Filed 10/1/12 CERTIFIED FOR PARTIAL PUBLICATION * IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE DON JOHNSON PRODUCTIONS, INC., Plaintiff, Cross-Appellant, and Respondent, v. RYSHER ENTERTAINMENT et al., Defendants, Appellants and Cross-Respondents. B227304 (Los Angeles County Super. Ct. No. BC407796) APPEAL from an order of the Superior Court of Los Angeles County, Michael Stern, Judge. Affirmed in part; reversed in part. Kirkland & Ellis, Mark Holscher, Jeffrey S. Sinek, Christopher Landau and Michael Shipley for Plaintiff, Respondent and Cross-Appellant. Horvitz & Levy, Frederic D. Cohen, Lisa Perrochet and John A. Taylor, Jr.; Munger Tolles & Olson, Bart H. Williams, Manuel F. Cachán and Soraya C. Kelly for Defendant and Appellant, Rysher Entertainment, LLC. Gibson, Dunn & Crutcher, Theodore J. Boutrous, Jr., and Theane Evangelis Kapur for Defendant, Appellant and Cross-Respondent, 2929 Entertainment, LP. O‘Melveny & Myers, Charles P. Diamond, Alicia Hancock and Amy R. Lucas for Defendant, Appellant and Cross-Respondent, Qualia Capital, LLC. * Pursuant to California Rules of Court, rules 8.1100 and 8.1110, this opinion is certified for publication with the exception of parts III(1)(A)(d) through III(B).
Don Johnson's law suit against Rysher Productions for Nash Bridges damages.
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Filed 10/1/12
CERTIFIED FOR PARTIAL PUBLICATION*
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
DON JOHNSON PRODUCTIONS, INC.,
Plaintiff, Cross-Appellant,
and Respondent,
v.
RYSHER ENTERTAINMENT et al.,
Defendants, Appellants
and Cross-Respondents.
B227304
(Los Angeles County
Super. Ct. No. BC407796)
APPEAL from an order of the Superior Court of Los Angeles County, Michael
Stern, Judge. Affirmed in part; reversed in part.
Kirkland & Ellis, Mark Holscher, Jeffrey S. Sinek, Christopher Landau and
Michael Shipley for Plaintiff, Respondent and Cross-Appellant.
Horvitz & Levy, Frederic D. Cohen, Lisa Perrochet and John A. Taylor, Jr.;
Munger Tolles & Olson, Bart H. Williams, Manuel F. Cachán and Soraya C. Kelly for
Defendant and Appellant, Rysher Entertainment, LLC.
Gibson, Dunn & Crutcher, Theodore J. Boutrous, Jr., and Theane Evangelis Kapur
for Defendant, Appellant and Cross-Respondent, 2929 Entertainment, LP.
O‘Melveny & Myers, Charles P. Diamond, Alicia Hancock and Amy R. Lucas for
Defendant, Appellant and Cross-Respondent, Qualia Capital, LLC.
* Pursuant to California Rules of Court, rules 8.1100 and 8.1110, this opinion is
certified for publication with the exception of parts III(1)(A)(d) through III(B).
2
I. INTRODUCTION
Defendants, Rysher Entertainment, LLC, 2929 Entertainment, LP, and Qualia
Capital, LLC, appeal from a judgment entered in favor of plaintiff, Don Johnson
Productions, Inc. On December 7, 1994, plaintiff and Rysher Entertainment, LLC
entered into a contract for the services of an actor, Don Johnson. Entitled the ―Term
Agreement‖ (the contract), it provided for production of the ―Nash Bridges‖ television
series (the series). In the published portion of this opinion, we address defendants‘
contention that a tolling agreement is governed by Code of Civil Procedure1 section
360.5. As will be discussed, section 360.5 has a requirement that a waiver of the statute
of limitations be renewed every four years. Defendants argue an agreement to toll the
statute of limitations is governed by the section 360.5 requirement that it be renewed
every four years. We conclude the agreement to toll the statute of limitations in this case
is not subject to section 360.5. In the unpublished portion of the opinion, we will explain
why we modify the damage award and dismiss plaintiff‘s cross-appeal.
II. FIRST AMENDED COMPLAINT
On November 1, 1994, CBS Television and plaintiff entered into development
agreements to air 22 episodes of the series. On December 7, 1994, plaintiff and Rysher
Entertainment, LLC entered into the contract governing the production of the series.
