Opinion
No. C 03-4796 SBA, [Docket No. 45].
July 30, 2004
ORDER GRANTING DEFENDANTS AND COUNTERCLAIM PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT
This matter comes before the Court on the motion for judgment on the pleadings or, in the alternative, for summary judgment or summary adjudication of issues of defendants and counterclaim plaintiffs Gloria Estefan and Estefan Enterprises, Inc. (collectively, "Defendants"). Having read and considered the arguments presented by the parties in their moving papers and in a hearing on July 27, 2004, the Court finds this matter appropriate for disposition. The Court hereby GRANTS Defendants' Motion.
I. BACKGROUND
A. Factual Summary
The parties in the dispute are Signatures Network, Inc. ("Signatures"), Gloria Estefan ("Estefan"), and Estefan Enterprises, Inc ("EEI"). The parties contracted to provide Signatures the exclusive merchandising rights for a concert tour headlined by Defendant Estefan (the "First Concert Series"). Two years after Defendant Estefan completed that tour, the parties amended their Agreement to provide that Signatures would be the merchandiser for a subsequent concert series (the "Second Concert Series").
More particularly, in July 1995, Sony Signatures, Inc. ("Sony Signatures"), Signatures' predecessor, entered into a Merchandising License Agreement ("Agreement") with Defendant EEI. Def's M.S.J., Exh. A, Merchandising License Agreement. The Agreement gave Sony Signatures the exclusive right to manufacture and distribute certain merchandise in connection with the First Concert Series by the popular recording artist, Defendant Estefan. Def's Exh. A, Agreement ¶ 2. Defendant Estefan signed a "Guarantee Agreement", agreeing to personally guarantee the full and complete performance of Defendant EEI's obligations under the Agreement. Id. at p. 22.
In exchange, Sony Signatures agreed to advance funds to EEI and pay royalties to EEI. Id. at ¶ 5. Sony Signatures would be able to recoup the royalties from the advances paid, meaning that it would recover the advances from the merchandising income. Id. Paragraph 6.4 of the Agreement provides that Sony Signatures could also have Defendants repay the advances. Id. Repayment effectively transforms advances into a loan recoverable directly from the recipient of the advances without regard to merchandising income. Sony Signatures paid EEI $1 million in advances incrementally over the course of the Agreement as EEI and Estefan hit certain performance benchmarks. Plaintiff's Opp. 2:11-15; Def's M.S.J. 4:7-9.
The compensation schedule was as follows:
5.1 Advances. Signatures shall pay Licensor an "Advance" equal to $1,000,000. The Advance shall be payable as follows:
(a) $200,000 within seven business days after the execution of this agreement.
(b) $200,000 no later than sixty days prior to the first Qualifying Performance of a major worldwide tour by Artist;
(c) $300,000 upon the first Qualifying Performance of a major worldwide tour by Artist;
(d) $150,000 when Artist has performed before at least 400,000 Qualifying People;
(e) $150,000 when Artist has performed before at least 600,000 Qualifying People (inclusive of the 400,000 Qualifying People referred to in Paragraph 5.1(d)).
Def's Exh. A, Agreement ¶ 5.1.
A "Qualifying Performance" means "a live musical concert in the Qualifying Countries of at least 60 minutes, given by [the] Artist as the sole headliner in a venue with a capacity of between 2,000 and 25,000 people." Id. at ¶ 14.1. The "Performance Requirement" required Estefan to perform before a minimum of 600,000 Qualifying People within twenty four months of the first Qualifying Performance. Id. at ¶ 6.1.
Based on the total number of Qualifying Performances before the required number of Qualifying People, Sony Signatures paid the final $150,000 Advance, which was required by Paragraph 5.1(e) of the Agreement. Def's Answer ¶ 14. By the end of the First Concert Series, however, Sony Signatures had not recouped all of its advances paid under the Agreement. Def's Answer, Exh. E, Signatures' Correspondence ¶ 2.
EEI and Estefan include in their motion for summary judgment, Exhibit D, a copy of a check for $150,000 from Sony Signatures to EEI, dated February 25, 1997. Def's M.S.J., Exh. D, Check.
In anticipation of Defendant Estefan's upcoming U.S. tour, on January 13, 2000, Signatures and EEI amended the Agreement through the "Amendment No. 1 to Merchandising License Agreement" ("Amendment"). Def's M.S.J., Exh. B, Amendment; Def's M.S.J. 5:16-6:2. Defendant Estefan guaranteed the performance of Defendant EEI's duties and obligations under the Amendment. Amendment p. 5-6. The Amendment created a new schedule of Advances:
2. Advances. Signatures shall pay Licensor an additional Advance equal to Three Hundred Twenty-five Thousand Dollars ($325,000) payable as follows:
(a) $175,000 within seven business days after execution of this Amendment;
(b) $150,000 upon the first Qualifying Performance of a major U.S. tour by Artist.
