Factors Etc., Inc. And Boxcar Enterprises, Inc. v. Pro Arts, Inc. And Stop and Shop Companies, Inc.

652 F.2d 278, 211 U.S.P.Q. (BNA) 1, 7 Media L. Rep. (BNA) 1617, 1981 U.S. App. LEXIS 11899

• Court: Court of Appeals for the Second Circuit
• Decided: June 29, 1981
• Docket: 503, Docket 80-7692
• Status: Published

Opinions

NEWMAN, Circuit Judge:

The merits of this appeal concern the interesting state law question whether a person has a protected interest in publicizing his name and likeness after his death, or, as the matter has been put, is there a descendible right of publicity?¹ Despite the fascination of this question, what divides the members of this panel and forms the basis for the majority’s disposition of this appeal is the more esoteric question, apparently of first impression, concerning the deference a federal court exercising diversity jurisdiction should give to a ruling by a court of appeals deciding the law of a state within its circuit. Believing that conclusive deference should be given, except in certain situations not applicable here, we reverse the judgment of this case.

FACTS

The facts are set forth in this Court’s first encounter with this litigation, Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215 (2d Cir. 1978), cert. denied, 440 U.S. 908, 99 S.Ct. 1215, 59 L.Ed.2d 455 (1979) (Factors I), and need be recounted only briefly here. During his life, Elvis Presley, the well-known popular singer, formed a Tennessee corporation, Boxcar Enterprises, Inc., and assigned it exclusive ownership of all rights to use for commercial purposes his name and likeness.² On August 18, 1977, two days after Presley’s death, Boxcar granted to plaintiff-appellee Factors Etc., Inc., a Delaware corporation, an exclusive license for 18 months, renewable at the licensee’s option for up to four years, to use Presley’s name and likeness in connection with the manufacture and sale of any kind of merchandise. The licensee agreed to pay a royalty of 5% of sales, subject to a minimum royalty for the first 18 months of $150,000, and also subject to certain minimum royalties on specified items, for example $.08 for each poster.

On August 19, 1977, defendant-appellant Pro Arts, Inc., an Ohio corporation, published a poster displaying a photograph of Presley and the dates 1935-1977. Pro Arts had purchased the copyright in the photograph from the newspaper photographer who had taken it. Pro Arts marketed the poster through various retailers, including co-defendant-appellant Stop and Shop Companies, Inc., which sold the poster through its Bradlee Stores Division in the Southern District of New York. After communication between Boxcar, Factors, and Pro Arts, Factors brought this suit in the Southern District of New York and obtained a preliminary injunction restraining defendants from manufacturing, selling, or distributing the Presley poster and from making any commercial use of Presley’s name or likeness. Factors Etc., Inc. v. Pro Arts, Inc., 444 F.Supp. 288 (S.D.N.Y.1977). We affirmed that injunction in Factors I.

Contemporaneously with the initiation of this suit, Factors found itself in litigation on another front. The Memphis Development Foundation, an organization formed in Memphis, Tennessee, to construct a bronze statue of Presley in downtown Memphis, sued Factors in the District Court for the Western District of Tennessee to prevent Factors from interfering with the Foundation’s efforts to raise funds by selling eight-inch pewter replicas of the proposed Presley statue priced at $25. Factors counterclaimed for an injunction to restrain the Foundation’s distribution of the statuettes and secured a preliminary injunction, Memphis Development Foundation v. Factors, Etc., Inc., 441 F.Supp. 1323 (W.D. Tenn.1977), aff’d without opinion 578 F.2d 1381 (6th Cir. 1978). On motion for summary judgment in the Tennessee litigation, Factors obtained a permanent injunction in the District Court. However, the Sixth Circuit reversed, holding that Presley’s right of publicity did not survive his death. Memphis Development Foundation v. Factors Etc., Inc., 616 F.2d 956 (6th Cir.), cert. denied, 449 U.S. 953, 101 S.Ct. 358, 66 L.Ed.2d 217 (1980).

Thereafter Factors moved for summary judgment in the New York litigation. Appellants (hereafter collectively “Pro Arts”) brought to the District Court’s attention the Sixth Circuit’s reversal in Memphis Development, contending that Memphis Development collaterally estopped Factors from asserting that it possessed any exclusive publicity rights to the name and likeness of Presley after his death. Implicitly rejecting this contention, the District Court (Charles H. Tenney, Judge) granted Factors’ motion and issued a permanent injunction, from which this appeal has been taken. 496 F.Supp. 1090 (S.D.N.Y.1980).

