Opening Brief - Filed

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Case No. 13-55545 UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
__________________________________________________________
National Conference of Personal Managers, Inc.

Plaintiff-Appellant
vs. Edmund G. Brown, Jr. et al

DefendantsAppellees __________________________________________________________ Appeal from United States District Court, Southern District of California District Court Case Number CV 12-09620 The Honorable Dean D. Pregerson, Judge, Presiding __________________________________________________________
APPELLANTS OPENING BRIEF

__________________________________________________________
STEPHEN F. ROHDE (SBN 51446) ROHDE & VICTOROFF 1880 Century Park East, Suite 411 Los Angeles, CA 90067 Tel: (310) 277-1482 Fax: (310) 277-1485 RYAN H. FOWLER (SBN 227729) CHRISTOPHER B. GOOD (SBN 232722) FRANK W. FERGUSON, II (SBN 211694) FOWLER & GOOD LLP 15303 Ventura Boulevard, 9th Floor Sherman Oaks, CA 91403 Tel: (818) 302-3480 Fax: (818) 279-2436
Attorneys for Appellant National Conference of Personal Managers, Inc.
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CORPORATE DISCLOSURE STATEMENT Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, Appellant is a Nevada based private not-for-profit corporation, with no subsidiaries or affiliates that has issued shares to the public.
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TABLE OF CONTENTS I. STATEMENT OF JURISDICTION ......................................................................1 II. STATEMENT OF ISSUES PRESENTED FOR REVIEW .................................2 III. STATEMENT OF THE CASE ............................................................................2 IV. PROCEDURAL HISTORY ................................................................................3 V. STATEMENT OF FACTS AND SUMMARY OF COMPLAINT .....................4 VI. SUMMARY OF ARGUMENT ...........................................................................7 VII. THE DISTRICT COURT ABUSED ITS DISCRETION BY DENYING LEAVE TO AMEND.................................................................................................9 VIII. STANDARD OF REVIEW ............................................................................12 IX. ARGUMENT .....................................................................................................13 A. THE DISTRICT COURT ERRED IN FINDING THE TAA IS NOT UNCONSTITUTIONALLY VAGUE..................................................................13 1. The TAA Is Unclear As To What Activities It Regulates ..........................13 2. The TAA Lacks Clarity As To Who Is Regulated ......................................15 3 The Ambiguity of the TAA Has Resulted In Conflicting And Arbitrary Determinations by the Commissioner ...............................................................20 4 The TAA As Applied Exceeds Commissioners Statutory Authority .........24 5. The Commissioner Selective Enforcement of the TAA Violates The Equal Protection Clause Of The Fourteenth Amendment ...........................................26 B. THE DISTRICT COURT ERRED IN FINDING PLAINTIFF HAS NOT STATED A CLAIM FOR INVOLUNTARY SERVITUDE ...............................27
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C. THE DISTRICT COURT ERRED IN FINDING PLAINTIFF DID NOT STATE A CLAIM FOR VIOLATION OF THE COMMERCE CLAUSE .........30 D. THE DISTRICT COURT ERRED IN FINDING THE TAA REGULATES CONDUCT AND NOT SPEECH ............................39 E. THE DISTRICT COURT ERRED IN FINDING PLAINTIFF FAILED TO STATE A CLAIM FOR A VIOLATION OF THE CONTRACT CLAUSE OF THE CONSTITUTION ........................................................................................43 F. THE DISTRICT COURT ERRED BY NOT CONSIDERING PLAINTIFFS COMPLAINT IN ITS ENTIRETY..............................................46 X. CONCLUSION .................................................................................................488
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TABLE OF AUTHORITIES SUPREME COURT CASES Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) ................................................................13 Astoria Federal Savings & Loan Association v. Solimino, 501 U.S. 104 (1991) ...18 Barnes v. Glen Theatre, Inc., 501 U.S. 560 (1991) .................................................32 Bates v. State Bar of Arizona, 433 U.S. 350 (1977) ................................................41 BMW of America v. Gore, 517 U.S. 559 (1995) ......................................................24 Board of Trustees v. Fox, 492 U.S. 469 (1989) .......................................................43 Central Hudson Gas & Electric Co. v. Public Service Commn., 447 U.S. 557 (1980) ....................................................................................... 42, 43 Citizens Bank v. Alafabco, Inc., 539 U.S. 52 (2003) ...............................................31 City of Chicago v. Morales, 527 U.S. 41 (1999) .....................................................20 Connecticut Nat'l Bank v. Germain, 503 U.S. 249 (1992) ......................................15 Costello v. United States, 365 U.S. 265 (1961) .......................................................38 Crutcher v. Commonwealth of Kentucky, 141 U.S. 47 (1891) ................................37 Energy Reserves Group v. Kansas Power & Light, 459 U.S. 400 (1983)...............44 Foman v. Davis, 371 U.S. 178 (1962) .....................................................................10 Giboney v. Empire Storage & Ice Co., 336 U.S. 490 (1949) ..................................40 Gonzales v. Raich, 545 U.S. 1 (2005) ......................................................................31 Granholm v Heald, 544 U.S. 460 (2005) .................................................................36
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Grayned v City of Rockford, 408 U.S. 104 (1972) ..................................................19 H. P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525 (1949)....................................36 Halliburton Oil Well Cementing Co.v. Reily, 373 U.S. 64 (1963) ..........................36 Ibanez v. Florida Dept. of Business and Professional Regulation, 512, U.S. 136 (1994) ....................................................................................................................41 Interstate Circuit, Inc. v City of Dallas, 390 U.S. 676 (1968).................................16 Iselin v. United States, 270 U.S. 245 (1926)............................................................32 Kolender v. Lawson, 461 U.S. 352 (1983)...............................................................20 Lambert v. California, 355 U.S. 225 (1957) ............................................................24 Lanzetta v. New Jersey, 306 U.S. 451 (1939) ..........................................................16 License Cases, 46 U.S. 504 (1847) ..........................................................................32 McCall v. People of The State of California, 136 U.S. 104 (1890) .........................37 Oneale v. Thornton, 10 U. S. (6 Cranch) 53, 68 (1810) ..........................................14 Oregon Waste Sys., Inc. v. Dept. of Envir. Quality of Oregon, 511 U.S. 93 (1994) ................................................................................................36 Pike v. Bruce Church, Inc., 397 U.S. 137 (1970) ....................................................36 Robertson v. Baldwin, 165 US 275 (1897) ..............................................................28 Rubin v. United States, 449 U. S. 424 (1981) ..........................................................14 Smith v. Gougen, 415 U.S. 566 (1972) ....................................................................20 Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U. S. 308 (2007) ............. 9, 13, 46 U.S. v. Evans, 333 U.S. 483 (1948) 24 vi
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United States v. Eaton, 144 U.S. 677 (1892) ...........................................................25 United States v. Edge Broadcasting Co., 509 U.S. 418 (1993) ...............................42 United States v. Evans, 333 U.S. 483 (1948) .................................................... 16, 24 United States v. Goldenberg, 168 U. S. 95 (1897) ..................................................14 United States v. Kozminski, 487 U.S. 931 (1988) ................................................7, 28 United States v. Lopez, 514 U.S. 549 (1995) ...........................................................30 United States v. Ron Pair Enterprises, Inc., 489 U. S. 235 (1989) .........................14 United States v. Schubert, 348 U.S. 222 (1955) ......................................................31 Virginia State Bd. Of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976) .40 FEDERAL CASES Astaire v. Best Film, 116 F.3d 1297 (1997) .............................................................14 Balistreri v. Pacifica Police Dept., 901 F.2d 696, 701 (9th Cir.1990) ....................11 Chang v. Chen, 80 F.3d 1293 (9th Cir.1996) ................................................... 11, 12 City of Los Angeles v. San Pedro Boat Works, 635 F.3d 440 (9th Cir. 2011) ........10 DCD Programs, Ltd. v. Leighton, 833 F.2d 183 (9th Cir.1987) .............................10 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2003).................10 Gilligan v. Jamco Dev. Corp., 108 F.3d 246 (9th Cir. 1997) ........................... 12, 13 Klamath-Lake Pharm. Ass'n v. Klamath Med. Serv. Bureau, 701 F.2d 1276, 1292 (9th Cir.1983)........................................................................................................10 Krainski v. Nevada ex rel. Bd. of Regents of NV. System of Higher Educ., 616 F.3d 963 (9th Cir.2010).................................................................................................11 vii
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Lopez v. Smith, 203 F.3d 1122 (9th Cir.2000) .........................................................11 Lowrey v. Tex. A & M Univ. Sys., 117 F.3d 242 (5th Cir.1997) ..............................10 LSO, Ltd. v. Stroh, 205 F.3d 1146 (9th Cir. 2000) ..................................................13 Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708 (9th Cir.2001) ...............10 Pacific Merchant Shipping Association v. Goldstene, 639 F.3d 1154 (9th Cir. 2011) .....................................................................................................................35 Palatine Ins. Co. v. Ewing et al, 92 Fed 111 98 (1899)...........................................45 Schwartz v. Northern Life Ins. Co., 25 F.2d 555 (9th Cir. 1928) ............................37 Shwarz v. United States, 234 F.3d 428 (9th Cir. 2000) ...........................................13 Starr v. Baca, 652 F.3d 1202 (9th Cir. 2011) ..........................................................12 U.S. v. Sutcliffe, 505 F.3d 944 (9th Circuit, 2007)...................................................31 United States v. Clayton, 108 F.3d 1114 (9th Cir. 1997)) .......................................31 United States v. Redwood City, 640 F.2d 963 (9th Cir. 1981) ................................12 Walling v. Peavy Wilson Lumber Co., 49 F. Supp. 846 (1943) ...............................16 Ward v. Maryland, 12 Wall. 418 (1871)..................................................................36 Western Union Telegraph Company v. State of Kansas on the Relation of Coleman , 216 U.S. 1 (1910) ..................................................................................................37 Wicks v. Southern Pacific Co., 231 F. 2d 130 (9th Cir. 1956) ................................28
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STATE CASES Barajas v City of Anaheim, 15 Cal.App. 4th 1808 (1993).......................................25 Calwood Structures v. Herskovic, 105 Cal.App.3d 519 (1980) ..............................45 Dyna-Med, Inc. v. Fair Employment & Housing Comm., 43 Cal. 3d 1385 (1987).25 Felix v. Zlotoff, 90 Cal.App.3d 155 (1979)..............................................................45 Kugler v. Yocum, 69 Cal.2d 371 (1968) ..................................................................20 Marathon Entertainment v. Blasi, 42 Cal. 4th 974 (2008) ............... 5, 16, 20, 29, 42 Matthau v. Superior Court, 151 Cal. App. 4th 593 (2007) .....................................29 Morris v. Williams, 67 Cal 2d 733 (1967) ...............................................................25 Norwood v. Judd, 93 Cal.App.2d 276 (1949) ..........................................................45 Quintano v. Mercury Cas. Co., 11 Cal.4th 1049 (1995) .........................................14 Royal Co. Auctioneers, Inc. v. Coast Printing Equipment Co., 138 Cal.App.3d 868 (1987) ....................................................................................................................25 State Board of Education v. Honig, 13 Cal.App.4th 720 (1993) .............................20 Styne v. Stevens, 26 Cal. 4th 42 (2001) ....................................................................42 Southfield v. Barrett, 13 Cal.App.3d 290 (1970) .............................................. 44, 45 Vitek Inc. v. Alvarado Ice Palace, Inc., 34 Cal.App.3d 586 (1973) ........................45 Wachs v. Curry, 13 Cal.App. 4th 616 (1993) ..........................................................19 Wolff v. Fox, 68 Cal. App. 3d 280 (1977) ................................................................24 Wood v. Krepps, 168 Cal 382 (1914)................................................................ 25, 45 Yoo v. Robi, 126 Cal. App.4th 1089 (2005) .............................................................38 ix
