Case Number: EC061586 Hearing Date: April 18, 2014 Dept: A

Gilkyson v The Walt Disney Co.

DEMURRER &
APPLICATIONS TO APPEAR PRO HAC VICE

Calendar: 12
Case No: EC061586
Date: 4/18/14

MP: Defendant, Disney Enterprises and Wonderland Music Company, Inc.
RP: Plaintiffs, Eliza Gilkyson, Tony Gilkyson, and Nancy Gilkyson

ALLEGATIONS IN COMPLAINT:
The Plaintiffs are the heirs of Terry Gilkyson, who wrote songs, one of which was used in the film “The Jungle Book”. The Defendants agreed to pay Terry Gilkyson $1,000.00 plus royalties for each song. The Defendants breached this agreement by failing to pay royalties for subsequent releases of the movie, “The Jungle Book”. The Plaintiffs brought this action to seek damages for the failure to pay royalties for the VHS, DVD, and Blu-Ray releases of the movie.

CAUSES OF ACTION IN COMPLAINT:
1) Breach of Contract
2) Unjust Enrichment
3) Declaratory Judgment
4) Breach of Fiduciary Duty

ORDERS REQUESTED:
1. Demurrer to 1st, 2nd, 3rd, and 4th causes of action in Complaint.
2. Order authorizing G. Alan Waldrop to appear pro hac vice for the Defendants.
3. Order authorizing Alan Milstein to appear pro hac vice for the Plaintiffs.
4. Order authorizing Michael Dube to appear pro hac vice for the Plaintiffs.

DISCUSSION:
This hearing concerns the following:

1) the Defendants’ demurrer to the first, second, third, and fourth causes of action in the Complaint; and
2) the applications of the Plaintiffs and Defendants for attorneys to appear pro hac vice.

1. Demurrer
a. First Cause of Action for Breach of Contract
The Defendants argue that this cause of action is barred by the statute of limitations. When the dates alleged in the complaint show the action is barred by the statute of limitations, a general demurrer lies. Saliter v. Pierce Bros. Mortuaries (1978) 81 Cal.App.3d 292, 300.
This cause of action is based on the breach of a written contract. The statute of limitations for breach of a written agreement is four years under CCP section 337.
A review of the cause of action reveals that it does not plead the contract properly. Instead, the Plaintiffs’ cause of action improperly incorporates the essential elements of its claim from other portions of the Complaint. For example, the Plaintiffs allege in paragraph 47 that the parties entered into the “above-described valid and binding contracts.” There are no allegations in the cause of action that identify this contract, its terms, or its legal effect.
A civil plaintiff may, for the sake of convenience, incorporate by reference previous portions of his pleading for informational purposes only. Cal-West Nat. Bank v. Superior Court (1986) 185 Cal. App. 3d 96, 101. Here, the Plaintiff is not incorporating portions for informational purposes. Instead, the Plaintiff is attempting to plead the essential elements of a cause of action for breach of contract by referring to unknown other paragraphs. This is an improper use of incorporation.

Next, a review of the allegations reveals that the dates indicate that the claim was brought more than four years after the breach. The contract is identified in paragraphs 9 to 17. The Plaintiffs allege that the parties agreed that Terry Gilkyson would receive the following for each song:

1) $1,000;
2) a 5 cent royalty for each piece of sheet music sold in the United States and Canada;
3) 50 percent of all net sums received by the publisher in connection with sheet music sales in all foreign countries except Canada;
4) 50% of the net amount received by the music publisher on account of licensing or other disposition of the mechanical reproduction rights in the song; and
5) the royalties do not apply to revenue or receipts received on account of the exercise of grand rights [performances in stage play, musical, opera], dramatic rights, television rights, and other performance rights, including use in motion pictures, photoplays, books, merchandising, television, radio, and endeavors of same or similar nature.

