Luken Commc'ns, LLC v. Jim Owens Entm't, Inc. (In re Luken Commc'ns, LLC), 13-13069
| Decision Date | 27 June 2014 |
| Docket Number | Adv. No. 14-1023,No. 13-13069,13-13069 |
| Parties | In re Luken Communications, LLC Debtor Luken Communications, LLC Plaintiff v. Jim Owens Entertainment, Inc. Defendant |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Eastern District of Tennessee |
In re Luken Communications, LLC Debtor
Luken Communications, LLC Plaintiff
v.
Jim Owens Entertainment, Inc. Defendant
No. 13-13069
Adv. No. 14-1023
UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF TENNESSEE SOUTHERN DIVISION
SIGNED: June 27, 2014
The complaint initiating this adversary proceeding seeks the partial disallowance of the defendant's claim for the purpose of determining (1) the distribution on the claim under any chapter 11 plan that may be confirmed in this case, and (2) the amount that must be paid in con-
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nection with the assumption of executory contracts between the parties.1 Having considered the evidence presented at trial and the arguments and briefs of the parties, the court now makes its findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure, as made applicable in bankruptcy adversary proceedings by Rule 7052 of the Federal Rules of Bankruptcy Procedure.
On May 20, 2011, the parties entered into eleven license agreements whereby defendant Jim Owens Entertainment, Inc. ("JOE"), licensed certain television programs to debtor and plaintiff Luken Communications, LLC, and, on March 6, 2012, the parties entered into one additional license agreement for certain television episodes from the series Music City Tonight. At the outset, the court notes that there is no dispute with respect to four of the license agreements.
Country Performances. The "Country Performances" agreement was for 1,500 episodes for a fee of $200.00 per episode. JOE acknowledges that the debtor never received any episodes, and so does not owe anything under that contract. The debtor proposes to reject this license agreement, but to assume all of the others.
Country Standard Time. The original "Country Standard Time" agreement was for twenty-six thirty- minute episodes for a fee of $750.00 per episode, but the parties modified the agreement to provide for 129 sixty-minute episodes and a fee of $1,250.00 per episode. The
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debtor received all 129 episodes, and so it is obligated to pay license fees with respect to 129 episodes of Country Standard Time.
Funny Business. The "Funny Business" agreement was for sixteen episodes for a fee of $1,500 per episode. The parties are in agreement that fifteen episodes were delivered, and so the debtor is obligated to pay license fees with respect to fifteen episodes of Funny Business.
Year in Country Music. The "Year in Country Music" agreement was for ten episodes for a fee of $1,500.00 per episode. The parties are in agreement that eight episodes were delivered, and so the debtor is obligated to pay license fees with respect to eight episodes of The Year in Country Music.
Turning to the first category of license agreements in controversy, in two instances JOE delivered more episodes than were called for by the parties' agreements. The debtor contends that, in each case, it should not be liable for payment of the license fees for the number of episodes exceeding the number specified by the license agreement unless they were broadcast. JOE contends that the debtor should be required to pay for the additional episodes because it converted them to a digital format upon receipt. The court holds that the debtor must pay for only the number of episodes stated in the license agreements, unless the additional episodes were actually broadcast, because those agreements were never modified, either expressly or by a course of dealing. The programs and license agreements falling into this category are as follows.
Crook and Chase. The "Crook and Chase" agreement was for 270 episodes for a fee of $1,500.00 per episode. The debtor aired only fifty of the original 270 episodes from the 1996-97 season that the debtor had picked up from JOE, either because JOE withdrew them (according to
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the debtor) or by mutual agreement (according to JOE). However, the debtor picked up tapes belonging to JOE from CBS that contained 593 additional episodes for purposes of replacing the original 270 episodes, and the debtor aired 270 of those 593 episodes. JOE contends that the debtor must pay for all 593 episodes, because the debtor has converted all of the episodes to digital format but, as noted above, the court disagrees.
The parties agreed to license only 270 episodes, and that agreement was never modified. In an email that James Owens, president and owner of JOE, sent on August 16, 2012, to Matthew Winn, an executive supervisor of the debtor's, Mr. Owens acknowledged that "we have delivered more programs than were agreed upon originally," specifically mentioning the additional episodes of Crook and Chase and also additional episodes of Music City Tonight, and stated that "we can discuss later down the road if you want to add them to the Luken library or not." There is no dispute that there were no such additional discussions. Mr. Winn also testified that it was the debtor's policy to have written license agreements for the programs that the debtor intended to broadcast.
The proof revealed that the programs the debtor received from JOE were on video tapes and that the debtor could not accurately determine the content of the tapes without manually reviewing them. When the debtor received boxes of tapes from JOE over a period of approximately eighteen months,2 each tape was played through a tape player connected to a computer so that the content of the tape could be converted to a digital format for review, verification, and
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analysis. Also, because the tapes were not received at one specific time, it was necessary to convert the programs to a digital format so that the programs could be saved until all of the licensed content was received, with the tapes being returned to JOE promptly after the programs were copied. Although the debtor could not broadcast the programming without converting it to a digital format, the mere fact that the episodes were converted to a digital format during the initial review process did not indicate that the debtor had agreed to license additional episodes beyond the number set forth in the license agreements.3 The debtor did, however, acknowledge that it was responsible for paying additional fees for broadcasting the fifty episodes from the 1996-97 season that were later withdrawn. Accordingly, the debtor is obligated to pay license fees with respect to 320 episodes of Crook and Chase.
Music City Tonight. Likewise, the "Music City Tonight" agreement was for 455 episodes for a fee of $1,750.00 per episode. JOE delivered 569 episodes, and it contends that the debtor is liable for all of them because it has digitized them all. Again, the court disagrees. Accordingly, the debtor is obligated to pay license fees with respect to 455 episodes of Music City Tonight.
The second category of disputed license agreements is the converse of the first: in three instances JOE delivered fewer episodes than were called for by the parties' agreements, and the court holds that the debtor must pay for only the number of episodes delivered. The programs and license agreements falling into this category are as follows.
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Celebrity Kitchen. The "Celebrity Kitchen" agreement was for 200 episodes for a fee of $750.00 per episode. JOE delivered 191 episodes and, although the debtor contended that forty-two episodes were duplicates, the court finds, based upon the testimony of Lorianne Crook-Owens, a vice-president and manager of JOE's, that there were no duplicate episodes but rather certain celebrities appeared in more than one episode of the series. Accordingly, the debtor is obligated to pay license fees with respect to 191 episodes of Celebrity Kitchen.4
Yesteryear. The "Yesteryear" agreement was for sixteen episodes for a fee of $1,500.00. The court finds that the debtor received only seven episodes, and so the debtor is obligated to pay license fees with respect to seven episodes of Yesteryear.
Celebrities Offstage. The final agreement that the court considers to fall within this category is the "Celebrities Offstage" agreement. The original contract was for sixteen thirty-minute episodes for a fee of $750.00 per episode, but the parties modified the agreement to license seventeen sixty-minute episodes for a fee of $1,250.00 per episode. JOE delivered all seventeen episodes, but the court finds it asked the debtor not to air six of those episodes until it had a chance to review them for content. JOE never thereafter authorized the airing of the six episodes. Accordingly, the debtor is obligated to pay license fees with respect to eleven episodes of Celebrities Offstage.
The final category of disputed license agreements involve situations in which the debtor now contends some of the programs do not conform to the contracts. All four of the agreements
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falling into this category were signed in May 2011, at which time the debtor began retrieving boxes of tapes from JOE and "ingesting" them by...
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