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STATUTES 28 U.S.C. 1291 ...........................................................................................................1 28 U.S.C. 1331 ...........................................................................................................1 28 U.S.C. 2201 .......................................................................................................1, 2 28 U.S.C. 2202 .......................................................................................................1, 2 42 U.S.C. 1983 .......................................................................................................1, 2 CA BPC 5000 et seq .............................................................................................16 CA BPC 2000 et seq ...........................................................................................16 CA BPC 2900 et seq ...........................................................................................16 CA BPC 4000 et seq ...........................................................................................16 CA BPC 5615 et seq ...........................................................................................16 CA BPC 6980 et seq ...........................................................................................16 CA BPC 7000 et seq ...........................................................................................16 CA BPC 7065.4........................................................................................................33 CA BPC 1200 et seq ............................................................................................16 CA Labor Code 1700 ..................................................................................... 16, 17 CA Labor Code 1700.10 .......................................................................................18 CA Labor Code 1700.12 (b) .................................................................................32 CA Labor Code 1700.15 .......................................................................................18 CA Labor Code 1700.19 (b) .................................................................................32
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CA Labor Code 1700.20 .......................................................................................32 CA Labor Code 1700.23 .......................................................................................18 CA Labor Code 1700.24 .......................................................................................18 CA Labor Code 1700.4(a).......................................................................... 4, 13, 15 CA Labor Code 1700.41 .......................................................................................18 CA Labor Code 1700.44 (d) .................................................................................35 CA Labor Code 1700.44(b) ..................................................................................28 CA Labor Code 1700.5 .....................................................................................4, 15 CA Labor Code 1700 et seq. (Talent Agencies Act) ............................................2 CA Labor Code 1700.25-27................................................................................18 California Education Code, Sections 44252, 44253.3, 44257, 44274.2, 44279.1, 44280, 44281, and 44282 ......................................................................................33 Title 5, California Code of Regulations, Section 80413.3 .......................................33 OTHER AUTHORITIES Albert, Taking Away an Artists Get Out of Jail Free Card: Making Changes and Applying Basic Contract Principles to Californias Talent Agencies Act , Pierce L. Rev., Vol. 8, No. 3 (2010). ....................................................................24 American Federation of Television and Radio Artists, Regs. Governing Agents, rule 12-C ...............................................................................................................27 CA Talent Agency License Database ......................................................................34 Devlin, Reconciling the Controversies Surrounding Lawyers, Managers, and Agents Participating in California's Entertainment Industry, Pepperdine L. Rev., Vol. 28, 381 (2001). ..............................................................................................23 xi
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Johnson & Lang, The Personal Manager in the California Entertainment Industry, 52. S. Cal. L. Rev. 375 (1979) ..............................................................................23 LaFave & Scott, Substantive Criminal Law 1.2(d) (1986); .....................................24 OBrien, Regulation of Attorneys Under Californias Talent Agencies Act; A Tautological Approach to Protecting Artists, CA. L. Rev., Vol. 80, Is. 2, 492 (1992). ...................................................................................................................23 Robertson, Dont Bite The Hand That Feeds: A Call For A Return To An Equitable Talent Agencies Act Standard, Hastings Comm. & Ent. L. J., 223, 233 (1997). .23 Screen Actors Guild, Codified Agency Regs., Rule 16(g) ......................................27 Zarin, The California Controversy over Procuring Employment: A Case for the Personal Managers Act, Fordham Intell. Prop. Media & Ent. L.J., Vol. 7 Is. 2, 943 (1997). ............................................................................................................42 Zelinski, Conflicts in the New Hollywood, So. Ca. L. Rev., Vol. 76:979, pp. 989990 (2003) .............................................................................................................28 RULES CA Rules of Court 9.47, 9.48 ..................................................................................31 Fed.R.App.P. 26.1 ..................................................................................................... ii Fed.R.App.P. 4(a)(1) ..................................................................................................1 Fed.R.Civ.P. 12 ........................................................................................................33 Fed.R.Civ.P. 12(b)(1).................................................................................................3 Fed.R.Civ.P. 12(b)(6).......................................................................... 3, 9, 12, 32, 46 Fed.R.Civ.P. 15 ........................................................................................................10 Fed.R.Civ.P. 15(a)....................................................................................................10 xii
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Fed.R.Civ.P. 57 ..........................................................................................................3 Fed.R.Civ.P. 65 ..........................................................................................................3 CONSTITUTIONAL PROVISIONS Article I, Section 10 (Contracts Clause) ............................................... 2, 3, 9, 44, 46 Article I, Section 8 (Commerce Clause) ............................................... 2, 3, 8, 38, 39 Fifth Amendment .......................................................................................................9 First Amendment............................................................................................. 2, 3, 42 Fourteenth Amendment ................................................................................ 3, 26, 27 Tenth Amendment................................................................................................8, 32 Thirteenth Amendment ................................................................... 2, 3, 7, 27, 28, 29 LABOR COMMISSION DETERMINATIONS Baker v. Bash, (TAC 12-96) ....................................................................................38 Behr v Dauer And Assoc., TAC 21-00.....................................................................21 Billy Blanks Jr. v. Ricco, (TAC 7163) .....................................................................27 Blasi v. Marathon Entertainment, (TAC 15-03)......................................................22 Creative Artists Group v. Jennifer ODell, (TAC 26-99) ........................................21 Gittleman v Karolat, (TAC 24-02) ..........................................................................22 James Breuer v. Top Draw Entertainment, Inc.; Antonio U. Camacho, (TAC 8-95)............................................................................................................18 James Breuer v. Top Drawer Entertainment, (TAC 18-95) ....................................39 xiii
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Jewel v. Inga Vainshtein, (TAC 02-99) ...................................................................22 Kelly Garner vs. Gillaroos, David Delorenzo, David Gillaroos, Chris Wood , (TAC 1994-65)......................................................................................................39 Krutonog v. Chapman, (TAC 3351) ........................................................................26 Macy Gray v. Lori Leve Management, (TAC 18-00) ..............................................22 Marathon Entertainment v. Nia Vardalos, (TAC 02-03) ........................................26 Martha Robi v. Howard Wolf, (TAC 29-00) ...........................................................38 Nick Sevano v. Artistic Productions, Inc., (TAC 8-93) ...........................................18 Park v. Deftones, (TAC 9-97) ..................................................................................22 Parker Posey v. Lita Richardson, (TAC 7-02) ........................................................21 Thomas Haden Church v. Ross Brown, (TAC 52-92) .............................................18 Tool v. Larrikin Management (TAC-35-01) ............................................................21 Transeau v. 3 Artist Mgmt., (TAC 7306) .................................................................21 Wesley Snipes v. Delores Robinson, (TAC 36-96) ..................................................21
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I. STATEMENT OF JURISDICTION The District Court has jurisdiction of this action under to 28 U.S.C. 1331, 28 U.S.C. 2201 and 2202 and 42 U.S.C. 1983. This Court has jurisdiction under 28 U.S.C. 1291. The District Court Order (Excerpt of Record (ER), Vol. I, p.1) entered March 5, 2013, is the final appealable order in this action. Plaintiff filed a Notice of Appeal on April 2, 2013 (ER, Vol. II, p.18). This appeal is timely pursuant to Fed.R.App.P. 4(a)(1).
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II. STATEMENT OF ISSUES PRESENTED FOR REVIEW The District Courts dismissal with prejudice, without leave to amend, of Appellant National Conference of Personal Managers (NCOPM) Complaint for failure to state a claim raises the following issues: 1. Whether NCOPM stated a claim that California Talent Agencies Act (the TAA) is unconstitutionally vague on its face. 2. Whether NCOPM stated a claim that enforcement of the TAA regulates speech and violates the First Amendment rights of Plaintiff and its members, as applied. 3. Whether NCOPM stated a claim for involuntary servitude in violation of the Thirteenth Amendment. 4. Whether NCOPM stated a claim that the TAA violates the Commerce Clause of the U. S. Constitution. 5. Whether NCOPM stated a claim that enforcement of the TAA violates the Contracts Clause of the U. S. Constitution. 6. Whether the District Court abused its discretion by dismissing NCOPMs Complaint without granting leave to amend.
III. STATEMENT OF THE CASE NCOPMs Complaint presented actionable and plausible facial and as applied constitutional challenges to California Labor Code 1700 et seq., known as the California Talent Agencies Act (ER, Vol. IV, p. 174, 1) arising under 42 U.S.C. 1983 and the United States Constitution. (ER, Vol. IV, p. 174, 5) NCOPM seeks declaratory relief as authorized by 28 U.S.C. 2201 and 2202
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and by Rules 57 and 65 of the Federal Rules of Civil Procedure. (ER, Vol. IV, pp. 175-176, 6) Plaintiff-Appellant NCOPM, a Nevada not-for-profit corporation, is a national trade association of individuals employed in the occupation of personal management, who manage and represent talent engaged in entertainment, media and the performing arts. (ER, Vol. IV, p. 175, 10) Defendants-Appellees are Edmund G. Brown, Jr., Governor of the State of California; Kamala D. Harris, Attorney General of the State of California; and Julie A. Su, California Labor Commissioner, all in their official capacities. (ER, Vol. IV, p. 176, 12-14) The Complaint alleges NCOPMs constitutional rights and the constitutional rights of its members are violated by Appellees interpretation and enforcement of the TAA in violation of Article I, Sections 8 and 10, the First Amendment, the Thirteenth Amendment and the Due Process and Equal Protection Clauses of the Fourteenth Amendment of the U.S. Constitution. (ER, Vol. IV, p. 174, 2)
IV. PROCEDURAL HISTORY On November 9, 2012, NCOPM filed its Complaint. The Complaint was never amended. On January 11, 2013, Appellees filed a Motion To Dismiss pursuant to FRCP Rules 12(b)(1) and 12(b)(6), (ER, Vol. IV, p. 141:5-14) On March 5, 2013, the District Court issued its Order finding: 1. 2. Plaintiff likely has standing; (ER, Vol. I, p. 5, 15-16) The Labor Commissioner was likely the appropriate party to sue for her non-adjudicatory acts; (ER, Vol. I, p. 5, 6-18) 3. The Governor and Attorney General likely have sovereign immunity. (ER, Vol. I, p. 5, 18-19) 4. Plaintiff failed to state a claim. (ER, Vol. I, p. 5, 6-18) 3
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5.
Because any amendment to the Complaint would be futile, the Motion to Dismiss was granted with prejudice. (ER, Vol. I, p. 5, 15-16)
Plaintiff filed a timely Notice of Appeal on April 2, 2013. (ER, Vol. II, p. 18)
V. STATEMENT OF FACTS AND SUMMARY OF COMPLAINT Labor Code 1700.5 states: No person shall engage in or carry on the occupation of a talent agency without first procuring a license therefor from the Labor Commissioner. Labor Code 1700.4(a) states: Talent agency means a person or corporation who engages in the occupation of procuring, offering, promising, or attempting to procure employment or engagements for an artist or artists, except that the activities of procuring, offering, or promising to procure recording contracts for an artist or artists shall not of itself subject a person or corporation to regulation and licensing under this chapter. Talent agencies may, in addition, counsel or direct artists in the development of their professional careers. The TAA has no provisions expressly reserving any of the three defining activities of a talent agent to licensees nor any notice of consequences should non-licensees engage in any such activity and/or occupation of talent agent. The Complaint arose from a decades-long controversy: The state Legislature has grappled with the procurement of employment in the entertainment industry for decades. The ongoing regulatory tension comes from the attempt to simultaneously govern personal managers and talent agents - professions that overlap. Managers often have no choice but to seek employment for clients who are unable to get licensed agents.