Pursuant to paragraph II-12 of the contract, plaintiff owned a 50 percent interest in the
series copyright. During the course of the production of the series, the contract was
extended in 1997, 1998 and 1999. CBS Television aired the final episode on May 4,
2001. Rysher Entertainment, LLC was contractually obligated to fund production of the
series.
1 Future statutory references are to the Code of Civil Procedure unless otherwise
noted.
3
In 2001, 2929 Entertainment, LP purchased Rysher Entertainment, LLC which
owned an extensive catalogue of television programs. According to the first amended
complaint, Rysher Entertainment, LLC ―was a mere shell corporation with no employees
or offices‖ which was operated by 2929 Entertainment, LP. In 2006, 2929
Entertainment, LP sold Rysher Entertainment, LLC to Qualia Capital, LLC the present
owner. As in the case of 2929 Entertainment, LP, Qualia Capital, LLC operated Rysher
Entertainment, LLC. Prior to 2008, Qualia Capital, LLC dissolved Rysher
Entertainment, LLC. Both 2929 Entertainment, LP and Qualia Capital, LLC were the
alter egos of Rysher Entertainment, LLC.
In 1999, Rysher Entertainment, LLC sold the syndication rights of the series to
USA Networks. Plaintiff was not a party to the syndication agreements. Since then, the
series has been syndicated worldwide. As noted, pursuant to paragraph II-12, plaintiff is
a 50 percent owner of the series copyright. Plaintiff is entitled to a 50 percent
exploitation of the copyright. Rysher Entertainment, LLC, which was obligated to remit
50 percent of any profit to plaintiff, failed to do so.
Under the terms of the contract with Rysher Entertainment, LLC, plaintiff is
entitled to 50 percent of the profits of contingent compensation. The first amended
complaint describes plaintiff‘s contingent compensation rights in paragraph II-4 of the
contract: ―In addition to providing [plaintiff] 50% ownership in the Series copyright, the
[contract], under Section II-4, also guaranteed [plaintiff] 50% of all gross receipts (AGR),
which is defined as all gross receipts from all sources received by Rysher [Entertainment,
LLC] or any affiliated entity after the deduction of (i) a 15% distribution fee to Rysher
[Entertainment, LLC], (ii) distribution costs, (iii) direct production costs, and (iv) interest
on the net deficited portion of the direct production costs.‖ Despite the fact Rysher
Entertainment, LLC reported $316 million in receipts, it claimed a deficit of $150 million
existed. This provision, according to the first amended complaint, had no effect on
plaintiff‘s rights as a 50 percent copyright owner. Rather, paragraph II-4 provides a right
to additional compensation beyond that guaranteed by the copyright ownership language
4
paragraph II-12. Finally, the contract provides plaintiff access to the series masters so
that it may exploit the program on interactive devices.
On May 16, 2002, the plaintiff and Rysher Entertainment, LLC entered into a
tolling agreement. The agreement states the tolling period began on May 15, 2002.
Neither party had rescinded the tolling agreement.
Based on the foregoing, the first cause of action alleges Rysher Entertainment,
LLC breached the contract by failing to: document plaintiff‘s copyright interest so as to
insure its enforceability; pay plaintiff 50 percent of all profits from the series; and provide
access to the series masters so plaintiff could exploit them through interactive devices.
The second cause of action for conversion alleges defendants have converted the masters
and the revenue from the series. The third cause of action alleges defendants have been
unjustly enriched because they have retained 50 percent of the series profits. The fourth
cause of action seeks an accounting so plaintiff can receive 50 percent of the series
profits utilizing generally accepted accounting principles. The final cause of action
alleges defendants interfered with plaintiff‘s prospective economic advantage by denying
it access to the series masters. The prayer for relief seeks: compensatory damages;
injunctive relief; attorney fees; punitive damages; and interest. Defendants‘ first
amended answers allege plaintiff‘s claims were barred by various statutes of limitations.
We will discuss the pertinent facts when discussing the parties‘ relevant contentions.