For purposes of clarification, the unrecouped Advances paid under the Agreement shall continue to be recoupable from Royalties earned hereunder.Id. at ¶ 2. Thus, the Amendment provided that for any advances Signatures already had paid under the Agreement, Signatures could recoup from the royalties for the new performances listed in the Amendment. While the Amendment specifically clarified that unrecouped advances from the First Concert Series could be recouped from the merchandise sales from the U.S. tour (the "Second Concert Series"), it did not make any such explicit clarification regarding repayment of those advances.
The Amendment also created a new performance requirement:
6. Between December 31, 1999 and December 31, 2000, Licensor shall cause Artist to conduct live musical performances before a minimum of 265,000 Qualifying People (the "Amendment No. 1 Performance Requirement"). All references to the Performance Requirement in the Agreement shall also refer and apply to the Amendment No. 1 Performance Requirement.Id. at ¶ 6. In addition, paragraph 7 of the Amendment replaced paragraphs 6.3 and 6.4 of the Agreement, regarding the recoupment of Advances:
7. From and after the date of this Amendment, Paragraphs 6.3 and 6.4 are hereby deleted in their entirety and replaced with the following:
6.3 Non-Commencement of Tour; Gap in Touring. If (a) Artist's major U.S. Tour does not begin by August 15, 2000 and/or (b) there is a gap of ninety days or more between Qualifying Performances by Artist, then interest on any unrecouped balance of Advances, calculated monthly at the then current prime rate charged by Bank of America plus two percent, will be added as an additional advance hereunder. Such interest will be charged until the start or resumption of Artist's major U.S. tour, as applicable.
6.4 Cancellation or Postponements. If for any reason (a) Artist's major U.S. tour does not begin by September 15, 2000 or (b) more than one hundred eighty days elapses between Qualifying Performances, or (c) Artist dies or incurs an injury, illness or similar incapacity, whether physical or mental, which will render her unable to perform at a Qualifying Performance for more than one hundred eighty days thereafter, Signatures has the right to require Licensor to repay all unrecouped Advances paid hereunder. Such amount shall be due within thirty days of Licensor's receipts of a written request for same. Upon such full repayment, this Agreement shall terminate.Id. at ¶ 7. Per the Amendment, Signatures paid the initial $175,000 Advance. Def's Answer ¶ 19. Defendant Estefan, however, did not commence performances in accordance with the schedule set forth in the Amendment. Def's Answer, Exh. E, Signatures' Correspondence ¶ 2.
B. Procedural History
On October 24, 2003, Signatures filed a diversity action for breach of contract, requesting a $452,000.00 award. On May 3, 2004, Defendants filed a motion for judgment on the pleadings, or in the alternative, for summary judgment or summary adjudication of issues.
II. LEGAL STANDARD
A. Judgment on the Pleadings
Federal Rule of Civil Procedure 12(c) authorizes a party to bring a motion for judgment on the pleadings. "A judgment on the pleadings is properly granted when, taking all the allegations in the non-moving party's pleadings as true, the moving party is entitled to judgment as a matter of law." Fajardo v. County of Los Angeles, 179 F.3d 698, 699 (9th Cir. 1999). For purposes of such a motion, "the allegations of the non-moving party must be accepted as true, while the allegations of the moving party which have been denied are assumed to be false." Hal Roach Studios v. Richard Feiner and Co., 883 F.2d 1429, 1436 (9th Cir. 1989). The Court may not go beyond the face of the pleadings to resolve the motion without converting the motion to one for summary judgment.Id.
B. Summary Judgment
The moving party's burden in a motion for summary judgment is as follows:
In order to carry its burden of production, the moving party must produce either evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial. In order to carry its ultimate burden of persuasion on the motion, the moving party must persuade the [C]ourt that there is no genuine issue of material fact.Nissan Fire Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000).
Under Federal Rule of Civil Procedure 56, summary judgment is warranted against a party who "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). There is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. Anderson v. Liberty Lobby, Inc, 477 U.S. 242, 249 (1986).
In opposing a summary judgment motion, the nonmoving party must come forward with specific facts demonstrating a genuine factual issue for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Thus, an opposition which fails to identify and reference triable facts is insufficient to preclude the Court's granting of a properly supported summary judgment motion. See Nilsson, Robbins, Dalgarn, Berliner, Carson Wurst v. Louisiana Hydrolec, 854 F.2d 1538, 1545 (9th Cir. 19880. Nonetheless, any inferences to be drawn from the facts must be viewed in a light most favorable to the party opposing the motion. T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir. 1987).
III. DISCUSSION
A. Contract Interpretation
Because the Court must determine the meaning of the contract, it treats Defendants' motion as a motion for summary judgment.
