Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from an order of the Superior Court of Los Angeles County, No. BC353893, Joanne O’Donnell, Judge.
Esner, Chang & Ellis, Stuart B. Esner, Andrew N. Chang for Plaintiffs and Appellants.
Pryor Cashman LLP, James A. Janowitz, Tom J. Ferber, Nia J.C. Castelly, Karen M. Robson for Defendants and Respondents.
KITCHING, J.
INTRODUCTION
The trial court sustained defendants’ demurrer to plaintiffs’ first amended complaint without leave to amend. We hold that although the demurrer was correctly sustained, the trial court should have granted plaintiffs leave to amend. Accordingly, we reverse the order of dismissal.
This is an idea theft case. Plaintiffs allege that they created a concept for a television series entitled “So You Think You Can Dance?” They further allege that they disclosed their concept to defendants on the conditions that defendants would reasonably compensate plaintiffs for its use and give plaintiffs credit for the creation of the series. Defendants, plaintiffs contend, used the concept but did not compensate them or give them credit for the concept. As a result, plaintiffs allege, defendants breached an implied contract they had with plaintiffs.
The essential issue is whether plaintiffs can allege that defendants, or defendants’ agent, voluntarily accepted plaintiffs’ disclosure of their concept with knowledge of the conditions on which it was tendered. At the hearing on demurrer, plaintiffs indicated that they could and, if given the opportunity, would plead such allegations. The trial court should have allowed plaintiffs to do so.
FACTUAL AND PROCEDURAL BACKGROUND
In June 2006, plaintiffs and appellants John Cassese and Brian Nelson and plaintiffs Mark Wolfe and Maria La Mangra filed a complaint in superior court against defendant Martin Erlichman Associates, Inc. (MEA) and defendants and respondents Fox Broadcasting Company (Fox), Dick Clark Productions, and 19 Entertainment, Inc. Although there is nothing in the record indicating that Wolfe and La Magra are no longer plaintiffs, only Cassese and Nelson have pursued this appeal. MEA, while apparently still a defendant below, is not a respondent here. We shall refer to Fox, Dick Clark Productions and 19 Entertainment, Inc. collectively as “defendants,” and MEA separately.
The complaint sets forth six causes of action, including breach of implied contract against defendants. Defendants and MEA filed separate demurrers to the complaint. Prior to the hearings on these demurrers, however, plaintiffs filed their first amended complaint.
The first amended complaint sets forth seven causes of action, four of which are against defendants. This appeal only concerns plaintiffs’ fourth cause of action for breach of implied contract, as well as two additional causes of action plaintiffs did not allege in the first amended complaint but claim they can allege now.
Following is a summary of the allegations in the first amended complaint. Plaintiff Cassese is a dance instructor who “has taught countless celebrities to dance and has appeared and been featured on film, television (including Fox News and other Fox shows), to choreograph, teach, perform and promote dancing.” Plaintiff Wolfe “has worked on, produced or been a studio executive in connection with numerous mainstream films.” Plaintiff La Magra is a former vice president of publicity for Universal Studios Home Video Division. Plaintiff Nelson “is a professional competitive ballroom dancer, has instructed celebrities, and has been featured on television and on music videos.”
For purposes of this appeal, we assume that the material facts in plaintiffs’ first amended complaint are true. (Rakestraw v. California Physicians’ Service (2000) 81 Cal.App.4th 39, 43 (Rakestraw).)
In May 2003, plaintiffs registered the “So You Think You Can Dance?” concept with the Writers Guild of America (WGA). The concept, as registered, included the following elements:
“a. 60 minute ‘realty’ television show;
“b. contestants are recruited from various cities across the nation, with the final competition to occur in Los Angeles, California;
“c. the contestant dancers are challenged with a grueling schedule and by randomly pairing the contestants with strangers who are experienced dancers as partners and requiring the contestants to dance in styles with which they may be unfamiliar;
“d. professional dancers instruct contestants on various dances [sic] styles in preparation for the competition performances;
“e. a panel of judges evaluates performances by the contestants;
“f. the competition uses an elimination-style format, with contestants eliminated over time and only the final remaining contestants receiving the cash prize;
“g. the television show involved non-competition scenes including contestant practices with the professional dancers, dancers given their challenges (e.g. dancers asked to dance Salsa that week); and interviews and ‘real life’ scenes with contestants (background, are they anxious, mad, and how they bonded with their co-contestants and partners);
“h. the final competitions are before a live audience; and
“i. the final stages of the competition involve elaborate costume and set design to highlight the young, diverse, edgy nature and visual excitement of the show.”
