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Don Johnson Productions, Inc v. Rysher Entertainment et al

October 1, 2012

[5]     DON JOHNSON PRODUCTIONS, INC., PLAINTIFF, CROSS-APPELLANT, AND RESPONDENT,
v.
RYSHER ENTERTAINMENT ET AL., DEFENDANTS, APPELLANTS AND CROSS-RESPONDENTS.



[6]     APPEAL from an order of the Superior Court of Los Angeles County, Michael Stern, Judge. (Los Angeles County Super. Ct. No. BC407796)

[8]     The opinion of the court was delivered by: Mosk, J.

[9]      CERTIFIED FOR PARTIAL PUBLICATION*fn1

[10]     Affirmed in part; reversed in part.

[11]     I. INTRODUCTION

[12]     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 Procedure*fn2 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 In the unpublished portion of the opinion, we will explain why we modify the damage award and dismiss plaintiff's cross-appeal.

[13]     II. FIRST AMENDED COMPLAINT

[14]     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.

[15]     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.

[16]     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.

[17]     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 paragraph II-12. Finally, the contract provides plaintiff access to the series masters so that it may exploit the program on interactive devices.

[18]     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.

[19]     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.

[20]     III. DISCUSSION

[21]     A. Appeal

[22]     1. Statute of limitations

[23]     a. overview

[24]     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.

[25]     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.

[26]     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 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.

[27]     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).*fn3 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.

[28]     b. the circumstances leading to the adoption of section 360.5 in 1951 and its amendment in 1953

[29]     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. 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.

[30]     Section 360.5 was originally enacted in 1951. (Stats. 1951, ch. 1106, § 1, p. 2863.*fn4 ) 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 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.)

[31]     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 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.)

[32]     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 Civil Procedure Section 360.5, 1951-1952, 4 Stan. L.Rev. 415, 417-418.) The Senate Interim Judiciary Committee identified the effect of Senate Bill No. 671 (1953 Reg. Sess.) on that uncertainty, '"The confusion can easily be clarified by limiting Section 360.5 to the subject of waivers."' (Carlton Browne & Co. v. Superior Court, supra, 210 Cal.App.3d at p. 43.)

[33]     The Legislative Counsel's May 1, 1953 report states: "Changes subject matter of the section from 'acknowledgment, promise, or any form of waiver' to simply 'waiver.' [¶] Changes limitation on effectiveness of waiver of statute of limitations executed after the statutory period has run from four years from the dates of termination of the period to four years from the date of the waiver. [¶] Permits renewal for the same period from, rather than upon, the expiration of the immediately preceding waiver. [¶] Provides that the 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." (Legis. Counsel, Rep. on Sen. Bill No. 681 (1953 Reg. Sess.) p. 1.)

[34]     The May 4, 1953 report of the Attorney General states: "Amends Section 360.5 of the Code of Civil Procedure by eliminating acknowledgments of an existing debt and promises to pay an existing debt from the effect of this section. As amended, the section is confined to waivers of the statute of limitations. [¶] Amends Section 360.5 so as to provide that a waiver of the statute of limitations made after the expiration of the time to sue may be effective for a period of four years from the date of the waiver, under the existing section such a waiver would be effective only for a [four-year] period commencing upon the date that the statute of limitations would expire on the original obligation. [¶] Amends Section 360.5 so as to exempt from the provisions thereof written waivers, acknowledgements and promises made by a person obligated to repay moneys fraudulently or [illegally] obtained from a county or to secure repayment of the indigent aid. [¶] Comment: There appears to have been some conflict between the existing Section 360.5 and Section 360 of the [Code of Civil Procedure section] insofar as promissory notes were concerned. Under Section 360 payment of the interest or principal due on a promissory note would constitute a promise or acknowledgment (Steiner v. Croonquist [(1951)] 108 Cal.App.2d [Supp.] 895), while under Section 360.5 such a payment would be ineffective unless accompanied by a written promise." (Deputy Attorney General William J. Power, letter on Sen. Bill No. 681 (1953 Reg. Sess.) to Gov. Earl Warren, p. 1.)

[35]     On April 30, 1953, Edward D. Landels, counsel for the California Bankers Association, which originally sponsored Senate Bill No. 681, wrote Governor Warren: "Section 360.5 was added to the Code of Civil Procedure in 1951 so as to invalidate indefinite and perpetual waivers of the Statute of Limitations. To that no one took exception. The Section was so drafted, however, as to possibly repeal the provisions of Section 360 which provides that payment of principal or interest on a promissory note should be deemed to toll the Statute if made before the Statute had run. This was unintended and Senate Bill [No.] 681 will make it clear that Section 360.5 applies only to waivers and does not affect the provisions of the preceding section dealing with what constitutes a sufficient acknowledgment to toll the Statute of Limitations." (Edward D. Landels, Counsel for Cal. Bankers Assoc., letter to Gov. Earl Warren, Sen. Bill No. 681 (1953 Reg. Sess.) p. 1.)