5
III. DISCUSSION
A. Appeal
1. Statute of limitations
a. overview
Defendants argue that plaintiff‘s complaint was untimely filed. The complaint
was filed on February 17, 2009. Defendants‘ first amended answers allege plaintiff‘s
claims are barred by the section 337, subdivision (1) four-year statute of limitations for
written contracts.
Both plaintiff and defendants agree the contract based claims in the first amended
complaint vested on March 17, 1998. On that date, an accountant employed by Rysher
Entertainment, LLC provided Marc Granier, an employee of plaintiff, with a
―participation/distribution statement‖ for the period ending December 31, 1997. This
statement detailed the income for the series. The accountant held the title of ―Director
Participations and Residuals‖ of Rysher Entertainment, LLC.
On May 16, 2002, Samuel R. Pryor, an attorney representing plaintiff, sent a letter
to Frank Stewart who represented Rysher Entertainment, LLC. Mr. Pryor‘s May 16,
2002 letter confirmed an agreement to toll the statute of limitations for potential claims
against Rysher Entertainment, LLC. Mr. Pryor‘s letter states in part: ―This letter will
confirm our conversation on Wednesday, May l5th, in which you courteously agreed that
Don Johnson‘s time in which to bring any action relating to the series ‗Nash Bridges‘
against Rysher Entertainment will be tolled from, at least, our conversation on Tuesday,
May 14th until and unless you give us reasonable notice (30 days) rescinding this tolling
agreement (the ‗tolling period‘). [¶] You also mentioned that you would ‗work with me‘
if I requested a reasonable earlier date. I am informed there was a statement dated March
6
17, 1998. Accordingly, I would appreciate your agreeing that the tolling period begins on
March 16, 2002. [¶] Under this agreement, all statutorily prescribed periods of
limitations (and the doctrine of laches to the extent based upon the time period being
tolled pursuant to this agreement) will be tolled during the tolling period. The conduct of
any party in entering into this agreement will not be used against any party for any
purpose in any subsequent litigation except with respect to the tolling of the period of
limitations and the doctrine of laches.‖ The May 16, 2002 letter was executed by
Mr. Stewart on behalf of Rysher Entertainment, LLC. As noted, the complaint was filed
on February 17, 2009.
Defendants present two statute of limitations contentions. First, defendants argue
that suit was filed after the tolling agreement expired by operation of law. Defendants
assert section 360.5 requires that a tolling agreement be renewed in writing every four
years. Since the tolling agreement was executed by Mr. Pryor more than four years
before suit was filed, defendants argue plaintiff‘s claims are barred by section 337,
subdivision (1).2 Section 337, subdivision (1) is the statute of limitations for written
contracts. We will discuss in the published portion of this opinion the first issue as to
whether section 360.5 applies to a tolling agreement. Second, defendants argue that the
tolling agreement does not apply to plaintiff as it refers only to the actor, Mr. Johnson.
This second statute of limitations issue will be discussed in the unpublished portion of
this opinion.
b. the circumstances leading to the adoption of
section 360.5 in 1951 and its amendment in 1953
Defendants argue section 360.5 requires that an indefinite tolling agreement be
renewed every four years. We begin with an analysis of section 360.5 and the
circumstances which gave rise to its enactment in 1951 and amendment in 1953.
2 Section 337, subdivision (1) states in part: ―Within four years. [¶] 1. An action
upon any contract, obligation or liability founded upon an instrument in writing . . . .‖
7
Defendants rely on section 360.5 which states: ―No waiver shall bar a defense to any
action that the action was not commenced within the time limited by this title unless the
waiver is in writing and signed by the person obligated. No waiver executed prior to the
expiration of the time limited for the commencement of the action by this title shall be
effective for a period exceeding four years from the date of expiration of the time limited
for commencement of the action by this title and no waiver executed after the expiration
of such time shall be effective for a period exceeding four years from the date thereof, but
any such waiver may be renewed for a further period of not exceeding four years from
the expiration of the immediately preceding waiver. Such waivers may be made
successively. The provisions of this section shall not be applicable to any
acknowledgment, promise or any form of waiver which is in writing and signed by the
person obligated and given to any county to secure repayment of indigent aid or the
repayment of moneys fraudulently or illegally obtained from the county.‖ (Italics added.)
It is the italicized language referring to the four-year renewal requirement that is at issue.
Section 360.5 was originally enacted in 1951. (Stats. 1951, ch. 1106, § 1, p.