Plaintiffs disclosed the concept to Martin Erlichman, who agreed to act as plaintiffs’ agent on behalf of MEA for the purpose of pitching the concept to Creative Artists Agency (CAA) and others. Erlichman understood that plaintiffs would be entitled to receive compensation for use of their concept and credit “for their participation in creating, writing, producing and starring as judges and choreographers for the Concept[.]” Erlichman also understood that he would disclose the concept only under circumstances which required third parties to keep the concept confidential. In September 2003, Erlichman confirmed that the concept had been “successfully placed” with CAA and that CAA “wanted permission to hold on to the physical document embodying the ‘So You Think You Can Dance?’ Concept.”
In July 2005, Fox aired for the first time the television series entitled “So You Think You Can Dance?” The series included nearly identical elements of plaintiffs’ concept, as registered with WGA. Defendants 19 Entertainment, Inc. and Dick Clark Productions produced the series. Fox falsely stated on its website and elsewhere that 19 Entertainment, Inc., Dick Clark Productions, Simon Fuller and Nigel Lythgoe created the “So You Think You Can Dance?” concept.
Through Erlichman and CAA, plaintiffs disclosed the “So You Think You Can Dance?” concept to defendants. This disclosure resulted in an implied contract between plaintiffs and defendants, whereby plaintiffs “would receive full and reasonable compensation for any use of their Concept, including for performing their respective roles in connection with any production (producers, creators, performers, judges etc.) and for all derivative, ancillary and merchandising rights, and that Plaintiffs would be entitled to receive credit for their participation in creating, writing and producing the Concept as a realty television show.” Defendants breached the contract by using the concept without informing the plaintiffs that they were doing so, without compensating plaintiffs, and without providing plaintiffs credit for the concept.
Defendants and MEA filed separate demurrers to the first amended complaint. A hearing on the demurrers was held in November 2006. At the beginning of the hearing, the trial court announced that its tentative ruling was to sustain defendants’ demurrer. Plaintiffs argued that the demurrer should be overruled or, alternatively, that they should be granted leave to amend.
The trial court took the matter under submission. In December 2006, the court filed a minute order sustaining defendants’ demurrer without leave to amend. In February 2007, the court filed an order dismissing Fox, Dick Clark Productions and 19 Entertainment, Inc.~(CT 99)~ Plaintiffs Cassese and Nelson filed a timely notice of appeal.
CONTENTIONS
Plaintiffs contend that the trial court should have overruled defendants’ demurrer. At a minimum, plaintiffs argue, the trial court should have granted them leave to amend their breach of implied contract cause of action. Plaintiffs also argue that as alternative theories of liability, plaintiffs can and should be allowed to allege causes of action for tortious interference with contract and for aiding and abetting breach of confidence.
DISCUSSION
1. Standard of Review
“A demurrer tests the legal sufficiency of factual allegations in a complaint.” (Rakestraw, supra, 81 Cal.App.4th at p. 42.) “On appeal, a plaintiff bears the burden of demonstrating that the trial court erroneously sustained the demurrer as a matter of law. This court thus reviews the complaint de novo to determine whether it alleges facts stating a cause of action under any legal theory.” (Id. at p. 43.)
“When a demurrer is sustained without leave to amend, this court decides whether a reasonable possibility exists that amendment may cure the defect; if it can we reverse, but if not we affirm. The plaintiff bears the burden of proving there is a reasonable possibility of amendment. [Citation.] The plaintiff may make this showing for the first time on appeal.” (Rakestraw, supra, 81 Cal.App.4th at p. 43 .)
“To satisfy that burden on appeal, a plaintiff ‘must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading.’ [Citation.] The assertion of an abstract right to amend does not satisfy this burden.” (Rakestraw, supra, 81 Cal.App.4th at p. 43 .) The plaintiff must clearly and specifically state “the legal basis for the amendment, i.e., the elements of the cause of action[,]” as well as the “factual allegations that sufficiently state all required elements of that cause of action.” (Ibid.)
