Foxcroft Prods., Inc. v. Universal City Studios LLC

76 Cal.App.5th 1119

292 Cal.Rptr.3d 310

FOXCROFT PRODUCTIONS, INC., et al., Plaintiffs and Appellants,

v.UNIVERSAL CITY STUDIOS LLC, Defendant and Appellant.

B303161

Court of Appeal, Second District, Division 8, California.

Filed March 30, 2022

As Modified on Denial of Rehearing April 26, 2022

Burkhalter Kessler Clement & George, Alton G. Burkhalter, Daniel J. Kessler, Keith E. Butler, Irvine; Greines, Martin, Stein & Richland, Robert A. Olson and Alana H. Rotter, Los Angeles, for Plaintiffs and Appellants.

O'Melveny & Myers, Daniel M. Petrocelli, Timothy B. Heafner, Los Angeles; Hueston Hennigan, Robert N. Klieger and Rajan S. Trehan, Los Angeles, for Defendant and Appellant.

WILEY, J.

We must define a key contract word: "photoplays." This word includes television episodes of Columbo, says the studio that made this long-running television show. The creators of the Columbo character disagree. They say the word photoplays has many meanings and is ambiguous—but it cannot mean what the studio says. The studio, however, is right: photoplays includes episodes . That resolves the core of this contractual dispute.

The court held a trial without defining photoplays for jurors, who found the studio breached its contract about Columbo. After this verdict, however, the court came to agree with the studio: defining the contract word was an issue for the court and not the jury, and a photoplay meant "any video recorded program ," which included episodes of Columbo. The court granted the studio's motion for a new trial but denied its motion for judgment notwithstanding the verdict.

These rulings were right. The interpretive task was for the court, not the jury. The court's interpretation of photoplays was correct, as was its order for a new trial. The trial court also properly refused to give the studio the judgment outright.

The pretrial summary adjudication of a fraud claim was, however, in error. We reverse this ruling.

I

Events began in the 1960s, when two writers entered a decades-long relationship with Universal City Studios, LLC. The relationship fell into litigation in 2017, when these writers sued Universal, alleging the studio owed them money from a 1971 contract. The facts span half a century.

A

We divide this long story into three little chapters. First we summarize Columbo's origin. Next we recount the 1971 contract at issue. Then we sketch later events.

William Link and Richard Levinson invented the character of a detective named Columbo. Foxcroft Productions, Inc. is Link's company. Fairmount Productions, Inc. is Levinson's company. In their work here as writers and producers, Link and Levinson were a team. For simplicity, we sometimes refer to this team, or their companies, as "the writers."

In 1962, the team's stage play about Columbo toured in 56 cities.

In 1967, Link and Levinson licensed the television and movie rights to their play to Universal. They also sold Universal the rights to the Columbo character. Link and Levinson remained involved with Columbo, however, through several agreements with Universal. Link and Levinson agreed, for fixed compensation, to write and to executive produce a television movie based on their play.

In 1970, a different writer wrote the script for a second Columbo television movie that served as a pilot. NBC picked up the show for a television series.

A 1971 contract is the linchpin of this case. Link and Levinson entered this contract with Universal about the right to produce and distribute their work for up to three years. This arrangement applied both to their work on Columbo and to their other projects.

Marvin Moss, an agent from a major talent agency, led negotiations for Link and Levinson. Attorney Barry Hirsch, who had worked in entertainment law since approximately the early 1960s, also represented them.

The 1971 negotiations culminated in a 17-page contract. The contract has two parts: a 15-page typed body (the Memorandum) and a two-page printed attachment (the Rider). When we use the word "contract," we are referring to the whole deal: the Memorandum and the Rider together. We excerpt these two parts in turn.

a

The Memorandum is typed on Universal letterhead. Executives at Universal negotiated the Memorandum's terms with the writers’ representatives, Moss and Hirsch. A Universal typist then put the Memorandum on paper.

The Memorandum is not a form contract. Its terms are personalized to the particulars of the ongoing relationship between Universal and the team of Link and Levinson.

