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Kaufman v. Warner Bros. Entertainment Inc.

United States District Court, D. Arizona

May 13, 2019

David Kaufman, Plaintiff,
v.
Warner Bros. Entertainment Incorporated and Warner Bros. Consumer Products Incorporated, Defendants.

          ORDER

          JAMES A. TEILBORG SENIOR UNITED STATES DISTRICT JUDGE.

         Pending before the court is Defendant Warner Bros. Entertainment Inc. and Defendant Warner Bros. Consumer Products Inc.'s (collectively, “Defendants”) Motion for Attorneys' Fees (Doc. 92) and Plaintiff David Kaufman's (“Plaintiff”) Motion for Leave to File Surreply to Defendants' Motion for Attorneys' Fees (Doc. 116). These motions are fully briefed.[1] Finding these matters appropriate for decision without oral argument, [2] the Court now rules on these motions.

         I. BACKGROUND

         Assuming familiarity with the factual and procedural history of this action, the Court will recount only those aspects of this litigation that are relevant to the pending issue of attorneys' fees and costs.

         In the mid-1960s, Kustomotive-a partnership between Richard Korkes (“Korkes”) and Daniel Dempski (“Dempski”) that created automobiles for use in movies, television, and other forms of entertainment-entered into contracts with Twentieth Century-Fox Television, Inc. (“Fox”) and Greenway Productions, Inc. (“Greenway”) to build a “Batcycle” and a “Batgirl-Cycle” to be used in the 1960s Batman television show and movie and the Batgirl movie. (Docs. 67-6; 67-16). One of these contracts, the Batcycle Agreement, stated that Kustomotive:

quitclaims, assigns, transfers and sets over to [Fox and Greenway] any and all right, title and interest in and to the design of the Batcycle . . . and in and to the design or designs of the completed Batcycle . . . and any and all right, title and interest in and to said designs shall forever be vested in and owned solely by [Fox and Greenway].

(Doc. 67-6 at 7). The Batgirl-Cycle agreement contained the same language. (See Doc. 67-16 at 4).

         The agreements did provide, however, the opportunity for Kustomotive to “acquire a percentage of net profits received from merchandising rights in and to the Batcycle” and Batgirl-Cycle “[s]ubject to entering into an agreement with Licensing Corporation of America” (“LCA”). (Docs. 67-6 at 5; 67-16 at 4-5). In this suit, Plaintiff claimed that Kustomotive entered into such a merchandising contract with LCA regarding the Batcycle (“Merchandising Contract”), (Doc. 72 at 2), and the Batgirl-Cycle, (Doc 28 at 4), while Defendants contested that such merchandising agreements were ever made, (Doc. 66 at 2).

         Korkes and Dempski, the individuals who signed these alleged Merchandising Contracts, are now deceased. (Id.). Plaintiff claimed to be the assignee of Korkes' rights under the Batcycle and Batgirl-Cycle contracts and the related merchandising agreements. (Id.). Plaintiff sued Defendants, who are allegedly successors in interest to LCA, arguing that Defendants owed Plaintiff a percentage of the merchandising profits from selling Batcycle and Batgirl-Cycle products. (Id.). Plaintiff alleged five causes of action in this lawsuit, including: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) conversion; (4) unjust enrichment; and (5) fraudulent concealment. (Doc. 28).

         On October 5, 2017, Defendants filed a Motion for Summary Judgment, arguing that Plaintiff failed to prove the existence of the alleged Merchandising Contract. (Doc. 66). Based on the lack of evidence regarding the existence of the alleged Merchandising Contract, the Court granted Defendants' Motion for Summary Judgment on all of Plaintiff's six claims. (Doc. 86). After entry of judgment, Plaintiff filed a Motion for Reconsideration, (Doc. 88), which the Court denied. (Doc. 124).

         II. PLAINTIFF'S MOTION FOR LEAVE TO FILE SURREPLY

         After Defendants' Motion for Attorneys' Fees was fully briefed, Plaintiff filed a Motion for Leave to File Surreply to Defendants' Motion for Attorneys' Fees to address the “new evidentiary statements” allegedly made in Defendants' Reply. (Doc. 116). With this Motion for Leave to File Surreply (Doc. 116), Plaintiff also filed a proposed Surreply (Doc. 116-1 at 1-7) and eleven new exhibits (Docs. 116-2-116-13). In their Response In Opposition to Plaintiff's Motion for Leave to File Surreply, (Doc. 118), Defendants request that the Court permit them to supplement their request for attorneys' fees to include the additional post-judgment fees incurred by Defendants after they filed their Motion for Attorneys' Fees, including fees accrued in responding to Plaintiff's Motion for Leave to File Surreply and Plaintiff's Motion for Reconsideration. (Doc. 118 at 12-13). Thereafter, Plaintiff filed a Reply (Doc. 119) in support of its Motion for Leave to File Surreply.