DISCUSSION

The District Court, exercising its diversity jurisdiction, 28 U.S.C. § 1332 (1976), was obliged to apply the substantive law of the state to which the forum state, New York, would have turned had the suit been filed in state court. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Curiously, the choice of law issue had received no attention from the parties in this litigation prior to the Sixth Circuit’s reversal in Memphis Development. Perhaps assuming that the law governing this infringement action was the law of the place of the wrong, as appellees now explicitly contend on this appeal, the parties did not refer to choice of law rules on the prior appeal, and this Court, without discussion, simply observed that the issue of the duration of the right of publicity is “one of state law, more specifically the law of the State of New York,” 579 F.2d at 220. That choice of law ruling, made in the course of affirming the preliminary injunction, does not preclude our reexamination of the point on this appeal from a final adjudication of the case, see Diversified Mortgage Investors v. U.S. Life Title Insurance Co., 544 F.2d 571, 576 (2d Cir. 1976), especially now that the parties have put the choice of law issue in dispute.³

Factors not only contends that New York law is applicable as the law of the place of the wrong, citing Cousins v. Instrument Flyers, Inc., 44 N.Y.2d 698, 699, 405 N.Y.S.2d 441, 442, 376 N.E.2d 914, 915 (1978) (per curiam), but also asserts that even if a “significant contacts” test were applied, see Babcock v. Jackson, 12 N.Y.2d 473, 240 N.Y.S.2d 743, 191 N.E.2d 279 (1963), the significant contacts of this dispute, i. e., those that “relate to the purpose of the particular law in conflict,” Miller v. Miller, 22 N.Y.2d 12, , 290 N.Y.S.2d 734, 737, 237 N.E.2d 877, 879 (1968), are with New York. Factors points not only to the sale of the infringing poster, which occurred in New York, but also to the fact that New York, as a center of communications and the locale where the publicity value of many per-sonas has developed, has an interest in ensuring against misappropriation of a celebrity’s right of publicity. Against this rather sparse showing, Pro Arts points out that Tennessee is where Presley was domiciled, Boxcar was incorporated, and the agreement between Boxcar and Factors was made. Moreover, the latter agreement specifically provides that it is to be construed in accordance with Tennessee law. We think it likely that these facts would persuade a New York court to look to the law of Tennessee. But even if a New York court would apply New York law in considering some elements of Factors’ claim, such as the occurrence of an infringement, we feel certain that Tennessee law would be referred to in deciding whether Boxcar had a right of publicity in Presley’s name and likeness, after his death, that was capable of being contracted for by Factors. Cf. Restatement (2d) of Conflict of Laws (1971) § 147, Comment (i), noting that tort conflicts rules apply to issue of conversion of property, but property conflicts rules apply to whether plaintiff has title to property allegedly converted.

All members of the panel agree that we should turn to Tennessee law to determine what rights the Boxcar-Factors contract conveyed to Factors. We find, as the Sixth Circuit concluded in Memphis Development, that Tennessee statutory and decisional law affords no answer to the question. We are thus brought to the issue that divides the panel: whether deference should be accorded to the decision in Memphis Development.

Somewhat to our surprise, there has been hardly a mention in the appellate reports of the appropriate deference a court of appeals should give to a decision made by the court of appeals of another circuit on the law of a state within that other circuit. It has frequently been observed that a court of appeals should give considerable weight to state law rulings made by district judges, within the circuit, who possess familiarity with the law of the state in which their district is located. See 1A Moore’s Federal Practice 1 0.309(2), at 3125 n.28 (collecting cases). The Supreme Court has expressed similar views concerning state law interpretations by a panel of circuit judges whose circuit includes the relevant state. Mac-Gregor v. State Mutual Life Assurance Co., 315 U.S. 280, 62 S.Ct. 607, 86 L.Ed. 846 (1942). But no ease appears to have turned on whether one court of appeals should defer to another circuit as to the law of a state within that circuit.⁴

In deciding Memphis Development, the Sixth Circuit was expounding Tennessee’s version of the common law. It makes no difference that the Court was unable to find any Tennessee decisional law to guide its resolution of the issue before it, leaving it, as Judge Merritt candidly acknowledged, with “no way to assess” the predisposition of the Tennessee courts. 616 F.2d at 958. The Sixth Circuit may have lacked any sure basis for predicting what the Tennessee courts would do and therefore felt obliged to make its decision “in the light of practical and policy considerations, the treatment of other similar rights in our legal system, the relative weight of the conflicting interests of the parties, and certain moral presuppositions concerning death, privacy, in-heritability and economic opportunity.” Ibid. But this recourse to such general considerations did not alter the function that the Sixth Circuit was performing. In adjudicating a state-created right in the exercise of its diversity jurisdiction the Court was “for that purpose, in effect, only another court of the State.” Guaranty Trust Co. v. York, 326 U.S. 99, 108, 65 S.Ct. 1464, 1469, 89 L.Ed. 2079 (1945). It had no power “to declare substantive rules of common law,” Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938); it could only declare the law of Tennessee. “ ‘The common law so far as it is enforced in a State, whether called common law or not, is not the common law generally but the law of that State existing by the authority of that State Id. at 79, 58 S.Ct. at 822, quoting Black and White Taxicab and Transfer Co. v. Brown and Yellow Taxicab and Transfer Co., 276 U.S. 518, 533, 48 S.Ct. 404, 408, 72 L.Ed. 681 (1928) (Holmes, J., dissenting).

