Thursday, August 23, 2001
Page 7
PERSPECTIVES (Column)
Court of Appeal Unseals Papers in Disney Case
By ROGER M. GRACE
Div. Seven of this district’s Court of Appeal yesterday permitted access to papers in a case in which secrecy earlier had reigned to the point that the court’s opinion was filed under seal. The papers reveal staggering sums being paid for the right to air television series.
The case is Agency for the Performing Arts, Inc. v. The Walt Disney Company, B138373. It involves the contention of a talent agency, APA, that Disney underpaid commissions to it in connection with a ’90s sitcom, “Home Improvement.” Div. Seven partially reinstated APA’s action, scuttled by Los Angeles Superior Court Judge Dzintra Janavs.
The appeals court’s opinion, issued July 3, recited: “All documents in this matter have been filed under seal pursuant to a confidentiality order. Consequently, this opinion is filed under seal.”
I found out about the secret opinion in looking through the court’s minutes. The minutes merely showed that the court affirmed and reversed. That’s it. It wasn’t even possible to ascertain which side had appealed. I went to the Clerk’s Office thinking there would at least be an order reciting the reasons for the sealing. Nothing in the case was publicly available, I learned.
Surely national security was not at stake.
I balked, in a letter to Div. Seven, at what struck me as an egregious affront to the public’s right to know, both with respect to the sealing of the opinion and the record in the case. The court asked the parties for input. Diana Greene Gordon, responding for APA, joined in the request for public release of the opinion and asked that all of the documents be released except one. John S. Schuster, representing Disney, said his client did not oppose public disclosure of the opinion if certain redactions were made. He supplied the court with a copy of its July 3 opinion, with portions blotted out. Schuster, an attorney with Howrey Simon Arnold & White, urged that the record remain sealed.
The justices assigned to the case—Justice Fred Woods (author of the opinion), Acting Presiding Justice Earl Johnson Jr., and Acting Justice Paul Boland (a Los Angeles Superior Court judge serving on assignment)—apparently recognized that the cause of protecting trade secrets had been accommodated in the extreme. A new opinion was filed July 27. It was not certified for publication but was publicly available. Facts relating to specific sums of money in issue were simply omitted.
The trial court was instructed, upon remand, to reexamine its two 1998 protective orders in the case in light of intervening case law and state rules.
So far, so good. However, there were two problems:
•The opinion recited that the July 3 opinion had been sealed “in accordance with California Rules of Court, rule 12.5, subdivision (f).” That rule provides that “[a] record filed publicly in the reviewing court must not disclose material contained in a record that is sealed....” The rule pertains to what the parties file. It provides no authorization for a court to file an entire opinion under seal. To the extent the justices assert that the July 3 sealing was in accordance with a state rule, they rationalize a blunder with a falsehood.
•The Court of Appeal was still concealing from public view the reporters’ transcripts of public proceedings conducted in the trial court, papers in the appendices which had been publicly filed below, the appellate briefs, and its improperly sealed July 3 opinion. These were sealed not by virtue of the trial court’s action, but solely based on the Court of Appeal’s doing.
MNC moved for access to these documents. It specified the trial-court documents it sought which had not been sealed below. In an order filed Tuesday and received yesterday, Div. Seven said:
On August 1, 2001, Metropolitan News Company filed a "Motion for Access to Court Records" citing NBC Subsidiary (KNBC-TV) Inc. v. Superior Court (1999) 20 Cal. 4th 1178 and the California Rules of Court, rules 12.5 and 243.1 (adopted January 1, 2001) as authority for seeking public access to records it claims were publicly filed in the trial court, but were subsequently filed under seal in this Court. Specifically, MNC’s motion requests access to the following:
1) “Complaint filed August 25, 1997.”
2) “Answer filed September 9, 1997.”
3) “Answer filed December 16, 1997.”
4) “Stipulation and protective order, each filed February 9, 1998.”
5) “Stipulation and order for supplemental protective order filed May 29, 1998.”
6) “Motion for Summary Judgment and statement of facts filed March 19, 1999.”
7) “Order filed July 30, 1999.”
8) “Notice of entry of judgment, filed December 15,1999.”
9) “Notice of appeal, filed January 10, 2000.”
10) “Minute orders of March 22,1999, June 10, 1999 and November 15, 1999.”
11) “[t]he transcripts of hearing(s) in the Los Angeles Superior Court.”
12) “[t]he parties’ appellate briefs.”
13) “A copy of the opinion in this case, filed July 3, 2001.”
The above listed documents, with the exception of Number 13, the July 3, 2001 opinion of this Court, were filed in this Court under seal pursuant to August 30, 2000 and December 6, 2000 orders of this Court upon the Appellant’s August 29, 2000 and Respondent’s December 4, 2000, applications to file the appellate briefs and appendixes under seal. The parties’ applications, this Court’s sealing orders and the filing of the appellate briefs1 occurred prior to the January 1, 2001 effective date of the California Rules of Court, rules 12.5 and 243.1.
In view of our Supreme Court’s opinion in NBC favoring public access to court records, in consideration of fairness to the Appellant and Respondent who submitted their respective record appendixes and prepared their Appellate Briefs in reliance upon this Court’s sealing orders, and for good cause appearing, this Court finds and orders as follows:
MNC’s motion is granted with respect to the documents listed above in Numbers 1-5 and 7-11 to the extent that such documents were included in the appellate record. The documents listed in Numbers 1-5 and 7-11 are hereby unsealed. On August 13, 2001, MNC withdrew its request for access as to the documents listed in Number 6.
