The Tenth Circuit Court of Appeals issued its opinion in Stan Lee Media Inc. v. Walt Disney Co. on Tuesday, December 23, 2014.

In October 1998, legendary comic book artist Stan Lee entered into an employment agreement (“1998 agreement”) with a Colorado company he formed to create new characters, Stan Lee Entertainment, Inc. (the predecessor to Stan Lee Media). At the time, Lee had worked for Marvel for approximately 60 years, and the agreement expressly recognized he would continue to work for Marvel. In November 1998, Lee entered into a similar agreement with Marvel, transferring to Marvel essentially the same rights he had transferred to Stan Lee Media through the 1998 agreement. In 2001, Stan Lee repudiated the 1998 agreement, contending Stan Lee Media committed material breach and reclaiming ownership of the intellectual property rights. Over five years later, Stan Lee Media recorded the 1998 agreement with the U.S. Copyright Office, asserting in a cover letter that the 1998 agreement transferred to Stan Lee Media ownership rights in many famous characters, including Spider-Man and Iron Man.

Meanwhile, Marvel exploited the comic book universe by selling and licensing the character rights to major production companies in order to create, sell, and distribute motion pictures. These included 2002’s Spider-Man movie, which has grossed over $800 million worldwide. Despite Marvel’s success, Stan Lee Media did not assert ownership interests over the characters until 2007, at which time it filed lawsuits across the country. Many courts have considered Abadin v. Marvel Entm’t, Inc., No. 09 Civ. 0715 (PAC), 2010 WL 1257519 (S.D.N.Y. Mar. 31, 2010) (Abadin I) binding precedent, including the lower court in this action.

Stan Lee Media filed a claim against Disney in the U.S. District Court for the District of Colorado, alleging a single cause of action for federal copyright infringement. The district court granted Disney’s motion to dismiss, relying on Abadin I as precluding the Colorado litigation. Since the district court’s decision, the Ninth Circuit has issued a decision in a related suit. The U.S. District Court for the Central District of California dismissed Stan Lee Media’s claims on res judicata grounds, but the Ninth Circuit affirmed on different grounds, finding that Stan Lee Media failed to state a claim that is plausible on its face.

The Tenth Circuit reviewed the Ninth Circuit decision, the briefing in the Ninth Circuit and the Central District of California, and supplemental briefing submitted in the Tenth Circuit, and found that none of the elements of collateral estoppel can be reasonable debated, because each are present in the Tenth Circuit case.

The Tenth Circuit found that only the fourth element of collateral estoppel was seriously contested — Stan Lee Media alleges it did not have a full and fair opportunity to litigate the ownership issue. However, the Tenth Circuit rejected that argument. Stan Lee Media devoted five full pages in a response explaining how its claims met the Iqbal/Twombly and Rule 8 standards. Further, the Ninth Circuit’s decision was a dismissal with prejudice, so there is no point in allowing Stan Lee Media to amend its complaint. Finally, the Ninth Circuit’s singular and readily discernible rationale for dismissal — that Stan Lee Media’s claims are “simply implausible,” — clears all remaining obstacles to the application of collateral estoppel.

The Tenth Circuit affirmed the district court’s dismissal of Stan Lee Media’s complaint for failure to state a claim.

Tenth Circuit: Allowing Recovery for Lost Horses Would Effectively Nullify State Forfeiture Proceeding

The Tenth Circuit Court of Appeals issued its opinion in Campbell v. City of Spencer on Tuesday, December 16, 2014.

The City of Spencer, Oklahoma, along with the Town of Forest Park and Blaze Equine Rescue seized 44 emaciated and malnourished horses from Ann Campbell’s three properties pursuant to a search warrant issued for one of the properties. The City and Town filed a joint petition in Oklahoma County District Court for forfeiture of the horses as a remedy for animal abuse. During the forfeiture proceeding, Campbell did not raise any argument regarding the scope of the search warrant. The court granted the forfeiture petition, the Oklahoma Court of Civil Appeals affirmed, and the Oklahoma Supreme Court denied certiorari.