2. The Trial Court Correctly Sustained Defendants’ Demurrer
An idea for a film or television series is generally not regarded as property. (Desny v. Wilder (1956) 46 Cal.2d 715, 731 (Desny).) It is the expression of the idea (e.g., a script) that qualifies for copyright protection. (Id. at 732-733.) The act of disclosing an unprotected idea for a film or television series, however, may serve as consideration for an implied contract. (Id. at p. 729.)
In Desny, our Supreme Court stated the circumstances under which an unprotected idea for a film could serve as the basis for an implied contract. The court balanced the interests of producers with the interests of the creators of ideas for films. “[W]e are not oblivious,” the court stated, “of the hazards with which producers . . . are confronted through the unsolicited submission of numerous scripts on public domain materials . . . .” (Id. at p. 734.) The Court also recognized that producers did not have carte blanche to misappropriate ideas offered for sale, because the law “is dedicated to the proposition that for every wrong there is a remedy[.]” (Ibid.)
“The law will not imply a promise to pay for an idea from the mere facts that the idea has been conveyed, is valuable, and has been used for profit; this is true even through the conveyance has been made with the hope or expectation that some obligation will ensue.” (Desny v. Wilder, supra, 46 Cal.2d at p. 739.) However, if an idea purveyor clearly conditions an offer to disclose an idea on the offeree’s obligation to pay for it, and the offeree voluntarily accepts the disclosure knowing the condition on which it is tendered, the law will imply a promise to pay for an idea. (Ibid.)
“[F]or an implied-in-fact contract, one must show: [1] that he or she prepared the work; [2] that he or she disclosed the work to the offeree for sale; [3] under all circumstances attending disclosure it can be concluded that the offeree voluntarily accepted the disclosure knowing the conditions on which it was tendered (i.e., the offeree must have the opportunity to reject the attempted disclosure if the conditions were unacceptable); and [4] the reasonable value of the work.” (Faris v. Enberg (1979) 97 Cal.App.3d 309, 318, citing Desny, supra, 46 Cal.2d at p. 744.)
The trial court found that the facts alleged in the first amended complaint did not satisfy element number three and that there was no reasonable possibility that plaintiffs could allege facts that would satisfy this element. We agree with the first conclusion but not with the second.
There are two defects with plaintiffs’ breach of implied contract cause of action as currently pled. First, plaintiffs do not allege that they disclosed their concept to defendants or defendants’ agent. Although plaintiffs allege that they disclosed their concept to CAA, they do not allege that CAA was Fox’s agent. Plaintiffs also do not clearly and unequivocally allege that CAA was the agent of 19 Entertainment, Inc. and Dick Clark Productions. Rather, plaintiffs allege that 19 Entertainment, Inc., Dick Clark Productions, Simon Fuller, Nigel Lythgoe “or some of them” were represented by CAA. This could mean CAA represented Fuller and Lythgoe or one of them, but did not represent Dick Clark Productions and 19 Entertainment, Inc. Such equivocal allegations subject the first amended complaint to general demurrer. (See O’Hare v. Marine Electric Co. (1964) 229 Cal.App.2d 33, 35, 37 [allegation that defendant was “ ‘an officer and/or director and/or shareholder’ ” was not a direct allegation that defendant was either a director or shareholder].)
The second defect is that plaintiffs do not clearly and unequivocally allege that defendants knew the conditions on which plaintiffs tendered their concept. Instead, plaintiffs allege that 19 Entertainment, Inc. and Dick Clark Productions “knew or should have known that Plaintiffs would not have disclosed their original concept ‘So You Think You Can Dance?’ without the expectation that Plaintiffs would receive both credit and compensation[.]” (Italics added.) Likewise, plaintiffs allege that Fox “knew or should have known” that 19 Entertainment, Inc. and Dick Clark Productions “did not create the ‘So You Think You Can Dance’ original concept” and that “Plaintiffs would not have disclosed their original concept ‘So You Think You Can Dance?’ without the expectation that Plaintiffs would receive both credit and compensation[.]” (Italics added.)
