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Imax Corporation, A Canadian Corporation v. Sanborn Theatres

June 16, 2011

IMAX CORPORATION, A CANADIAN CORPORATION, PLAINTIFF,
v.
SANBORN THEATRES, INC. DBA THE MOVIE EXPERIENCE, A CALIFORNIA CORPORATION, DEFENDANT.
SANBORN THEATRES, INC., A CALIFORNIA CORPORATION, COUNTERCLAIMANT,
v.
IMAX CORPORATION, A CANADIAN CORPORATION; REGAL CINEMAS, INC., A TENNESSEE CORPORATION DOING BUSINESS AS EDWARD TEMECULA STADIUM 15 AND AS EDWARDS TEMECULA STADIUM 15; AMC ENTERTAINMENT, INC., A DELAWARE CORPORATION DOING BUSINESS AS AMC TYLER GALLERIA 16; AND DOES 1-10, INCLUSIVE, COUNTERDEFENDANTS.



The opinion of the court was delivered by: Honorable Ronald S.W. Lew Senior, U.S. District Court Judge

ORDER

Re: Defendant and Counterclaimant's Motion for Summary Judgment as to the Complaint and Partial Summary Judgment

On May 10, 2011, Defendant and Counterclaimant Sanborn Theatre's, Inc.'s Motion for Summary Judgment as to the Complaint and for Partial Summary Judgment [32] came on for regular calendar before this Court. The Court having reviewed all papers submitted pertaining to this Motion and having considered all arguments presented to the Court, NOW FINDS AND RULES AS FOLLOWS:

The Court hereby DENIES Defendant and Counterclaimant's Motion for Summary Judgment and for Partial Summary Judgment.

Summary judgment is appropriate when the pleadings, affidavits, and other supporting papers demonstrate that there are no genuine issues of material fact, and the moving party is entitled to prevail as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). When making this determination, the Court must view the record in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). A "genuine" dispute is one that is supported by evidence sufficient to permit a reasonable jury to find in favor of the nonmoving party. Id. at 247-48.

Defendant and Counterclaimant Sanborn Theatre's, Inc. ("Defendant") first assert Summary Judgment as to Plaintiff and Counterdefendant IMAX Corporation's ("Plaintiff") Complaint against Defendant for Breach of Contract. Specifically, Defendant argues there is no genuine issue of material fact as to whether Defendant breached the June 29, 2007 contract between the Parties (the "Agreement") that is the subject of this Action.

Defendant also asserts Partial Summary Judgment as to thirteen issues raised by Defendant in its Counterclaim that arise out of and relate to the underlying issue of whether Defendant breached the Agreement. Defendant claims that because there is no genuine issue of material fact regarding whether Defendant breached this Agreement, there are no genuine issues of material fact with regard to these issues as well. As such, Defendant requests Partial Summary Judgment as to the following: (1) Plaintiff's claim for Breach of Contract is without merit and Defendant is entitled to judgment on that claim for relief as a matter of law; (2) Defendant commenced the cure of the default alleged by Plaintiff on June 8, 2009; (3) Defendant did not breach the Agreement; (4) Plaintiff improperly terminated the Agreement; (5) Plaintiff's termination of the Agreement on June 15, 2009 was improper; (6) Plaintiff improperly terminated Defendant's exclusive territory rights under the Agreement; (7) Plaintiff breached the Agreement; (8) Plaintiff did not give Defendant the opportunity to diligently pursue the cure to completion because Plaintiff terminated the Agreement prior thereto; (9) Defendant attempted to pursue the cure to completion diligently between June 15, 2009 and June 26, 2009; (10) Counterdefendant Regal Cinemas, Inc. ("Regal") is operating an IMAX Theater house in Riverside County within an area covered by Defendant's exclusive territory as defined by the Agreement; (11) Counterdefendant AMC Entertainment, Inc. ("AMC") is operating an IMAX Theater house in Riverside County within an area covered by Defendant's exclusive territory as defined in the Agreement; (12) AMC operated an IMAX Theater house in Orange County within an area covered by Defendant's exclusive territory as defined by the Agreement; and (13) Defendant's exclusive rights to show IMAX movies within the territory defined in the Agreement remain in full force and effect because Plaintiff did not have a right to terminate these rights.

