Court Opinion

ID: 8989909
Source: CourtListenerOpinion
Date Created: 2022-11-27 12:06:39.88007+00
Date Added: 2024-06-11T17:10:53.467963
License: Public Domain

KOZINSKI, Circuit Judge,
dissenting:
This case is dead, procedurally as well as substantively. By breathing new life into it, my colleagues create much business for the lawyers but ill-serve the interests of the parties and the cause of sound judicial administration.
I
A. The Federal Rules of Civil Procedure are clear as mountain spring water: All complaints must include “a demand for judgment for the relief the pleader seeks.” Fed.R.Civ.P. 8(a)(3) (emphasis added). Z Channel’s complaint does not demand money damages; it seeks only declaratory and injunctive relief, neither of which can now be granted. There’s nothing left; we must dismiss.
The majority reaches the contrary conclusion by focusing on Fed.R.Civ.P. 54(c). But my colleagues are looking at the wrong end of the elephant. Fed.R.Civ.P. 54(c) governs final judgments; parties who have litigated a case to completion are entitled to all available relief. Rule 54(c) only applies, however, after the case has been fully litigated; it says nothing about what a plaintiff must put in its complaint in order to get to judgment. That issue is governed by Rule 8(a)(3), which has a much lower number because it comes into play long before Rule 54(c). If plaintiff does not satisfy Rule 8(a)(3) by stating a claim for- available relief, it never gets to Rule 54(e).
The long and short of it is that the majority has rendered Fed.R.Civ.P. 8(a)(3) meaningless in contested cases. If Rule 54(c) automatically cures any and all failures to state a prayer, Rule 8(a)(3) becomes nothing more than friendly advice. It is, of course, totally inappropriate to construe two parts of a statute — or two rules of civil procedure — so that one will cancel out the other. See Nieto v. Ecker, 845 F.2d 868, 873 (9th Cir.1988); 2A N. Singer, Sutherland Statutory Construction § 46.06 (4th ed. 1984). Yet, that is what the majority has done today.
B. My colleagues leap over two hurdles with a single bound by also ignoring the rule that claims may not be raised for the first time on appeal. The fact of the matter is, Z Channel never said boo in the district court about damages under count I. The majority nonetheless concludes that the issue is “sufficiently before us,” majority at 1341, because Z Channel is raising *1346the issue now.1 But now is far too late, as we are in the court of appeals, not the district court. It goes without saying that to preserve an issue for appeal, one must first present it to the trial court; all issues not raised below are deemed waived. See Image Technical Service, Inc. v. Eastman Kodak Co., 903 F.2d 612, 615 n. 1 (9th Cir.1990); United States v. Whitten, 706 F.2d 1000, 1012 (9th Cir.1983), cert. denied, 465 U.S. 1100, 104 S.Ct. 1593, 80 L.Ed.2d 125 (1984); 10 C. Wright, A. Miller & M. Kane, Federal Practice & Procedure § 2716, at 650-54 (2d ed. 1983). This is the approach adopted by the Seventh Circuit in James Luterbach Constr. Co. v. Adamkus, 781 F.2d 599, 603 (7th Cir.1986), and the Fifth Circuit in H.K. Porter Co. v. Metropolitan Dade County, 650 F.2d 778, 782 (5th Cir.1981), cited in James Luterbach, 781 F.2d at 603. The majority creates a conflict without so much as a nod to our sister circuits.2
The case for waiver is stronger here than it was in James Luterbach and H.K. Porter. In those cases, the plaintiff neglected to include any prayer for damages in the initial complaint, id.; the failure may indeed have been an oversight. But damages were not overlooked or forgotten here. Z Channel’s complaint, carefully tailored by experienced counsel, requested damages for some claims but not for others. Compare Second Amended Complaint ¶¶ 65-66 (seeking injunctive relief and damages), with id. ¶¶ 54-56 (seeking only in-junctive and declaratory relief). Z Channel then voluntarily dismissed the count that included a prayer for damages and proceeded only on its claim for declaratory and injunctive relief.
If Z Channel, a well-heeled litigant represented by one of the giants of the antitrust bar, is not bound by its litigation choices, who is? How can the majority reconcile its decision with White v. McGinnis, 903 F.2d 699 (9th Cir.1990) (en banc), cert. denied, — U.S. -, 111 S.Ct. 266, 112 L.Ed.2d 223 (1990), where we held that an incarcerated civil rights plaintiff, who complied fully with the Federal Rules of Civil Procedure, nevertheless abandoned his constitutional right to a jury by failing to reassert it at trial? I see no reason to cut Z Channel more slack than we did poor Mr. White.
By holding that Z Channel has a viable claim for damages, the majority in effect grants Z Channel leave to amend its pleadings to include such a claim, inverting the roles of the trial and appellate courts. Under the Federal Rules and our case law, the decision whether to permit an amendment belongs to the district judge. See Fed.R. Civ.P. 15(a). Our job is only to review for abuse of discretion. Thomas-Lazear v. FBI, 851 F.2d 1202, 1206 (9th Cir.1988). The majority’s elephant is not merely backwards, it’s upside down.