The Memorandum is long, organized, and detailed, but contains no section devoted to definitions. It uses the words photoplay or photoplays more than two dozen times. Sometimes it uses this noun alone and unmodified: photoplay. Other times it modifies the noun in five ways: television photoplays, anthological photoplays, episodic photoplays, pilot photoplay, and feature-length photoplay.

The Memorandum's paragraphs display structural logic. We tour them, pausing where appropriate.

The first paragraph specifies a guaranteed annual payment to the writers. The second paragraph lists their writing and producing duties. The third paragraph sets dollar sums of " ‘per assignment’ compensations" for an array of specified possible jobs involving executive producing, producing, and writing. This paragraph has subsections, sub-subsections and so forth. Covering 11 pages, it is the Memorandum's longest section. The guaranteed annual payment subsumes the per assignment compensation unless the latter exceeds the former, in which case Universal would pay the writers the greater sum.

The fourth and fifth paragraphs spell out other payments Universal would make to the writers: script consultant fees, contractual royalties, sequel royalties, and residuals. For the most part, these payments would be in addition to the guaranteed annual payment. These sums are not at issue here.

The sixth paragraph introduces the topic of this case: net profits. This provision grants the writers a share of net profits under certain conditions. "The computation of net profits shall be as per the attached [Rider] ." The italics are ours.

b

The Rider is attached to the Memorandum. This two-page printed form sets out a general formula for calculating and dividing net profits between Universal and the writers.

The Rider devotes more than half of its text to definitions. Examples of its nine defined terms are Gross Receipts, Distribution Expenses, and Production Costs. Photoplay is not a defined term.

The Rider uses the singular or plural version of the word photoplay more than 40 times. Most uses are unmodified: photoplay. The exceptions are references to feature-length television photoplays and pilot photoplays. There are no references to anthological photoplays, episodic photoplays, or other modified uses of the word photoplays.

After the definitions, the Rider discusses accountings and payments. This section requires Universal to provide periodic accounting statements. Accounting statements would not be required, however, during periods when the writers were not entitled to any payments.

For this appeal, the Rider's crucial provision is its paragraph C, which authorizes Universal to act as the distributor of "the Photoplays." This paragraph allows Universal to treat its distribution fees as expenses that reduce net profits. Thus, the larger Universal's distribution fees, the smaller the net profits Universal would share with the writers.

Paragraph C includes a cap on the size of Universal's distribution fees that is significant in this case. We emphasize the key words: "such fees and charges shall not exceed those charged by [Universal] according to its then existing standard practices , applicable to photoplays owned, financed or distributed by [Universal], and in all other matters affecting gross receipts, distribution expenses, and production costs [Universal] shall adhere to the same practices and procedures according to which it normally conducts its business at the time in question with respect to photoplays owned, financed or distributed by [Universal]."

Columbo was a hit. Universal's trial counsel called it "incredibly successful." Gross receipts for Columbo totaled about $600 million. NBC broadcast Columbo from 1971 to 1978. Link and Levinson produced the first season. ABC broadcast a second cycle of the show from about 1989 to 2003.

Universal financed and paid for the production of both cycles of Columbo. That is, Universal did the work of making the show, including hiring and paying writers, actors, directors, camera operators, lighting and sound crews, wardrobe teams, editors, makeup artists, set designers, and the other personnel. Universal found the filming locations, supplied studios, equipment, post-production work, and so on.

Universal also distributed the show. Distribution is the process of finding licensees and negotiating contracts to license programs. Universal negotiated agreements with television networks to air the original broadcast and to license the right to exhibit Columbo nationally and internationally. When Universal distributed programs itself, it charged distribution fees as a percentage of gross receipts. Universal said its distribution fees totaled about $160 million.

Before the second cycle began, the parties believed the first cycle of Columbo was not in net profits. In 1988, Link and Levinson negotiated an amendment to the 1971 contract to preclude Universal from offsetting losses from the first cycle against potential profits from the second cycle. The amendment also modified the definition of net profits to specify how Universal would account for home video receipts.

According to Universal, it did not send accounting statements to the writers because it did not believe the show was in net profits.

In 2013, Link asked for an accounting and an audit of Universal's books.

Universal contends it was allowed to cross-collateralize losses from the second cycle against profits from the first cycle, but it elected not to do so....