Disney Enterprises, Inc. v. Vidangel, Inc. ( 2018 )

NOT FOR PUBLICATION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
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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
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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.
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