II
The majority engages in judicial necromancy yet again when it resurrects a substantive theory Z Channel long ago let expire, bringing this case back from the dead not once but twice.
A. This case got started because Z Channel wanted to include advertising in its programming but ran into a problem: *1347Movie distributors refused to license films to Z Channel unless it agreed not to; they also refused to release Z Channel from the no-advertising clauses in existing licenses. The reason for this refusal is no mystery; it is well documented in the record.
In general, distributors insist on no-advertising restrictions in pursuit of a marketing strategy with a fancy name, “sequential window licensing,” and a straightforward goal — making more money. Declaration of Chase Carey, Senior Vice President of Twentieth Century Fox Film Corp., SER 57, at 164. Here’s how it works: At each stage of a film's life (in each “exhibition window,” as the denizens of Hollywood would say), the distributor licenses the film to one type of exhibitor only. A major release starts out in its “first run,” playing in a few, select theaters. When the film gets older and interest dies down, the distributor licenses it to additional theaters at a lower rate for a “second run” or “roll out” {e.g. “now showing at theaters and drive-ins everywhere”). See United States v. Syufy Enterprises, 903 F.2d 659, 665 n. 7 (9th Cir.1990). Still later the film becomes available on videotape; eventually it is shown on pay t.v. — television supported entirely by subscription fees and not by advertising. Last of all, it appears on stations that include advertising (free cable and network television).
By licensing films one window at a time, the distributor accomplishes what economists call price discrimination.3 See R. Posner, Economic Analysis of Law 259-260 (3d ed. 1986); A. Alchian & W. Allen, University Economics 125-27 (3d ed. 1972). Price discrimination maximizes film revenues without restricting supply, but it only works to the extent film distributors are able to keep the exhibition windows separate. See id. at 126. Theaters are willing to pay premium license fees for a film only if everyone who wants to see it immediately must pay full price; few patrons would pay $7 a ticket if they could rent the same movie on video for $3.
This case involves the same phenomenon as to a different exhibition window: Subscription television companies are willing to pay top dollar for a license only if they know viewers can’t see the same movie on another channel for free. Hence, distributors generally include no-advertising restrictions in their licenses to pay t.v. exhibitors. Similarly, when HBO buys a license, it insists that licenses to other exhibitors also contain no-advertising clauses; that way HBO doesn’t pay a bundle only to find its would-be patrons watching the same film on another channel for nothing.
B. These restrictions are at the heart of Z Channel’s complaint: The film distributors insisted on their no-advertising clauses and HBO stood on its right not to have the movies it exhibits licensed to stations supported by advertising. So Z Channel sued. First, it claimed that HBO’s licenses with distributors and the distributors’ insistence on no-advertising clauses were unreasonable restraints of trade. That theory is still in the case, assuming there’s a case left at all; and as the majority correctly points out, it’s not barred by Newman v. Universal Pictures, 813 F.2d 1519 (9th Cir.1987), cert. denied, 486 U.S. 1059, 108 S.Ct. 2831, 100 L.Ed.2d 931 (1988).4 So far, so good.
*1348The majority, however, goes on to address another claim: that HBO coerced distributors into keeping the no-advertising restrictions. That claim simply isn’t part of the case anymore. Who says so? Z Channel, for one:
[The only remaining count] attacks a licensing agreement and ... is limited to licensing agreements constituting an unreasonable restraint of trade....
No matter how much you examine [that count], your honor, you will not find the word boycott, you will not find the word conspiracy, and you will not find the word[s] concert of action. [It] charges that the contracts themselves, the licensing agreements and the enforcement of those licensing agreements violate[] [Sherman Act] section 1.
Transcript of Oral Argument before the District Court, RT 7, (Sept. 22, 1988) (emphasis added).
Z Channel abandoned the coercion theory with good reason: There’s not a morsel of evidence to support it. All the evidence Z Channel managed to muster was the contracts themselves. As Z Channel’s counsel explained:
What we have here are agreements between HBO and the defendant studios which have been enforced against Z Channel, that is the essence of this case and ... that is why we are still in court.... What we are talking about is whether we qualify under section 1 by having alleged that the contracts between HBO and the defendants precluding their relicensing pictures to competitors of HBO which would permit those competitors to advertise, whether that contractual restraint standing alone and ... viewed cumulatively reached a level of an unreasonable restraint of trade.
Id. at 8-9.
But why take his word for it? A quick look at the record confirms that the coercion theory just doesn’t hold water. According to MGM/UA, one of the alleged victims of coercion, "HBO did not force us into [our] deals with it.... In fact, HBO’s license with us expressly provides for our right to render that license non-exclusive (subject, of course, to a substantial reduction in the license fee paid to us by HBO).” Declaration of Anthony Lynn, Executive Vice President, International Television and Worldwide Pay Television of MGM/UA Telecommunications, Inc., SER 20, at 98. And what about Twentieth Century Fox? “Pox’s decision [to not license movies to Z Channel if it advertised] was not due to any alleged pressure from or coercion by HBO.... ” Carey Declaration, SER 57, at 191.
Instead, film distributors refused to modify their agreements because doing so would have blurred two exhibition windows, decreasing revenue. “The plain and simple fact is that Fox has independently, and for valid business and economic reasons ... determined to enforce its purposefully negotiated rights under the Fox-Z Channel License Agreements. It has done so to preserve ... its Sequential Window Licensing Strategy ... to maximize Fox’s total revenues from the licensing of all of its Theatrical Films.” Carey Declaration, SER 57, at 192-93. As Anthony Lynn of MGM/UA Pictures explained, licensing to a station that includes advertising while pay t.v. stations are willing to buy licenses is like “turning gold into lead.” Supplemental Lynn Declaration, SER 47, at 139 — 40; see Declaration of Alan Cole-Ford, Former Vice President of Video Distribution, Paramount Pictures Corporation, SER 39, at 133 (Paramount’s use of no-advertising clauses designed to maximize revenues); Lynn Declaration, SER 20, at 96 (enforcement of windows is to maximize the value of the films); Declaration of Edward Bleier, President of Warner Bros. Domestic Pay-TV, Animation & Network Features, SER 48, at 150-51 (regardless of contractual restrictions imposed by the Warner-HBO agreements, Warner believed that permitting Z Channel to include commercial advertising in its format would harm Warner’s window marketing strategy and economic interests).5
*1349C. The majority nonetheless points an accusatory finger and pronounces the evidence sufficient to support a coercion theory. Majority at 1343-1344. But what facts do my colleagues recite? That Twentieth Century Fox received “a bad letter” from HBO, majority at 1344 n. 8, and subsequently refused to license Z Channel any films without a no-advertising clause. From that the majority infers that HBO threatened to boycott Fox if it licensed any films to Z Channel — even films for which HBO hadn’t taken a license. Id. But all HBO’s letter does is remind Fox of it’s contractual obligations:
As you are no doubt aware, HBO has licensed from you the right to exhibit motion pictures during periods when those pictures will not be available on any service or channel which carries ad-vertising_ [Contemporaneous appearance of programming on the HBO services and on an advertiser supported service would substantially lessen the value, and compromise one of the most distinguishing features, of the HBO services. Consequently, the Agreement prohibits such contemporaneous appearance.
Accordingly, please be advised that should Z Channel proceed with its announced plans to include such advertising on its service, and should Z Channel exhibit any motion picture licensed to us ..., HBO shall deem such exhibition a material breach [of contract].
Letter from HBO to 20th Century Fox, February 29, 1988, ER 142, Exhibit G (emphasis added). There’s absolutely no mention of movies not already under license to HBO; there’s no coercion. All HBO did was to stand on its contracts. If there’s any reason to remand to the district court, it’s for a determination whether HBO’s contracts amount to an unreasonable restraint of trade, not for trial on a coercion theory.6
Z Channel wisely gave up its coercion claim when it discovered there was no evidence to support it.7 The majority would do well to respect that informed decision rather than encourage the parties to litigate a dispute that no longer exists.
Conclusion
Once in a while big, interesting, difficult cases implode, leaving nothing for us to decide. When this happens, we should sweep aside the rubble, not compress it until it turns into a judicial black hole that sucks up productive resources of cosmic proportions. Defying a clear rule of procedure, creating an inter-circuit conflict and resurrecting a legal theory long ago abandoned by the parties makes no sense to me at all. This case is dead. R.I.P.