Of course reasonable minds may differ as to the preferable course that the common law of Tennessee ought to follow on the merits of Factors’ claim. The writer would probably uphold a descendible right of publicity, were he serving on the Tennessee Supreme Court, and perhaps if he served on the Sixth Circuit when Memphis Development was decided. But the issue for this Court is not which view of the merits is wiser policy; it is whether, and under what circumstances, a ruling by a court of appeals, interpreting the common law of a state within its circuit, should be regarded as authoritative by the other federal courts of the nation. The answer is illuminated by consideration of the functioning of diversity jurisdiction.

One distinct shortcoming of diversity jurisdiction is the interruption of the orderly development and authoritative exposition of state law occasioned by sporadic federal court adjudications. Except in those few jurisdictions permitting a federal court to certify an unsettled question of state law to the state’s highest court,⁵ a federal court’s decision on state law cannot be corrected, for the benefit of the litigants in the particular case, by the state’s authoritative tribunal. As long as diversity jurisdiction exists, this price must be paid. However, the opportunities for federal court departure from the normal paths of state law development should be held to a minimum, for the benefit of both the orderly development of state law and fairness to those subject to state law requirements. Both values are served by recognizing, within the federal system, the authoritativeness of decisions on the law of a particular state rendered by the court of appeals for the circuit in which the state is located. Orderly development is enhanced because the state legislature will know that the decision of the pertinent court of appeals will determine legal rights, unless superseded by a later state supreme court decision. This knowledge will focus state legislative efforts on the appropriateness of a statutory change. Fairness to the public is promoted by making clear that there is a single, authoritative answer to the particular state law issue, instead of leaving the matter subject to the varying interpretations of the courts of appeals for the several circuits.⁶ If this Court were to disregard the Sixth Circuit’s view and declare that Tennessee law recognizes a de-scendible right of publicity, what standard of conduct should guide Tennessee residents endeavoring to determine whether their publicity rights are to be valued only for a lifetime or beyond? Of course, lawyers frequently have to advise clients concerning unsettled issues of law, but the exercise of diversity jurisdiction should not add to their uncertainty. Diversity jurisdiction, especially in its post-Erie incarnation, should not create needless diversity in the exposition of state substantive law. Even though the decision of the pertinent court of appeals may be revised by a subsequent state supreme court ruling, a state court will normally have the option of making such a ruling prospective only, thereby protecting any rights bargained for in reliance on the ruling of the pertinent court of appeals. That option would make little sense if the authoritative state court ruling came after divergent rulings had been made by several courts of appeals.

We need not and do not conclude that the state law holding of the pertinent court of appeals is automatically binding upon the federal courts of all the other circuits. The ultimate source for state law adjudication in diversity cases is the law as established by the constitution, statutes, or authoritative court decisions of the state. A federal court in another circuit would be obliged to disregard a state law holding by the pertinent court of appeals if persuaded that the holding had been superseded by a later pronouncement from state legislative or judicial sources, e. g., Waters v. American Automobile Insurance Co., 363 F.2d 684, 689 (D.C.Cir.1966), or that prior state court decisions had been inadvertently overlooked by the pertinent court of appeals. Neither circumstance exists in this case. Where, as here, the pertinent court of appeals has essayed its own prediction of the course of state law on a question of first impression within that state, the federal courts of other circuits should defer to that holding, perhaps always, and at least in all situations except the rare instance when it can be said with conviction that the pertinent court of appeals has disregarded clear signals emanating from the state’s highest court pointing toward a different rule. However our sense of the common law might lead us to resolve the merits of this case were we judges of the Tennessee Supreme Court, as “outsiders” with respect to Tennessee law, Lehman Brothers v. Schein, 416 U.S. 386, 391, 94 S.Ct. 1741, 1744, 40 L.Ed.2d 215 (1974), we should defer to the views of the Sixth Circuit unless we can point to a clear basis in Tennessee law for predicting that the Tennessee courts, when confronted with a case such as this, would conclude that the Sixth Circuit’s prediction was incorrect.⁷ Since we are unable to find any such indication in Tennessee law, we accept Memphis Development as controlling authority and conclude that after Presley’s death, Boxcar had no right of publicity in Presley’s name and likeness to convey to Factors.⁸

For these reasons the judgment of the District Court is reversed.