2863.3) The Legislative Counsel‘s June 12, 1951 report on section 360.5 states:
―Invalidates any form of waiver of statutes of limitations unless in writing signed by the
person obligated. Provides such waiver is effective for not more than 4 years from
expiration of time limited. Authorizes successive renewals of such waivers.‖ (Legis.
Counsel, Rep. on Assem. Bill No. 370 (1951 Reg. Sess.) p. 1.) The June 12, 1951 report
of the Attorney General reiterated the position of the Legislative Counsel but added, ―We
3 When adopted in 1951, section 360.5 stated: ―No acknowledgment, promise or
any form of waiver shall bar a defense to any action that the action was not commenced
within the time limited by this title unless the acknowledgment, promise or any form of
waiver is in writing and signed by the person obligated. No such acknowledgment,
promise or any form of waiver executed prior or subsequent to the expiration of the time
limited for the commencement of the action by this title shall be effective for a period
exceeding four years from the date of expiration of the time limited for commencement
of the action by this title, but such waiver may be renewed for a further period of not
exceeding four years upon the expiration of the immediately preceding waiver. Such
waivers may be made successively.‖ (Stats. 1951, ch. 1106, § 1, p. 2863.)
8
believe that this bill is subject to no substantial legal objections.‖ (Rep. of Deputy
Attorney General Marcus Vanderlaan on Assem. Bill No. 370 (1951 Reg. Sess.) p. 1.)
Governor Earl Warren‘s Legislative Secretary, Beach Vasey, stated in a June 15, 1951
memorandum: ―I recommend approval. The general purpose of statutes of limitations is
to prevent the enforcing of stale claims. The purpose would appear furthered by this
legislation. There appears to be no objection.‖ (Legislative Memorandum from Beach
Vasey to Governor Earl Warren on Assem. Bill No. 370 (1951 Reg. Sess.) p. 1.)
Section 360.5 was amended in 1953 to state as it does now. (Stats. 1953, ch. 655,
§ 1, p. 1906.) In Carlton Browne & Co. v. Superior Court (1989) 210 Cal.App.3d 35, 42-
43, our colleagues in Division Four of this appellate district digested the report of the
Senate Interim Judiciary Committee concerning the 1953 amendment. We recite our
Division Four colleagues‘ summary of that interim committee report prepared in
connection with Senate Bill No. 671 (1953 Reg. Sess.) in detail: ‗―In 1947 Section 360
of the Code of Civil Procedure was amended so as to provide that the statute of
limitations on a promissory note should not commence to run until the last payment of
principal or interest made by the party to be charged prior to the time when the statute of
limitations would otherwise have run. The purpose of this amendment was to make
unnecessary the successive renewal of promissory notes and recording of mortgages or
deeds of trust every four years in those cases in which the borrower continued to
regularly make payments on account of principal or interest. The rule theretofore was
that a payment on account of interest or principal would toll the statute only if in addition
to the mere fact of payment there existed some acknowledgment of the debt or promise to
pay it. This amendment has made it possible for lenders to carry borrowers without
either commencing suit or compelling a renewal of the obligation so long as the borrower
kept up his payments. [¶] In 1951 Section 360.5 was added to the code, designed to
prevent the exaction for purchasers or borrowers of an unlimited and indefinite waiver of
the statute of limitations at the time credit was extended or a loan made. This amendment
was intended not only to require that waivers of the statute be in writing but that no one
9
waiver could waive the statute for a period of more than four years beyond the time when
the statute would otherwise have run.‖‘ (Carlton Browne & Co. v. Superior
Court, supra, 210 Cal.App.3d at pp. 42-43.)
In 1951, the drafters of section 360.5 had included some language from section
360. (Carlton Browne & Co. v. Superior Court, supra, 210 Cal.App.3d at pp. 42-43.)
Section 360, as it was viewed in 1951 and 1953, allowed for tolling of the statute of
limitations in the case of written acknowledgment of or a promise to pay a debt.