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The enactment of the TAA in 1978 established the current regulatory framework. The growing concern was the attempt to bifurcate the roles and regulation of personal managers and talent agents. The TAA aimed to clarify this distinction by redefining artists' managers as talent agents. According to the TAA, talent agents are individuals engaged in the occupation of procuring, offering, promising or attempting to procure employment for an artist. Personal managers, in theory, act strictly as coordinators and advisors for an artist's career opportunities. The TAA establishes that no person can act as a talent agent without first obtaining a license from the labor commissioner. A disgruntled artist believing a personal manager has violated the TAA can file a "petition to determine controversy" with the labor commissioner, and the decision then may be tried de novo in superior court Until 2008, the vast majority of claims resulted in management contracts being voided ab initio and all earned commissions being forfeited or, if previously paid, ordered disgorged. That year, the state Supreme Court decided Marathon Entertainment v. Blasi, 42 Cal. 4th 974 (2008), which held that while fully voiding the parties' contract is an available remedy, the labor commissioner has discretion to apply the doctrine of severability to enforce the remaining lawful portions of management agreements Despite the increasing use of severability, however, the commissioner still voids management contracts ab initio (Johnson & Mueller, Talent Agency the TAA Survives Suit, Clarity Remains Elusive, Los Angeles Daily Journal, May 10, 2013). (Article reprint available at http://www.jjllplaw.com/2013/05/11/talent-agency-actsurvives-suit-clarity-remains-elusive.) In the 1900s, talent agents were referred to as Artist Managers and the relevant occupational scheme was entitled the Artists Managers Act. In 1978, in part due to the growing number of personal managers, California considered new legislation to determine who was to be regulated. While the Legislature recognized that a variety of professionals talent agents, personal managers,
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publicists and attorneys work to advance artists careers, it chose only to regulate one occupation: talent agent. (ER, Vol. IV, pp. 177-181, 16-32) The schemes new title, the Talent Agencies Act, versus the Artists Representatives Act, underscores the Legislatures thinking. (ER, Vol. IV, pp. 179-180, 23-24) Between 1982-1986 the Legislature again revisited and rejected the idea of regulating the occupation of personal manager. It did amend the Act. Most relevantly it first temporarily, then permanently, repealed the only penalty provision ever written into the TAA; under which the selling of a talent agency without the Commissioners consent was a criminal misdemeanor, punishable by fine or imprisonment. Since then the TAA has never contained any statutory notice setting forth the consequences for any action undertaken in connection with its licensing provisions. (ER, Vol. IV, pp. 181, 32) Against this background, the Complaint asked the District Court to declare that the TAA: (1) fails to provide adequate notice as to who is subject to the TAA (ER, Vol. IV, pp. 182, 34) or what acts, if any, are regulated Id.; (2) has no provision granting the Commissioner, who hears all TAA controversies, authority to impair contracts or order disgorgement if the TAA regulations are violated (ER, Vol. IV, pp. 182, 37); (3) contains no remedy for the TAA violations (ER, Vol. IV, pp. 183, 41); 4) unconstitutionally interferes with interstate commerce. (ER, Vol. IV, pp. 182, 38); and (5) is unconstitutional as applied, lacking any statutory foundation for Appellees enforcement in practice. (ER, Vol. IV, pp. 183, 40) The Complaint alleges the enforcement of the TAA injures the NCOPM and its members and interferes with their right to life, liberty and property, justifying declaratory and injunctive relief. (ER, Vol. IV, pp. 183-184, 45-49) 6
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The Complaint alleges the Commissioners enforcement of the TAA is unconstitutional and contrary to the California laws prohibiting administrative agencies from creating remedies withheld by the Legislature and requiring statutory provisions for forfeiture of rights to contract in occupational licensing schemes. (ER, Vol. IV, pp. 185, 56- 57) The Complaint alleges that the Commissioner routinely orders disgorgement of compensation earned from lawful services from alleged violators of the TAA, without statutory authority based on a finding of fraud, failure to perform or a criminal conviction, thereby creating involuntary servitude in violation of the Thirteenth Amendment. (ER, Vol. IV, pp. 186, 61-64) VI. SUMMARY OF ARGUMENT 1. Neither the Legislature, the Commissioner nor any court have ever provided specific notice as to what constitutes illicit procurement or attempted procurement. The District Court concluded, based solely on the limited information it possessed at the initial pleading stage (and without granting Plaintiff leave to amend), the TAA provides a person of ordinary intelligence a reasonable opportunity to know what is permitted and what is prohibited, so they may act accordingly. Yet the Commissioner and California Supreme Court acknowledge an ongoing struggle with articulating clear and reliable definitions of procurement. Thus, ruling Plaintiff failed to state a plausible claim that the TAA is unconstitutionally vague was a reversible error. 2. The U. S. Supreme Court defined involuntary servitude as a condition of servitude in which the victim is forced to work by the use or threat of physical restraint or physical injury or by the use or threat of coercion through law or the legal process. United States v. Kozminski 487 U.S. 931 (1988) (emphasis added). When the Commissioner voids a personal management contract ab initio, 7
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ordering the manager to disgorge previously lawfully earned compensation, the manager is forced through the legal process to have worked without compensation in a private business and for the benefit of the artist, thus subjecting them to indentured servitude ex post facto. 3. The Commerce Clause grants congressional authority and restricts States powers to regulate. The dormant Commerce Clause refers to the implied prohibition against States passing legislation discriminating against or excessively burdening interstate commerce. Under the Tenth Amendment and the Interstate Commerce Clause, California only has the power to issue licenses for the conduct of businesses within its sovereign borders; not for the operation of businesses wholly outside its borders. The TAA precludes out-of-state persons from getting licensed and, therefore engaging in Californias entertainment industry. As this favors Californias economic interests over their out-of-state counterparts, the TAA on its face is discriminatory and per se invalid, and unconstitutional as applied. 4. Citing a case predating the development of the commercial speech doctrine, the District Court erred in finding the TAA regulates conduct and does not regulate speech. Speech, which does no more than propose a commercial transaction, is protected and is the essence of a personal managers contractual responsibility to promote a clients career. The facial and as applied restrictions imposed by the TAA on commercial speech cannot be justified under the current test for restraints on commercial speech. 5. Based solely on the limited information it possessed at the initial pleading stage (and without granting leave to amend), the District Court concluded the TAA regulates conduct; that, it limits the personal managers ability to enforce contractual obligations when that person engages in the conduct of procuring employment. (ER, Vol. I, p. 10:5-7) The TAA has no provisions that (1) 8
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expressly prohibit unlicensed persons from engaging in procuring employment; (2) reserve the right of procurement or the other defined activities of a talent agent solely to licensees, or (3) impede the right to contract of non-licensees who engage in the act of procuring employment for artists. Yet, without the required statutory authority, the Commissioner under color of law routinely and arbitrarily voids personal management contracts ab initio. She has ordered past compensation disgorged even when the services were fully and lawfully performed years before, and without serving any significant or legitimate purpose. Plaintiff stated a plausible claim that the enforcement of the TAA is in violation of the Contracts Clause. The Commissioner enforced imaginary provisions, and as the deprivation of the right to contract for ones labor without findings of fraud or non-performance is a criminal penalty, such actions violate the due process provision of the Fifth Amendment of the Constitution. 6. Contrary to Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U. S. 308 (2007) (courts must consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions) the District Court failed to consider all of the claims asserted in the Complaint and, therefore the dismissal should be reversed and remanded to the District Court. VII. THE DISTRICT COURT ABUSED ITS DISCRETION BY DENYING LEAVE TO AMEND The District Court's denial of leave to amend the Complaint is reviewed for an abuse of discretion. See Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004). When reviewing a district court's decision for abuse of discretion, [w]e first look to whether the trial court identified and applied the correct legal rule to the relief requested. Second, we look to whether the trial court's resolution of the motion resulted from a factual finding that was illogical, implausible, or without
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support in inferences that may be drawn from the facts in the record. City of Los Angeles v. San Pedro Boat Works, 635 F.3d 440, 454 (9th Cir. 2011). Generally, under FRCP Rule 15, leave shall be freely given when justice so requires. This policy is to be applied with extreme liberality. Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir.2001). Foman v. Davis, 371 U.S. 178 (1962) held in the absence of any apparent or declared reason such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. - the leave sought should, as the rules require, be freely given. Id. at 182. As this circuit and others have held, it is the consideration of prejudice to the opposing party that carries the greatest weight. See DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 185 (9th Cir.1987). Absent prejudice, or a strong showing of any of the remaining Foman factors, there exists a presumption under Rule 15(a) in favor of granting leave to amend. See Lowrey v. Tex. A & M Univ. Sys., 117 F.3d 242, 245 (5th Cir.1997). A simple denial of leave to amend without any explanation by the district court is subject to reversal. Such a judgment is not an exercise of discretion; it is merely abuse of that discretion and inconsistent with the spirit of the Federal Rules. Foman, 371 U.S. at 182, 83 S.Ct. 227; Klamath-Lake Pharm. Ass'n v. Klamath Med. Serv. Bureau, 701 F.2d 1276, 1292-93 (9th Cir.1983) Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th Cir. 2003). The District Court did not find Appellees would be prejudiced had leave to amend been granted. And for good reason: the case was in its initial stage. The Complaint had been filed on November 9, 2012 and had never been amended. Appellees moved to dismiss on January 11, 2013. A Hearing was promptly held on February 25, 2013 and the District Court granted the motion on March 3, 10
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2013. No prejudice whatsoever would have befallen Appellees had Plaintiff been granted twenty (20) days to amend. Appellees never offered even a hint how they would suffer any prejudice whatsoever if leave to amend was granted. (ER, Vol. IV, pp. 139-172) Dismissal with prejudice and without leave to amend is not appropriate unless it is clear on de novo review the complaint could not be saved by amendment. Chang v. Chen, 80 F.3d 1293, 1296 (9th Cir.1996). A district court's failure to consider the relevant factors and articulate why dismissal should be with prejudice instead of without prejudice may constitute an abuse of discretion. (Citations omitted). Id. at 1052. The standard for granting leave to amend is generous. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 701 (9th Cir.1990). Here, the District Court failed to apply the correct legal standard. There was no evidence of delay, prejudice, bad faith, or previous amendments, and the District Court did not find any of those factors were present. Instead, without conducting the necessary and required analysis, the District Court simply announced, [b]ecause any amendment would be futile, the court grants the Motion with prejudice. (ER, Vol. I, p. 11, ll. 15-16) Under the appropriate futility analysis, [d]ismissal without leave to amend is improper unless it is clear, upon de novo review, that the complaint could not be saved by any amendment. Krainski v. Nevada ex rel. Bd. of Regents of NV. System of Higher Educ., 616 F.3d 963, 972 (9th Cir.2010); see also Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir.2000); Balistreri, 901 F.2d at 701. Ironically, rather than finding the Complaint could not be cured by allegations of other facts, the District Court itself presented a potential cure. It noted how NCOPM claimed, [a]lmost any act undertaken by Plaintiff, even as innocuous as helping choose a headshot, could and has been linked to the ultimate goal of any artist represented by Plaintiff to get a job, but the allegation 11
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does not appear in the Complaint. (ER, Vol. I, p. 6, 20-21) That and other allegations could have been added with leave to amend. Balistreri at 701; Lopez at 1130-31. Plaintiff expressly requested leave to amend (ER, Vol. II, p. 78: 5) and specifically indicated the precise allegations it would add.1 It is clear on de novo review that the Complaint could be saved by amendment. Chang at 1296. The District Court's failure to consider the relevant factors and articulate why dismissal should be with prejudice, instead of without prejudice, constitutes an abuse of discretion and reversible error. The Order dismissing the Complaint with prejudice should be reversed. VIII. STANDARD OF REVIEW This Court reviews de novo a District Courts dismissal of a complaint for failure to state a claim under FRCP Rule 12(b)(6). Starr v. Baca, 652 F.3d 1202, 1205 (9th Cir. 2011) Rule 12(b)(6) motions are viewed with disfavor and rarely granted. Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 249 (9th Cir. 1997). It is only under extraordinary circumstances that dismissal is proper. United States v. Redwood City, 640 F.2d 963, 966 (9th Cir. 1981). When considering such motions, the court must accept as true all factual allegations in the complaint as well as all reasonable inferences that may be drawn from such allegations. LSO, Ltd. v. Stroh, 205 F.3d 1146, 1150 n.2 (9th Cir. 2000). Such allegations must be
Plaintiff will cite the TAA determinations where the same actions are alternately found lawful in one instance and unlawful in another; (ER, Vol. II, P. 55, fn2); Plaintiff will present examples of how the Labor Commissioner has advocated for the TAA enforcement versus staying objective as required for five decades; (ER, Vol. II, P. 66, fn4); Plaintiff will present several examples of efforts asking the Labor Commissioner for clarification on issues that went ignored; (ER, Vol. II, P. 68, fn6); and Plaintiff will show several examples of inconsistent, contrary interpretations by the Labor Commissioner, at times in almost simultaneous handed down determinations. (ER, Vol. II, p. 72, ll. 26-27)
1
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construed in the light most favorable to the nonmoving party. Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000). The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims. Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 249 (9th Cir. 1997). Under FRCP Rule 8(a), the Court must determine whether the complaint contains sufficient factual matter that, taken as true, state a claim for relief is plausible on its face. Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). Courts must consider the complaint in its entirety when deciding a Rule 12(b)(6) motion to dismiss. Tellabs, Inc., 551 U.S. at 322.
