Monday, October 01, 2012

Don Johnson Productions v. Rysher Ent. (Cal. Ct. App. - Oct. 1, 2012)

Even Nash Bridges himself would be hard-pressed to find justice in this one.  It's instead a set of confused and conflicting equities perhaps requiring resolution by Nash's co-star, Cheech Marin.

Nash and Cheech come to mind because the case is about profits that allegedly are due to go to Don Johnson from the syndication of the television series Nash Bridges.  Of course, the profits don't go directly to Don Johnson himself -- to exploit various inequitable loopholes in the tax laws, the profits instead go to "Don Johnson Productions," which "loans out" its "talent" (e.g, Don Johnson) in return for money.  Which gets put into favorable tax havens, subjected to absurd depreciation regimes, etc.

But Don Johnson's not the only one abusing the system.  The studio only (allegedly) owes him 50%, so they -- consistent with the industry as a whole -- routinely manufacture a variety of Machiavellian deductions, sales, and manipulative transactions to make it look like even the most profitable series actually lost (rather than gained) money, thereby resulting in no profits due to the "talent" on the back end.  But Don's got his own series of legal moves in response, including hiring some very high-priced legal talent that comes up with a complex argument that insists that Johnson's actually entitled to fifty percent of any money received -- not just profits -- due to a conflict between the copyright and other provisions of the relevant contracts.  Because I'm sure that's what the parties intended.

But the studio's got plenty of high-priced legal talent of its own.  So it comes up with its own anti-equitable argument.  You see, back in 2002, Johnson's lawyer (Sam Pryor) wanted to continue to negotiate with the studio's lawyer (Frank Stewart) instead of filing a lawsuit, and the studio agreed, so the two sides entered into a formal agreement to toll the statute of limitations -- which was about to expire -- while they continued to talk.  Those talks took a long time, but ultimately failed, so Johnson filed suit in 2009.

At which point the studio says:  "Gotcha."  Because, yes, there's a binding agreement to toll the statute of limitations.  But, the studio says, CCP 360.5 requires that any such agreement be renewed every four years, and no one renewed it.  So it expired in 2006, even though the parties agreed in the contract otherwise, and so Johnson gets nothing.

In short, there's a story, and a resulting legal fight.  But, at least in my mind, no real protagonist.

But things get even worse.

At trial, Johnson wins.  The jury awards him $15 million.  It also awarded him an extra $8 million in prejudgment interest even though no one asked them the jury to do so.  And thereafter, Johnson files a motion to add prejudgment interest onto the entire $23 million judgment.  Because why be a $23 million hog when you can be a pig as well?  And the trial court grants Johnson's request, adding on an additional $29 million to the already-inflated award.

What to do?  What to do?

My sense is that the majority opinion does something that attempts to achieve some sort of rough justice.  Not that they deliberately ignore the law, of course.  Maybe they think that what they do is appropriate under the relevant legal rules.  But they're not willing to give Johnson nothing, so they find a way to reject the studio's hypertechnical (and unjust) argument about the limitations period, holding that Section 360.5 only applies to "waivers" of limitations periods not "tolling" agreements about such periods.  But they're also not willing to give Johnson the $50-plus million.  So they get rid of the jury's award of prejudgment interest on the grounds of juror misconduct -- a jury's not allowed to add an award that wasn't proper and that no one requested, and here, everyone concedes that's what they did -- and then get rid of the judge's award of prejudgment interest on the grounds of a procedural, hypertechnical error that the trial court made (not giving an express statement of reasons).

So the studio doesn't win on its hypertechnical argument to give Johnson nothing but the Court of Appeal does let them win on its hypertechnical argument to give Johnson only a piece.

Splitting the baby.  In sum, if not in substance.

Maybe this is an equitable result.  Maybe this is the best we can do in a case like this.

The only problem is that Justice Mosk authors a persuasive dissent.  One that presented itself to me even before I got to his opinion.  The problem is that the inequitable argument the studio makes about Section 360.5 is, as a matter of law, actually right.  Moreover, the majority's equally -- if not more -- hypertechnical distinction between "waiving" and "tolling" under Section 360.5 just doesn't work.

Justice Turner holds that the parties entered into an agreement to "toll" the statute of limitations while they talked.  That's right.  Justice Turner also says that Section 360.5 only requires that "waivers" of the limitations period be renewed every four years.  That's true too.  He also says that back when the statute was passed in 1951, no one really used the term "tolling," which is what transpired here.  All true.

But he concludes from this that the statute accordingly only applies to waivers, not to agreements to toll.  That's where he runs off the rails.

The reality is that the two mean the same thing, and so the statute applies to both.  Or, both more accurately and more dispositively, that the statute here manifestly applies to tolling agreements if only because it doesn't make any sense otherwise.

