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Blanks v. Shaw

February 20, 2009


APPEAL from a judgment of the Superior Court of Los Angeles County, Susan Bryant-Deason, Judge. Reversed and remanded. (Los Angeles County Super. Ct. No. BC308355).

The opinion of the court was delivered by: Aldrich, J.



In this legal-malpractice based lawsuit, plaintiff and respondent Billy Blanks (Blanks) won a multi-million dollar judgment against his former attorneys, defendants and appellants William H. Lancaster (Lancaster) and Seyfarth Shaw, LLP (Seyfarth Shaw), jointly "Seyfarth."*fn1

The issues raised require us to discuss the exclusive jurisdiction of the Labor Commissioner in cases involving the Talent Agencies Act (Lab. Code, § 1700 et seq., the TAA or the Act) as most recently decided by the Supreme Court in Styne v. Stevens (2001) 26 Cal.4th 42 (Styne). We are also called upon to discuss the effect of Seyfarth's failure to file a petition with the Commissioner within the Act's one-year statute of limitation (Lab. Code, § 1700.44, subd. (c)), and the doctrine of severability of contracts applied to the TAA as addressed in Marathon Entertainment, Inc. v. Blasi (2008) 42 Cal.4th 974 (Marathon).

We hold that: (1) plaintiffs seeking affirmative relief under the TAA must bring their cases to the Labor Commissioner within the Act's one-year statute of limitations and cannot rely on the longer statute contained in the Unfair Competition Law; (2) the trial court prejudicially erred in failing to properly instruct on the doctrine of severability of contracts; (3) the discovery rule cannot extend the TAA statute of limitations in this case; (4) the trial court prejudicially erred by addressing a subject not presented in a motion in limine; and (5) the issue of "judgmental immunity" must be addressed on remand.

We reverse and remand to the trial court for further proceedings.


A. Factual Background of the Underlying Case*fn2

1. The Initial Facts

Blanks is a celebrity karate champion. He developed "Tae Bo," a fitness routine combining calisthenics, karate, dance, and push-ups. The routine was ideal for weight control, organized exercise classes, and training. Blanks developed an enthusiastic following and established the Billy Blanks World Karate Center where people lined up around the block to take classes. Radio and television programs spotlighted the Tae Bo craze. Blanks was in demand for film projects and public appearances. The first mass marketed Tae Bo videotape was a huge success.

2. Blanks Hires Greenfield

In 1991 or 1992, certified public accountant Jeffrey Greenfield (Greenfield) came into Blanks's studio as a client. Soon thereafter, Greenfield became Blanks's accountant.

In December 1997, Blanks hired licensed talent agent Suzy Unger (Unger) at the William Morris Agency.

In 1998, Greenfield convinced Blanks to change their relationship and allow Greenfield to manage Blanks's business affairs, negotiate business deals and media appearances, and schedule Blanks's appearances, in return for 10 percent of Blanks's revenues. Greenfield did not have a talent agencies' license. Greenfield began to manage and oversee many aspects of Blanks's business. His responsibilities ranged from doing the payroll to handling computer problems, hiring employees who addressed apparel design and product marketing, and negotiating with the parking valet.

Greenfield introduced Blanks to his lawyers, John Younesi and Jan Yoss. Blanks retained Younesi & Yoss LLP's services.

While Blanks was represented by the William Morris Agency, Greenfield arranged a number of movie and television appearances in 1998 and 1999. However, Greenfield's inept actions also harmed Blanks. For example, Greenfield's negotiations relating to a television action project called "Tae Bo Squad" did not result in an agreement. The project fizzled during the contract stage. In 1999, Greenfield's mishandling of the negotiations for a television series called "Battle Dome" resulted in Blanks being paid only as a consultant and at a sum far below Blanks's worth.*fn3 Greenfield did not return telephone messages from those seeking to hire Blanks, resulting in lost opportunities.

Greenfield said he wanted to be Blanks's agent. Greenfield convinced Blanks to fire the William Morris Agency. On February 19, 1999, Yoss wrote a letter to the agency terminating its services.

In 1999, Greenfield tried to license the Tae Bo trademark to NCP Marketing Group, Inc. (NCP), the company that produced Blanks's infomercials. However, the deal fell through because Greenfield could not work with NCP's principal. Eventually, Blanks and Younesi & Yoss negotiated the deal, securing for Blanks $20 million annually for 7 years. Blanks received $30 million upon signing the NCP deal, including a $20 million advance.

Greenfield was receiving a 10 percent fee on royalties, appearance fees, and other income generated by Blanks, including that from the NCP infomercials and product sales.