IX. ARGUMENT A. THE DISTRICT COURT ERRED IN FINDING THE TAA IS NOT UNCONSTITUTIONALLY VAGUE 1. The TAA Is Unclear As To What Activities It Regulates
Labor Code 1700.4(a) defines a talent agent as one who (a) engages in the occupation of procuring, offering, promising, or attempting to procure employment or engagements, (b) counsels artists in the development of their professional careers and (c) directs artists in the development of their professional careers. The TAA does not specify which of these activities are reserved exclusively for licensees. Nor is there a provision prohibiting those without licenses from engaging in any or all of these defining activities, nor is there any provision giving notice that one engaging in any or all of those activities is thereby engaging in the occupation of a talent agent. Despite finding the TAA is not standardless, the District Courts own words support NCOPMs claim of unconstitutional vagueness. The District Court
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acknowledged, the activities of personal managers and talent agents have significant overlap with respect to procuring employment, but concluded without reasoning or explanation, this breadth does not render the statute standardless. Id., p. 6: 23-24. If the District Court cannot articulate which activities constitute procuring employment and which do not, how can people of ordinary intelligence be expected to do so? We begin by reviewing California law on statutory interpretation. The California Supreme Court recently stated [the] first task in construing a statute is to ascertain the intent of the legislature so as to effectuate the purpose of the law. Quintano v. Mercury Cas. Co., 11 Cal.4th 1049 (1995). In determining such intent, a court must first look to the words of the statute themselves, giving to the language its usual, ordinary import and providing significance, if possible, to every word, phrase and sentence in pursuance of the legislative purpose The words of the statute must be construed in context, keeping in mind the statutory purpose, and statutes and statutory sections relating to the same subject must be harmonized, both internally and with each other, to the extent possible. Dyna-Med, Inc. v. Fair Employment & Housing Commission 43 Cal.3d 1379 (1987). "[I]n interpreting a statute a court should always turn to one cardinal canon before all others. . . .[C]ourts must presume that a legislature says in a statute what it means and means in a statute what it says there." See, e. g., United States v. Ron Pair Enterprises, Inc., 489 U. S. 235, 241-242 (1989); United States v. Goldenberg, 168 U. S. 95, 102-103 (1897); Oneale v. Thornton, 6 Cranch 53, 68 (1810). 112 S. Ct. 1146, 1149. Indeed, "when the words of a statute are unambiguous, then, this first canon is also the last: 'judicial inquiry is complete.'" Rubin v. United States, 449 U. S. 424, 430 (1981); see also Ron Pair Enterprises, supra, at 241. Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 254 (1992) (CNB). Following CNB (at 254), courts must presume the Legislature meant to allow anyone to lawfully engage in any of the defining activities, so long as they are not engaged in the occupation of talent agent. As interpreted and enforced 14
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by the Commissioner, but not as enacted by the Legislature, the TAA only prohibits unlicensed procurement but not unlicensed directing and unlicensed counseling of artists. The selective disconnect between the TAAs actual language and its enforcement renders the statute unconstitutionally vague as applied. Despite the fact the District Court found the TAA is not vague because the term procure is easily understandable, the operative question is not just what procuring, offering, promising, or attempting to procure employment or engagements means, but at what stage does it become unlawful? (ER, Vol. IV, p. 184, 47-48) The Complaint alleges a Legislative Commission empanelled to create a model Act found procuring employment such an ambiguous phrase it left reasonable persons in doubt about the meaning of the language or whether a violation has occurred.(ER, Vol. IV, p. 177, 18) The TAA requires those endeavoring to engage in the occupation of talent agent to first procure a talent agency license. (CA. Labor Code 1700.5). As noted, under 1700.4(a), talent agents have three defining responsibilities: (1) procuring or attempting to procure employment opportunities; (2) directing artists and/or (3) counseling artists. The Commissioner enforces 1700.4(a) and 1700.5 (defining artists) as if only licensees can procure employment and anyone can counsel or direct artists. To show the disconnect between the Commissioners interpretation and the legislative intention behind the TAA, it is important to recognize what is and is not part of the Acts plain language. 2. The TAA Lacks Clarity As To Who Is Regulated
"[C]ourts must presume that a legislature says in a statute what it means and means in a statute what it says there." CNB Supra. The statute is entitled the 15
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Talent Agencies Act, not the Talent Procurement Act, which would have signaled that anyone who procures employment opportunities must be regulated. Nor is it entitled the Artists Representatives Act. Following CNB, courts must presume the Legislature expressly chose to regulate only those in the occupation of talent agent, not all representatives of talent who procure employment opportunities for artists as an incident of acting as an attorney, accountant, business manager or personal manager. For Appellees enforcement of the TAA to pass constitutional muster, there must be clear notice of who is regulated by the Act, Lanzetta v. New Jersey, 306 U.S. 451 (1939); what conduct is regulated by the Act, Interstate Circuit, Inc. v City of Dallas, 390 U.S. 676 (1968); and what consequences alleged violators would face. United States v. Evans, 333 U.S. 483 (1948). The TAA fails all three tests. In concluding that those in the occupation of personal management are subject to the provisions of the TAA, the California Supreme Court referenced how in 1700, person is expressly defined to include any individual, company, society, firm, partnership, association, corporation, limited liability company, manager, or their agents or employees. Marathon v. Blasi, 42 Cal. 4th 974, 984 (2008). That dicta misinterprets the Acts verbiage. That list references ones place in a company, not their occupation. According to the statutory canon of ejusdem generis, where, the general words shall be construed as applicable only to persons or things of the same general nature or kind as those enumerated," Walling v. Peavy Wilson Lumber Co., 49 F. Supp. 846, 859 (1943), courts are required to interpret the term manager similarly to the other terms in that list. Neither firm nor society nor any of the others are occupations; the list refers to ones place in an organization. Further, 1700 offers no specificity as to which managers might be being regulated. Must all managers personal 16
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managers, business managers, property managers, retail store managers obtain licenses irrespective of occupation and responsibilities? Following Walling, if personal managers were to be regulated by the TAA, the Legislature would have included the word personal in 1700. (ER, Vol. IV, p. 184, 46) Most California business licensing schemes2 include provisions limiting that professions defined activities to licensees; making it a criminal offense when unlicensed people ignore those restrictions. The TAA has no such provisions; it mirrors verbiage of licensing schemes3 that as written and applied do not regulate conduct. Only licensees can hold themselves out as, for example, accountants, landscape architects or psychologists, but anyone can engage in those professions defined activities. The Canon of In Pari Materia obliges courts to compare verbiage and interpretation of similar statutes when a statute is ambiguous. The words of the TAA are of the same general nature as those enumerated in the Psychologists and Landscape Architects Acts, where it is not conduct, but the occupational title that is reserved for licensees. The TAA is anomalously interpreted and enforced. It is not treated like the licensing schemes with similar verbiage but instead like licensing schemes with provisions that expressly restrict conduct. (ER, Vol. IV, p. 186, 62-64.) The TAA has no provision for penalty, fine, remedy or consequence should an unlicensed person procure employment for an artist. The surplusage rule is the principle whereby each word and phrase of a statute is meaningful and useful.
2
See, among others, the Clinical Laboratory Technology Act (BPC 1200 et seq., 1270(a)), the Medical Practice Act (BPC 2000 et seq. 2050); the Pharmacy Act (BPC 4000 et seq., 4320); the Locksmiths Act (BPC 6980 et seq., 6980.10), and the Contractors State Licensing Law (BPC 7000 et seq., 7027-2031).
3
Examples: The CA. Landscape Architects Act (BPC 5615 et seq.), the CA. Psychologists Act (BPC 2900 et seq.), and among others, the CA Accountancy Act (BPC 5000 et seq.).
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Statutes should be construed so as to avoid rendering superfluous any statutory language. Astoria Federal Savings & Loan Association v. Solimino, 501 U.S. 104, 112 (1991). The Commissioners interpretation makes notice of regulated activities and consequences superfluous. If one can be punished without codified provisions, there is no need for provisions that give notice of activities reserved for licensees or of consequences for those who engage in them without a license as are contained in the Contractors, Locksmiths and similar schemes. The Legislatures decision not to include prohibitive and consequential provisions in the TAA obliges courts to assume unlicensed procurement of employment opportunities for artists is lawful and thus Appellees enforcement to the contrary must be viewed as ultra vires and unconstitutional as applied. (ER, Vol. IV, p. 186, 62). Appellees Motion to Dismiss cites the seven different steps one must take to comply with the TAAs precepts. Licensed talent agents are required to annually renew their license (1700.10); post a $50,000 bond (1700.15); file their contractual forms with the Labor Commissioner (1700.23); post and file their fee schedules (1700.24); comply with trust fund and records requirements (1700.25-27); reimburse travel costs for job opportunities that are not finalized (1700.41); and refer controversies to the Labor Commissioner. (ER, Vol. IV, p. 153 11-27). Appellees Reply also cites the six express prohibitions of the TAA, to wit: agents cannot publish false or misleading information (1700.32); send artists to unsafe places (1700.33); employ persons of bad character (1700.35); secure employment for an artist where there is labor unrest without notifying the artist (1700.38), split fees with employers (1700.39), or collect fees or secure employment with entities the agent has a financial interest (1700.40). (ER, Vol. II, p. 39:8-27). 18
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The canon of Expressio unius est exculsio aterius obliges courts to assume that only regulations the Legislature chose to enforce are those expressly included in a list of requirements and/or prohibitions in the statute. The Legislature did not include on the TAAs list of requirements a provision whereby one must have a license to procure employment for an artist. And the Legislature did not include on the list of its prohibitions, the act of procuring employment opportunities for artists without a license. In rejecting NCOPMs vagueness challenge, the District Court relied on Wachs v. Curry, 13 Cal.App. 4th 616, 628-29 (1993) and Grayned v City of Rockford, 408 U.S. 104, 108 (1972) and used a generic dictionary definition of procurement rather than consider legal precedents and real-world realities. Wachs concluded that on its face, the term occupation of procuring [employment] is not so patently vague and wholly devoid of objective meaning that it provides no standard at all. However, the Court specifically noted, Whether the Act is unconstitutional as applied to Plaintiffs is a question for another day. Id at 504. This is that day. Citing Grayned, the District Court stated a law is not unconstitutionally vague if it provides a person of ordinary intelligence with a reasonable opportunity to know what is prohibited, so he or she may act accordingly. (ER, Vol. I, p. 6:3-5) In 1982, the Legislature created the California Entertainment Commission (CEC) to recommend changes to the TAA. Chaired by the Labor Commissioner, the CEC was comprised of four talent agents, four personal managers, and four artists, assumedly all of at least ordinary intelligence. Its recommendation, which the Legislature subsequently adopted, was that no licensing violation be considered criminal, specifically because they could not discern what was or was not prohibited by the Act, finding:
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an inherent inequity and some question of constitutional due process in subjecting one to criminal sanctions in violation of a law which is so unclear and ambiguous as to leave reasonable persons in doubt about the meaning of the language of whether a violation has occurred. Procuring employment is just such a phrase the uncertainty of knowing such activity may or may not have occurred has left the personal manager uncertain and highly apprehensive about the permissible parameters of their daily activity. (See The Report of the California Entertainment Commission, p. 25.) (Emphasis added.) Californias judicial branch is equally confounded as to what constitutes procurement. The California Supreme Court has stated: The Act contains no definition, and the Labor Commissioner has struggled over time to better delineate which actions involve general assistance to an artists career and which stray across the line to illicit procurement. Marathon at 990.4 3. The Ambiguity of the TAA Has Resulted In Conflicting And Arbitrary Determinations by the Commissioner
No law should be drafted, interpreted or enforced to facilitate arbitrary and discriminatory enforcement. City of Chicago v. Morales 527 U.S. 41, 58-59 (1999); Kolender v. Lawson 461 U.S. 352, 357 (1983); Smith v. Gougen 415 U.S. 566, 575 (1972). There are a litany of examples showing the Commissioner has fluctuated between multiple and conflicting interpretations without standards in enforcing the TAAs application. Kugler v. Yocum (1968) 69 Cal.2d 371, 376-77; State Board of Education v. Honig 13 Cal.App.4th 720, 750 (1993). The Commissioner has ordered disgorged lawful compensation earned by personal managers for such common free speech activities as sending out resumes and
Marathon did not address the constitutional challenges presented here by NCOPM.
