Animal Film, LLC v. D.E.J. Prods., Inc.

• Decision Date: 23 February 2011
• Docket Number: No. B222994.,B222994.
• Citation: 123 Cal.Rptr.3d 72,193 Cal.App.4th 466,2011 Daily Journal D.A.R. 3710
• Court: California Court of Appeals Court of Appeals
• Parties: ANIMAL FILM, LLC, Plaintiff and Appellant, v. D.E.J. PRODUCTIONS, INC. et al., Defendants and Respondents.

193 Cal.App.4th 466

123 Cal.Rptr.3d 72

2011 Daily Journal D.A.R. 3710

ANIMAL FILM, LLC, Plaintiff and Appellant,

v.D.E.J. PRODUCTIONS, INC. et al., Defendants and Respondents.

No. B222994.

Court of Appeal, Second District, Division 1, California.

Feb. 23, 2011.

Law Offices of Dennis Holahan and Dennis J. Holahan, Los Angeles, for Plaintiff and Appellant.

Costa Abrams & Coate, Charles M. Coate, Santa Monica, and Darius Anthony Vosylius for Defendants and Respondents.

ROTHSCHILD, J.

Appellant Animal Film, LLC (Animal) sued respondents D.E.J. Productions, Inc. (DEJ) and First Look Studios, Inc. (First Look) in Los Angeles County Superior Court for contract damages and an accounting related to the production of a motion picture. Based on a clause in the production agreement providing that Texas law governs the parties' rights and stating that the parties submit to jurisdiction in Texas, DEJ and First Look moved to stay or dismiss the action on forum non conveniens grounds, arguing that Texas is the proper forum for the case to be tried. The trial court agreed, first staying the action so Animal could file it in Texas and later dismissing it. We reverse, concluding that the Texas forum selection clause in the production agreement is permissive, not mandatory, and that the trial court erred in determining under forum non conveniens principles that the action should be tried in Texas.

FACTUAL AND PROCEDURAL BACKGROUND

1. Animal's Complaint

Animal, a California limited liability company with its principal place of business in Los Angeles, filed a complaint on September 10, 2009, in Los Angeles County Superior Court for breach of contract, breach of the implied covenant of good faith and fair dealing, and an accounting against DEJ and First Look, both Delaware corporations whose undisputed principal places of business are in Los Angeles.

According to the complaint, on September 24, 2004, Animal and DEJ entered into a written production agreement for the acquisition, financing, production, and distribution of a feature film titled “Animal.” Under the production agreement, Animal agreed to produce and deliver the film to DEJ, and Animal's principal, movie actor Ving Rhames, agreed to star in it. DEJ agreed to finance the production by paying Animal the “Purchase Price” of $975,000. In addition, DEJ promised to pay Animal $250,000 as a “Producer Deferment” after DEJ recouped the Purchase Price, interest on the Purchase Price, and a distribution fee. DEJ also promised to pay Animal a percentage of the “Distributor Gross Receipts” as defined in the agreement. The production agreement required DEJ to account to Animal for the first calendar quarter in which DEJ received Distributor Gross Receipts and for every quarter thereafter for 24 months.

The complaint further alleges that Animal completed and delivered the film to DEJ in early 2005, that the film was released on DVD in the United States and the United Kingdom in the fall of 2005, and that it generated more than $3 million of gross income as of the end of 2006. When DEJ issued its first accounting statement, a year late, Animal demanded an audit. Auditors, retained by Animal, concluded that DEJ and First Look owed Animal at least $272,266 under the production agreement, but DEJ and First Look, which had acquired DEJ from Blockbuster, Inc. in 2005, refused to pay. Animal thus seeks from DEJ and First Look damages based on the terms of the production agreement, an accounting, audit costs, prejudgment interest, attorney fees, and costs.

2. The Forum Non Conveniens Motion

DEJ and First Look filed a motion to dismiss or stay the action on forum non conveniens grounds, arguing that the choice-of-law and forum selection provision in the production agreement requires that the action be tried in Texas, not California. That provision states in bold capital letters: “APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS APPLICABLE TO AGREEMENTS MADE IN AND WHOLLY TO BE PERFORMED IN THAT JURISDICTION, AND THE PARTIES HERETO SUBMIT AND CONSENT TO THE JURISDICTION OF THE COURTS PRESENT IN THE STATE OF TEXAS IN ANY ACTION BROUGHT TO ENFORCE (OR OTHERWISE RELATING TO) THIS AGREEMENT.”

In support of the motion, referring to this provision, First Look's chief executive officer, Trevor Short, who also is an officer of DEJ, stated in his declaration that First Look “does not agree to waive enforcement of the parties' bargained for forum selection contract.” DEJ and First Look represented that Blockbuster, which is listed in the production agreement as a party to be copied on notices given to DEJ at its office in Dallas, sold DEJ to First Look and claimed that the Texas forum selection clause was included in the production agreement to protect Blockbuster from litigation outside of Texas.

