N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT GUY M ITC HELL AND B ETTY J. M ITC H ELL FAM ILY TR UST, by an d through, Jose

ph S. Sta nz ak, a s Truste e , Plaintiff - Appe lle e , v. AR TISTS R IGHTS ENFOR C EM ENT C ORPOR ATION, a

Ne w York C orporation, De fe nda

nt - Appe lla

nt. No. 14-35046

D.C . No. 2:11-c v-00024-TOR M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the Ea ste rn Distric t of W a shington Thom a s O. R ic e , C hie f Distric t Judge , Pre siding Argue d a nd Subm itte d

June 10, 2016 Se a ttle , W a s hington B e fore : EB EL, ** PAEZ, a nd B YB EE, C irc uit Judge s. 

# FIL ED JUN 24 2016 M OLLY C. DW Y ER, CLERK U . S. CO URT O F APPEALS

* This disposition is not a ppropria te for public a t ion a

nd is not pre c e de nt e xc e pt a s provide d

by 9th C ir. R . 36-3. ** The Honora

ble David M . Ebe l , Se nior C irc uit Judgefor the U.S. C ourt of Appe a ls for the Te nth C irc uit, sitting by de signa t ion.Pla intiff-Appe lle e Guy M itc he ll & B e tty J. M i tc he ll Fa m ily Trust (“ the Trust” ) sue d De fe nda

nt-Appe lla

nt Artists R

ights Enforc e m e nt C orporation (“ AREC ” ) for bre a c h of c o ntra c t ste m m ing from

AREC ’ s a lle ge d viola

tion of a roy a ltie s a gre e m e nt be t

we e n the two pa

rtie s. The distric t c ourt he ld tha t it ha d dive rsity jurisdic tion unde r 28 U.S.C . § 1332(a ), and a fte r a be nc h tria l, de te rm ine d that AREC ha d bre a c he d its c ontra c t with theTrust, tha t AREC ’ s bre a c h

wa s m a te ria l , a

nd tha t AREC ’ s bre a c h justifie d re sc inding thec ontra c t in full. On a ppe a l, AR

EC c ha lle nge s the distric t c o urt’ s de te rm ination tha t it ha d dive rsity jurisdic tion ove r the Trust’ s suit, a s we ll a s its c onc lusion tha t AREC ’ s bre a c h of the roy a ltie s c ontra c t justifie d the c ontra c t ’ s re sc ission. W e hav e jurisdic tion ove r this a

ppe a l pursua

nt to 28 U.S.C . § 1291. W e re vie w the distric t c ourt’ s de c ision to e xe rc i s e dive rsity jurisdic tion de novo a

n d re v ie w “ for c le ar e rror the distric t c o urt’ s findings of fa c t re l e va nt to its de te rm ination of subje c t m a tte r jurisdic tion.” C

r um v . C irc us C irc us Ente rs. , 231 F.3d 1129, 1130 (9th C ir. 2000). “ W e re vie wthe distric t c ourt’ s findings of fa c t a fte r a be n c h tria l for c le ar e rror” and “ re vie w its c onc l usions of la w de novo.” O ne

Be ac on Ins. C

o. v . Haas Indus., Inc . , 634 F.3d 1092, 1096 (9th C ir. 2011). For there a s ons outline d be low, we a ffirm .

21. Fe de ra l c ourts ha ve dive rsity

jurisdic tion ove r a c t ions file d be twe e n

“ c i tiz e ns of diffe re nt Sta

t e s” so long a s the pa

rty a sse rting jurisdic tion a l le ge s tha t

“ the m a tte r in c ontrove rsy e xc e e ds the sum or va lue of $75,000.”28 U.S.C . § 1332(a ). W e use the “ le ga l c e rta inty ” te st to de te rm ine whe the r the am ount-in-c o ntrove rsy

re quire m e nt ha s be e n sa

tisfie d. Se e N

affe v . Fre y , 789 F.3d 1030, 1039 (9th C ir. 2015). “Unde r this te s t, ‘ the sum c la im e d by the pla i ntiff c ontrols if the

c la im is a ppa re ntly m a d e in good fa ith. It m ust a ppe ar to a le ga l c e rta inty tha t the c la im

is re a lly for le ss tha

n the jurisdic tiona l am o unt to justify dism issa l.’ ” N

affe , 789 F.3d a

t 1040 (quoting St. Paul Me rc ury Inde m . C o. v . Re d C ab C o. , 303 U.S. 283, 288–89 (1938)). He re , we c annot sa

y — t o a le ga l c e rta inty

— that the am ount-in-c ontrove rsy c la im e d by

the Trust fa lls be low the $75,000.01 thre shold. “ [I] t is we ll e sta blishe d that the am ount in c ontrove rsy is m e a sure d by

the va lue of the obje c t of the litiga tion.” C hapman v . De utsc he Bank N at. Trust C

o. , 651 F.3d 1039, 1045 n.2 (9th C ir. 2011) (pe r c uriam ) (inte rna l quota tion m arks om itte d ). In this suit, the

“ obje c t of the litiga

t ion” wa s the pa

rtie s’ c ontra c t, whic h the Trust sought to re sc ind, a nd the c o ntra c t’ s “ va lue ” wa s the sha re of future roy a lty

pa ym e n ts tha

t AREC stood to c olle c t through tha t a gre e m e n t. Although the e xa c t va lue of future roy a lty pa ym e nts c annot be qua

ntifie d pre c ise ly , in light of the fa c t tha t the 3pa

ym e nts c ould a c c rue inde finite ly , we c a nnot de te rm ine to a

le ga l c e rta i nty

tha t AREC ’ s sha

re of those future pa

ym e nts would fa ll short of the am ount-inc ontrove rsy

thre shold. Ac c ordingly , the distric t c ourt prope rly found tha

t it ha d dive rsity jurisdic tion ove r the Trust’ s suit a ga inst AR EC . 2. Substa ntia l e v ide nc e supports the distric t c ourt’ s finding tha t AREC m a te ria l ly bre a c he d its c ontra c t

with theTrust. 1 A m a t e ria l bre a c h is “ a bre a c h so signific ant [tha

t] it e x c use s the othe r party ’ s pe rform anc e and justifie s re sc ission of the c ontra c t.” Park

Av e . C ondo. Ow n e r

s Ass’n v . Buc han De v

s., LLC , 71 P.3d 692, 698 (W a sh. App. 2003). W he the r a bre a c h is m ate ria l is a que stion of fa c t. Se e 224 W e stlak e , LLC v . Engstrom Props., LLC , 281 P.3d 693, 707 (W a sh. App. 2012). He re , a fte r a

full be nc h tria l, the distric t c ourt found tha t “ by withholding 100% m ore of the roy a lty pa ym e nt tha n it wa s e ntitle d to,” AREC ha d “ d e fe a t[e d] the c ontra c t’ s ve ry

purpose ” and “ irre p ara

bly dam a ge d the Trust’ s fa i th in AR EC .” The distric t c ourt did not err by de te rm i ning tha

t AREC ’ s a c tions a

m ounte d to a m a te ria l bre a c h of its c o ntra c t with theTrust, a n d unde r W a shington la

w, a m a te ria l bre a c h by

one pa rty justifie s the full c anc e lla

t ion of the c ontra c t. As suc h, re sc ission of the

pa rtie s ’ roy a ltie s a gre e m e nt wa s a prope r re m e dy .

1 AREC doe s not c onte st tha t it bre a c he d

its c o ntra c t with theTrust a nd inste a d a rgue s tha t its bre a c h wa s not m ate ria l.

4AFFIRM E D.

5