DC3 Entertainment v. John Galt Entertainment, C04-2374C.
| Decision Date | 26 January 2006 |
| Docket Number | No. C04-2374C.,C04-2374C. |
| Citation | 412 F.Supp.2d 1125 |
| Court | U.S. District Court — Western District of Washington |
| Parties | DC3 ENTERTAINMENT, LLC, a Washington limited liability company, Plaintiff and Counterclaim Defendant, v. JOHN GALT ENTERTAINMENT, INC., a California corporation; David Kershenbaum and Timmi Derosa Kershenbaum, husband and wife and the marital community composed thereof, Defendants and Counterclaim Plaintiffs. John Galt Entertainment, Inc., a California corporation; David Kershenbaum and Timmi Derosa Kershenbaum, husband and wife and the marital community composed thereof, Third-Party Plaintiffs, v. Jonathan Phelps and Esther Phelps, husband and wife and the marital community composed thereof, Third— Party Defendants. |
O. Yale Lewis, Jr., Stacia N. Lay, Whitney I. Furman, Hendricks & Lewis, Seattle, WA, for Plaintiff and Counterclaim Defendant and Third-Party Defendants.
Michael C. Subit, Frank Freed Subit & Thomas, Seattle, WA, Stanley H. Stone, Steven H. Stone, Stone & Stone, Encino, CA, for Defendants and Counterclaim Plaintiffs.
Roger D. Mellem, Foster Pepper & Shefelman, Seattle, WA, for Third-Party Plaintiffs.
This matter comes before the Court on Plaintiffs and Third-Party Defendants' (Partial) Motion for Summary Judgment on Defendants' Contract Counterclaims and Third-Party Plaintiff Claims (Dkt. No. 178) ("Pl.'s Mot."), Defendants' and Third-Party Claimants' Opposition (Dkt. No. 226) ( ), and Plaintiffs and Third-Party Defendants' Reply in support of their motion (Dkt. No. 232) ("Pl.'s Reply"). The Court has considered all of the papers submitted regarding this motion and determined that oral argument is not necessary. The Court hereby GRANTS IN PART and DENIES IN PART the motion and rules as follows.
TABLE OF CONTENTS
I. BACKGROUND AND FACTS ............................................... 1129
A. The Parties ..................................................... 1130
B. The Agreements .................................................. 1131
1. The John Galt-Judah Production Agreement ..................... 1131
2. A Second John Galt-Judah Agreement?........................... 1132
3. The John Galt-DC3 Assignment ................................. 1133
4. The DC3 Judah Recording and Production Agreement ............. 1134
5. The John Galt-DC3 Development Agreement ...................... 1135
6. The DC3 Co-president Agreement ............................... 1136
C. Motion for Summary Judgment on Contract Counterclaims and
Third-Party Claims ............................................ 1136
II. APPLICABLE STANDARD ................................................ 1137
III. CHOICE OF LAW ...................................................... 1138
IV. ANALYSIS ........................................................... 1139
A. Standing of Ms. Kershenbaum ..................................... 1139
B. The John Galt-DC3 Assignment .................................... 1139
C. An Analogous Implied-in-Fact Contract?........................... 1145
D. Enforceability of an Implied-in-Fact Contract ................... 1149
E. Accounting and Constructive Trust Counterclaims and Third-Party
Claims ......................................................... 1151
V. CONCLUSION ......................................................... 1151
The underlying dispute concerns a series of agreements related to the development of a debut album by recording artist Brian Judah ("Mr. Judah"), as well as the business relationship between the parties. Plaintiffs First Amended and Supplemental Complaint (Dkt. No. 14) alleged claims for declaratory judgment, breach of contract, breach of a covenant of good faith and fair dealing, breach of fiduciary duty, and injunctive relief in connection with Plaintiffs relationship with Defendants, particularly David Kershenbaum and Timmi DeRosa Kershenbaum. Defendants counterclaimed for breach of contract, an accounting of royalties, establishment of a constructive trust, discrimination, harassment, retaliation, and wrongful termination; they also claimed against Third— Party Defendants for an accounting of royalties, establishment of a constructive trust, harassment, and retaliation. (Defs.' Counterclaims (Dkt. No. 18).)
On December 8, 2005, this Court granted Plaintiff's and Third-Party Defendants' motion for leave to file a Second Amended Complaint and First Amended Answer to Defendants' Counterclaims and Third-Party Claims. (See Order (Dkt. No. 222); Second Amended Complaint (Dkt. No. 224); Plaintiff's and Third-Party Defendants' First Amended Answer (Dkt. No. 223).) The Second Amended Complaint and First Amended Answer incorporated claims and defenses based on the possibility that one of the parties' agreements—an assignment of Defendants' contract rights with Mr. Judah to Plaintiff—was voidable. Plaintiff and Third-Party Defendants thus added claims for rescission, intentional misrepresentation, and negligent misrepresentation. To support these amendments, Plaintiff and Third Party-Defendants argued that the contract rights that Plaintiff had been "assigned" by Defendants were expired, and therefore could not be assigned in the first instance. Such an expiration would render the assignment voidable and unenforceable and, in turn, also be a basis to rescind another of the parties' agreements—an oral services contract.