The Plaintiffs allege in paragraph 49 that the Defendants breached the agreement by failing to pay royalties associated with the sale of “The Jungle Book” on VHS, DVD, and Blue-Ray. The time to commence the claim was within four years of the first failure to pay royalties. Mappa Music Co. v. Universal-Polygram Int’l Publ’g (C.D. Cal. Dec. 17, 2001) 2001 U.S. Dist. LEXIS 24554, 23-25.
In Mappa Music, the Court considered a claim that the defendant had breached a letter agreement regarding the payment of royalties related to the song “Gonna Get Along Without Ya Now”. The Court analyzed California law regarding the statute of limitations and found that the cause of action accrued at the time of breach, which was the first failure to send the royalty payments under the contract. The Court found that this occurred in the late 1950s and that the four year statute of limitations under CCP section 337 ran in the early 1960s.
Further, the Court found that the fact that the agreement gave rise to an ongoing obligation to pay royalty payments did not change the Court’s conclusion. The cause of action accrued at the time of the first breach and the plaintiff could have sued for the royalties, an accounting of future profits, and an injunction to prohibit future exploitation. The Court found that the plaintiff was not permitted to proceed with a claim “after sitting on its rights for more than 40 years.”
In Mappa, Judge Collins also relied upon California appellate authority, April Enterprises, Inc. v.KTTV and Metromedia, Inc. (1983)147 Cal.App. 3rd 805
which actually applied a discovery rule based upon the fiduciary duties existing between joint venturers.
In the pending case, the Plaintiffs do not allege the date of the VHS release, although defendants’ papers refer to the release date as 1991. (Demurrer, 7:2). The Plaintiffs’ cause of action for breach of the agreement to pay the claimed royalties would have commenced when the Defendants allegedly failed to pay royalties at that time.
However, the Plaintiffs allege in paragraph 27 that in 2007, the Defendants released “The Jungle Book” on DVD. The alleged breach would have occurred when the Defendants failed to pay the royalties associated with the DVD release. If the Court assumes that the movie was released on the last date of 2007, the Plaintiffs had four years from December 31, 2007, or until December 31, 2011 to bring this claim.
A review of the Court file reveals that the Plaintiffs commenced this action on November 15, 2013. Since the Plaintiffs did not commence the action by December 31, 2011, the dates in the pleadings indicate that the Plaintiffs’ first cause of action for breach of contract is barred by the statute of limitations.
The Plaintiffs did not attempt to plead any basis in their Complaint for finding that the statute of limitations does not bar their claim.

In their opposition, Plaintiffs refer to legal authority regarding the payment of back rent to a landlord, oil payments, and monthly bills for copiers. None of these contemplate a contract in which the defendant had a duty to make royalty payments for the use of the plaintiff’s intellectual property. Plaintiffs make no analysis or discussion of the legal authority that analyzes California law to find that the breach of an agreement to pay royalties for the use of a song occurs when the first failure to pay the royalty occurs.

The Plaintiffs cite no legal authority that uses California law to resolve issues regarding the failure to pay royalties owed for the use of intellectual property, i.e., a song. Instead, the Plaintiffs cite to legal authority in a New York State opinion that applied the six-year statute of limitations under New York law. In Faulkner v. Arista Records LLC (S.D.N.Y. 2009) 602 F. Supp. 2d 470, the Court found that New York statutory and common law permitted the plaintiff to bring a claim for royalties that were not paid within the six years before the commencement of the lawsuit. The Court based its conclusion on New York statutory law regarding the six-year statute of limitations, New York common law regarding a continuing obligation, and New York statutory law regarding the manner for tolling or restarting the running of the statute of limitations.
The Plaintiffs set forth no basis to find that that this case offers any persuasive authority on the issue. The Plaintiffs offer no rationale to apply New York statutory and common law instead of the California law analyzed and discussed in Mappa Music Co. v. Universal-Polygram Int’l Publ’g (C.D. Cal. Dec. 17, 2001) 2001 U.S. Dist. LEXIS 24554, 23-25. Further, the Plaintiffs do not demonstrate that New York law is analogous to California law in order to support their argument.
Instead, as discussed above, the Plaintiffs’ cause of action commenced when the Defendant allegedly breached the agreement by failing to make a royalty payment for the use of the Plaintiffs’ intellectual property. Under California law, the time to commence the Plaintiffs’ claim based on the breach of a written agreement was four years from the first failure to make the royalty payment. Since the dates in the pleadings indicate that the statute of limitations bars the Plaintiffs’ claim, there are grounds for a demurrer to the first cause of action.