The point of the statute is to disallow infinite extensions of the statute of limitations.  Which is, in fact, precisely what the parties did here.  So the entire purpose of the statute is nullified if you hold, as the Court of Appeal does, that it doesn't apply to "tolling" agreements.

More centrally, the statute doesn't even make sense as applied to alleged "waivers" as opposed to "tolling" agreements.  If you "waive" the statute of limitations you waive it.  It's gone.  It makes no sense to require such "waivers" to be renewed.  There's nothing to renew or not renew.  To say that you've got to "renew" only "waivers" is to say something that doesn't make any sense.  By contrast, the only things that you renew are precisely what we today call tolling agreements.  Those are the things it makes sense to make the parties renew every four years.  Which is why the statute applies, by both its terms and by its fundamental central purpose, to tolling agreements.  Because when the Legislature said in 1951 that you have to renew "waivers" every four years what they meant is that you have to renew tolling agreements.  That didn't happen here.  So Johnson should lose.

Mind you, I think that statute's stupid.  At least as applied to situations like this one, in which very sophisticated parties represented by very sophisticated counsel entered in to an arms-length and very sensible agreement to toll the statute while they tried to work things out.  I think it's profoundly silly not to let parties do that, and to allow entities like the studio to play "gotcha" and, seven years later, say that they screwed you (yet again) because your lawyer was too stupid not to know that these sorts of agreements aren't enforceable unless they're renewed.

So it's a statute that's silly and that works, at least in this case, a huge injustice.

Nonetheless, that's what it says.  And, I think, pretty clearly.

But it's not just me.  Justice Mosk points out in his dissent that, right after Section 360.5 was passed, an editor of a then-upstart publication called the Stanford Law Review (my words) authored a law review article about that statute.  In which the student accurately -- and eerily presciently -- said that even though the statute uses the word "waiver," it surely applies to "waiver" regardless of how those waivers are made, including but not limited to tolling agreements.  So even observers at the time had an understanding that the word "waiver" in the statute included tolling agreements.  Justice Mosk can (and does) also cite a plethora of modern commentators who've said the same thing in practice guides and other treatises.  Q.E.D.

That's pretty darn persuasive to me.  As much as I hate -- hate -- it, the studios seem right.  And while I might apply doctrines like laches or waiver or anything like that if I could, if I couldn't, I'd have to hold (as Justice Mosk does) that the studios successfully screwed an actor out of his well-earned and justly rewarded funds.  Again.

Mind you, I think that the Court of Appeal is maybe overly hypertechnical (as opposed to, on the Section 360.5 issue, undertechnical) on the other side as well.  I agree with Justice Turner that, under California law, the jury's award of $8 million in prejudgment interest has to be reversed, because you can't let things like this stand.  But it's a stretch to say that the trial court's similar (albeit larger) award also has to be reversed.  Yes, the trial court didn't discuss at length why it was doing what it did.  But it's nonetheless clear.  To reverse an award on this basis seems to advance form over substance in a way that's perhaps equally as improper as advancing substance over form on the Section 360.5 issue.

Maybe the best defense of the majority's opinion is that, here, two wrongs make a right?  That this is the best we can do as between the competing alternatives of giving Johnson an unjust $50-million plus or unjustly giving him nothing?

Maybe.  Maybe as a result.  Though the process of getting there still doesn't feel right to me.  There's still something about making the law make sense that appeals to me.  Not just getting a result that we can all be happy with the next time we watch rerun of Nash Bridges on Channel 13.

One more thing.  The 1952 Stanford Law Review article that Justice Mosk cites -- and that, in a really cool fashion, is all about the issue that presented itself 60 years later -- is unsigned.  Which we do on a lot of law journals for student-written pieces, including the Harvard Law Review when I was on it back in the 80s and 90s.  (Which is why you can't tell whether I wrote any of the really good pieces during that era or one of the other ones; or, more accurately, the ones about sex and drugs.)

But that led me to wonder:  Who did write the thing?  So I walked over to the library to try to find out.

There were only a small number of people on the Stanford Law Review during that era, and their names are on the masthead.  There's no way to tell which one of them wrote the piece.  Many of the law review editors at the time went on to become district attorneys and the like in California, and if I was a little older, I might recognize a couple more names than I did.  (They all graduated from law school in the early 1950s, so are about 40 years older than I am.)

But two names nonetheless stood out.  They were the only two women on the Stanford Law Review at the time.  Either of them conceivably could have written the piece.  (Though it could easily have been someone else as well.)

The two women were friends and roommates.  One of them was named Catherine Lockridge, who married a doctor, moved to Rochester while he worked at the Mayo Clinic, and then moved back to Palo Alto for the remainder of her life, which sounds wonderful.  The other was named Sandra Day.  Who married a guy named O'Connor.

It'd be awesome if either of them wrote the piece that the Court of Appeal today decides was wrong.