Disney Enterprises, Inc. v. Vidangel, Inc.

• Court: Court of Appeals for the Ninth Circuit
• Decided: August 17, 2018
• Docket: 17-56665
• Status: Unpublished

Opinion

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS FILED FOR THE NINTH CIRCUIT AUG 17 2018 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS DISNEY ENTERPRISES, INC.; et al., No. 17-56665

Plaintiffs-counter- D.C. No. defendants-Appellees, 2:16-cv-04109-AB-PLA

v. MEMORANDUM* VIDANGEL, INC.,

Defendant-counter-claimant- Appellant.

Appeal from the United States District Court for the Central District of California Andre Birotte, Jr., District Judge, Presiding

Argued and Submitted August 9, 2018 Pasadena, California

Before: TASHIMA and CHRISTEN, Circuit Judges, and RUFE,** District Judge.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Cynthia M. Rufe, United States District Judge for the Eastern District of Pennsylvania, sitting by designation. Counter-Claimant VidAngel, Inc. (VidAngel) appeals a district court order

dismissing VidAngel’s counterclaims without leave to amend. We have

jurisdiction under 28 U.S.C. § 1291 by virtue of the district court’s certification of

its dismissal order as a final judgment under Fed. R. Civ. P. 54(b). We review de

novo. Name.Space, Inc. v. Internet Corp. for Assigned Names & Numbers, 795

F.3d 1124, 1129 (9th Cir. 2015). We affirm the dismissal.

1. VidAngel alleged that Counter-Defendants (the “Studios”) violated

Section 1 of the Sherman Act. Although “‘[a]ll allegations of material fact are

taken as true and are construed in the light most favorable to [VidAngel],’” id.

(quoting Coal. for ICANN Transparency, Inc. v. VeriSign, Inc., 611 F.3d 495, 501

(9th Cir. 2010)), VidAngel’s factual allegations do not give rise to a plausible

claim for relief. VidAngel argues that a collective bargaining agreement between

the Studios and the Directors Guild of America (DGA) evidences a horizontal

agreement to ban filtering. Contrary to VidAngel’s assertions, the DGA agreement

does not prohibit studios from editing or filtering productions. VidAngel also

characterizes the Studios’ collective refusal to license content to filtering

companies like itself as a horizontal conspiracy in restraint of trade. However, the

behavior at issue is “no more consistent with an illegal agreement than with

rational and competitive business strategies, independently adopted by firms acting

2 within an interdependent market.” In re Musical Instruments & Equip. Antitrust

Litig., 798 F.3d 1186, 1189 (9th Cir. 2015). VidAngel’s other

arguments—including its contentions that the Studios connived to prevent

licensees from doing business with VidAngel and exploited their respective market

power to enforce a vertical restraint on trade—are similarly unavailing.

2. VidAngel also brought state law claims under the “unlawful” and

“unfair” prongs of California’s Unfair Competition Law (UCL), Cal. Bus. & Prof.

Code § 17200. Because VidAngel has not plausibly alleged a violation of federal

antitrust laws, its claim under the “unlawful” prong of the UCL necessarily fails.

Under the “unfair” prong of the UCL, VidAngel asserts that the Studios’ conduct is

harming the public at large. However, VidAngel’s allegations demonstrate only

that some consumers are unable to have their preferences satisfied by the free

market; that, by itself, does not constitute a threat or injury to competition.

3. Finally, VidAngel brought a claim for intentional interference with

prospective economic relations, accusing the Studios of disrupting its prospective

economic relations with Google Play and Youtube. VidAngel’s allegations fall

short of stating a violation of Californian tort law because the advantages

VidAngel sought from Google Play and Youtube were purely speculative.

VidAngel did not have prior commercial ties to Google, and the negotiations

3 between them do not make it reasonably probable the contemplated economic

advantage would have been realized but for the Studios’ interference. In addition,

VidAngel has not articulated a legally cognizable theory of why the Studios’

interference was independently wrongful. See Della Penna v. Toyota Motor Sales,

U.S.A., Inc., 11 Cal. 4th 376, 392–93 (1995).

4. The district court did not err in denying VidAngel leave to amend its first

amended complaint. The standard for granting leave to amend is generous, but

leave may be denied if the proposed amendment either lacks merit or is inadequate

to save the plaintiff’s suit. Chinatown Neighbourhood Ass’n v. Harris, 794 F.3d

1136, 1144 (9th Cir. 2015). The deficiencies in VidAngel’s counter-complaint

cannot be cured by the facts VidAngel proposes to develop.

AFFIRMED.