         In general, surreplies are “highly disfavored, as they usually are a strategic effort by the nonmoving party to have the last word on a matter.” Sims v. Paramount Gold & Silver Corp., No. CV 10-356-PHX-MHM, 2010 WL 5364783, at *8 (D. Ariz. Dec. 21, 2010) (quoting In re Enron Corp. Sec., 465 F.Supp.2d 687, 690 n.4 (S.D. Tex. 2006)). Accordingly, surreplies will not be permitted except “in the most extraordinary circumstances.” Id. (quoting Beckner v. Astrue, No. 06-1012-JTM, 2007 WL 2013608, at *1 (D. Kan. July 9, 2007)). Further, a surreply may be appropriate if the opposing party raises an entirely new issue in a reply brief, or if that party files new evidence with their reply brief. ML Liquidating Tr. v. Mayer Hoffman McCann P.C., No. 2:10-CV-02019-RRB, 2011 WL 10451619, at *1 (D. Ariz. Mar. 11, 2011).

         Although Plaintiff claims that Defendants' Reply “sets forth three factual arguments” that are “unsupported by evidence appearing in the record, ” (Doc. 116 at 1), this is not a valid basis for requesting a surreply. To the contrary, Defendants' Reply did not raise any novel issues or introduce any new evidence that would warrant granting Plaintiff leave to file a surreply. Defendants' Reply merely responded to, and rebutted, Plaintiff's arguments concerning the Associated Indemnity factor relating to the merits of Plaintiff's claim, (Doc. 111 at 4-7), which is not improper. See Haldiman v. Cont'l Cas. Co., No. CV-13-00736-PHX-DLR, 2014 WL 12670637, at *9 n.6 (D. Ariz. Aug. 26, 2014), aff'd, 666 Fed.Appx. 612 (9th Cir. 2016) (Plaintiff moved “for leave to file a surreply addressing Defendant's ‘new argument.' Plaintiff's motion is denied because Defendant does not raise a new argument but only rebuts arguments first raised by Plaintiff in her opposition.”). Moreover, Defendants' Reply merely cites to previously filed evidence.

         Finally, the Court finds no “extraordinary circumstances” which would justify the granting of Plaintiff's request. Indeed, any argument that Defendants' Reply presents new factual arguments is without merit. First, to the extent Plaintiff claims that Defendants raised a new factual argument concerning whether Korkes and Dempski created “new intellectual property, ” (Doc. 116 at 2), Plaintiff misstates the record. After Defendants argued in their Motion for Attorneys' Fees that Korkes had assigned any rights he had to Fox and Greenway, and thus there was no logical reason that LCA would have gratuitously given Korkes merchandising royalties, (Doc. 92 at 12), Plaintiff asserted in his Response that it was “undisputed that Korkes and Dempski created the Batcycle-a new piece of intellectual property.” (Doc. 106 at 10 (emphasis added)). Then, in their Reply, Defendants' argued in rebuttal that Korkes and Dempski did not create the Batcycle, because the Batcycle had already been depicted in comic books before Mr. Korkes built a version of the Batcycle to be used in filming the television series. (Doc. 118 at 8 (citing Doc. 111 at 5)). This was a proper rebuttal argument to Plaintiff's assertion that Korkes “created” the Batcycle. Further, the Court agrees with Defendants that “there is no just reason to further extend the briefing on the motion for attorneys' fees to allow Plaintiff to argue over the immaterial issue of whether Korkes and Dempski created ‘new intellectual property,' because any rights they may have had were assigned to Fox and Greenway.” (Id. at 8-9).

         Next, Plaintiff asserts that he should be permitted to file a surreply to point out that Twentieth Century Fox did not pay Plaintiff any funds to Plaintiff for Plaintiff's dismissal of the claims against it. (Doc. 116 at 2). Plaintiff makes this argument in response to the statement in Defendants' Reply that Plaintiff “makes no mention of the value of his settlement with Defendant Twentieth Century Fox.” (Doc. 111 at 7). Defendants make this statement to point out that Plaintiff failed to present evidence in his Response (Doc. 106 at 8) that an attorneys' fees award would cause extreme hardship. Pointing out all of the financial assets which Plaintiff failed to discuss in establishing “extreme hardship” is a proper rebuttal argument which Defendants were permitted to make in their Reply. See Haldiman, 2014 WL 12670637, at *9 n.6. Moreover, Defendants even concede that Plaintiff entered a tolling agreement and did not receive any funds from Twentieth Century Fox, (Doc. 118 at 11), so a surreply discussing this topic is unnecessary.

