July 03, 2013 5:55pm PT by Jonathan Handel
Few Options for Weinstein Co. in Wake of MPAA 'Butler' Ruling (Analysis)
Tuesday’s ruling in an MPAA title registration arbitration puts The Weinstein Company in a quandary. As The Hollywood Reporter reported, the arbitrators held that The Weinstein Company could not use the title “The Butler” on its upcoming film because that previously served as the title of a 1916 short film that now belongs to the Warner Bros. library.
In response, The Weinstein Company issued a statement from veteran Supreme Court litigator David Boies that said, “The suggestion that there is a danger of confusion between TWC’s 2013 feature movie and a 1917 [sic] short that has not been shown in theaters, television, DVDs, or in any other way for almost a century makes no sense. The award has no purpose except to restrict competition and is contrary to public policy.”
We don’t know if Boies is quoting from the arbitration ruling – those documents aren’t public and neither Warner Bros. nor The Weinstein Company would supply a copy to THR – but “danger of confusion” isn’t the test under the MPAA system -- identicality is (or, in some cases, similarity). Here, the titles are identical. Protection is generally perpetual; in some cases, the duration is only four years, but that doesn’t seem to be at issue here. The MPAA's Title Registration Bureau does have an appeal process, but the rules for challenged titles are the same on appeal as in the initial process.
None of that bodes well for The Weinstein Co. But what about Boies’ comment that the award restricts competition? That’s an antitrust argument, and at first glance it has some allure. Surely federal antitrust law – passed by Congress and enforced by agencies and judges – places some limits on what a mere industry association can do?
Actually, not so much, it seems. That’s because another law, the Federal Arbitration Act, requires judges to defer to arbitration agreements, such as the agreement that companies agree to when they sign up with the TRB. Says the 1925 statute, “A written provision in any … contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction … shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”
In recent decades, the Supreme Court has interpreted the FAA expansively, with the conservative majority on the court using the statute to allow large companies to divert claims out of the court system and into arbitration. In many instances, that’s favored companies at the expense of consumers and employees, since it keep cases out of the hands of sympathetic juries, and frequently bars class actions as well.
It turns out that the court’s latest case in this line of precedent was decided less than two weeks ago – and it involved an antitrust claim.
In the case, American Express Co. v. Italian Colors Restaurant, the plaintiff restaurant alleged that “American Express used its monopoly power in the market for charge cards to force merchants to accept credit cards at rates approximately 30% higher than the fees for competing credit cards.” The restaurant asserted that this was a violation of a key antitrust law, the Sherman Act, and brought a class action.
Citing the FAA, Amex sought to enforce the arbitration clause in its merchant agreements, which also included a prohibition on class actions in arbitration. The restaurant countered that enforcing this prohibition would effectively strip it of its rights, because the case would be too expensive to bring on an individual, plaintiff by plaintiff basis. Expert witness fees alone would be in the hundreds of thousands of dollars at a minimum, whereas the most the restaurant stood to recover if it won a non-class-action case was about $38,000.
By a 5-3 vote (with one Justice not participating), the Supreme Court turned away the restaurant’s objection. As a result of the FAA, said Justice Scalia for the majority, “courts must ‘rigorously enforce’ arbitration agreements according to their terms. … That holds true for claims that allege a violation of a federal statute, unless the FAA’s mandate has been ‘overridden by a contrary congressional command.’”
The decision then found no such contrary command in the antitrust laws as regarding class actions. Regarding the underlying substantive issue – the alleged antitrust violation – the decision said, “so long as the prospective litigant effectively may vindicate its statutory cause of action in the arbitral forum, the statute will continue to serve both its remedial and deterrent function.”
That may give Boies an opening, because the TRB rules don’t provide a mechanism for challenging the system itself on antitrust grounds (or any grounds at all). But the Supreme Court decision includes a dissent (by Justice Kagan) that, ironically, works against such an argument: “If the arbitration clause is enforceable, Amex has insulated itself from antitrust liability – even if it has in fact violated the law.”
In other words, even an arbitration clause that snuffs out an antitrust claim will be upheld by the conservative majority on the court.
As THR reported, Boies also argued in a letter to Warner Bros. on Wednesday that Warners had agreed to allow The Weinstein Co. to use the title “in return for certain contributions that TWC agreed to make.” A source familiar with the dispute rejects the notion that there was any deal. That’s the sort of he-said she-said that a court is likely to say The Weinstein Co. should have raised with the arbitrator. Perhaps it did so – in which case it evidently lost the argument. A court is unlikely to revisit the issue.
That all would seem to make a suit by TWC against Warners a long shot at best. What about suing the MPAA? Boies wrote them on Wednesday too, saying “To the extent that the MPAA in concert with its members seeks to ‘permanently protect’ titles where there is no plausible claim of possible confusion, and no claim of actual damages, such an attempt would be a naked restraint on trade in violation of the antitrust laws.”
But there are problems here. The TRB rules include a waiver of damages against the MPAA, TRB and related entities. That doesn’t preclude seeking an injunction against the rules, of course.
Even an injunction seems unlikely, though, because The Weinstein Co. voluntarily and knowingly agreed to the arbitration process when it signed on to the TRB. And TWC received a benefit – its own titles are protected from reuse by other TRB signatories and by MPAA members.
In essence, a suit against the MPAA is an attempt to make an end-run around an unfavorable arbitration award. That’s exactly the sort of thing courts disfavor, as the 9th Circuit (the federal Court of Appeals that includes California) pointed out in a case involving a challenge to WGA credit arbitration, Marino v. Writers Guild of America.
Stepping back for a moment, it’s not even clear that an antitrust claim would have legs. After all, the arbitration award doesn’t prohibit The Weinstein Co. from releasing its film; it just has to do so under a different name. That’s a restriction, of course, but intellectual property laws – and IP-related contracts – always impose restrictions. They provide monopolies of various sorts to the IP owner.
Boies and The Weinstein Co. may have arguments to counter this point, but whether they’ll be able to get a court to even consider those arguments remains to be seen. Arbitration may sometimes be a bed of nails, but under Supreme Court precedent, if those are the accommodations you agreed to, the courts won’t provide a mattress later.
E-mail: jhandel99 at gmail dot com