Tuesday, August 23, 2011

Variety wins anti-SLAPP appeal over bad review of big advertiser

Calibra Pictures, LLC v. Variety, 2011 WL 3612209 (Cal. App. 2 Dist.)

Variety is an entertainment trade magazine with “complete separation between the advertising and editorial departments.”

Calibra is managed by Joshua Newton, who wrote, directed, and produced Iron Cross for Calibra, starring the late Roy Scheider, who died before filming was completed. In early 2009, Newton contacted the sales director at Variety to place a front cover ad to promote a Roy Scheider tribute and to attract attention to his film. The ad ran for $45,000.

The tribute featured a screening of the film trailer. The sales director was there and congratulated Newton on the trailer, then wrote him an email calling the trailer “amazing.” She offered to promote the film at the upcoming Cannes Film Festival, but Newton declined. She then invited him to attend a gala as the guest of the president of Variety, Neil Stiles. Newton attended; his guests included his son Alexander, Roy Scheider’s Iron Cross costar. (Rhetorical question: what is the function of including this factual detail?) Stiles told Newton that Variety was the lead industry with an overwhelming market share, making it useless to advertise with a competitor. He emphasized that all Academy Awards members, studios and production and distribution decisionmakers read Variety and asked if Iron Cross had a distributor. Newton said no.

Stiles then asked if Newton had considered entering Iron Cross into the 2010 Oscars. “Newton indicated it was a possibility but that he would have to ask his investors when he returned to London. Stiles stated that if Calibra was to pursue the Oscars, Variety would be the perfect partner and it could help ‘Iron Cross’ achieve an Oscar nomination.”

Newton met with his investors and then agreed to use Variety to submit the film for the Academy Awards. A few weeks later, he told the sales director that it was unlikely that the film would be completed in time for the Oscar race. The next month, she told Newton that the Variety Group Editor, Timothy Gray, had published a short list of possible Academy Award contenders that included Iron Cross. As it turned out, she’d asked Gray to include the film on the list. A few months later, Variety published another list of contenders including Iron Cross, indicating a fall release, as well as a media pack, “Academy Season 2010,” listing the film.

The sales director then told Newton that Gray had chosen to include the film in the “exclusive” Variety Screening Series, for $25,000, as part of an overall exclusive partnership with Calibra for a promotional campaign to attract a distributor and nominations for the Academy Awards and the British Academy Awards (BAFTA) for Roy Scheider. Newton told her that he could only justify the expense in order to secure a major distribution deal. The sales director “assured Newton that if Calibra had the budget, Variety could create sufficient excitement about the film through a carefully designed Academy Awards campaign that the film would achieve the attention of major distributors. She also said that she would contact distributors directly and help Calibra obtain a distributor, but only if Calibra selected Variety as an exclusive media partner.”

Variety asked for over $427,500 for its screening and promotional activities, including covers, DVD inserts, and other ads. The campaign generated enough interest that various industry people requested screener copies. To qualify for the Academy Awards and get the most value out of the Variety deal, the sales director said that Calibra needed to finish the film and have it exhibited in a commercial movie theater for one week in December 2009. In reliance on that claim, Calibra spent $800,000 to expedite completion of the film. “Newton worked 24 hours a day, seven days a week.” The sales director and another Variety representative attended the December Los Angeles screening and told Newton the film was “outstanding.” By late December, Calibra had paid Variety $226,000.

A freelance film critic, Robert Koehler, was assigned to review the film for Variety. His December 20 review began: “‘Iron Cross’ will be remembered as Roy Scheider’s swan song and little else. A film of serious intent undone by hackneyed plotting and intrusive editing, writer-director Joshua Newton's revenge drama is reasonably sound in its general outline, until it delves into specifics. Scheider feels at home in his final role as a retired Gotham cop who goes to Germany to hunt down the Nazi who killed his family, though his onscreen presence is increasingly trimmed away as the reels roll by. The briefest of theatrical windows (pic opened Friday for a one-week Oscar-qualifying run) will quickly close shut before a muted vid bid.” The court summarized the rest of the review as criticizing “the film's writing, structure and direction and some of the actors.” (The review is amusingly uses cut-off lingo suggesting that the writer gets paid, in part, for chopping letters off of words—or maybe, more to the point, for sounding like a classic Variety review. Of some note, given my question above, is that Alexander Newton was singled out as a “promising actor” despite his incongruous British accent.)

Newton asked the sales director what happened. She said “she was flabbergasted, apologized and asked Newton to meet with Stiles.” When Newton met with Stiles the next day, he asked for the review to be deleted, alleging that it contained factual inaccuracies and that Koehler left the screening before the film ended. Stiles allegedly promised that he’d “see what he could do.” The critic who’d assigned the film to Koehler promised to investigate and took the review down for a short time “to give Newton enough time to get other reviews.” But the article had already been printed in LA and NY, and many online traces and quotes remained. After Variety’s critic concluded that Newton’s factual claims were wrong, Variety reposted the review online.

Calibra sued for breach of contract (specifically, the implied covenant of good faith and fair dealing), negligence, fraud, breach of fiduciary duty and violation of California statutory consumer protection law. Variety filed an anti-SLAPP motion, which the trial court granted on the ground that the lawsuit arose from an exercise of free speech and that there was no evidence that Variety waived its rights by contracting not to publish a review of the film. With the burden shifted to Calibra to demonstrate a probability of prevailing on the merits, the suit failed. Variety got its attorneys’ fees as well, pursuant to the anti-SLAPP law.