As a preliminary matter, the Court hereby DENIES Defendant's Request for Judicial Notice. Fed. R. Evid. 201. With regard to Plaintiff and Counterdefendants' evidentiary objections, the Court OVERRULES Plaintiff and Counterdefendants' objections to Exhibits 1, 2, 10 and 13 of the Declaration of Bruce Sanborn ("Sanborn Declaration") and OVERRULES the objections to paragraphs 6, 7, 9, 11, 12 and 16 of the Sanborn Declaration. The Court SUSTAINS Plaintiff and Counterdefendants' objection to paragraph 29 of the Sanborn Declaration for lack of foundation and SUSTAINS the objection to Exhibit 16 of this Declaration on the grounds that it is not relevant.

1. Defendant's Motion For Summary Judgment As To Plaintiff's Complaint For Breach Of Contract

In this present Motion, Defendant first asserts Summary Judgment as to Plaintiff's Complaint for Breach of Contract. Plaintiff's Complaint centers around Defendant's alleged breach of the Agreement that was entered into between Defendant and Plaintiff for the sale of two projection systems and the provision of certain related services to Defendant. Plaintiff alleges that after the Parties entered into this Agreement, Defendant went into default when it failed to make the scheduled payments to Plaintiff pursuant to the terms of the Agreement. On May 7, 2009, after Defendant had gone into default, Plaintiff sent Defendant a notice of default in accordance with Section 15.01 of the Agreement.*fn1 Plaintiff asserts that after this notice of default was sent, Section 15.01 required Defendant to completely cure the default within the thirty-day cure period. Plaintiff states it later agreed to extend the cure deadline to June 15, 2009, but asserts that because Defendant did not make the necessary payment by the June 15, 2009 deadline, Defendant was therefore in breach of the Agreement. Plaintiff subsequently terminated the Agreement, and now brings this current Action for damages arising from Defendant's alleged breach.

Defendant asserts that Summary Judgment should be granted as to Plaintiff's Complaint for Breach of Contract because there is no genuine issue of material fact as to whether Defendant breached the Agreement. Specifically, Defendant first argues that after Plaintiff sent the notice of default, the language contained in Section 15.01 of the Agreement did not require Defendant to completely cure the default by the end of the applicable cure period. Instead, Defendant asserts that Section 15.01 only required Defendant to timely commence a cure of the default and diligently pursue the completion of such cure in order to comply with the terms of the Agreement. Defendant argues that this interpretation of Section 15.01 is in line with the language of the Agreement as a whole, the intent of the Parties and the negotiations between the Parties that took place prior to the drafting of the Agreement. Accordingly, Defendant asserts the Court should find that Section 15.01 of the Agreement only required that Defendant commence to cure the default and diligently pursue such cure to completion, and therefore find that Defendant was not in breach of the Agreement by failing to completely cure the default by the end of the applicable time period.

Defendant then argues that there is no genuine issue of fact regarding whether it complied with the requirements of Section 15.01 under its proffered interpretation. Specifically, Defendant asserts that it timely commenced the cure when it send Plaintiff a check for $50,263.00 on June 8, 2009 and that it took steps throughout the cure period to diligently pursue the cure of the default, up until the point in time in which Plaintiff terminated the Agreement. Therefore, Defendant argues the Court should find as a matter of law that Defendant did not breach the Agreement and that Summary Judgment should be granted as to Plaintiff's Complaint for Breach of Contract.

A. Interpretation Of Section 15.01 The threshold issue in this present Motion centers around the correct interpretation of the language at issue in Section 15.01, setting forth that,

Whenever [Defendant] is in default of its material obligations under this Agreement and continues to be in default and has failed to commence to cure such default and diligently pursue such cure to completion, within thirty (30) days after [Plaintiff] has delivered written notice of the default to [Defendant], [Plaintiff] may at its election ... terminate this Agreement. [Declaration of Bruce Sanborn, Ex. 4.] Specifically, the Parties raise the issue of what this Section required once Plaintiff sent Defendant the notice of default. Defendant argues that the Court should find that the above language in Section 15.01 did not require Defendant to completely cure the default, but instead only required that Defendant commence to cure the default and diligently pursue such cure ...


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