The substantive law of the forum state applies in diversity jurisdiction. See Stanford Ranch, Inc. v. Maryland Cas. Co., 89 F.3d 618, 624 (9th Cir. 1996). Thus, California contract law governs this case. A plaintiff bringing a breach of contract claim must plead and prove (1) the existence of a contract, (2) plaintiff's performance or excuse for non-performance, (3) defendant's breach, and (4) resulting damages to plaintiff.Reichert v. General Ins. Co. of America, 68 Cal.2d 822, 830 (1968).
"The interpretation of contracts under California law involves a complex interplay of questions of fact and questions of law."City of Santa Clara v. Watkins, 984 F.2d 1008, 1012 (9th Cir. 1993). The threshold question in interpreting a contract or its provisions is "whether the contested terms are ambiguous." Id. Whether a written contract is ambiguous is a question of law to be decided by the court. Brobeck, Phleger Harrison v. Telex Corp., 602 F.2d 866, 871 (9th Cir. 1979), cert. denied, 444 U.S. 981 (1979).
In assessing whether a contract is ambiguous, the district court "must accept extrinsic evidence that can prove a meaning to which language of the contract is `reasonably susceptible.'"Id. This is true even if the agreement is "clear and unambiguous on its face." Id. However, if the Court finds,after considering preliminary evidence that the language of the contract is not reasonably susceptible of interpretation and is unambiguous, extrinsic evidence cannot be received for the purpose of varying the terms of the contract. Id.
Summary judgment is proper only if the contract or the provision in question is unambiguous. Id. If an ambiguity exists, the Court cannot resolve the dispute on summary judgment. National Union Fire Ins. Co. v. Argonaut Ins. Co., 701 F.2d 95, 97 (9th Cir. 1983). "The rationale for this proposition is simple: ambiguity in a contract raises a question of intent, which is a fact question precluding summary judgment."Id.
"It follows from these settled principles that if the factual context renders [a party's] claim implausible — if the claim is one that simply makes no economic sense — [that party] must come forward with more persuasive evidence to support their claim than would otherwise be necessary. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
B. Analysis
Here, Signatures has the burden to show that Defendants breached the Agreement the parties signed in 1995. Because Signatures is claiming monies paid as advances under the Agreement, the issue is whether Defendants still owe Signatures the unrecouped advances for the First Concert Series. Whether or not they do depends on how the Court interprets the Agreement and the Amendment.
Having reviewed the extrinsic evidence submitted by the parties, the Court finds the Agreement and Amendment are not susceptible to more than one meaning; they are not ambiguous. By the terms of the Agreement, Signatures' right to demand repayment, under ¶ 6.4 of the Agreement, was extinguished by the completion of the First Concert Series, in 1997. Signatures would have the Court find that an act or omission triggering their right to demand repayment under the Amendment also creates a right to demand repayment of advances made under the Agreement. However, the Court finds otherwise.
The Amendment has no effect on the advances paid under the Agreement. First, the right to demand repayment for the First Concert Series was extinguished in 1997, when the series was completed. Second, amended ¶ 6.4, which provides for Signatures' right to demand repayment, acts prospectively from the date of the Amendment, January 13, 2000, three years after the right to repayment for the advances paid by the First Concert Series was extinguished. This extinguished right is evidenced by Signatures' final payment of $150,000, which was to be made when Estefan fulfilled her performance obligation of the First Concert Series. Third, the Amendment ¶ 2 specifically addresses Signatures' right to continue recouping advances paid under the Agreement, but does not address Signatures' right to demand repayment of unrecouped advances paid under the Agreement. The Amendment ¶ 2 provides that "for purposes of clarification, unrecouped Advances paid under the Agreement shall continue to be recoupable from Royalties earned hereunder." (emphasis added). Without the explicit language to resurrect Signatures' extinguished right to demand repayment, the Court cannot read that right into the Amendment.
Signatures' claim clearly is based on the First Concert Series and the Agreement, and not the Second Concert Series and the Amendment, as it alleges because the $452,000 figure is necessarily derived from the Agreement advances. Because the Court has determined that Signatures' right to demand repayment under the Agreement had been extinguished, Signatures' claim fails. Therefore, the Court determines that Signatures did not have a right to demand repayment of Agreement advances, thus precluding Plaintiff's showing that Defendants breached the contract.
The Declaration of Michael L. Gunzburger, which speaks to the parties' settlement efforts, is inadmissible under Fed.R.Evid. 408 and is irrelevant to a showing of the parties' intent made at the time of the contract formation.
IV. CONCLUSION
For the foregoing reasons,IT IS HEREBY ORDERED THAT Defendants' Motion for Summary Judgment is GRANTED. The Clerk of the Court shall terminate the file and vacate all deadlines.
IT IS SO ORDERED.