         To the extent Plaintiff claims that Defendants raised a “new” factual argument concerning the fact that George Barris, the person who built the Batmobile, did not receive royalties from Defendants, (Doc. 116 at 2), this argument was not raised for the first time in Defendants' Reply (Doc. 111). Rather, Defendants made this exact argument in their initial Motion for Attorneys' Fees. (See Doc. 92 at 12 (“George Barris, who built the iconic Batmobile for the same television series in the 1960s, was not given any merchandising rights in the Batmobile. He signed a similar agreement assigning all of his rights in the design of the Batmobile, and to the same entities that Korkes assigned his rights in the design of the Batcycle.”)). Finally, to the extent Plaintiff contends that Defendants raised a “new” factual argument concerning the fact that there was no admissible evidence of a merchandising agreement, (Doc. 116 at 2), this argument also fails. Defendants' Motion for Attorneys' Fees raised the argument that “Defendants established a just defense to all of Plaintiff's claims. There never was any alleged Merchandising Contract.” (Doc. 92 at 12; see also Id. at 13 (“Plaintiff . . . rested its claims upon an alleged Merchandising Contract that never existed.”)). For these reasons, the Court denies Plaintiff's Motion for Leave to File Surreply to Defendants' Motion for Attorneys' Fees (Doc. 116). The Court will not consider Plaintiff's proposed Surreply, (Doc. 116-1 at 1-7), or the eleven new exhibits he filed therewith, (Docs. 116-2-116-13), in ruling on Defendants' Motion for Attorneys' Fees.

         Furthermore, the Court denies without prejudice Defendants' request for additional post-judgment fees incurred after filing the Motion for Attorneys' Fees at issue, including fees accrued in responding to Plaintiff's Motion for Leave to File Surreply and Plaintiff's Motion for Reconsideration. (Doc. 118 at 12-13). Defendants' request for further fees incurred in responding to these post-judgment motions fails to comply with Local Rule (“LRCiv”) 54.2(d), as Defendants do not submit a task-based, itemized statement of time expended in the preparation of their Response to Plaintiff's Motion for Leave to File Surreply (Doc. 118) and Response to Plaintiff's Motion for Reconsideration (Doc. 112).

         III. DEFENDANTS' MOTION FOR ATTORNEYS' FEES AND COSTS

         On October 3, 2018, Defendants filed their Motion for Attorneys' Fees, seeking an award of attorneys' fees and costs pursuant to A.R.S. § 12-341.01 and LRCiv 54.2. (Doc. 92). In total, Defendants seek an award of $138, 792.50, including $118, 886.10 in attorneys' fees, $1, 208.00 in paraprofessional fees, $1, 200.00 in computerized legal research charges, and $17, 498.40 in attorneys' fees incurred in the preparation of the Motion for Attorneys' Fees. (Doc. 92 at 17). Plaintiff filed his Response (Doc. 106) in opposition on October 25, 2018, arguing that Defendants' Motion for Attorneys' Fees should be denied, or else significantly reduced, because Defendants did not satisfy the requirements of A.R.S. § 12-341.01. (Doc. 106 at 1).[3] On November 7, 2018, Defendants filed their Reply in support of their Motion for Attorneys' Fees. (Doc. 111).[4]

         “A federal court sitting in diversity applies the law of the forum state regarding an award of attorneys' fees.” Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 883 (9th Cir. 2000) (citations omitted). Under Arizona law, “[i]n any contested action arising out of contract, express or implied, the court may award the successful party reasonable attorney fees.” A.R.S. § 12-341.01(A). Therefore, to award attorneys' fees under this statute, the Court must find that this action arises out of a contract, that Defendants are the “successful” or prevailing party, that an award of attorneys' fees is appropriate, and that the requested fees are reasonable. See Lexington Ins. Co. v. Scott Homes Multifamily Inc., No. CV-12-02119-PHX-JAT, 2016 WL 5118316, at *2 (D. Ariz. Sept. 21, 2016). Ultimately, any award under A.R.S. § 12-341.01 “should be made to mitigate the burden of the expense of litigation to establish a just claim or a just defense.” A.R.S. § 12-341.01(B). The award “need not equal or relate to the attorney fees actually paid or contracted, but the award may not exceed the amount paid or agreed to be paid.” Id.