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photographs,5 distributing resume and videotapes,6 and sending written materials introducing the client to the casting and development communities. 7 Managers lawfully create sales/marketing materials and prepare their clients for market, making a bright line test between marketing and sales completely impossible. Managers must possess the unfettered ability to interact with, and speak with their clients and other industry professionals to intelligently advise and counsel their clients. The Commissioner herself has determined the requirements of the [Safe Harbor] statute cannot be construed to call for a game of Mother May I? every time an artist manager takes some action during a long term relationship To find otherwise would be to ignore the realities of the day to day life in the [entertainment] industry. Wesley Snipes v. Delores Robinson (TAC 36-96), Creative Artists Group v. Jennifer ODell (TAC 26-99). But conversely, the Commissioner has found it unlawful when a personal manager proactively procures once without the request of a licensed agent. Behr v Dauer and Assoc. (TAC 21-00). In Tool v. Larrikin Management (TAC35-01), the Commissioner found the personal manager did not qualify for the Safe Harbor because the manager called the talent agency about an opportunity rather than the agency calling the personal manager. See also Transeau v. 3 Artist Mgmt. (TAC 7306). In Parker Posey v. Lita Richardson (TAC 7-02), the Commissioner voided the contractual rights of an attorney for procuring without a license. However, in Jewel v. Inga Vainshtein (TAC 02-99), the Commissioner left the contractual
5 6 7
Thomas Haden Church v. Ross Brown, (TAC 52-92), California Labor Commission. Nick Sevano v. Artistic Productions, Inc., (TAC 8-93), California Labor Commission.
James Breuer v. Top Draw Entertainment, Inc.; Antonio U. Camacho (TAC 8-95), California Labor Commission.
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rights of the attorney intact because the artist only petitioned to void and recapture her previous payments to her manager. It is noteworthy the Commissioner acknowledges her difficulty in discerning violations. It goes without saying there will not always be a bright line between what constitutes arranging for the placement of an artist, and what constitutes selling a product or service, on the other. For close cases, there is no single formulation that can delineate on which side of the line the activity falls. Todd v. Meagher (TAC 13148). This is the very embodiment of unconstitutional vagueness: if those empowered to enforce the law cannot clearly discern where lawfulness ends and lawlessness begins, how can a reasonable layperson of average intelligence do so? Without judicial redress, the Commissioner will continue to mete out inconsistent, arbitrary rulings on the meaning of procurement. Gittleman v Karolat, (TAC 24-02), holds that a talent agency license is not required for the procurement of a guest appearance on a talk show provided the appearance does not involve the rendition of artistic services. Id., p. 27. But in Blasi v. Marathon Entertainment, (TAC 15-03), decided the same year as Gittleman, the Commissioner ruled that helping an actress procure appearances on three talk shows (where the actor was not acting) did violate the Act. Id., p. 21. Same facts, same year, opposite rulings. In Macy Gray v. Lori Leve Management, (TAC 18-00), the managers right to enforce a contract with an artist was affirmed even though Commissioner found the showcase the manager arranged was to procure a recording contract. Indeed Epic Records promptly signed the artist as a direct result of the showcase. But in Park v. Deftones, (TAC 9-97), the manager was found to have violated the TAA for organizing 83 showcases for his client until, on the 84th effort, the band was signed to Maverick Records. The managers in both actions 22
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took identical actions but the Commissioner reached opposite results. Ironically, the manager in Deftones was punished for his tenacious commitment to his client. Since 1979, the vagueness of the TAA has been an ongoing subject of commentary in a wide array of law review articles: Two questions that remain unresolved after passage of the TAA are when, if ever, procurement activity is permissible by an unlicensed talent agent, and what quantum of activity constitutes procurement activity. Johnson & Lang, The Personal Manager in the California Entertainment Industry, 52. S. Cal. L. Rev. 375 (1979). Ambiguous language renders the Act inherently unjust because it does not give fair and adequate warning of the type of activity that constitutes procurement and it does not provide a consistent standard that the Labor Commissioner can apply to determine whether an individual has violated the Act. OBrien, Regulation of Attorneys Under Californias Talent Agencies Act; CA. L. Rev., Vol. 80, Is. 2, 492 (1992). The Legislature fostered confusion by failing to stipulate precisely which individuals and specific activities fall beneath the umbrella of the new licensing requirements. Robertson, Dont Bite The Hand That Feeds: A Call For A Return To An Equitable Talent Agencies Act Standard, Hastings Comm. & Ent. L. J., 223, 233 (1997). The TAA, the TAA's predecessors and amendments, the CEC, California courts, and the Labor Commissioner have each failed to define precisely which activities constitute procurement. Devlin, Reconciling the Controversies Surrounding Lawyers, Managers, and Agents Participating in California's Entertainment Industry, Pepperdine L. Rev., Vol. 28, 381 (2001). [I]nconsistent interpretations by the Labor Commissioner and courts, [have created] an environment where no one is quite sure what is allowed. The ambiguity leaves unlicensed personal managers unfairly exposed to staggering potential liability. Taking Away an Artists Get Out of Jail Free Card, Pierce L. Rev., Vol. 8, No. 3 (2010).
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4.
The TAA As Applied Exceeds Commissioners Statutory Authority
The District Court ignored Plaintiffs claim that the Commissioners enforcement is rendered unconstitutional because the TAA gives no notice of any penalty. The Complaint cited multiple instances where the Commissioner ordered the disgorgement of compensation despite there being no statutory authority to do so. (ER, Vol. IV, pp. 182-191, 37-42, 56-58, 70, 72-73, 76, 79-80, 93-97) Engrained in our concept of due process is the requirement of notice. Notice is sometimes essential so that the citizen has the chance to defend charges. Notice is required before property interests are disturbed, before assessments are made, before penalties are assessed. Wolff v. Fox (1977) 68 Cal. App. 3d 280 citing Lambert v. California 355 U.S. 225, 228 (1957); BMW of America v. Gore 517 U.S. 559, 574 (1995) (one is entitled to fair notice not only of the conduct that will subject him to punishment but also of the severity of the penalty that a State may impose.) Trying to assign a penalty without statutory guideposts is a task outside the bounds of judicial interpretation reserved only by legislative action. U.S. v. Evans 333 U.S. 483, 495 (1948). (ER, Vol. IV, p. 183, 40) In Evans, the statute prohibited both bringing undocumented persons into the country and harboring them, but only contained a penalty for the former. While noting Congress wanted to prohibit both actions, the Court stated it was powerless to create a penalty for harboring because only Congress can assign penalties. Violations of law are "made up of two parts, forbidden conduct and a prescribed penalty. The former without the latter is no [violation]." LaFave & Scott, Substantive Criminal Law 1.2(d) (1986); see Evans at 486. The District Court ignored the allegation that without notice of a penalty, the TAA is unconstitutional. (ER, Vol. IV, p. 178-181, 21 32; p. 185, 57; p. 186, 62 64) 24
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The general rule is that "[w]here the enabling statute is essentially remedial, and does not carry a penal program declaring certain practices to be crimes or provide penalties or fines in vindication of public rights, an agency does not have discretion to devise punitive measures such as the prescription of penalties or fines An administrative agency cannot by its own regulations create a remedy which the Legislature has withheld. [Citations]. 'Administrative regulations that alter or amend the statute or enlarge or impair its scope are void and courts not only may, but it is their obligation to strike down such regulations.' Morris v. Williams, 67 Cal 2d 733, 748 (1967). Dyna-Med, Inc. v. Fair Employment & Housing Comm., 43 Cal. 3d 1385, 1388 (1987). (ER, Vol. IV, p. 185, 56) The District Court overlooked how Appellees ignored that the Legislature, first temporarily in 1982 and then permanently in 1986, repealed the TAAs only penalty provision; a change by which it is presumed that it intended to effect a substantial change in the law. Royal Co. Auctioneers, Inc. v. Coast Printing Equipment Co. 138 Cal.App.3d 868, 873(1987); Barajas v City of Anaheim 15 Cal.App. 4th 1808, 1814 (1993). The Commissioner acted as if there had been no change; continuing to accept Petitions for Controversy, hold hearings, void contracts and order disgorgement. For a contract to be voided, there must be a provision indicating the failure to obtain a license was intended to affect in any degree the right of contract. Wood v. Krepps, 168 Cal 382, 387 (1914). The TAA has no such provision. The Commissioner alone created the penalty. "A violation of reasonable rules regulating the use and occupancy of the property is made a crime, not by the Secretary, but by Congress. The statute, not the Secretary, fixes the penalty." United States v. Eaton, 144 U.S. 677, 688 (1892). The Commissioner routinely violates this admonition.
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5.