Plaintiffs argue that under the “custom” of the television industry, defendants should have understood the nature of plaintiffs’ disclosure of their concept. In support of their position, plaintiffs cite Minniear v. Tors (1968) 266 Cal.App.2d 495 (Minniear); Chandler v. Roach (1957) 156 Cal.App.2d 435 (Chandler) and Gunther-Wahl Productions, Inc. v. Mattel, Inc. (2002) 104 Cal.App.4th 27 (Gunther-Wahl). These cases, however, are merely examples of litigants using custom as evidence of an ultimate fact. (See Minniear, at p. 504; Chandler, at p. 441; Gunther-Wahl, at p. 31, fn. 5.) Here, one of the ultimate facts that plaintiffs must plead and prove is defendants’ knowledge of the conditions on which plaintiffs tendered their concept. (See 4 Witkin, supra, Pleadings, § 387, p. 526 [knowledge is an ultimate fact].) Although the custom of the television industry may perhaps be used as evidence to prove that ultimate fact, it is not in and of itself an ultimate fact.
Ultimate facts are “those that raise the issues on which the right to recover depends: i.e., the essential elements of the cause of action.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2008) ¶ 6:124, p. 6-33 (Weil & Brown).) While the distinction between ultimate facts, evidentiary matter and legal conclusions is one of degree only, and often difficult to make (see 4 Witkin, Cal. Proc. (5th ed. 2008) Pleading, § 378, pp. 513-515 (Witkin)), in this case the distinction is helpful to our analysis.
In Desny, the court held that a requirement for the formation of an implied contract based on the disclosure of an unprotected idea was that the offeree “voluntarily accept the disclosure, knowing the conditions on which it is tendered.” (Desny, supra, 46 Cal.2d at p. 739, italics added.) Plaintiffs have cited no authority, and we have found none, for the proposition that this requirement can be satisfied if the offeree “should have known” of the conditions on which the idea was tendered.
An offeree’s knowledge of the conditions of an offer to sell an idea is relevant to the offeree’s acceptance of the offer, i.e., the mutual consent of the parties. “ ‘ “The existence of mutual consent is determined by objective rather than subjective criteria, the test being what the outward manifestations of consent would lead a reasonable person to believe.” ’ ” (Money Store Investment Corp. v. Southern Cal. Bank (2002) 98 Cal.App.4th 722, 728.) Thus, an offeree’s subjective knowledge of the conditions on which an offer is tendered is irrelevant; if a person in the offeree’s shoes would have reasonably known the conditions, the offeree’s knowledge is inferred.
Unless the express terms of the contract state otherwise, the parties to a contract may be presumed to have constructive knowledge of industry custom if the custom is of general and universal application. (Heggblade-Marguleas-Tenneco, Inc. v. Sunshine Biscuit, Inc. (1976) 59 Cal.App.3d 948, 956-957; Pastorino v. Green Brothers (1949) 90 Cal.App.2d 841, 846.) Here, plaintiffs do not state sufficient facts in their first amended complaint regarding an alleged industry custom to satisfy the third element of Desny. They do not, for example, describe the nature and scope of any alleged custom. The trial court therefore correctly sustained defendants’ demurrer to plaintiffs’ cause of action for breach of implied contract.
3. The Trial Court Should Have Granted Plaintiffs Leave to Amend Their Breach of Implied Contract Cause of Action
a. Plaintiffs Indicated They Could Allege CAA Was Defendants’ Agent
At the hearing on the demurrer, plaintiffs’ counsel stated:
“First of all, we did allege, and perhaps not as artfully as I believe it should have been, the fact that Fox defendants were [at] all relevant times represented by the Creative Artists Agency.
“[¶] . . . [¶]
“. . . we probably should carry the burden to amend to allege more articulately that [CAA] was the agent at all times with respect to the issue of the disclosure of the concept.
“We did make an allegation in the first amended complaint that [CAA] was acting as the agent for the Fox defendants, and the law clearly is that an agent binds the principal.
“I do think that that’s more of a matter – evidentiary matter and perhaps [an] issue that should be brought up in summary judgment.”
These statements indicate that plaintiffs can and will allege that CAA was defendants’ agent. There is a reasonable possibility, therefore, that plaintiffs can cure the first defect in their breach of implied contract cause of action.
In Desny, the plaintiff tendered for sale a story for a film to defendant Billy Wilder’s secretary. Wilder was employed by defendant Paramount Pictures Corporation (Paramount) as a writer, producer, or director, or a combination of the three. (Desny, supra, 46 Cal.2d at p. 726.) Plaintiff alleged that he had an implied contract with Paramount because Paramount used his story in a successful film but refused to compensate him.