MNC’s motion is denied as to the documents listed above in Numbers 12 and 13. On July 27, 2001, this Court remanded the issue of “sealing” records under California Rules of Court, rules 12.5 and 243.1, to the trial court. The documents listed in Numbers 12 and 13 include information that is the subject of the order of remand. Consequently, in light of this Court’s July 27, 2001 opinion and order of remand, and for the reasons stated therein, we conclude MNC’s request for access to Numbers 12 and 13 is premature and is therefore denied. The attachment to the letter brief of The Walt Disney Company, et al., dated July 19, 2001, is sue sponte unsealed.
fn. 1. Though Appellant filed its Reply Brief in January 2001, the Reply Brief was governed by the August 30, 2000 order granting Appellant’s application to file all briefs under seal.
What was released yesterday was sufficient to show the complete lack of justification for any secrecy in connection with the July 3 opinion.
The opinion, as redacted by Schuster, has but a few blot-outs. Most of them relate to the amount of the licensing fee ABC paid to Disney for the right to air episodes of “Home Improvement” in the years in issue. That information, however, was disclosed during public proceedings in Janavs’ courtroom—hence, was information in the public domain.
The show began Sept 17, 1991. A contract between APA and Disney specified that APA would receive one percent of the “base license fee” plus a four percent hike each year. The licensing fee paid by ABC to Disney for the first season was $410,000 per episode.
Each year, Disney paid APA at a rate of one percent of $410,000, plus a four percent annual boost. However, in 1994, APA learned that every year, Disney had negotiated an increase in the licensing fee from ABC. APA claimed, in an action filed in 1997, that it should have received one percent of the actual licensing fee.
The issue was whether “base” license fee meant initial license fee ($410,000 per episode) or actual current license fee. Janavs held that it means the former; the Court of Appeal reversed, finding there is a triable issue of fact as to the meaning.
The transcript of proceedings before Janavs shows that the per-episode licensing fee for the second season was $460,000; it went up to $750,000 for the 1993-94 season; the next year it swelled to $895,000; the fifth season fee was $1,120,000, and the 1996-97 tab was $1,203,000.
Disney lawyer Peter Mott argued at a hearing before Janavs that his client had the same $410,000-plus-four-percent deal with the William Morris Talent Agency in connection with a show called “Boy Meets World,” and had interpreted that agreement the same as it did the one with APA.
Gordon countered that the deal with the William Morris Agency involved a package which included the series “Dinosaur.” There was a drop in the licensing fee for the third season of that show, she said, and William Morris’ payments dipped.
“Instead of being the escalated four percent or more, it was actually $75,000-or-so-an-episide less,” Gordon said of the commission Disney paid.
Mott retorted that an “additional episode” of “Home Improvement” was produced for the fourth season comprised of clips from earlier shows. For that episode, he said, ABC paid Disney only $250,000, yet Disney handed APA a commission based on “460-something-thousand dollars.”
Gordon complained that Disney had represented to it that $3 million per episode was the amount it was paying for rights to air “Roseanne,” the highest licensing fee it had ever paid. That sum “was our benchmark,” the lawyer commented. She insisted, however, that the representation was false. “[T]he per-episode license fee for ‘Roseanne’ was $3.3 million per episode, not $3 million an episode,” Gordon told Janavs.
APA also complained that Disney breached the covenant of good faith and fair dealing by negotiating a licensing fee with ABC for the seventh and eighth seasons that was below the fair market value of the show. ABC, it pointed out, had been purchased by Disney. It claimed, in essence, that ABC was keeping coins in its ABC pocket that should have gone into the Walt Disney Pictures and Television pocket. This minimized the profits for the television show, APA argued, thus reducing its commission.
Woods responded that Disney had not breached the covenant because it had complete control over distribution, and could have opted not to market the show, at all.
The transcript of proceedings in the trial court reveals testimony attributed to Disney President Michael Eisner during a deposition in another case that, as paraphrased by Gordon:
“[O]nce Disney acquired ABC, it was not possible to do an arm’s length negotiation. It was one company. So, all that could be done, where there were profit participants, was to provide and set a fair price.”
Under Woods’ reasoning, however, that price need not be fair.
Anyway, the case will be heading back to the trial court, unless Supreme Court review is sought and granted.
Los Angeles Superior Court Judge Richard Fruin, to whom the case was transferred in its final stages, presumably will try the issue relating to the meaning of “base license fee.” The matter of the breath of the protective order, however, could go back to Janavs. There is case law authority for the proposition that any reexamination of such an order should be by the judge who made it.
Meanwhile, AFT is suing Disney in a new case. Disney, in calculating APA’s one percent commission based on the net profits of “Home Improvement,” has reduced the profits by the $4.7 million it spent on attorney fees and costs in the suit brought by APA and by another plaintiff in a related action.
An error in judgment was made in connection with the July 3 sealing of the opinion.
With respect to the sealing of records, the court did not (contrary to an assumption I previously expressed) violate the new Rule 12.5, except as to APA’s reply brief. That rule requires a document-by-document examination of papers which a party seeks to file under seal which had not been sealed below. The papers (except for the reply brief) had been sealed in 2000. It obviously cannot be expected that the rule would be applied prior to its Jan. 1, 2001 effective date.
(The date of the filings of papers could not be ascertained from the register inasmuch as the register in the case could not be accessed via the Internet in light of the sealing orders. And, by the way, it still can’t be.)
However, the sealing of the transcript of public proceeding below, trial-court documents not sealed in the trial court, and the appellant’s opening brief and the respondent’s brief did run afoul of the public’s First Amendment right of access, delineated in NBC Subsidiary in 1999, and should not have occurred.
Div. Seven has acted with conscientiousness in rectifying its errors. It remains, however, remiss in failing to excise from its July 27 opinion—even though that opinion is unpublished—its assertion that the sealing of an entire opinion is authorized by Rule 12.5. It has the power to modify the opinion through tomorrow, and should.
Copyright 2001, Metropolitan News Company