At issue on the instant motion are Defendants' contract counterclaims and third-party claims. Specifically, Defendants and Counterclaim Plaintiffs John Galt Entertainment, David Kershenbaum, and Timmi DeRosa Kershenbaum seek damages for breach of contract against Plaintiff and Counterclaim Defendant DC3. Defendants and Counterclaim Plaintiffs John Galt Entertainment and David Kershenbaum also seek an accounting and establishment of a constructive trust against Plaintiff and Counterclaim Defendant DC3. Finally, Defendants and Third-Party Plaintiffs John Galt Entertainment and David Kershenbaum seek an accounting and establishment of a constructive trust against Third-Party Defendants Jonathan Phelps and Esther Phelps.1
Mr. Kershenbaum is a record producer with a 30-plus-year career in the music industry who has worked with such well-known artists as Joe Jackson, Duran Duran, Kenny Loggins, Bryan Adams, Janet Jackson, Tori Amos, Joan Baez, Peter Frampton, Cat Stevens, and Tracy Chapman. Ms. Kershenbaum is a songwriter and seminar teacher for aspiring songwriters who was married to Mr. Kershenbaum until their October 11, 2005 divorce. The Kershenbaums are residents of California. Together they own John Galt, a music production and entertainment company with its principal place of business in Bel Air, California. The Kershenbaums were the sole owners and employees of John Galt when the facts giving rise to this lawsuit occurred.
Jonathan Phelps and Esther Phelps are husband and wife and are residents of Washington. They own multiple businesses, one of which is DC3, an entertainment company formed in Washington with a principal place of business in Seattle, Washington.2 The Phelpses are the sole owners of DC3, which is both a business and a "ministry." (Pl.'s Mot., Lay Decl. Ex. 9 (Dep. of Mr. Phelps) 77:2-4.) The "ministry"—or "motto"—of DC3 is "[f]looding the heart of darkness with the light of Jesus." (Pl.'s Mot., Lay Decl. Ex.11 (Dep. of Ms. Phelps) 65:18-21, 67:22-24.) The Phelpses also own a recording studio called "Sonic Temple," which is located in Ferndale, California.
The Phelpses and the Kershenbaums met each other in May and early June 2003. Mr. Phelps had successfully bid on an eBay auction for a three-day seminar with Mr. Kershenbaum that was to take place in May 2003 at the Kershenbaums' home. On the second or third day of the seminar, the Kershenbaums introduced Mr. Phelps to Mr. Judah, a new recording artist with whom the Kershenbaums had been working. Mr. Judah performed for Mr. Phelps, who was "very impressed" with Mr. Judah. Mr. Phelps invited the Kershenbaums to join the Phelpses at their Ferndale, California ranch in early June 2003 for a retreat with the Phelpses and some other of their friends. The Kershenbaums attended. During the retreat, the Phelpses and the Kershenbaums began discussing their mutual desire to work together, particularly in producing Mr. Judah. Mr. Phelps was interested in signing Mr. Judah as DC3's first artist, and Ms. Kershenbaum felt that God was "telling" her to sign over John Galt's contract with Mr. Judah to DC3.
Several contracts and agreements are relevant to the instant motion for summary judgment. These include contracts and agreements between John Galt and Mr. Judah, between John Galt and DC3, between the Kershenbaums and DC3, and between DC3 and Mr. Judah.
The first of these agreements is between John Galt and Mr. Judah. On or about May 8, 2002, John Galt executed a 9-page "Production Agreement" with Mr. Judah, dated as of May 1, 2002. It is in the form of a letter signed by Mr. Judah and by Mr. Kershenbaum for John Galt. One of the material terms is an initial "shopping"3 period that would expire upon the earlier of (1) 10-and-a-half months following the date of the contract; or (2) the date upon which John Galt entered into a "Distribution Agreement." (Pl.'s Mot., Lay Decl Ex. 14 () 2 [hereinafter "John Galt— Judah Production Agreement"].) Further, in the event that John Galt had "substantially negotiated the material provisions of a Distribution Agreement, but [had] not entered into such agreement upon the date when the initial period would otherwise expire," the initial "shopping" period...
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...rights not similarly defined or named cannot be considered part of the rights transferred.” ( DC3 Entertainment, LLC v. John Galt Entertainment, Inc. (W.D.Wash.2006) 412 F.Supp.2d 1125, 1144.) Here, none of the allegations regarding assignment in the SAC specified that the assignment was tr......
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