The Commissioner Selective Enforcement of the TAA Violates The Equal Protection Clause Of The Fourteenth Amendment
The Complaint alleges the TAA, as enforced, is discriminatory and violates the Equal Protection Clause of the Fourteenth Amendment. (ER, Vol. IV, p. 174182, 1, 29, 37) Along with the arbitrary nature of the enforcement, where the same action is sometime lawful, sometimes not, an examination of past TAA Determinations spotlights how, on occasion, the infraction does not appear to be about the specific activity, but specifically because the accused is labeled a personal manager. For instance, in Marathon Entertainment v. Nia Vardalos (TAC 02-03), attorney Jon Moonves and producer Gary Goetzman testified to helping put together My Big Fat Greek Wedding, but only the personal manager was found to have acted unlawfully. (Vardalos Supra, p. 2:27 p. 3:1). Another appalling example is Krutonog v. Chapman, (TAC 3351), where the Commissioner regulated the status, not the conduct, of Boris Krutonog, an actor and producer. A producer who never held himself out as a personal manager, Krutonog optioned the life story rights of Duane Dog Chapman, a colorful bounty hunter. For eight years Krutonog spent his time and money on the project, routinely renewing the option, customary producer activities. Id., Pg. 5:11-19. In 2003, the A&E Network agreed to produce a reality show based on Chapman, and Krutonog signed an agreement to serve as a series co-executive producer. Id., p. 6, lines 1-7. But the Commissioner found many of the tasks Krutonog rendered as a producer were rendered as a personal manager who also acted as a talent agent. Id., p. 13:24-25. There was no evidence Krutonog had any personal management clients before, during or after his relationship with Chapman and A&E. He testified all his efforts were done as a producer. Yet because there was evidence others
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assumed Krutonog was Chapmans manager,8 the Commissioner labeled Krutonog a personal manager and ordered him to disgorge the considerable amount of $539,450.21 in otherwise lawful, previously earned compensation. This finding was irrelevant to conduct; Krutonogs actions mirror those of producers. Rather it was based on the assumption of his being a personal manager. Similarly, in Billy Blanks Jr. v. Ricco, (TAC 7163), a business partner was found to have unlawfully procured an appearance for an artist on the ELLEN show Id., p. 9, lines 16-17, expressly because he also agreed to be the artists manager. Id., lines 20-22. The Commissioner presumptively views personal managers as acting unlawfully, requiring them to prove their innocence. Just being a manager converts what the Commissioner deems lawful for others into unlawfulness. Such enforcement violates the Equal Protection clause of the Fourteenth Amendment. The District Court erred in finding Plaintiff failed to state a claim that the TAA is unconstitutionally vague. The Order should be reversed or in the alternative this matter should be remanded to allow amendment of the Complaint. B. THE DISTRICT COURT ERRED IN FINDING PLAINTIFF HAS NOT STATED A CLAIM FOR INVOLUNTARY SERVITUDE Section 1 of the Thirteenth Amendment of the U. S. Constitution states, Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.
8
The evidence all referenced the term manager, not personal manager. One can certainly manage others affairs without being in the specific entertainment-industry occupation of a personal manager.
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The essence of slavery or involuntary servitude is that the worker must labor against his will for the benefit of another. Wicks v. Southern Pacific Co., 231 F. 2d 130 (9th Cir. 1956). Involuntary servitude can only exist lawfully as a punishment for crime of which the party shall have been duly convicted. Such is the plain reading of the Constitution. A condition of enforced service, even for a limited period, in the private business of another, is a condition of involuntary servitude. Robertson v. Baldwin, 165 US 275 (1897). The Supreme Court defines involuntary servitude as a condition of servitude in which the victim is forced to work for [another] by the use or threat of physical restraint or physical injury or by the use or threat of coercion through law or the legal process. United States v. Kozminski 487 U.S. 931 (1988). When the Commissioner issues an administrative determination voiding a personal management contract ab initio and ordering the personal manager to disgorge their compensation, the personal manager has no choices whatsoever to avoid being subjected to involuntary servitude. The TAA expressly states the failure of any person to obtain a license from the Labor Commissioner pursuant to this chapter shall not be considered a criminal act under any law of this state. 1700.44(b) (emphasis added). Indentured servitude can only exist lawfully in the United States as a punishment for a crime of which the party shall have been duly convicted. Since failure to obtain a the TAA license is not a criminal violation, the Commissioners routine practice of voiding contracts ab initio and ordering the disgorgement of past compensation without a provision of criminal penalty, violates the involuntary servitude prohibition of the Thirteenth Amendment. NCOPMs claim that such enforcement infringes on the rights of its members to be free from involuntary servitude is therefore plausible. 28
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In finding NCOPM did not state a claim for involuntary servitude in violation of the Thirteenth Amendment, the District Court found Plaintiffs members have choices: they could refrain from procuring employment for their clients, to procure employment without a license and risk the voiding of parts of their contracts, or to obtain a license. (ER, Vol. I, p. 8:23-26) The Court, however, did not answer this important question: can ones compensation for labor be forfeited without a finding of non-performance, fraud, or conviction of a crime, without violating the Thirteenth Amendment, which expressly forbids involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted? The Complaint alleges a plausible case that the answer is no. The District Court stated NCOPMs members have the option to obtain a license. One might ask, Why doesnt a personal manager simply obtain a talent agency license? First, persons of reasonable intelligence who recognize personal management as a separate, yet incidentally connected to the occupation of talent agent, so without statutory imperatives, would see no reason to acquire such a license. Furthermore, a personal manager applying for and granted a TAA license would make them talent agents, eliminating their ability to be compensated when, as is standard in the industry, they co-represent a client with a bona fide talent agency. The major creative labor guilds limit compensation paid by a guild member to a talent agent to 10% of the members earnings.9 After the bona fide agency is paid its standard 10%, there is no compensation available for the
See Marathon at 979: Artists Guilds bylaw restrictions typically include a cap on the commission charged (generally 10 percent) (Screen Actors Guild, Codified Agency Regs., Rule 16(g); American Federation of Television and Radio Artists, Regs. Governing Agents, rule 12-C; Matthau v. Superior Court (2007) 151 Cal. App. 4th 593, 596-597; Zelinski, Conflicts in the New Hollywood, So. Ca. L. Rev., Vol. 76:979, pp. 989-990 (2003); Birdthistle, A Contested Ascendancy, 20 Loy. L.A. Ent. L. Rev. 493, p. 503 (2000).
9
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personal manager if they are now licensed as a talent agency. Thus, the option of a personal manager obtaining a talent agency license is not a real-world option. C. THE DISTRICT COURT ERRED IN FINDING PLAINTIFF DID NOT STATE A CLAIM FOR VIOLATION OF THE COMMERCE CLAUSE NCOPM alleged the TAA, as written, in practical effect and as enforced, violates the Commerce Clause of the U.S. Constitution, Art. 1 Sec. 8, (ER, Vol. IV, pp. 188-190, 75-89) and Appellees, under color of law, have deprived NCOPM and its members of their rights, privileges and immunities secured by the Constitution in violation of the Commerce Clause (ER, Vol. IV, p. 188-190, 75-89). Dennis v. Higgins, 498 U.S. 439 (1991). Art. 1 Sec. 8, of the U.S. Constitution grants Congress the power to regulate Commerce among the several states. The Tenth Amendment to the U.S. Constitution states: The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people. Derived from the Tenth Amendment and established in Gibbons v. Ogden, 22 U.S. 1 (1824), the dormant Commerce Clause doctrine expressly grants Congress the power to regulate interstate commerce and prohibits states from passing legislation discriminating against or directly burdening interstate commerce. United States v. Lopez, 514 U.S. 549, 558 (1995) defined three broad categories of activity subject to interstate commerce regulation: (1) the use of the channels of interstate commerce; (2) the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities; and (3) those activities having a substantial relation to interstate commerce.
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NCOPM and its members regularly use channels and instrumentalities of interstate commerce, including cellular telephones (see United States v. Clayton, 108 F.3d 1114, 1117 (9th Cir. 1997)), telephone lines and the Internet (see U.S. v. Sutcliffe, 505 F.3d 944, 952-53 (9th Circuit, 2007)). The Commerce Clause applies when purely local activities that are part of an economic class of activities have a substantial effect on interstate commerce. Gonzales v. Raich, 545 U.S. 1, 2 (2005). Entertainment is a class of activities with a substantial relation to interstate commerce. Entertainment industry activities that have a substantial relation to interstate commerce include: the production, distribution and exhibition of motion pictures, producing, booking and presenting legitimate theatrical attractions and the booking and presentation of vaudeville acts, even though individual showings of a film or performance of a stage attraction is of course a local affair. United States v. Schubert, 348 U.S. 222, 225-28 (1955). Commerce Clause power may be exercised in individual cases without showing any specific effect upon interstate commerce if in the aggregate the economic activity in question would represent a general practice . . . subject to federal control. Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56-7 (2003). The Court need not determine whether the activities of NCOPM and its members taken in the aggregate, substantially affect interstate commerce in fact, but only whether a rational basis exists for so concluding. Gonzales at 2. NCOPM alleges the TAA discriminates against interstate commerce by limiting the TAA licenses to only talent agencies with in-state premises, thus denying licenses to non-residents with premises located wholly out-of-state. The States traditional police power, also derived from the Tenth Amendment, is the authority to provide for the public health, safety, and morals. Barnes v. Glen Theatre, Inc., 501 U.S. 560, 569 (1991). It is a states 31
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power to govern men and things within the limits of its dominion. License Cases, 46 U.S. 504, 583 (1847) (emphasis added). Section 1700.19 (b) requires the TAA License application to contain: A designation of the city, street and number of the premises in which the licensee is authorized to carry on the business of a talent agency and 1700.20 states, No license shall protect any places other than those designated in the license. In addition, 1700.12 (b) mandates an annual license fee of Fifty dollars ($50) for each branch office maintained by the talent agency in this state. (Emphasis added.) As written, the TAA neither provides for the issuance of a License to an applicant with an out-of-state business address nor requests identification of any state location. A statute with particularity, and in plain, unambiguous language, cannot be enlarged by construction to cover other cases omitted through presumable inadvertence of the legislature. Iselin v. United States, 270 U.S. 245, 250 (1926). The District Court found NCOPMs claim that only California residents may obtain a talent agency license is weak and is not plausible in light of public documents offered by Appellees (ER, Vol. I, p. 9:15-16). This finding was incorrect because: (1) on a 12(b)(6) Motion, the district court only considers the facts presented by a plaintiff, or judicially noticed; (2) the public documents presented by Appellees10 and accepted by the District Court as undeniable fact do not show, as, Appellees allege, that there are TAA Licensees wholly located in states other than California. (ER, Vol. IV, p. 166:1-4); and, (3) when
Appellees submitted a Premise Certification, which as part of a talent agents license application, contains spaces for city, state and zip ( ER, Vol. IV, pp. 165:25-166:01); and the Commissioners talent agency license database.
10
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genuine issues of material fact exist, it should not be resolved on a Motion to Dismiss. FRCP Rule 12. The Premise Certification (ER, Vol. III, p. 2) is an administrative form prescribed by the Commissioner, not by the Legislature. The form asks applicants for their State domicile, but that information is not mandated by provision; thus it is ultra vires and not statutorily authorized. Secondly, Appellees purported to submit twelve TAA Licensees who allegedly had out-of-state addresses. (ER, Vol. III, pp. 86-91). However, each of those Licensees has California residency status: Digital Development Management Inc. (ER, Vol. III, pp. 86) has offices in Burlingame, Los Angeles and San Diego. (www.ddmagency.com) Allensworth Entertainment Inc. (ER, Vol. III, pp. 87) has an office in Beverly Hills. (See www.allensworthentertainment.com.) Atlas Agency (ER, Vol. III, pp. 88) has an office in West Hollywood. (www.atlastalent.com.) CAMI Composer Management, LLC (ER, Vol. III, pp. 88) has a booking representative in San Francisco. (www.cami.com.) Common Chord LLC (ER, Vol. III, pp. 88) is a Florida limited liability company whose principal is Sony Music Entertainment. (See http://www.florida-annual-report.com/COMMON-CHORDLLC.html), a wholly owned subsidiary of Sony Corporation of America, which has offices throughout California. (www.sonymusic.com.) Ford Models Inc. (ER, Vol. III, pp. 88) has an office in Los Angeles. (www.fordmodels.com.) IMG Talent Agency, Inc. (ER, Vol. III, pp. 88) has multiple offices in Los Angeles and San Francisco. (www.icm.com.)
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N. S. Bienstock Inc. (ER, Vol. III, pp. 88) has a resident agent in Sacramento. (www.kepler.sos.ca.gov.) Next Management, LLC (ER, Vol. III, pp. 88) has an office in Beverly Hills. (www.nextmanagement.com.) Mod Media Professional Talent Representation LLC (ER, Vol. III, pp. 89), which no longer holds an active TAA license, has a resident agent in Culver City. (www.kepler.sos.ca.gov.) 25 Live LLC (ER, Vol. III, pp. 90) is Florida-owned, by Word Entertainment LLC (www. http://www.florida-companies-info.com). Word Entertainment, LLC is co-owned by Warner Music Group and Curb Records of Burbank. (http://start.cortera.com/company/research/k7m7ssn6q/warner-musicgroup-corp.) Linda McAlister Talent (ER, Vol. III, pp. 91) has an office in Pasadena. (www.lmtalent.com.) All 719 TAA Licensees (as of October 1, 2013) on the Commissioners database (http://www.dir.ca.gov/databases/dlselr/talag.htm) have instate resident status; none are wholly domiciled outside of the State of California. Unlike other California statutes and regulations governing licensing of non-resident occupations and professions,11 the TAA has no jurisdictional definitions, State reciprocity agreements or any other provision for licensing non-residents to carry on the occupation of a talent agency. It is plausible inference that people of reasonable intelligence would understand that TAA Licenses are neither available to, nor required of, nonresidents with an out-of-state business premise.