Calibra didn’t contest that this was a case involving free speech in connection with an issue of public interest, but argued that the trial court should have found that it established a prima facie case. The court of appeals disagreed.

First, Variety didn’t waive its right to publish the review. A waiver of First Amendment rights requires “clear and compelling” relinquishment, and courts “indulge every reasonable presumption” against such a waiver. With that as a standard, Calibra was doomed. Calibra argued that Variety impliedly waived its right to publish a review of the film through its exclusive media partnership with Calibra, which formed a fiduciary relationship. But courts won’t imply a waiver of free speech rights. Calibra argued that the fact that Variety took the review down after Newton complained indicated the parties’ understanding that Variety agreed to avoid negative promotion, but the record made it reasonable to presume that this was a courtesy only, especially since Variety then reposted the review.

In Paragould Cablevision v. City of Paragould, Ark., 930 F.2d 1310 (8th Cir.1991), a cable company agreed to a contract that provided that if the company desired to offer “additional income-producing activities “such as advertising” over the cable system, it would first notify the city in order to negotiate the proposed modification. The cable company then sued for violation of its commercial speech rights. The court held that the cable company “effectively bargained away some of its free speech rights,” and could have bargained for an unqualified right to advertise. The 9th Circuit has read Paragould to hold that waiver of free speech rights can be implied in commercial transactions involving sophisticated parties. But “[p]roperly understood,” the case covers only sophisticated parties who use “contractual language that expressly restricts the party's exercise of a certain type of speech.” The waiver is implied only in a loose sense: the term “waiver” and the speech rights at issue aren’t spelled out. But the waiver “flows directly from the concrete and agreed upon restriction on speech.” That’s not this case.

The implied covenant of good faith and fair dealing prevents a party from frustrating the other party’s rights to the benefit of the contract, but because there was no waiver of free speech rights, there was no breach. Likewise, the negligence claim failed; there’s no precedent for allowing tort recovery against a newspaper for publishing opinion and nondefamatory assertions of fact. Thus, Variety could have no duty to refrain from publishing the review.

Nor did a fiduciary duty exist because of Variety’s promises, including its promises to promote Iron Cross to distributors. Calibra didn’t argue that the parties formed an agency relationship. “In any event, the context of the allegations and evidence demonstrate that Variety was offering help to Calibra as a method of landing a large advertising contract, and in no way was Variety offering to act in anyone's interest but its own.”

The exclusive media partnership wasn’t a legal partnership but an arm’s length transaction. “Variety was acting in its own financial interest. Calibra could not have reasonably expected otherwise, particularly because Variety was a trade paper that did not agree to waive its free speech rights or be a fiduciary.” Variety’s alleged ability to exploit a disparity in bargaining power didn’t of itself create a fiduciary relationship. “Regardless, we note that Calibra was an obviously well-funded film company with hundreds of thousands of dollars at its disposal. It held the purse strings and did not have to advertise in Variety ….”

It may well have been the case that Calibra depended on Variety to refrain from panning Iron Cross, “but that dependence cannot, by itself, convert what was otherwise an arm's length transaction into a fiduciary relationship.” Moreover, it was unreasonable to believe that an ad contract with the sales department would have an impact on the editorial department. (Comment: this has to mean unreasonable as a matter of law. As a matter of fact, such influences are well-known even if often decried.) “If Variety's editorial department handled advertising customers with a velvet glove, Variety would lose credibility as a source of independent news and opinions about the entertainment industry.” Nor did Calibra’s reliance on Variety’s advice about when to release the film matter, since the advice was free and Calibra didn’t have to take it.

Fraud: Calibra alleged that Variety misrepresented Calibra’s potential for winning Academy Awards. But these were merely opinions about possible future actions by Academy voters. Opinions are actionable only under special circumstances, “such as when the defendant holds itself out as being specially qualified; the opinion is stated as fact or implies justifying facts; or the opinion is rendered by a fiduciary or other trusted person.” Calibra only argued that Variety was a fiduciary (not that it held itself out as being specially qualified?), which wasn’t the case.

Calibra argued that Variety knew its predictions were false beause no one at Variety had seen the film. The court didn’t follow. “Presumably what Calibra means is that Variety did not believe that its predictions had any merit,” but the court disagreed: the evidence indicated that Variety’s prediction had “arguable merit,” given that Iron Cross was Roy Scheider’s last film, which might have gotten the sentimental vote, and that the Holocaust film genre has resonated with Academy voters over the years.

Even assuming that Variety didn’t believe its own prediction, Calibra’s reliance was unjustified. Iron Cross, an obscure independent film, had an uphill battle for Oscar consideration, and the film was uncompleted at the time of the contract. “Thus, other than the film's theme and star, Variety had no legitimate basis for offering a prediction.” There was also no evidence that Variety had a secret intent to destroy the film with a negative review, which in fact worked against Variety’s economic interest since Calibra stopped paying.

Unfair business practices: also no. Variety sold and provided advertising, “which the evidence shows was a success because it generated interest in ‘Iron Cross.’ Variety did not promise to waive its free speech rights, and its sales department is separate from its editorial department. Thus, it is unlikely Variety's conduct would lead the public to believe that buying advertising would preclude Variety from publishing negative press about the buyer.”

Variety was therefore entitled to an additional fee award for the appeal, over the $57,000 it initially got.

Comment: while this seems plainly the right result, it also appears that Hollywood sells hope at least as much as Max Factor does.

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