First Amendment Limits Media Liability for Inducing Breach of Nondisclosure Agreement -- Now a Precedent in California

The Court of Appeal has ordered that the formerly nonprecedential decision, which I blogged about four weeks ago, will now be precedential.

As I wrote on May 30, in Jenni Rivera Enterps., LLC v. Latin World Entm't Holdings, Inc. the California Court of Appeal held that the First Amendment sometimes limits creators' liability for tortiously inducing breach of contract by their sources. A quick summary of the facts:

These appeals arise from a dispute concerning a television production based on the life of the Mexican-American celebrity Jenni Rivera, who died in a plane crash in December 2012. The entity that controls most of Rivera's assets, Jenni Rivera Enterprises, LLC (JRE), entered into a nondisclosure agreement with Rivera's former manager, Pete Salgado, that restricted his disclosure and use of certain personal information about Rivera and her family.

Alleging Salgado breached that agreement by disclosing information to the producers and the broadcaster of a television series based on Rivera's life, JRE sued Salgado and the program's producers for breach of contract, interference with contract, and inducing breach of contract. JRE also sued the program's broadcaster for interference with contract and inducing breach of contract….

And a quick summary of the ruling: The court concluded that the plaintiffs' claim against Univision Network & Studios for tortiously inducing Salgado to breach his contract

• were viable as a matter of California law,
• but were preempted by the First Amendment, given that "Univision had no knowledge of the nondisclosure agreement at the time it entered into the license agreement with BTF [the producers of the series about Rivera]," and that all Univision did after learning of the agreement appeared to "consist[] of continuing to pay license fees to BTF and promoting Salgado's involvement with the Series."

But the ruling, like over 80% of California Court of Appeal, was "unpublished," which is to say nonprecedential. Most such nonprecedential rulings just apply settled law to the facts of each case; and I expect that this practice of nonpublication may make matters easier for many lawyers and judges (and thus perhaps cheaper for many clients), since otherwise there'd be five times as many precedents that they would need to consider. And in California (as opposed to in the federal system), these cases may not be cited at all to California courts, even as merely persuasive but nonbinding precedent.

This case, though, struck me as pretty important, and not duplicative of existing law. So, leading First Amendment lawyer Floyd Abrams and First Amendment law professors David Ardia (North Carolina), Enrique Armijo (Elon), Dale Cohen (UCLA), RonNell Andersen Jones (Utah), Gregg P. Leslie (Arizona State), Lyrissa Lidsky (Missouri), Mary-Rose Papandrea (North Carolina), Jennifer E. Rothman (Loyola-L.A.), and I filed a letter asking the panel to publish the case; under California law, anyone, whether or not a party or an amicus, may make such a request. And Tuesday the Court of Appeal agreed, and ordered that the case be published. (Many thanks to my cosigners, and to my student Cheryl Wilson, who drafted the letter under my supervision.) I hope the precedent will prove useful to California courts, lawyers, and media organizations, and perhaps even persuasive to courts in other states.

Comments

[Brett Bellmore]

Even setting the 1st amendment aside, I don't see how you could tortuously induce somebody to violate an NDA you had no knowledge of.

[Bored Lawyer]

That bothered me to, as knowledge of the contract is a requirement for a claim of tortious interference with contract in CA and probably every other jurisdiction.

The Court's answer is that there are different kinds of knowledge:

We need not decide the broad question whether the torts of inducing a breach of contract and interfering with a contract are “independent torts” such that the First Amendment can never provide a defense to such claims when they arise from conduct that leads to the publication or broadcast of truthful and
newsworthy information. Here, it is uncontroverted Univision
had no knowledge of the nondisclosure agreement at the time it
entered into the license agreement with BTF. The evidence of
Univision’s actions, after it learned of the nondisclosure
agreement, that arguably contributed to Salgado’s continued
breaches of the agreement consisted of continuing to pay license
fees to BTF and promoting Salgado’s involvement with the
Series. Even if those actions were sufficient to serve as the basis
of liability for tortious interference, they are not sufficiently
“wrongful” or “unlawful” to overcome the First Amendment
newsgathering and broadcast privileges.