11
See CA Rules of Court 9.47, 9.48; California Business and Professions Code 7065.4; and California Education Code, 44252, 44253.3, 44257, 44274.2, 44279.1, 44280, 44281, and 44282, and Title 5, California Code of Regulations, 80413.3.
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Appellees claim the lack of an affirmative state residency requirement is what makes the TAA constitutional. (ER, Vol. IV, p. 166:25) Just the opposite is true: licensing non-residents to carry on the occupation of a talent agency at wholly out-of-state domiciles violates the prohibition established in Pacific Merchant Shipping Association v. Goldstene, 639 F.3d 1154, 1178 (9th Cir. 2011): " the Commerce Clause prohibits state legislation regulating commerce that takes place wholly outside of the state's borders, regardless of whether the commerce has effects within the state. NCOPM also claims the TAA discriminates against, and directly burdens, interstate commerce by only allowing unlicensed parties to act in the negotiation of an employment contract in conjunction with, and at the request of, a licensed talent agency 1700.44 (d). (ER, Vol. IV, p. 190, 81). In effect, any non-resident person or entity with a business premise located wholly out-of-state (who is therefore, according to Pacific Merchant, ineligible for a TAA License), even a talent agency licensed elsewhere, can enter the California talent marketplace only with the consent of one of the 719 in-state TAA Licensees. Conversely, the TAA in practical effect requires in-state personal managers to use in-state licensed agents even when the managers client is looking for employment opportunities outside California. (1700.44(d).) By licensing the occupation of a talent agency at premises located only within the State of California and permitting unlicensed parties to act in the negotiation of an employment contract only in conjunction with, and at the request of, a licensed talent agency, the TAA facially discriminates against, and directly burdens, interstate commerce. We have viewed with particular suspicion state statutes requiring business operations to be performed in the home State that could more efficiently be performed elsewhere. Pike v. Bruce Church, Inc. (1970) 35
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397 U.S. 137, 145. New Yorks in-state presence requirement runs contrary to our admonition that States cannot require an out-of-state firm to become a resident in order to compete on equal terms. Halliburton Oil Well Cementing Co v. Reily 373 U.S. 64, 72 (1963). The mere fact of non-residence should not foreclose a producer in one State from access to markets in other States. H. P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 539 (1949). See also Ward v. Maryland, 12 Wall. 418 (1871). Granholm v Heald 544 U.S. 460, 472 (2005). States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses Granholm supra. In Oregon Waste Sys., Inc. v. Dept. of Envir. Quality of Oregon, 511 U.S. 93, 93 (1994), the Court ruled: The first step in analyzing a law under the negative Commerce Clause is to determine whether it discriminates against, or regulates evenhandedly with only incidental effects on, interstate commerce. If the restriction is discriminatory i.e., favors in-state economic interests over their out-of-state counterpartsit is virtually per se invalid. The TAA by its own terms violates the Oregon Waste proscription and therefore is per se invalid. The TAA also directly burdens interstate commerce by mandating an annual license fee of $225.00 as a condition of carrying on the occupation of a talent agency, which as a general practice involves channels, instrumentalities and activities that have a substantial relation to interstate commerce. We have repeatedly decided that a state law is unconstitutional and void which requires a party to take out a license for carrying on interstate commerce, no matter how specious the pretext may be for imposing it. Crutcher v. Commonwealth of Kentucky, 141 U.S. 47, 58 (1891). (Emphasis added.)
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"... no state has the right to lay a tax on interstate commerce in any form, whether by way of duties laid on the transportation of the subjects of that commerce, or on the receipts derived from that transportation, or on the occupation or business of carrying it on, for the reason that such taxation is a burden on that commerce, and amounts to a regulation of it, which belongs solely to congress.'" McCall v. People of The State of California, 136 U.S. 104, 107-108 (1890) (Emphasis added) neither licenses nor indirect taxation of any kind, nor any system of state regulation, can be imposed upon interstate, any more than upon foreign, commerce, and that all acts of legislation producing any such result are, to that extent, unconstitutional and void. Crutcher at 62. (Emphasis added.) We are aware of no decision by this court holding that a state may, by any device or in any way, whether by a license tax in the form of a fee, or otherwise, burden the interstate business Western Union Telegraph Company v. State of Kansas on the Relation of Coleman, 216 U.S. 1, 26 (1910). (Emphasis added.) The Court rejected NCOPMs Commerce Clause claim in part because Plaintiff does not allege any of its members were refused licenses because they were located outside of California. (ER, Vol. I, p. 9:20-23). The Appellant made no claim that any of its members were refused TAA licenses or engaged in the occupation of a personal manager yet applied for a License to engage in the occupation of a talent agency, an ancillary occupation but not the principal business of a personal manager. NCOPM claims that accepting out-of-state licensees, irrespective of profession, is unconstitutional. This Court defined occupation in Schwartz v. Northern Life Ins. Co., 25 F.2d 555, 560 (9th Cir. 1928) as: the principal business of ones life employment or calling and that which engages his attention and time as distinguished from that which is incidentally connected with the life of men at any or all occupations In Costello v. United States, 365 U.S. 265, 276 (1961), in determining a persons occupation, the Court considered how he derived his 37
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principal income, how he spent any appreciable time conducting his affairs and whether he made it his central business concern. Furthermore, as applied, the Commissioners administration and enforcement of the TAA under color of law also discriminates against and directly burdens interstate commerce, as shown in numerous TAA Determinations. In Martha Robi v. Howard Wolf, (TAC 29-00) (also see Yoo v. Robi, 126 Cal. App.4th 1089 (2005)), a personal manager who used out-of-state booking agents to obtain work for The Platters at county and state fairs throughout the Midwest was found to have violated the TAA by employing unlicensed out-ofstate talent agencies. In Baker v. Bash, (TAC 12-96), singer Anita Bakers management contract was voided after the Commissioner found the use of: (1) a New York-based live bookings agency, the Associated Booking Corporation, co-founded by Louis Armstrong and recognized as the premiere talent agency for urban artists; and (2) a Paris-based agency for a French endorsement deal for singer Anita Baker violated the TAA. Requiring in-state agency representation, as the Labor Commission decreed in Wolf and Baker, when out-of-state agents are more qualified to accomplish the objectives, puts up a protectionist barrier that clearly violates the Commerce Clause. (See Pike supra.) Just as the Commissioner has acknowledged in Determinations and as Chair of the CEC the difficulty of ascertaining a clear line for procurement, the Commissioner has acknowledged a TAA controversy can directly burden interstate commerce. In Kelly Garner vs. Gillaroos, David Delorenzo, David Gillaroos, Chris Wood, (TAC 1994-65), the Commissioner dismissed the controversy acknowledging Respondents were engaged in interstate commerce and Petitioner's claims arose precisely because of their involvement in interstate 38
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commerce. The Commissioner declined to apply California's tolling provisions against a non-resident engaged in interstate commerce. Yet in James Breuer v. Top Drawer Entertainment, (TAC 18-95), the Commissioner exercised jurisdiction over a New York-based personal manager who arranged a Los Angeles showcase for his New York domiciled client that resulted in the artist obtaining employment and moving to California to accept such employment. The TAA, both facially and as applied, impedes the flow of trade across state lines and deprives out-of-state competitors of equal access to local markets and therefore discriminates against NCOPM and its members and directly burdens interstate commerce in violation of the Commerce Clause. The finding that NCOPM did not state a plausible claim for violation of the Commerce Clause was premature and erroneous. This Court should find the TAA per se invalid or, in the alternative, reverse and remand this case to the District Court. D. THE DISTRICT COURT ERRED IN FINDING THE TAA REGULATES CONDUCT AND NOT SPEECH The District Court rejected NCOPMs claim that as a result of the TAAs lack of specificity, personal managers wishing to avoid crossing the illusive line between undefined lawful and unlawful conduct must restrict their speech to the point where performing their contractual duties is all but impossible. The chilling effect is far more than incidental; it implicates a significant public interest preventing individuals to lawfully pursue life, liberty and property as a direct result of unconstitutional interference by the Commissioner, far beyond the authority granted by the Legislature.
