Case 2:04-cv VAP -RNB Document 656 Filed 06/24/10 Page 1 of 8 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

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1 Case 2:04-cv VAP -RNB Document 656 Filed 06/24/10 Page 1 of 8 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES -- GENERAL PRIORITY SEND Case No. Date: June 24, 2010 Title: CELADOR INTERNATIONAL LTD., etc., et al., -v- THE WALT DISNEY COMPANY, etc., et al. ================================================================ PRESENT: HONORABLE VIRGINIA A. PHILLIPS, U.S. DISTRICT JUDGE Marva Dillard Courtroom Deputy ATTORNEYS PRESENT FOR PLAINTIFFS: None None Present Court Reporter ATTORNEYS PRESENT FOR DEFENDANTS: None PROCEEDINGS: MINUTE ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR JUDGMENT AS A MATTER OF LAW UNDER FEDERAL RULE OF CIVIL PROCEDURE 50(a) (IN CHAMBERS) Defendants The Walt Disney Company, American Broadcasting Companies, Inc., Buena Vista Television, Valleycrest Productions Ltd., and Walt Disney World Co. ("Defendants") filed a Motion for Judgment as a Matter of Law ("Motion") on June 20, 2010; Plaintiff timely filed its Opposition and Defendants timely filed their Reply. Having read and considered the filings submitted by all parties, and considered the arguments advanced by counsel at the hearings on the Motion conducted June 23 and 24, the Court rules as follows. A motion for judgment as a matter of law is governed by Federal Rule of Civil CIVIL -- GEN Page 1

2 Case 2:04-cv VAP -RNB Document 656 Filed 06/24/10 Page 2 of 8 Procedure 50, which states: If during a trial by jury a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue, the court may determine the issue against that party and may grant a motion for judgment as a matter of law against that party with respect to a claim or defense that cannot under the controlling law be maintained or defeated without a favorable finding on that issue. Fed. R. Civ. Pro. 50(a)(1). The standard for granting judgment as a matter of law is analogous to the standard for summary judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000). In reviewing all of the evidence in the record, "[t]he court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Id. The court "must disregard all evidence favorable to the moving party that the jury is not required to believe." Reeves, 530 U.S. at 151. In addition, "the court should give credence to the evidence favoring the nonmovant as well as that 'evidence supporting the moving party that is uncontradicted and unimpeached, at least to the extent that that evidence comes from disinterested witnesses.'" Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). 1. Defendants Are Not Entitled to Judgment as a Matter of Law Against Celador International on the Basis that it is a Non-Signatory to the Rights Agreement Although Defendants advance multiple arguments in support of this ground for their Motion, only one merits attention here, as Plaintiff relies solely on its theory that Celador Productions was acting on behalf of an undisclosed principal, Celador International, Ltd., when it signed the Rights Agreement upon which suit now is brought. (Opp'n at 1-7.) Plaintiff has introduced sufficient evidence during its case in chief for a jury to conclude that Celador Productions was acting on behalf of Celador International when it executed the Rights Agreement; such evidence CIVIL -- GEN Page 2

3 Case 2:04-cv VAP -RNB Document 656 Filed 06/24/10 Page 3 of 8 includes, for example, the testimony of Paul Smith and Sarah Gregson. To challenge Plaintiff's standing to sue as the undisclosed principal of the signatory, Celador Productions, Defendants rely on Paragraph 10 in the Rights Agreement, the nonassignment provision. This challenge fails. First, Paragraph 10 forbids the assignment of either party's obligations under the Agreement, but does not bar assignment of a party's right to payment. Under California law, such a non-assignment clause does not prevent the undisclosed principal from suing under the contract. Sumner v. Flowers, 130 Cal. App. 2d 672, 674 (1955); see also Restatement (Third) of Agency, 6.03, Agent for Undisclosed Principal, Comment (d) Circumstances that affect rights or liabilities of undisclosed principal: contract excluding undisclosed principal as party... "An undisclosed principal is not excluded from a contract by language stating that the contract is not assignable." Defendants' authorities cited in their Motion are easily distinguishable. For these reasons and those stated on the record at the hearing, the Court DENIES Defendants' Motion that they are entitled to judgment under Rule 50 against Celador International as a non-signatory to the Rights Agreement. 2. Defendants are Not Entitled to Judgment as a Matter of Law on Plaintiff's Network License Claim A. The Implied Covenant of Good Faith and Fair Dealing The covenant of good faith and fair dealing is implied into every contract. Wilson v. 21st Century Ins. Co., 42 Cal. 4th 713, 721 (2007). Defendants' assertions that Plaintiff must satisfy a "five prong test" before invoking the implied (Mot. at 8) are unsupported by the authorities they cite. 1 1 For example, Defendants cite In re Marriage of Corona, 172 Cal. App. 4th 1205,1219 (2009); that case actually holds "It is a well settled proposition that the law implies in every contract a covenant of good faith and fair dealing... The covenant creates a duty of good faith and fair dealing in a contract's performance and enforcement." (Citing Wilson, 42 Cal. 4th at 720; Jonathan Neil & Assoc., Inc. v. Jones, 33 Cal. 4th 917, 937 (2004). The discussion of a five-prong test in Corona CIVIL -- GEN Page 3