(Western Coal & Min. Co. v. Jones (1946) 27 Cal.2d 819, 822 [―The statutory rule in
respect to the tolling of the statute by a subsequent writing . . . .‖ is § 360]; Bank of
America etc. v. Hunter (1937) 8 Cal.2d 592, 594-595 [debt acknowledgments were
sufficient to toll statute of limitations pursuant to § 360].) As originally adopted in 1951,
section 360.5 created some confusion concerning the meaning of section 360. (Carlton
Browne & Co. v. Superior Court, supra, 210 Cal.App.3d at pp. 42-43; California Code of
Construction Co. (1991) 234 Cal.App.3d 1724, 1745.)
4. Prejudgment interest
On July 12, 2010, the trial court signed a judgment. The judgment did not include
a prejudgment interest award.6 When the judgment was signed, plaintiff had filed no
6.
The July 12, 2010 judgment states, ―NOW, THEREFORE, IT IS ORDERED,
ADJUDGED AND DECREED that plaintiff Don Johnson Productions Inc. shall have
28
motion for a prejudgment interest award. On July 27, 2010, plaintiff filed a notice of
intent to file to file new trial motion which only sought a prejudgment interest award:
―PLEASE TAKE NOTICE THAT Plaintiff Don Johnson Productions, Inc. intends to
move the Court to set aside the partial judgment entered on July 12, 2010 against
defendant Rysher Entertainment, Inc. and to issue a judgment that includes prejudgment
interest under Civil Code section 3287(b) on the $23,200,000 judgment against defendant
Rysher Entertainment, Inc.‖ The notice of intent further stated: ―The partial judgment
entered on July 12, 2010 against defendant Rysher Entertainment, Inc[.], did not include
prejudgment interest. By this motion, Plaintiff Don Johnson Productions, Inc. does not
seek a new trial. Rather, Plaintiff only seeks a judgment that includes an award of
prejudgment interest on the award of $23,200,000 against defendant Rysher
Entertainment, Inc. under Civil Code section 3287[, subdivision] (b). Pursuant to North
Oakland Medical Clinic v. Rogers (1998) 65 Cal. App. 4th 824, a request for
prejudgment interest may be sought in the form of a motion for a new trial on the grounds
of ‗inadequate damages.‘‖ On August 6, 2010, plaintiff filed its points and authorities in
support of its new trial motion to request prejudgment interest. Plaintiff argued that Civil
Code section 3287, subdivision (a) permitted the trial court to award prejudgment
interest. Rysher Entertainment, LLC argued the $23.2 million judgment was not
reasonably calculable within the meaning of Civil Code section 3287, subdivision (a). In
its papers, Rysher Entertainment, LLC noted that any order including prejudgment
interest must comply with the written specification of reasons requirement of section
657.7
On September 8, 2010, the trial court granted plaintiff‘s limited new trial motion
which sought an award of prejudgment interest. In a minute order, the trial court ruled:
and recover partial judgment from defendant Rysher Entertainment, Inc. in the amount of
$23,200,000.00, plus interest at the legal rate of 10% per annum from the date of this
judgment, and costs of suit pursuant to a timely-filed memorandum of costs.‖ 7 Section 657 states in part, ―When a new trial is granted, on all or part of the issues,
the court shall specify the ground or grounds upon which it is granted and the court‘s
reason or reasons for granting the new trial upon each ground stated.‖
29
―Plaintiff‘s motion to seek prejudgment interest on damage award is called and argued.
[¶] The motion is granted. The Court allows 10% per annum from May 22, 1998.‖ On
December 17, 2010, judgment was entered which states in part, ―NOW, THEREFORE,
IT IS ORDERED, ADJUDGED AND DECREED that plaintiff Don Johnson
Productions, Inc. shall have and recover judgment, jointly, and severally, from defendants
Rysher Entertainment, L.L.C., 2929 Entertainment, LP, and, and Qualia Capital LLC as
follows: damages in the amount of $23,200,000, plus prejudgment interest (calculated on
the principal sum of $23,200,000 from May 22, 1998 to the date hereof at the legal rate of
10 percent per annum) in the amount of $29,149,369.86 . . . .‖
Defendants argue the order granting a partial new trial motion, which awarded
prejudgment interest, must be reversed because of noncompliance with the section 657
specification of reasons requirement. We agree. The failure to state the grounds for
granting a new trial motion requires the order at issue be reversed. (Oakland Raiders v.
National Football League, supra, 41 Cal.4th at pp. 633-640; Stevens v. Parke, Davis &