. Whether plaintiff is in fact raising it even now is a highly debatable point. Z Channel has repeatedly told us it is not seeking damages. In its opening brief, Z Channel wrote:
[PJlaintiff is not seeking money damages arising from antitrust violations that produce the breach of a pre-existing contract. Instead, the injury Z Channel alleges and is trying to stop arises from defendants’ continued unjustifiable enforcement of a contractual restriction against advertising, which adversely affects Z Channel’s current and future ability to compete. ...
Appellant’s Opening Brief at 14 (emphasis added). Z Channel stuck to this position with mo-notorious consistency: ”[Z Channel] is not claiming as its antitrust injury specific dollar amounts of damage arising from defendants’ breach of pre-existing contracts_" Id. at 19 (emphasis added); see also id. at 21 n. 14. Nowhere does plaintiff make the claim that the majority attributes to it, nowhere that is until its response to the suggestion of mootness.

. While, as my colleagues note, the Fifth Circuit had reached the contrary conclusion in Sapp v. Renfroe, 511 F.2d 172, 176 n. 3 (5th Cir.1975), that court has since revisited the issue and placed itself in line with the Seventh Circuit. See H.K. Porter, 650 F.2d at 782.

. Some forms of price discrimination are prohibited under section 2(a) of the Robinson-Pat-man Act, 15 U.S.C. § 13(a). No Robinson-Pat-man violation is claimed here.

. In Newman, the plaintiffs contended that various studios had conspired to interpret contracts so as to deny the plaintiffs royalties from videotape distribution of movies they had worked on. We held that they had not alleged antitrust injury, having failed to show injury to competition or themselves as competitors. Newman, 813 F.2d at 1522. Here, Z Channel alleges that it was unable to compete with HBO for subscribers and cable-space because HBO had, through its contracts with distributors, prevented Z Channel from acquiring the raw materials (i.e. movie licenses) it needed to compete. Cf., e.g., Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 325-27, 333, 81 S.Ct. 623, 627-28, 631, 5 L.Ed.2d 580 (1961) (challenge to reasonableness of requirements contract for coal on grounds it foreclosed the supply of coal in the relevant market). As such, it has alleged both injury to competition and harm to itself as a competitor — in short, antitrust injury. Whether it can establish an antitrust violation on the basis of the no-advertising clauses in the distribution contracts is another story.

. The testimony of the alleged victims is particularly damning in light of their obvious economic interests: In the absence of an agreement between HBO and the defendant distributors to *1349share monopoly rents — an agreement everyone agrees cannot be proven — the distributors have nothing to gain and everything to lose by helping HBO destroy its competitors. HBO would become a monopsonist, the only buyer in the pay t.v. window; the distributors might well be at its mercy.

. The defendants did not argue in support of summary judgment that the contracts were reasonable as a matter of law and the district court did not address that issue; accordingly, neither do I.

. Z Channel’s decision was particularly well-advised considering its evidentiary burden: It had to exclude the possibility of independent action; even proof that the distributors’ conduct came in response HBO's complaints would not have been enough. See Monsanto v. Spray-Rite Service Corp., 465 U.S. 752, 764, 104 S.Ct. 1464, 1470, 79 L.Ed.2d 775 (1984).