Campbell subsequently filed a § 1983 action in the U.S. District Court for the Western District of Oklahoma, claiming that the municipalities and Blaze had violated the Fourth Amendment in two ways: (1) by withholding from the search warrant information about Campbell’s plan to reduce the number of horses, and (2) by searching the two locations not listed on the warrant. The municipalities filed motions to dismiss on preclusion grounds, since Campbell did not raise her arguments in the state forfeiture proceeding. Blaze filed a motion for summary judgment on preclusion grounds. The district court granted the motions. Campbell appealed.

The Tenth Circuit affirmed the district court, finding the exclusionary rule applied in Oklahoma state forfeiture proceedings and Campbell could have raised her claims in that proceeding. Campbell asserted that the state court judge refused to consider the legality of the evidence, but the Tenth Circuit reviewed the record and  found no evidence of such refusal. Campbell also suggested that suppression issues could not be raised in state court proceedings, which was an incorrect understanding of the law. Because of its conclusion that Campbell could have raised her claims in state court, the Tenth Circuit next considered whether allowing her to pursue the claims in federal court would nullify the original proceeding. The Tenth Circuit could not state with certainty whether barring the suppression would nullify the forfeiture proceeding, but found that allowing Campbell to pursue her claims would impermissibly impair the municipalities’ rights as established in the state court. The Tenth Circuit noted that allowing Campbell to recover the value of the lost horses would suggest the invalidity of the state court’s forfeiture order, and declined to allow recovery.

The Tenth Circuit affirmed the district court’s dismissal as to the municipalities and grant of summary judgment as to Blaze.

Tenth Circuit: Utah Supreme Court’s Dismissal on Laches Grounds Constitutes a Decision on the Merits

The Tenth Circuit issued its opinion in Fundamentalist Church of Jesus Christ of Latter-Day Saints v. Horne on Monday, November 5, 2012.

The Fundamentalist Church of Jesus Christ of Latter-Day Saints (“FLDS”)  filed a complaint in federal district court seeking declaratory and injunctive relief regarding the Utah probate court’s reformation and administration of a religious charitable trust (“Trust”). FLDS also moved for a temporary restraining order and a preliminary injunction against the probate court’s administration of the trust. This federal suit was stayed pending settlement negotiations.

While the federal case was pending, FLDS filed a petition for extraordinary writ with the Utah Supreme Court raising substantially the same claims as the federal complaint. The Utah Supreme Court dismissed the petition finding that FLDS’s claims regarding the trust were barred by the equitable doctrine of laches. FLDS then renewed its motion for temporary restraining order and preliminary injunction in federal court. The district court entered a temporary restraining order and also granted FLDS’s motion for a preliminary injunction, finding there was no basis for laches. The district court also found that the Utah Supreme Court’s finding of laches was not a judgment on the merits for res judicata purposes.

Defendants appealed the district court’s order granting FLDS a preliminary injunction. The Tenth Circuit certified the following question to the Utah Supreme Court:

Under Utah preclusion law, is the Utah Supreme Court’s discretionary review of a petition for extraordinary writ and subsequent dismissal on laches grounds a decision “on the merits” when it is accompanied by a written opinion, such that later adjudication of the same claim is barred?

In its answer to the Tenth Circuit’s certified question, the Utah Supreme Court concluded that such a decision is a decision on the merits for res judicata purposes that would preclude a subsequent action on the same claims between the same parties.

Having received the Utah Supreme Court’s answer, the Tenth Circuit concluded that FLDS was precluded from pursuing its claims in federal court.  The district court erred in granting a preliminary injunction, and specifically erred in holding that the Utah Supreme Court’s finding of laches was not a judgment on the merits for res judicata purposes.

Accordingly, the Tenth Circuit VACATED the district court’s grant of preliminary injunction and REMANDED with directions to dismiss the claims filed by the FLDS Association as barred by res judicata.