         A. Eligibility for Fees Under A.R.S. § 12-341.01

         Defendants are eligible for an award of reasonable attorneys' fees pursuant to A.R.S. § 12-341.01(A) as Defendants were the successful party in this litigation, and this suit involved a contested action arising out of contract.

         1. Defendants were the “Successful” Party

         Under Arizona law, “the trial court has substantial discretion to determine who is a ‘successful party'” when determining an award of attorneys' fees under A.R.S. § 12-341.01. Fulton Homes Corp. v. BBP Concrete, 155 P.3d 1090, 1096 (Ariz.Ct.App. 2007) (citing Pioneer Roofing Co. v. Mardian Constr. Co., 733 P.2d 652, 664 (Ariz.Ct.App. 1986)). “The decision as to who is the successful party for purposes of awarding attorneys' fees is within the sole discretion of the trial court, and will not be disturbed on appeal if any reasonable basis exists for it.” Maleki v. Desert Palms Prof'l Props., L.L.C., 214 P.3d 415, 422 (Ariz.Ct.App. 2009) (quoting Sanborn v. Brooker & Wake Prop. Mgmt., Inc., 874 P.2d 982, 987 (Ariz.Ct.App. 1984)).

         In this case, the Court granted Defendants' Motion for Summary Judgment, (Doc. 86 at 16), and the Clerk of the Court entered judgment in favor of Defendants on all claims and dismissed the case with prejudice, (Doc. 87). Plaintiff does not dispute that Defendants were the successful party. (See generally Doc. 106). As Defendants successfully defended each of Plaintiff's claims, the Court finds that Defendants were the “successful party” within the meaning of A.R.S. § 12-341.01.

         2. The Claims Arise out of Contract

         In determining whether a claim arises out of a contract, the court considers the “nature of the action and the surrounding circumstances.” Marcus v. Fox, 723 P.2d 682, 684 (Ariz. 1986) (citing Wenk v. Horizon Moving & Storage Co., 639 P.2d 321, 322 (Ariz. 1982)). “It is well-established that a successful party on a contract claim may recover not only attorneys' fees expended on the contract claim, but also fees expended in litigating an ‘interwoven' tort claim.” Modular Mining Sys., Inc. v. Jigsaw Techs., Inc., 212 P.3d 853, 860 (Ariz.Ct.App. 2009) (quoting Ramsey Air Meds, L.L.C. v. Cutter Aviation, Inc., 6 P.3d 315, 318 (Ariz.Ct.App. 2000)). “The test to determine if an action arises out of contract is whether the plaintiff would have a claim ‘even in the absence of a contract.'” ML Servicing Co. v. Coles, 334 P.3d 745, 753 (Ariz.Ct.App. 2014) (quoting Ramsey Air Meds, L.L.C., 6 P.3d at 320-21). Thus, a tort claim arises out of a contract under A.R.S. § 12-341.01(A) “only when the tort could not exist ‘but for' the breach or avoidance of contract.” Ramsey Air Meds, L.L.C., 6 P.3d at 320; see also Barmat v. John & Jane Doe Partners A-D, 747 P.2d 1218, 1222 (Ariz. 1987) (“Where . . . the duty breached is not imposed by law, but is a duty created by the contractual relationship, and would not exist ‘but for' the contract, then breach of either express covenants or those necessarily implied from them sounds in contract.”). Consequently, A.R.S. § 12-341.01 does not apply if the “contract is only a factual predicate to the action but not the essential basis of it.” Kennedy v. Linda Brock Auto. Plaza, Inc., 856 P.2d 1201, 1203 (Ariz.Ct.App. 1993). Nor does “[t]he mere reference to a contract in a complaint . . . make the action one ‘arising out of contract.'” Dooley v. O'Brien, 244 P.3d 586, 591 (Ariz.Ct.App. 2010) (citation omitted).

         a. Plaintiff's Claims for Breach of Contract and Breach of the Covenant of Good Faith and Fair Dealing

         Defendants first allege that they are eligible for an award of attorneys' fees for their defense of Plaintiff's claims for breach of contract and breach of the covenant of good faith and fair dealing. (Doc. 92 at 2). Defendants argue that Plaintiff's claim for breach of contract arose out of an alleged express contract, while Plaintiff's claim for breach of the covenant of good faith and fair dealing arose out of an alleged implied contract. (Id.). Plaintiff does not dispute that these two claims arise out of contract. (See Doc. 106 at 2- 5).[5] As each of these claims were premised on the existence of an alleged Merchandising Contract, Defendants are eligible for a fee award under A.R.S. § 12-241.01(A) for the work performed defending these claims. See Harris v. Maricopa Cty. Superior Court, 631 F.3d 963, 974-75 (9th Cir. 2011) (holding that the defendant was eligible for an award of attorneys' fees for work performed on the plaintiff's claims for breach of contract and the duty of good faith and fair dealing, as these claims were “explicitly premised on the existence of an implicit contract that the district court found did not exist”).[6]