In opposition to the motion, Animal argued that the forum selection clause is permissive only, and thus does not require trying the case in Texas, and that it would be inconvenient to litigate outside California because the parties, witnesses, location for performance of the production agreement, and the accounting documents are all in Los Angeles. Animal's counsel, Dennis Holahan, stated in a declaration that the audit of First Look was conducted in First Look's Los Angeles office and that the auditors who would testify at trial are in Los Angeles. Holahan also stated that Animal's principal, Rhames, lives in Los Angeles County and that Animal, which was formed in 2004 for purposes of producing the film, is a California resident. Animal argued that, because Blockbuster no longer owned DEJ and was not a party to the action, the connection to Texas was tenuous and that the forum selection clause was included because Blockbuster has its principal offices in Dallas.

3. The Trial Court's Ruling

The trial court ruled that the forum selection clause in the production agreement is permissive rather than mandatory. It concluded, however, that Texas is a suitable alternative forum and that the private and public interests weigh in favor of trying the action in Texas. Because the court ruled that California was not a convenient forum, it stayed the action and gave Animal two months to file the case in Texas. When, more than two months later, none of the parties appeared at a hearing in response to an order to show cause regarding dismissal, the court dismissed the action.

DISCUSSION

1. Forum Non Conveniens Governing Law

Forum non conveniens is an equitable doctrine, codified in Code of Civil Procedure section 410.30, under which a trial court has discretion to stay or dismiss a transitory cause of action that it believes may be more appropriately and justly tried elsewhere. ( Stangvik v. Shiley Inc. (1991) 54 Cal.3d 744, 751, 1 Cal.Rptr.2d 556, 819 P.2d 14( Stangvik ).) The inquiry is whether “in the interest of substantial justice an action should be heard in a forum outside this state.” (Code Civ. Proc., § 410.30, subd. (a).)

In a contract dispute in which the parties' agreement contains a forum selection clause, a threshold issue in a forum non conveniens motion is whether the forum selection clause is mandatory or permissive. A mandatory clause ordinarily is “given effect without any analysis of convenience; the only question is whether enforcement of the clause would be unreasonable.” But, if “the clause merely provides for submission to jurisdiction and does not expressly mandate litigation exclusively in a particular forum, then the traditional forum non conveniens analysis applies. [Citation.]” ( Intershop Communications AG v. Superior Court (2002) 104 Cal.App.4th 191, 196, 127 Cal.Rptr.2d 847, citing Berg v. MTC Electronic Technologies Co. (1998) 61 Cal.App.4th 349, 358–360, 71 Cal.Rptr.2d 523( Berg ).) The existence of a permissive forum selection clause is one factor considered along with the other forum non conveniens factors in applying the traditional analysis. ( Berg, at p. 359, 71 Cal.Rptr.2d 523.)

2. Forum Selection Clause

DEJ and First Look contend that the forum selection provision in the production agreement is mandatory, rather than permissive, as interpreted by the trial court. We agree with the trial court.

When, as here, no conflicting extrinsic evidence has been presented, the interpretation of a forum selection clause is a legal question that we review de novo. ( Intershop Communications AG v. Superior Court, supra, 104 Cal.App.4th at p. 196, 127 Cal.Rptr.2d 847.)

The forum selection clause in the production agreement between Animal and DEJ states that the parties submit and consent to the jurisdiction of the courts present in the state of Texas in any action brought to enforce (or otherwise relating to) this Agreement. This clause resembles forum selection clauses that courts have held to be permissive because they provide for submission to jurisdiction in a particular forum without mandating it. (E.g., Berg, supra, 61 Cal.App.4th at p. 357, 71 Cal.Rptr.2d 523 [“ ‘The company ... has expressly submitted to the jurisdiction of the State of California and United States Federal courts sitting in the City of Los Angeles, California, for the purpose of any suit ... arising out of this Offering’ ” (italics added) ]; Southwest Intelecom, Inc. v. Hotel Networks Corp. (Tex.Ct.App.1999) 997 S.W.2d 322, 323, 325–326 [“The Parties stipulate to jurisdiction and venue in Ramsey County, Minnesota, as if this Agreement were executed in Minnesota” (italics added) ].) Conversely, the clause lacks the language of exclusivity in forum selection clauses that courts have held to be mandatory. (E.g., Cal–State Business Products & Services, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1672, fn. 4, 16 Cal.Rptr.2d 417 [“ ‘[A]ny appropriate state or federal district court located in the Borough of Manhattan, New York City, New York shall have exclusive jurisdiction over any case of controversy arising under or in connection with this Agreement’ ” (italics added) ]; see also ...