While the NCP deal was pending and Blanks still was represented by the William Morris Agency, Greenfield proposed to Blanks a partnership in which Greenfield would leave his accounting practice and oversee all of Blanks's current and future business interests, including all financial, management, operational, and marketing functions. Greenfield was also to help Blanks set up a charitable foundation and obtain movie, television, and clothing deals. In exchange, Greenfield would obtain a percentage of all of Blanks's business. The proposal called for Greenfield initially to receive one-third of all of Blanks's income, escalating to a 49 percent share in 5 years. Blanks resisted, but agreed to a trial period during which Greenfield was to be given an opportunity to prove if he could be an agent and run Blanks's business. The agreement was never reduced to a writing and Blanks never considered Greenfield to be his partner. Greenfield began receiving periodic checks.

Blanks's wife, Mrs. Gayle Blanks, had always been involved in Blanks's business. Around August 2, 1999, Mrs. Blanks wrote a lengthy letter to Greenfield detailing numerous complaints about Greenfield's role in Blanks's affairs. The letter prompted a four hour meeting in August 1999, between Mrs. Blanks and Greenfield. At its conclusion, Mrs. Blanks was pressured into signing two checks Greenfield previously had prepared that were made payable to him. Mrs. Blanks signed the two checks that totaled more than $7.6 million in order "[t]o get Jeffrey out of our life." After arriving back at her home, Mrs. Blanks collapsed and was taken to the emergency room.

Including the two August 1999 checks, Greenfield received 16 checks from December 29, 1998 through August 2, 1999 totaling approximately $10.6 million. The record does not reflect how the amount of each check was calculated.*fn4

In August 1999, Greenfield's check writing authority on Blanks's accounts was eliminated.

3. Blanks Hires Seyfarth Shaw to Pursue Greenfield

In September 1999, Blanks, Mrs. Blanks, Jan Yoss, and John Younesi met with Greenfield at the Blanks's home. The meeting was contentious. After this meeting, Blanks and his wife met privately with Yoss. Yoss informed Blanks that Greenfield did not have a talent agencies' license. This was the first time Blanks had heard that Greenfield was supposed to be licensed.*fn5 Yoss suggested Blanks bring a lawsuit against Greenfield to recover the money Greenfield had received. Yoss referred Blanks to Seyfarth Shaw, a prominent law firm.

In October 1999, Blanks met with Seyfarth Shaw lawyers Barbara A. Fitzgerald and Lancaster. During this first meeting, there was a discussion of Greenfield's unlicensed status under the TAA. Seyfarth began preparing a civil complaint no later than October 22, 1999. On October 27, 1999, Blanks formally retained the law firm to represent him. Lancaster had primary responsibility for the case.

The TAA requires all agents to be licensed. If an agent procures work for an artist and is unlicensed, the Act permits the Labor Commissioner to void ab initio all contracts between the parties and order the unlicensed agent to disgorge funds earned for those services. Such requests for affirmative relief first must be made by filing a claim with the Labor Commissioner, who has original jurisdiction over TAA claims. The TAA has a one-year statute of limitations, which the parties agree begins to run from the date the payment is made to the unlicensed agent. (Lab. Code, § 1700.44.) Generally, there is no right to conduct discovery in TAA matters before the Commissioner.*fn6

Lancaster knew, within a week or so after his first meeting with Blanks, that the Labor Commissioner had original jurisdiction over Blanks's TAA claim.

On November 4, 1999, Lancaster filed a civil lawsuit in the Superior Court on behalf of Blanks. The first cause of action was for violation of the TAA. It wasbased upon the fact that Greenfield was unlicensed. Greenfield's lack of licensure was also a foundational fact in the complaint's other 16 causes of action. For example, Blanks alleged as to all causes of action that "Greenfield gradually began to perform career management tasks on Blanks's behalf, including, for example, the negotiation of personal appearances and Tae Bo training engagements. [A]t no time did [Greenfield] obtain licensure as . . . a talent agent . . . as required for the legitimate performance of the roles Greenfield purported to assume for Blanks." The complaint alleged that Greenfield handled and mishandled negotiations and often referred to Greenfield as a "manager/agent." The complaint sought disgorgement of all funds that had been paid to Greenfield, and other relief.

On December 6, 1999, Greenfield cross-complained for breach of contract. The cross-complaint alleged that Greenfield was owed at least $49 million based on a partnership agreement. That same week, Greenfield served hisfirst round of discovery requests on Blanks.

On December 29, 1999, the one-year TAA statute of limitations lapsed on the first check. The TAA statute lapsed on the 16th check on August 2, 2000.