1 . See Felcher & Rubin, The Descendi-bility of the Right of Publicity: Is There Commercial Life Añer Death?, 89 Yale L.J. 1125 (1980); Felcher & Rubin, Privacy, Publicity and the Portrayal of Real People by the Media, 88 Yale L.J. 1577 (1979); Nimmer, The Right of Publicity, 19 Law & Contemp. Prob. 203 (1954); Comment, Transfer of the Right of Publicity: Dracula’s Progeny and Privacy’s Stepchild, 22 U.C.L.A. L. Rev. 1103 (1975); Note, Lugosi v. Universal Pictures: Descent of the Right of Publicity, 29 Hastings L.J. 751 (1978).

2 . The circumstances surrounding the assignment of rights to Boxcar, a matter of some confusion, happily not of concern to this appeal, are discussed in Factors Etc., Inc. v. Creative Card Co., 444 F.Supp. 279 (S.D.N.Y.1977).

3 . Factors contends that Pro Arts is raising the choice of law issue for the first time on appeal, thereby foreclosing Factors from an opportunity to develop in the trial court a factual record demonstrating significant New York contacts. See DuBreuil v. Stevenson, 369 F.2d 690 (5th Cir. 1966). However, Pro Arts did call the District Court’s attention to the pertinency of Tennessee law on the issue of the existence of a publicity right after Presley’s death. (June 19, 1980 tr. 23-24). The point was made in urging that Factors was collaterally estopped to assert possession of a publicity right by the Memphis Development decision, an issue we need not resolve in view of our disposition of the appeal. Moreover, it is difficult to imagine what New York contacts Factors could possibly marshal to support a claim that a New York court would apply New York law in deciding the nature of the rights acquired by Factors pursuant to the Boxcar-Factors contract.

4 . In Waters v. American Automobile Insurance Co., 363 F.2d 684, 689 (D.C.Cir.1966), the District of Columbia Circuit seemed prepared to read Missouri cases to reach a result different from one adopted by the Eighth Circuit, but ultimately rested decision on a recent decision of a state intermediate appellate court, which was precisely in point. In Peterson v. U-Haul Co., 409 F.2d 1174, 1177 (8th Cir. 1969), the Eighth Circuit expressed the view that “Federal court decisions in diversity cases have no prec-edential value as state law and only determine the issues between the parties.” This view has been labeled erroneous by Professor Moore, 1A Moore’s Federal Practice H 0.309(2), at 3123 n.19, and several circuits, including the Eighth, have relied on the precedential force of their own prior rulings on state law, id. at 3124-25 and n.25 (collecting cases).

5 . E. g., Fla.App.R. 4.61; Md.Code Ann. § 12-601 (1980); Mass.Sup.Jud.Ct.R. 3:21.

6 . Even if uniformity is achieved throughout the federal courts, the possibility remains that the courts of various states, obliged to consider Tennessee law because of their conflicts rules, might reach different predictions of Tennessee law. We think it more likely that state courts would share our interest in uniformity and accept a ruling by a pertinent federal court of appeals, subject to the same qualifications we adopt for ourselves. If in some instances a state court did not do so, that might lessen but would not eliminate the appropriateness of promoting uniform exercise of diversity jurisdiction within the federal court system. And the uniformity achieved for the period after the date of the decision of the pertinent federal court of appeals is not less worthy of achievement simply because prior to that decision other federal courts or courts of other states may have made different predictions about the course of Tennessee law. The possibility of these unavoidable departures from uniformity, just like decisions of federal or other state courts rendered before an authoritative ruling by the pertinent state’s highest court, is an insufficient reason to create a needless departure from uniformity during what may be an extended period beginning after a decision by the pertinent federal court of appeals and ending, if at all, only in the event of a contrary decision by the pertinent state’s highest court or legislature.

7 . As it happens, the author of Memphis Development is a distinguished member of the Tennessee bar, whose sense of what may be expected of the Tennessee Supreme Court surely surpasses our own. But since Judge Merritt’s opinion so emphatically disclaims any basis for predicting how Tennessee will resolve the issue on the merits, we prefer to determine the authoritativeness of Memphis Development with regard to the territorial scope of the Sixth Circuit, rather than the heritage of the opinion’s author.

8 . In view of our disposition of the appeal, deferring, as a matter of stare decisis to the Sixth Circuit’s interpretation of Tennessee law, we need not consider Pro Arts’ other contentions, which include claims that the judgment in Memphis Development collaterally estops Factors from asserting a descendible right of publicity, that if New York law applies, New York would not recognize such a right, and that federal copyright law preempts application of state law purporting to protect such a right. Nor need we consider whether the law of a state recognizing a right of publicity may be enforced nationwide, or only within that particular state. Cf. Goldstein v. California, 412 U.S. 546, 93 S.Ct. 2303, 37 L.Ed.2d 163 (1973).