4 Case 2:04-cv VAP -RNB Document 656 Filed 06/24/10 Page 4 of 8 Plaintiff can prevail on its claim that ABC's assignment to BVT and BVT's license back of the network broadcast rights to ABC violated the implied covenant of good faith and fair dealing by one of two means. It can demonstrate either that Defendants ABC and BVT "subjectively lack[ed] belief in the validity of [their] act," or that Defendants' "conduct [was] objectively unreasonable." Carma Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc., 2 Cal. 4th 342, 373 (1992) (citations omitted). Plaintiff has not adduced evidence during trial that would permit a rational jury to conclude Defendants subjectively lacked belief in the validity of their conduct in entering into the license back transaction. Nevertheless, the Court denies the Rule 50 motion as to this issue because Plaintiff produced sufficient evidence to support a verdict in its favor based on the theory that the license back transaction was objectively unreasonable. None of Defendants' arguments to the contrary on this point are persuasive, including their contention that the industry prevalence of the type of license fee ABC paid proved the objective reasonableness of the license back transaction (Mot. at 12-13), nor their assertion that the assignment/license back transaction was objectively reasonable when viewed in the context of the entire amount paid to Plaintiff under the Rights Agreement (Mot. at 13-14). Defendants also seek judgment as a matter of law on Plaintiff's covenant of good faith and fair dealing claim as to the assignment/license back transaction by arguing that all of the William Morris & Associates witnesses testified (1) they understood such arrangements were typical, (2) they understood that ABC/BVT intended to enter into this type of arrangement, and (3) they understood what "typical" license fees producers usually received in these types of transactions. The jury is free to disbelieve the testimony of these witnesses, particularly given their interest (a financial one) in the outcome of the litigation. relates only to the prerequisites for reading an implied term into a contract, a disfavored practice. Corona, 172 Cal. App. 4th at CIVIL -- GEN Page 4

5 Case 2:04-cv VAP -RNB Document 656 Filed 06/24/10 Page 5 of 8 For all of these reasons, as well as the reasons set forth on the record at the hearing on the Motion, the Court DENIES the Motion as to the breach of the covenant of good faith and fair dealing claim. 3. Defendants are Not Entitled to Judgment as a Matter of Law on Plaintiff's Claim that Defendants Were Not Entitled to Deduct Merchandising Distribution Expenses In support of their Rule 50 Motion on this issue, Defendants rely in part on the June 18, 2009, ruling on their Motion in Limine No. 5. In that ruling, this Court, Cooper, J., held that Plaintiff had failed to proffer any evidence in opposition to the Motion on the express breach of contract claim (based on the dispute over Defendant's deduction of merchandising distribution expenses). Plaintiff has now introduced such evidence, making this issue appropriate for decision by a jury. As Plaintiff points out in its opposition to the Motion, it has introduced testimony from witnesses that BVT and Valleycrest were closely aligned, if not functionally the same entity, and that BVT allocated revenues to Valleycrest to avoid having to pay licensing fees to Plaintiff. This is sufficient to defeat Defendants' Motion for Judgment as a Matter of Law. For these reasons as well as the reasons set forth on the record at the hearing, the Court DENIES Defendant's Motion on this point. 4. Defendants are Entitled to Judgment as a Matter of Law on Plaintiff's Fraud Claim Plaintiff originally pled five statements by Defendants as the bases for its fraud claim. In an earlier ruling, Judge Cooper found three of those statements were not actionable. The Court GRANTS Defendants' Motion as to the fraud claim, finding no rational jury could find in favor of Plaintiff on the remaining two allegedly false CIVIL -- GEN Page 5