         b. Plaintiff's Unjust Enrichment, Conversion, and Fraudulent Concealment Claims

         Defendants also argue that they are entitled to fees for defending against Plaintiff's unjust enrichment, conversion, and fraudulent concealment claims, because “the[se] other claims were ‘inextricably intertwined' with the contract claims and predicated on a common set of facts.” (Doc. 92 at 2). In specific, Defendants point out that “[a]ll of the claims were defeated based upon the non-existence of the alleged Merchandising Contract.” (Id.). Plaintiff contends, however, that Defendants are not entitled to attorneys' fees incurred in defending these three claims because they did not “arise out of a contract, ” as § 12.341.01(A) requires. (Doc. 106 at 2-5).

         Plaintiff now argues that his unjust enrichment claim “was alleged as an alternative claim if no contract existed” and “does not rely on the existence of a contract or a breach of a contract litigated in this action.” (Id. at 5). Nevertheless, Plaintiff's Complaint indicates that the unjust enrichment claim was premised on the asserted failure of Defendants to pay Plaintiff for the “proceeds derived from licensing and merchandising contracts.” (Doc. 28 at 9-10). The Court granted summary judgment to Defendants on this claim based upon the absence of any genuine issue of fact concerning the existence of the alleged Merchandising Contract. (Doc. 86 at 14). Plaintiff's unjust enrichment claim could not exist “but for” the breach or avoidance of the alleged Merchandising Contract, and is therefore considered to be an “interwoven” tort claim for purposes of A.R.S. § 12-341.01. See Barmat, 747 P.2d at 1222 (“Where . . . the duty breached is not imposed by law, but is a duty created by the contractual relationship, and would not exist ‘but for' the contract, then breach of either express covenants or those necessarily implied from them sounds in contract.”); see also ML Servicing Co., 334 P.3d at 753 (holding, in part, that the trial court did not err in finding that the unjust enrichment claim arose out of contract because the unjust enrichment claim would not exist in the absence of the insurance contract which was paid out to the defendant).

         Similarly, Plaintiff's fraudulent concealment claim could not exist “but for” the alleged Merchandising Contract. Ramsey Air Meds, L.L.C., 6 P.3d at 320; Barmat, 747 P.2d at 1222. This claim was based upon allegations that Defendants “purposefully and knowingly concealed and denied the existence of . . . the Merchandising Contract . . . .” (Doc. 28 at 10). Therefore, the Court concludes that Plaintiff's fraudulent concealment claim arose out of contract within the meaning of § 12-341.01. See SK Builders, Inc. v. Smith, 436 P.3d 519, 528 (Ariz.Ct.App. 2019) (finding that homeowners' breach of contract and fraudulent misrepresentation claims against subcontractor were intertwined where fraudulent misrepresentation claim, which was based on the allegation that subcontractor knew it performed defective work under the contract and did not intend to cure the defects according to the contractually required plans and specifications, could not exist but for the alleged contract); Sunstate Equip. Co. v. Davis, No. 1 CA-CV-18-0222, 2019 WL 1499854, at *4 (Ariz.Ct.App. Apr. 4, 2019) (finding that a claim for fraudulent concealment arose out of contract for purposes of § 12-341.01 because it arose out of the alleged business transactions between the parties and could not exist “but for” the alleged breach of contract).

         Finally, Plaintiff argues that his conversion claim was “premised on the theory that if an agreement between Twentieth Century Fox Television, Greenway Productions, and Korkes was invalid, then any use of the Batcycle design by any person other than Korkes was an unlawful exercise of dominion or control over his intellectual property.” (Doc. 106 at 4). Although Plaintiff now claims that his conversion claim does not arise out of contract, (id.), the Court explicitly noted in its Order granting summary judgment that Plaintiff had previously argued that “if Korkes and Dempski did not receive merchandising rights, the assignment of rights to Fox and Greenway is subject to rescission.” (Doc. 86 at 15 (citing Doc. 72 at 10)). Thus, Plaintiff's claim for conversion, by his own admission, was predicated upon proof of rescission of contract, and was “substantially dependent” upon the contract being found unenforceable. Modular Mining Sys., Inc., 212 P.3d at 861. Accordingly, Plaintiff's claim for conversion arose out of contract. See Deutsche ...


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