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The Courts finding on this mixed question of fact and law, that the TAA only regulates conduct and does not regulate speech, made without the benefit of a full record, fails to consider the real-world realities of how personal managers actually carry out their daily duties. Most everything a manager does for a client is facilitated and communicated via the spoken or written word. Other than a handshake or a nod of the head, there is no conduct without speech that can be cited let alone regulated that does not limit or silence a manager and abridge their ability to perform their job for a client as agreed to by contract. Giboney v. Empire Storage & Ice Co., 336 U.S. 490, 502 (1949), cited by the District Court, is inapplicable. Giboney dealt with the efforts of the Ice and Coal Drivers and Handlers Local Union 953 urging of non-union ice peddlers to join the union, a violation of a Missouri criminal statute. It was not, as in the present case, a question of whether the unconstitutional enforcement of laws that do not exist prevented the performance of a vocation. The picketers sought to force one holdout distributor to stop selling ice to non-union peddlers. The picketing was deemed violative of a criminal statute, and the Court was unwilling to extend any commercial speech protections to an extent that would support a criminal act in restraint of trade. Moreover, Giboney predates the Supreme Courts groundbreaking development of the commercial speech doctrine. Twenty-seven years after Giboney, the Court voided a statute that declared it unprofessional conduct for a licensed pharmacist to advertise the prices of prescription drugs. Virginia State Bd. Of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976). The Court held speech that does no more than propose a commercial transaction is nonetheless of such social value as to be entitled to protection. Id. at 763-64. State interests asserted supporting the ban, such as protection of professionalism
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and the quality of prescription goods, were either badly served or served not at all by the statute. The primary function of personal managers is to maximize the quality and quantity of their clients career opportunities. In doing so the manager proposes commercial transactions in which the client is the beneficiary. These efforts are facilitated via commercial speech and therefore should not be inhibited by the vague and ambiguous language of the TAA. Certainly there have been situations in which commercial speech has been restrained. In distinguishing its ruling in Bates v. State Bar of Arizona, 433 U.S. 350, 356 (1977), the Court refused to extend the prohibition against in-person solicitation by an attorney to solicitation by a certified public accountant, explaining that CPAs, unlike attorneys, are not professionally trained in the art of persuasion,'' and the typical business executive client of a CPA is far less susceptible to manipulation.'' The state may only prohibit such speech if it is false, deceptive or misleading. If it is not, the state can only restrict "commercial speech" if it is shown the restriction directly and materially advances a substantial state interest. Even in these situations, the state's restriction may be no more extensive than is necessary to serve its interest. Ibanez v. Florida Dept. of Business and Professional Regulation, 512, U.S. 136 (1994). Personal managers are not attorneys. So as long as their speech is not false, deceptive or misleading, California cannot offer any substantial state interest that justifies the total restriction imposed on NCOPM and its members by the TAA. The Court has developed a four-pronged test to measure the validity of restraints upon commercial expression. Under the first prong, certain commercial speech is not entitled to any protection; the informational function of advertising is at the heart of the First Amendment. If it does not accurately inform the public about
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lawful activity, it can be suppressed. Central Hudson Gas & Electric Co. v. Public Service Commn, 447 U.S. 557, 563, 564 (1980). Second, when speech is protected, the interest of the government in regulating and limiting it must be assessed. The State must assert a substantial interest to be achieved by restrictions on commercial speech. Id. at 568-69. Third, the restriction cannot be sustained if it provides only ineffective or remote support for the asserted purpose. Id at 569. The regulation must, directly advance'' the governmental interest. Id. The Court resolves this issue with reference to aggregate effects, and does not limit its consideration to effects on the challenging litigant. United States v. Edge Broadcasting Co., 509 U.S. 418, 427 (1993). Appellees claim the, [e]xploitation of artists by representatives has remained the Acts central concern through subsequent incarnations to the present day. (ER, Vol. IV, p. 153:16-17), Marathon at 984 citing Styne v. Stevens 26 Cal. 4th 42, 50 (2001). With respect, this is incorrect. Californias Legislature created the statutes now known as the TAA to stop owners of burlesque halls and bordellos from fronting as talent representatives to lure ingnues to work for them. (See Zarin, The California Controversy over Procuring Employment: A Case for the Personal Managers Act , Fordham Intell. Prop. Media & Ent. L.J., Vol. 7 Is. 2, 943 (1997).) To the best of NCOPMs knowledge, not one TAA controversy is based upon claims that an employer masqueraded as an employment counselor to find employees. TAA Petitions are not about a personal manager taking advantage of, or exploiting, an artist, but almost without exception involve opportunistic artists making the foundational claim that the successful efforts of their managers to promote and further artists careers amounts to a harmful act for which the artists may elect to withhold all compensation to which managers are otherwise 42
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contractually entitled. California has never expressed an interest, let alone a substantial interest, in punishing people for helping others to find gainful employment as an actor, writer, musician or director. Fourth, if the governmental interest could be served as well by a more limited restriction on commercial speech, the excessive restriction cannot survive. Central Hudson at 569-71. While the Court has rejected the idea that a least restrictive means' test is required, what is necessary is a reasonable fit' between means and ends, with the means narrowly tailored to achieve the desired objective. Board of Trustees v. Fox, 492 U.S. 469, 480 (1989). The restrictions on commercial speech imposed by the TAA cannot be saved or justified. The enforced restriction limits efforts to procure a lawful commercial transaction for that benefit of the Artist. The personal managers speech is being expressed pursuant to an agreement between the client and the manager. The managers efforts directly benefit the client who retains the ability to refuse any such proposals generated as a result of the commercial speech. NCOPM has stated a plausible claim that the TAA violates Commercial Free Speech rights under the First Amendment. The District Courts finding that the TAA regulates conduct and does not regulate speech is premature at best; in error at worst. It must be reversed, or in the alternative, this matter should be remanded to allow the NCOPM the opportunity to amend its Complaint. E. THE DISTRICT COURT ERRED IN FINDING PLAINTIFF FAILED TO STATE A CLAIM FOR A VIOLATION OF THE CONTRACT CLAUSE OF THE CONSTITUTION Finding, Plaintiff does not allege that the law has been altered in any way subsequent to the formation of a particular contract. Because Plaintiff points to no contract in existence when the TAA was enacted or altered, Plaintiff has failed to state a claim for a violation of the Contract Clause of the Constitution (ER, 43
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Vol. I, p. 11:6-10) was a misunderstanding of NCOPMs claim. The Complaint does not advance a facial, but an applied challenge to the TAAs constitutionality under the Contracts Clause. Article 1, Section 10 of the U. S. Constitution states, No State shall enter into any ex post facto Law, or Law impairing the Obligation of Contracts. This prohibition can be waived in deference to a States inherent police power to safeguard the interests of its people. When substantial impairments are challenged, the State agency that impairs contracts must show significant and legitimate public purpose behind the regulation and the adjustment of the contracting parties rights and responsibilities are of a character appropriate to the public purpose justifying the legislation's adoption. Energy Reserves Group v. Kansas Power & Light, 459 U.S. 400, 401 (1983). Here, there is no regulation, only enforcement of unwritten provisions. The Court laid out a three-part test for whether a law conforms to the Contract Clause in Energy Reserves. First, the state regulation must not substantially impair a contractual relationship. The TAA does. Second, the State "must have a significant and legitimate purpose behind the regulation, such as the remedying of a broad and general social or economic problem." There is no such purpose here. Third, the law must be reasonable and appropriate for its intended purpose. 459 U.S. at 411- 413. There is no rationality between the enforcement and the Acts legislative purpose. NCOPM readily acknowledges the general rules regarding forfeiture: "the public importance of discouraging such prohibited transactions outweighs equitable considerations of possible injustice between the parties" Southfield v. Barrett, 13 Cal.App.3d 290, 294 (1970); contracts made in violation of a regulatory statute are void, Vitek Inc. v. Alvarado Ice Palace, Inc. 34 Cal.App.3d 586, 591 (1973) and normally, courts will not "'lend their aid to the enforcement 44
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of an illegal agreement or one against public policy'" Felix v. Zlotoff, 90 Cal.App.3d 155, 162 (1979); Norwood v. Judd 93 Cal.App.2d 276, 288289(1949). However, "the rule is not an inflexible one to be applied in its fullest rigor under any and all circumstances. A wide range of exceptions has been recognized." Southfield Supra at 294. For example, illegal contracts will be enforced to avoid unjust enrichment at the expense of plaintiff. Id. However, the rule will not be applied where the penalties imposed by the Legislature exclude by implication the additional penalty of holding the contract void. Vitek at 591592; Calwood Structures v. Herskovic (1980) 105 Cal.App.3d 519, 522. Commenting on why courts are loath to void contracts, Calwood noted, The violation of law was one which did not involve serious moral turpitude; the policy of protecting the public from the future consequences of the contract will not be furthered because the transaction has been completed; . . . Appellee [could] be unjustly enriched at the expense of plaintiff . . . and the penalty resulting from denial of relief [could] be disproportionately harsh in relation to the violation involved." Southfield v. Barrett 13 Cal.App.3d 290, 294 (1970) Calwood supra. [F]orfeitures are not favored in law, and the courts will seek to find, if fairly possible, such a construction of the contracts of parties as will relieve them from the inequitable consequences arising therefrom. Palatine Ins. Co. v. Ewing et al, 92 Fed 111 98 (1899). [N]or does this court favor the idea of giving one's goods to another without compensation. Wood v. Krepps, 168 Cal 382, 387 (1914). As stated above, the TAA controversies involving personal managers are almost without fail initiated by artists that were benefited, not harmed, by their representatives actions. There is no claim of moral turpitude; the payment of compensation was completed for transactions between the parties and any 45
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forfeiture unjustly enriched the artist and disproportionately penalized the person working to achieve the artists professional objectives. NCOPM stated a plausible claim that the enforcement of the TAA is in violation of the Contracts Clause. The District Courts finding that NCOPM has failed to state a plausible claim for a violation of the Contract Clause of the U. S. Constitution is clearly in error and should be reversed. F. THE DISTRICT COURT ERRED BY NOT CONSIDERING PLAINTIFFS COMPLAINT IN ITS ENTIRETY In Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U. S. 308 (2007), the USSC held on a Rule 12(b)(6) motion, courts must consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions. The District Court erred by not considering NCOPMs Complaint in its entirety, including these claims: 1. The vagueness of the TAA does not provide Plaintiff with notice as to what specific behavior is to be restrained. It fails to state with specificity who is subject to regulation and what acts specifically constitute a violation of the Act. (ER, Vol. IV, p. 183, 34) 2. There is neither statutory nor constitutional foundation for Appellees enforcement of the TAA. It is enforced as if there were codified statutes restricting activity to licensees; there are not. (ER, Vol. IV, p. 184, 40) 3. Despite there not being a defined punishment or penalty for alleged violation of the TAA or the Act expressly stating that no violation can be considered criminal, the Commissioner routinely determines there to be illegal behavior and disgorges the violators contractual rights to be paid for their labor, a criminal penalty. (ER, Vol. IV, p. 184, 42)
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4. The TAA fails to provide clear notice that: (1) anyone who attempts to procure is being regulated, (2) clear notice that only those licensed as talent agents may procure, and (3) clear notice of what the consequence/penalty will be if one wrongly engages in the regulated activity. (ER, Vol. IV, p. 185, 57) 5. The TAA fails to set forth with any ascertainable certainty who or what person(s) are subject to the TAA restrictions. (ER, Vol. IV, p. 185, 58) 6. The Labor Commissions creation of remedies the states Legislature withheld is against California law, unconstitutional as applied and thus unconstitutional. If there is no notice of penalties, no penalties can be meted out. (ER, Vol. IV, p. 186, 62) 7. As the enforcement of the TAA violates every tenet of statutory construction, it is thus unconstitutional. (ER, Vol. IV, p. 187, 68) 8. As the enforcement disgorges ones compensation for labor without claims of non-performance, fraud, or being duly convicted of a crime, it is thus unconstitutional. ER, Vol. IV, p. 187, 68)
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X. CONCLUSION The District Courts premature dismissal of the Complaint disregarded the serious constitutional questions and the compelling public policy issues presented in this case. NCOPM seeks a reversal of the District Courts Order, based on this Courts finding that the TAA is facially unconstitutional or in the alternative to remand this matter to the District Court with instructions to allow NCOPM the opportunity to amend its Complaint. Dated: October 8, 2013 Respectfully submitted,
STEPHEN F. ROHDE (SBN 51446) ROHDE & VICTOROFF 1880 Century Park East, Suite 411 Los Angeles, CA 90067 Tel: (310) 277-1482 Fax: (310) 277-1485 RYAN H. FOWLER (SBN 227729) CHRISTOPHER B. GOOD (SBN 232722) FRANK W. FERGUSON II (SBN 211694) FOWLER & GOOD LLP 15303 Ventura Blvd., 9th Floor Sherman Oaks, CA 91403 Tel: (818) 302-3480 Fax: (818)279-2436 Attorneys for the Appellant National Conference of Personal Managers Inc.
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STATEMENT OF RELATED CASES Pursuant to Circuit Rule 28-2.6, I state that I am not aware of any other cases that are related to this appeal. STEPHEN F. ROHDE (SBN 51446) ROHDE & VICTOROFF 1880 Century Park East, Suite 411 Los Angeles, CA 90067 Tel: (310) 277-1482 Fax: (310) 277-1485 RYAN H. FOWLER (SBN 227729) CHRISTOPHER B. GOOD (SBN 232722) FRANK W. FERGUSON II (SBN 211694) FOWLER & GOOD LLP 15303 Ventura Blvd., 9th Floor Sherman Oaks, CA 91403 Tel: (818) 302-3480 Fax: (818)279-2436 Attorneys for the Appellant National Conference of Personal Managers Inc.
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CERTIFICATE OF COMPLIANCE I hereby certify that this brief does not exceed the type-volume limitation imposed by Federal Rules of Appellate Procedure 32(a)(7)(B). The brief was prepared using Microsoft Word 2008 and contains 13,766 words of proportionally spaced text. The typeface is Times New Roman, 14-point font. STEPHEN F. ROHDE (SBN 51446) ROHDE & VICTOROFF 1880 Century Park East, Suite 411 Los Angeles, CA 90067 Tel: (310) 277-1482 Fax: (310) 277-1485 RYAN H. FOWLER (SBN 227729) CHRISTOPHER B. GOOD (SBN 232722) FRANK W. FERGUSON II (SBN 211694) FOWLER & GOOD LLP 15303 Ventura Blvd., 9th Floor Sherman Oaks, CA 91403 Tel: (818) 302-3480 Fax: (818)279-2436 Attorneys for the Appellant National Conference of Personal Managers Inc.
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Case: 13-55545

National Conference of Personal Managers, Inc.

vs. Edmund G. Brown, Jr. et al

APPELLANTS OPENING BRIEF

Attorneys for Appellant National Conference of Personal Managers, Inc.

The TAA As Applied Exceeds Commissioners Statutory Authority

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