Therefore, the Court will sustain the demurrer to the first cause of action for breach of contract. Since this is the original Complaint, the Court will grant the Plaintiffs’ a single opportunity to plead around the statute of limitations defense that appears on the face of their pleadings.

b. Second Cause of Action for Unjust Enrichment
The Defendants argue that this is not a cause of action. Under California law, there is no cause of action for unjust enrichment. Melchior v. New Line Productions, Inc. (2003) 106 Cal. App. 4th 779, 794. The phrase “unjust enrichment” does not describe a theory of recovery, but a general principle underlying various legal doctrines and remedies. Id. It is synonymous with restitution. Id. Accordingly, the first cause of action does not plead a cause of action.

Therefore, the Court will sustain the demurrer to the second cause of action. It is not reasonably possible to correct this by amendment because unjust enrichment is a remedy and not a cause of action. Accordingly, the Court will not grant leave to amend.

c. Third Cause of Action for Declaratory Judgment
The Defendants argue that this cause of action is subject to a demurrer because it is derivative of their other claims. Under California law, when a court has sustained a demurrer based on the failure to state sufficient facts to support a claim, a demurrer is also properly sustained as to a claim for declaratory relief which is “wholly derivative” of the claim. Ball v. FleetBoston Financial Corp. (2008) 164 Cal. App. 4th 794, 800. For example, if declaratory relief is sought with reference to an obligation which has been breached and the right to commence an action for breach of contract is barred by the statute, the right to declaratory relief is likewise barred. Maguire v. Hibernia S. & L. Soc. (1944) 23 Cal. 2d 719, 734.
In their third cause of action for declaratory relief, the Plaintiffs seek a declaration that they are entitled to royalties in connection with the sales of “The Jungle Book” on VHS, DVD, Blu-Ray, and any similar medium. This claim is based on the allegation that the Defendant breached the obligation to pay royalties. Since the analysis in the first cause of action reveals that this claim is barred by the statute of limitations, the Plaintiffs’ claim for declaratory relief is also barred.

Therefore, the Court will sustain the demurrer to the third cause of action. Since this is the original Complaint, the Court will grant the Plaintiffs’ a single opportunity to correct this defect by amendment.

d. Fourth Cause of Action for Breach of Fiduciary Duty
The Defendants argue that the pleadings do not demonstrate that a fiduciary relationship existed between the parties. To state a cause of action for breach of fiduciary duty, the Plaintiffs must allege the following:

1) the existence of a fiduciary relationship;
2) its breach; and
3) damage proximately caused by that breach.
Roberts v. Lomanto (2003) 112 Cal. App. 4th 1553, 1562.

The fact that in the course of a business relationship the parties reposed trust and confidence in each other does not impose any corresponding fiduciary duty in the absence of an act creating or establishing a fiduciary relationship known to law. Worldvision Enters. v. ABC (1983) 142 Cal. App. 3d 589, 595.
The Plaintiffs allege in paragraph 63 that “in the cases of royalty accounting to recording artists (and songwriters), the party handling and accounting for the money has a fiduciary duty to the artists/writers”. This has been expressly rejected by California’s Courts, which hold that a royalty agreement did not impose fiduciary duties. Wolf v. Superior Court (2003) 107 Cal. App. 4th 25, 27.
In Wolf, the plaintiff sued the defendant for the breach of an agreement to pay royalties for the use of his novel “Who Censored Roger Rabbit?” The plaintiff claimed that the defendant had failed to permit him to perform an audit of records after the release of the film “Who Framed Roger Rabbit?”.
The Court found that the defendant’s duty to pay royalties alone did not create a fiduciary relationship did not establish a fiduciary duty. The Court found that there had to be other circumstances that indicated that a confidential relationship existed between the parties.
The Supreme Court agreed with Wolf and concluded that “fiduciary obligations are not necessarily created when one party entrusts valuable intellectual property to another for commercial development in exchange for the payment of compensation contingent on commercial success.” City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal. 4th 375, 391. Based on this legal principle, the Supreme Court in City of Hope concluded that a trial court had erred in instructing the jury that a fiduciary relationship is necessarily created when a party, in return for royalties, entrusts intellectual property, even a secret idea for development as a patent, to another. Id. at 392.