(Another part of the opinion also states that for the tort of interference, you don't have to know the terms of the contract, just that there is a contract.)

So I guess what they are saying is that the "knowledge" requirement for the tort of interference is loose, but too loose when the First Amendment is involved.

[James Pollock]

Like you (I think?) I don't see clear application of the first amendment to this case. It seems you could decide this case on lack of intent without having to examine application of the first amendment. But "Oh, we had no idea!" is too easy to claim.

This decision incentivizes keeping one's eyes firmly on the ground while you check to see if anyone you're dealing with is covered by an NDA. This, in turn, makes NDAs much less applicable.

A contrary ruling, on the other hand, adds "are you currently covered by any NDA?" to the questions asked before entering a contract to obtain information, and gives power to that NDA.

[Brett Bellmore]

" But “Oh, we had no idea!” is too easy to claim."

Sure, but from the decision, " it is undisputed the broadcaster did not know of the nondisclosure agreement at the time it contracted with the producers to broadcast the series,". So it wasn't a matter of claiming, it was conceded.

This suggests that future plaintiffs making this sort of claim should probably not concede at the start that the defendant was unaware of the NDA.

[Brett Bellmore]

I should note that, as an engineer, I'm under an NDA myself in regards to my employer's IP. But I doubt anyone would get away with this "But we had no idea!" defense in my case, since such NDA's are basically universal in employment situations such as mine, you'd have to assume there was one.

[James Pollock]

But if I'm careful to not ask (likely if I have a legal reason not to ask), then I can claim "Hey, I had no idea there was an NDA in place!"

[Brett Bellmore]

If you were in a position to benefit from the stuff my NDA covers, nobody would believe you weren't aware I was bound by one, they're that universal in the field.

[James Pollock]

I don't know what you're talking about. I've never been limited by an NDA, so it can't be a thing.

[Beldar]

Making important precedential rulings — and then sticking them in the "Oh, well, that's not precedent category" — is and has always been a chickensh!t dodge by any appellate court that does it. Congrats to the California courts for cleaning up this particular dob of chickensh!t; it's a shame it took so many putting the spotlight on them to shame them into doing so, but congratulations, and thanks, Prof. Volohk, Floyd Abrams, et al. (fine company to be amongst).

[Bored Lawyer]

I too find myself annoyed by the non-precedential dodge. Some non-precedential opinions can be very important for future cases. If the court is doing its job, everything it does should be precedential. (That is a big if, as too many courts are lazy and just churn out cookie-cutter garbage opinions.)

[Voize of Reazon]

It can make sense with respect to appeals as of right when the court feels the case won't make for good precedent, but where they don't have the option to not take it up.

[WillDD]

Couldn't agree more, Beldar. It relieves the courts of appeals of having to apply the law consisetently. If court aren't willing to do that, I'd just as soon have the judges on a particular appeal say that they understand there is precedent against what we hold today, but we're judges and we get to do what we want until reversed. At least it would be honest.

[Bob from Ohio]

I don't think "fraud is protected by the 1A" is really a "win".

Univision found out in plenty of time. The court here says its ok to aid in a fraud if you are intentionally obtuse in the beginning.

110% chance a celebrity's manager is subject to a non disclosure agreement.

[jubulent]

Fraud isn't generally protected by the 1st Amendment.

The Court recognizes this, which is why this is a non-precedential opinion.

Some frauds are less fraudulent than other frauds.

[James Pollock]

"The Court recognizes this, which is why this is a non-precedential opinion."

You might want to reread the title of this blog post.

[David Nieporent]

Breach of contract is not fraud.

[WillDD]

Should there be other torts -- including intentional torts -- that media companies should be able to commit while wrapping themselves in first amendment protection?