From November 4, 1999, when Lancaster filed the civil lawsuit, until August 2, 2000, when the one-year TAA statute lapsed on the last of the 16 checks, the following occurred:

On February 8, 2000, Division Two of the Second District Court of Appeal filed and certified for publication Styne v. Stevens (B121208), in which the Court of Appeal prominently discussed the Labor Commissioner's exclusive original jurisdiction in TAA matters and the TAA's one-year statute of limitations. This decision involved a casein which an entertainer defended a lawsuit filed by her longtime personal manager. She argued that any contract with her manager was unenforceable because he was not a licensed talent agent. About a week after the court of appeal rendered its decision, another lawyer with whom Blanks had consulted, wrote Blanks a letter alerting him to the opinion and the lawyer's concern that Seyfarth had not filed a petition with the Labor Commissioner within the one-year statute of limitations. Blanks forwarded the letter to those at Seyfarth involved inBlanks's case. A Seyfarth attorney researched the court of appeal decision and Seyfarth held conferences about the issues it raised. Lancaster knew that an older case, Buchwald v. Superior Court (1967) 254 Cal.App.2d 347, held that the Labor Commissioner had original jurisdiction over TAA issues. Seyfarth researched and prepared a petition to be filed with the Commissioner.

On March 16, 2000, a status conference was held in the superior court during which Lancaster admitted he may have to file a petition with the Labor Commissioner in order to preserve Blanks's TAA claims and file a motion to stay the civil lawsuit. In response, the court invited Blanks to bring a stay motion. The court set trial and final status conference dates for February 2001.

On March 23, 2000, Lancaster sent Blanks a letter advising him of the status of the case, including an update as to ongoing discovery disputes. Lancaster stated in the letter that a motion to stay the TAA claim and the TAA petition were "being prepared and will be filed next week."

On June 2, 2000, the California Supreme Court granted review of the February 8, 2000, Court of Appeal opinion, Styne v. Stevens (June 2, 2000, S086787).*fn7

During the spring of 2000, Blanks's new business advisor, Michael Crum, became concerned that Blanks already had spent $300,000 on the case against Greenfield. Crum requested Lancaster preparea projected budget for the Greenfield litigation for the next six months. In response, Lancaster informed Crum that the estimated budget to pursue the case was in excess of $200,000.This included the cost of taking 10 to 15 depositions.

By the summer of 2000, Seyfarth had not requested a stay of the civil action against Greenfield. In July 2000, Seyfarth served its first notice of Greenfield's deposition. Blanks's deposition commenced on July 12, 2000.

In late August 2000, Lancaster made a frantic telephone call to Blanks's home. Lancaster asked Mrs. Blanks when Blanks first had learned that Greenfield was not a licensed talent agent. Mrs. Blanks told Lancaster that Yoss had told Blanks about Greenfield's lack of licensure in August or September 1999. (See fn. 5.)Blanks's recollection was that the purpose of the telephone call was that Lancaster had inquired about when Blanks had last paid Greenfield. Lancaster abruptly ended the call after stating he had to get something filed. Less than 24 hours later, Seyfarth sent Blanks's petition to determine controversy to the Labor Commissioner by Federal Express. The petition was received by the Commissioner the next business day, Monday, August 28, 2000.

On September 6, 2000, Greenfield refused to appear for his deposition scheduled for the next day because Seyfarth had filed a petition with the Labor Commissioner. In October 2000, Seyfarth filed a motion to stay the Blanks v. Greenfield civil lawsuit.

4. Blanks Fires Seyfarth

Blanks hired the law firm of Allen Matkins Leck Gamble & Mallory, LLP, which substituted into the case against Greenfield on October 20, 2000. On November 2, 2000, the Superior Court heard and granted the motion to stay that had been filed by Seyfarth, pending the TAA hearing before the Labor Commissioner.

While Seyfarth was handling Blanks's case against Greenfield, Blanks paid Seyfarth approximately $400,000. According to Seyfarth, Blanks still owed approximately $46,000.

Attorney Martin Singer of Lavely & Singer was experienced in handling TAA claims. He associated into the case against Greenfield and presented Blanks's claims to the Labor Commissioner. The hearing before the Labor Commissioner began on September 10, 2001, and was continued to November 5, 2001. At the hearing, Attorney Singer explained how Greenfield had violated the TAA.

5. The Labor Commissioner's Ruling

On March 11, 2002, the Labor Commissioner issued a formal determination of controversy finding that Greenfield was operating as an unlicensed talent agent and had violated the TAA at least twice (once for "Tae Bo Squad" and once for "Battle Dome"). The Commissioner further ruled that Blanks's petition was untimely because Blanks had not satisfied the one-year TAA statute of limitations and thus, the Commissioner could not order Greenfield to disgorge monies he had received ...

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