Paramount argued that neither Wilder nor his secretary was authorized to enter into a contract on its behalf. The court, however, held that because one of the functions of the secretary was to receive and deliver messages to Wilder, “her knowledge would be his knowledge.” (Desny, supra, 46 Cal.2d at p. 727.) The court further held: “Factually it would be inconsistent, and legally it would be untenable, for the defendant corporations to deny that Paramount’s [employees], Wilder and the secretary, had authority to negotiate contracts for the purchase of literary material and at the same time to permit them to act as agents for the procurement of material offered for sale, and to use the material so acquired while disavowing the authority of the agents.” (Id. at p. 745.)
Under Desny, if defendants used CAA to procure the concept for “So You Think You Can Dance?,” then CAA’s knowledge of the conditions on which plaintiffs tendered their concept would be imputed to defendants (Desny, supra, 46 Cal.2d at p. 727), and defendants would be bound by CAA’s voluntary acceptance of the concept. (Id. at p. 745.)
b. Plaintiffs Indicated They Could Allege That Defendants Knew of the Conditions On Which Plaintiffs Tendered Their Concept
At the demurrer hearing, plaintiffs’ counsel stated:
“[W]e are prepared to make allegations that [CAA’s] acceptance of the treatment – acceptance of the concept and their subsequent conduct by calling and asking for permission that they hold on to it for a while is a showing that it was, in fact, disclosed on the conditions that are demonstrated in the Desny case, and that would suffice to support the implied contract cause of action.
“[¶] . . . [¶]
“In this city people work through their agents, and in this particular case the plaintiffs worked through their agent. Their agent is Martin Erlichman.
“Defendants were wooing through their agent. Their agent is Creative Artists Agency. . . .
“We are prepared to put those allegations in the complaint that these are two of the most sophisticated agents and agencies in the country, and that when one agency, [CAA], on behalf of the defendants, calls Martin Erlichman and says, ‘we want to hold on to the treatment for a while,’ that that shows that they are voluntarily accepting it and that they clearly understood, as is the custom and practice in the industry, that if they are going to use it, they need to pay for it.
“[¶] . . . [¶]
“My clients did not just send unsolicited scripts to the defendants. They went through proper channels. They went through sophisticated agents.
“And I believe that we can – as I mentioned to the court, we can allege that the defendants, through their agent, through [CAA], knew the terms of the disclosure, and that’s evidenced by the fact [CAA] called and said, ‘can we hold on to it?’ and then by using it.
“[¶] . . . [¶]
“I – I think that we probably do need to allege many more facts, and the allegation against Fox, with respect to the third element [of Desny], and we are prepared to do that.” (Italics added.)
These statements indicate that plaintiffs can and will allege that defendants, through their agent, voluntarily accepted the disclosure of plaintiffs’ concept knowing the conditions on which it was tendered. Defendants dismiss such allegations as “conjectural.” “ ‘Direct evidence of knowledge,’ ” however, “ ‘is seldom possible, and proof is usually circumstantial[.]’ ” (People v. Du Bont (1965) 235 Cal.App.2d 844, 846.) At the pleadings stage, we must assume plaintiffs’ allegations regarding defendants’ knowledge are true. Accordingly, there is a reasonable possibility that plaintiffs’ can cure the second defect in their breach of implied contract cause of action.
4. Plaintiffs’ New Causes of Action
Plaintiffs claim on appeal that they can allege causes of action for tortious interference with contract and for aiding and abetting breach of confidence. Defendants contend that these causes of action are preempted under the Copyright Act of 1976 (17 U.S.C. § 101 et seq.), and even if not preempted, fail as a matter of law. We believe it is appropriate for the trial court to address plaintiffs’ new causes of action and defendants’ defenses to them in the first instance. (See Birkner v. Lam (2007) 156 Cal.App.4th 275, 286.)
Where, as here, a plaintiff is granted leave to amend, the court has discretion to permit the plaintiff to set forth entirely different claims. (Weil & Brown, supra, at ¶¶ 6:635:6, 6:640, pp. 6-162, 6-163.)
DISPOSITION
The order of dismissal is reversed. The parties are to bear their own costs on appeal.
We concur: CROSKEY, Acting P. J., ALDRICH, J.