6 Case 2:04-cv VAP -RNB Document 656 Filed 06/24/10 Page 6 of 8 representations. 2 The two statements now forming the basis for the fraud claim are: (1) that Disney was the "best" studio to develop a valuable franchise for the series for the mutual benefit of the parties and (2) that ABC would "aggressively monetize" the Millionaire series and brand on behalf of ABC/BVT. As to the second statement, Paul Smith testified that Michael Davies told him at some point in either 1998 or 1999 that "ABC would maximize or guarantee to merchandise to the absolute maximum the property,... not just by the broadcast of the television program, but through all ancillary rights, and that this would be to our mutual benefits, Celador's as well as to ABC's." Even when considered in the context of the other three allegedly fraudulent statements described in the Pretrial Conference Order (that ABC was the "only," "perfect" and "cleanest" choice for the series), as Plaintiff argues was the intent of Judge Cooper's Motion in Limine ruling, the evidence adduced at trial fails to survive Defendants' Rule 50 challenge. That evidence included (1) Mr. Smith's level of business experience and sophistication in the entertainment industry, (2) Celador's representation in the transaction by William Morris & Associates, and (3) the lack of interest in the series on the part of other networks or buyers. The evidence regarding the allegedly fraudulent representations simply reveals statements that are too vague, conclusory and of the nature of opinion to be actionable, particularly in the context of this record. See, e.g., Schonfeld v. City of Vallejo, 50 Cal. App. 3d 401, 412 (1975) (reversed on other grounds) (dismissing at pleading stage because 2 Although the Court need not reach the issue whether or not Paul Smith's contradictory statements during his trial testimony are sufficient to constitute binding admissions sufficient to form the basis for a grant of judgment as a matter of law in Defendants' favor, it rejects Defendants' argument that the conflicting testimony suffices for this purpose. Rather, it would be a question of fact for the jury to decide which of Smith's statements to accept, and how to interpret his testimony regarding the lack of belief on his part that Michael Davies made material misrepresentations to him. CIVIL -- GEN Page 6

7 Case 2:04-cv VAP -RNB Document 656 Filed 06/24/10 Page 7 of 8 statements of opinion not actionable); Summit Technology, Inc. v. High-Line Med. Instr. Co., 933 F. Supp. 918, 931 (C.D. Cal. 1996) (general, vague claims of superiority over comparative are not actionable because "mere expression of opinion"). Drawing all inferences in favor of Plaintiff, and having considered all evidence produced during its case in chief, the Court finds there is no legally sufficient evidentiary basis for a reasonable jury to find for Plaintiff on its fraud claim. Hence, it GRANTS Defendants' Motion under Rule 50(a) on that claim. 5. Defendants are Entitled to Judgment as a Matter of Law on Plaintiff's Claim for Tortious Interference with Contract The Court GRANTS the Motion as to Plaintiff's tortious interference with contract claim. Plaintiff's Opposition to the Motion did not address this claim, and although given the chance to argue this issue at the hearing on the motion, its counsel declined to do so. To the extent the tortious interference claim is based on a theory that Disney wrongfully interfered with its rights under the Rights Agreement by pressuring BVT to fail to renegotiate with ABC the compensation due to Celador under the Rights Agreement under the agreement, it lacks merit both legally and factually. First, Plaintiff has pointed to no authority holding Defendants had any obligation to renegotiate the Rights Agreement. Moreover, it introduced no evidence that Disney pressured, coerced or in any other manner caused BVT to fail to renegoiate Celador's rights under the Rights Agreement, or otherwise interfered with Celador's rights under the Rights Agreement. For these reasons, as well as the reasons set forth on the record during the hearing on the Motion, the Court GRANTS the judgment in favor of Defendants on the punitive damages claim. 6. Defendants are Entitled to Judgment as a Matter of Law on Plaintiff's Claim for Punitive Damages As the Court has granted judgment as a matter of law in favor of Defendants on the only claims that would support an award of punitive damages, i.e., the tort claims for fraud and for tortious interference with contract, the Court GRANTS the Motion under Rule 50 as to the claims for punitive damages. 7. Defendants are Entitled to Judgment as a Matter of Law that the William CIVIL -- GEN Page 7

8 Case 2:04-cv VAP -RNB Document 656 Filed 06/24/10 Page 8 of 8 Morris Agency served as the Plaintiff's Agent The Court GRANTS Defendants' Motion for Judgment as a Matter of Law on the issue that William Morris served as agent for Celador Productions in connection with the negotiation of the Rights Agreement. Not only did Paul Smith testify to this effect, so did every one of the William Morris agents. Drawing all reasonable inferences in favor of Plaintiff, no reasonable jury could find the William Morris Agency was acting as an agent for any party other than Celador Productions. Plaintiff relies in vain on evidence that William Morris was paying the compensation package for Defendant, as that evidence does not suffice to create a conflict in the evidence on this issue. A party to a transaction, or even a third party, may pay an agent's commission in a transaction without becoming the agent of one or both parties. For these reasons, as well as the reasons set forth on the record during the hearing on the motion, the Court GRANTS the Motion as to this issue. IT IS SO ORDERED. CIVIL -- GEN Page 8