In the pending case, the Plaintiffs pleaded only that the Defendants had a duty to pay royalties to the Plaintiffs. There are no allegations that any other circumstances existed to establish a fiduciary relationship. This is insufficient to plead the cause of action.

In the opposition, the Plaintiffs argue that the Court should consider the “strong dissent” in Wolfe, law review articles regarding a fiduciary duty, and a New York case involving the Beatles’ efforts to receive royalties. However, as noted above, there is California law directly on point.
Under the doctrine of stare decisis, all tribunals exercising inferior jurisdiction are required to follow decisions of courts exercising superior jurisdiction. Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal. 2d 450, 455. Courts exercising inferior jurisdiction must accept the law declared by courts of superior jurisdiction. Id. It is not their function to attempt to overrule decisions of a higher court. Id.
Accordingly, there are no grounds for this Court to disregard the legal principles identified in Wolfe and City of Hope. These legal principles hold that a duty to pay royalties alone does not create a fiduciary duty. Accordingly, the fourth cause of action lacks sufficient facts.

Therefore, the Court will sustain the demurrer to the fourth cause of action. Since this is the original Complaint, the Court will grant the Plaintiffs’ a single opportunity to correct this defect by amendment.

2. Applications to Appear Pro Hac Vice
The Plaintiffs have filed two applications and the Defendant has filed on application for their counsel to appear pro hac vice. CRC rule 9.40 requires attorneys requesting permission to appear pro hac vice to include the following in their verified application:

1) proof of service on all parties that have appeared and on the State Bar of California;
2) the applicant’s residence and office address;
3) the courts to which the applicant has been admitted to practice and the dates of admission;
4) that the applicant is a member in good standing in those courts;
5) that the applicant is not currently suspended or disbarred in any court;
6) the title of court and cause in which the applicant has filed an application to appear as counsel pro hac vice in this state in the preceding two years, the date of each application, and whether or not it was granted;
7) the name, address, and telephone number of the active member of the State Bar of California who is attorney of record; and
8) payment of $50 to the State Bar of California.

a. Application of G. Alan Waldrop (for the Defendants)
G. Alan Waldrop, who is a resident of Texas, seeks leave to appear for the Defendants. A review of his verified application reveals that it complies with the requirements of CRC rule 9.40.
Accordingly, the Court will grant his application.

a. Application of Michael Milstein (for the Plaintiffs)
Michael Milstein, who is a resident of New Jersey, seeks leave to appear for the Defendants. A review of his verified application reveals that it complies with the requirements of CRC rule 9.40.
Accordingly, the Court will grant his application.

a. Application of Michael Dube (for the Plaintiffs)
Michael Dube, who is a resident of New Hampshire, seeks leave to appear for the Plaintiffs. A review of his verified application reveals that it complies with the requirements of CRC rule 9.40.
Accordingly, the Court will grant his application.

RULINGS:
1. Defendants’ Demurrer
Sustain demurrers to first, third, and fourth causes of action with leave to amend.
Sustain demurrer to second cause of action without leave to amend.

2. Applications to Appear Pro Hac Vice
ISSUE order authorizing G. Alan Waldrop to appear pro hac vice for the Defendants.
ISSUE order authorizing Alan Milstein to appear pro hac vice for the Plaintiffs.
ISSUE order authorizing Michael Dube to appear pro hac vice for the Plaintiffs.