[36]     Finally, the May 11, 1953 report of Governor Warren's Legislative Secretary, Mr. Vasey, stated: "Amends Section 360.5, Code of Civil Procedure, relating to waiver of statute of limitations. [¶] Eliminates acknowledgments of, and promises to pay an existing debt from the coverage of the section, confining it to waivers of the statute of limitations. [¶] Provides that a waiver of the statute of limitations made after the statutory period has run, may be made effective for a period of four years from the date of the waiver, rather than four years from the date that the statutory period would expire on the original obligation. [¶] Provides that the limitation of the section upon the period of effectiveness of any waiver or statute of limitation, shall not be applicable to any acknowledgment, promise or waiver which is in writing and signed by the person obligated and given in any county to secure repayment of indigent aid or the repayment of monies fraudulently or illegally obtained from the county. [¶] . . . This section was added in 1951 to validate indefinite and perpetual waivers of the statute of limitations. To that no one took exception. As drafted, however, it would possibly repeal Section 360 providing the payment of principal or interest on a promissory note should be deemed to toll a statute if made before the statute of limitations had run. This was unintended. This amendment will make it clear that Section 360.5 applies only to waivers and does not affect the provisions of Section 360 dealing with what constitutes a sufficient acknowledgment to toll the statute of limitations." (Beach Vasey, Legis. mem. to Gov. Earl Warren, Sen. Bill No. 681 (1953 Reg. Sess.) pp. 1-2.)

[37]     c. section 360.5 does not apply to the tolling agreement in this case

[38]     Defendant's contention section 360.5, with its four-year renewal requirement, is the controlling statute of limitations provision is without merit. Section 360.5 involves the waiver of the statute of limitations. The present case does not involve waiver of the right to assert the statute of limitations. Rather, the parties entered into a tolling agreement. Tolling agreements are a comparatively recent development in law. Prior to 1977, only one federal or state opinion contains both the phrases "statute of limitation" and "tolling agreement." (U.S. v. Harris Trust and Sav. Bank (7th Cir. 1968) 390 F.2d 285, 288.) A tolling agreement, executed as the one here to permit efforts to be made to settle the matter without litigation, furthers the highly favored public policy of settling disputes. (See Neary v. Regents of University of California (1992) 3 Cal.4th 273, 277; Salmon Protection & Watershed Network v. County of Marin (2012) 205 Cal.App.4th 195, 201 [tolling agreement in a California Environmental Quality Act dispute].)

[39]     Under California law, tolling generally refers to a suspension of a statute of limitations. (Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665, 674 citing Woods v. Young (1991) 53 Cal.3d 315, 326, fn. 1 ['"Tolling may be analogized to a clock that is stopped and then restarted. Whatever period of time that remained when the clock is stopped is available when the clock is restarted, that is, when the tolling period has ended.'"]; Cuadra v. Milan (1998) 17 Cal.4th 855, overruled on a different point in Samuels v. Mix (1999) 22 Cal.4th 1, 16, fn. 4, citing 3 Witkin, Cal. Procedure (4th ed. 1996) Actions, § 407, p. 513 ['"The statute [of limitations] may be tolled (i.e., its operation suspended) by various circumstances, events or acts."'].) Federal decisional authority is in accord. (Chardon v. Soto (1983) 462 U.S. 650, 652, fn. 1; Board of Regents v. Tomanio (1980) 446 U.S. 478, 486.) Various California statutory provisions permit the statute of limitations to be tolled; i.e., suspended for a specified period. (E.g., §§ 352, subd. (a) [minors, insanity], 352.1 [imprisonment], 366.1 [plaintiff's death], 366.2, subd. (a) [defendant's death].) Decisions from other jurisdictions state that a tolling agreement suspends or interrupts the operation of the statute of limitations. (Camico Mutual Insurance Company v. Citizens Bank (7th Cir. 2007) 474 F.3d 989, 993 [both parties agreed tolling meant suspension]; Hunter-Boykin v. George Washington Univ. (D.C.Cir. 1998) 132 F.3d 77, 83-84 [relying on legal dictionary definitions--tolling means suspension or interruption of the statute of limitations]; Clark v. Milam (S.D.W.Va. 1994) 847 F.Supp. 409, 421 [describing tolling agreement as suspending the running operation of the statute of limitations].)

[40]     Our duty is to implement the Legislature's intent. (People v. Gonzalez (2008) 43 Cal.4th 1118, 1125; Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1386-1387.) We turn now to section 360.5. Section 360.5 applies to waivers of the statute of limitations. One could intelligently argue that waiver includes a tolling agreement. After all, the defendant waives the right to assert the tolling period counts as part of the time during which the statute of limitations is running. On the other hand, tolling involves the suspension of the statute of limitations. It is plausible that a defendant has not waived the right to assert the statute of limitations when a tolling agreement is entered into by potential litigants. The defendant can litigate the statute of limitations issue but is barred from including the tolling period in the time to bring suit. Thus, there is some ambiguity as to the reach of section 360.5 and we may examine extrinsic aids to determine its application to the case before us which ...


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