Networks v. Pivot Point Ent. Llc

• Decision Date: 18 March 2011
• Docket Number: No. 10 Civ. 9422 (PGG)(JLC).,10 Civ. 9422 (PGG)(JLC).
• Parties: A & E TELEVISION NETWORKS, LLC and D & D Television Productions, Inc., Interpleader, Plaintiffs,v.PIVOT POINT ENTERTAINMENT, LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

771 F.Supp.2d 296

A & E TELEVISION NETWORKS, LLC and D & D Television Productions, Inc., Interpleader, Plaintiffs,

v.PIVOT POINT ENTERTAINMENT, LLC, et al., Defendants.

No. 10 Civ. 9422 (PGG)(JLC).

United States District Court, S.D. New York.

March 18, 2011.

Martin David Edel, Adam J. Safer, Miller & Wrubel, P.C., Cameron Altman Stracher, Cameron A. Stracher Attorney at Law, New York, NY, for Plaintiffs.

Howard Ernest King, Stephen David Rothschild, King, Holmes, Paterno & Berliner, LLP, Andrew Brad Brettler, Martin D. Singer, Paul N. Sorrell, Lavely & Singer Professional Corporation, Los Angeles, CA, for Defendants.

MEMORANDUM AND ORDER

JAMES L. COTT, United States Magistrate Judge.

On December 17, 2010, A & E Television Networks, LLC (“A & E”), and D & D Television Productions, Inc. (“D & D”) (together “Plaintiffs”) filed this interpleader action seeking the Court's authorization to deposit certain funds claimed by Defendants Pivot Point Entertainment, LLC (“Pivot Point”), Duane Chapman, and Alice Barmore–Smith Chapman (together the “Defendants”) into the Court's Registry and requesting that the Court enjoin Defendants from making any claim against Plaintiffs for recovery of these funds. In a decision dated January 18, 2011, Judge Gardephe allowed the action to proceed under 28 U.S.C. § 1335 and directed Plaintiffs to deposit $2,400,732.59, along with all additional royalties and fees as they become due, into the Court's Registry. By Order dated February 8, 2011, he referred this matter to me to determine what additional amounts, if any, Plaintiffs must deposit into the Court's Registry.

For the reasons set forth below, Plaintiffs are directed to deposit into the Court's Registry, by March 31, 2011, an amount equal to all compensation increases that have been granted to Mr. Chapman since December 19, 2005.

I. BACKGROUND

The factual background to this interpleader action is set out more fully in Judge Gardephe's January 18, 2011 decision, see A & E Television Networks, LLC v. Pivot Point Entm't, LLC, No. 10 Civ. 9422(PGG), 2011 WL 182083, at *1–2 (S.D.N.Y. Jan. 18, 2011), and familiarity with the facts underlying this action is assumed. In short, this action arises out of long-running disputes among various parties associated with the A & E television show, “Dog the Bounty Hunter” (the “Program”), which stars Duane “Dog” Chapman (“Mr. Chapman”) and his wife, Alice Barmore–Smith Chapman (together the “Chapmans”). Id. at *1.

In December 2003, Boris Krutonog and Hybrid Films, Inc. entered into a co-producer agreement (the “Hybrid Agreement”) for the Program under which Hybrid Films, Inc. was to pay Krutonog fees for each episode of the Program. Id. The greater the number of episodes, the larger the fee he would receive. Declaration of Howard E. King filed February 1, 2011 Ex. 1, ¶ 2 (“King Decl.”) (Dkt. No. 34). The Hybrid Agreement also provided, among other things, that “[p]ayments for additional episodes ... shall be negotiated by Krutonog and Hybrid in good faith. It is understood, however, that Krutonog's increase in compensation (over the then current fee) shall be based upon the percentage increase given to Chapman for these additional episodes.” Id. Ex. 1, ¶ 2(C).

In December 2005, Pivot Point, D & D, and A & E entered into an agreement (the “Pivot Point Agreement”) pursuant to which Krutonog assigned all of his rights under the Hybrid agreement to Pivot Point and Hybrid assigned all of its rights to D & D. A & E Television Networks, LLC, 2011 WL 182083, at *1. The Pivot Point Agreement provided for, among other things, the fees that D & D was to provide to Pivot Point for additional seasons of the Program. King Decl. Ex. 4, ¶ 3. Those fees primarily consisted of payments tied to the number of episodes of the Program that aired, id. Ex. 4, ¶ 3(c)(i)-(iv), royalties from, among other things, DVD sales of the Program, id. Ex. 2, ¶ 3(e), and an annual exclusivity payment of $15,000, id. Ex. 4, ¶ 3(f).

The Hybrid and Pivot Point Agreements are the ultimate source of the disputes among the parties that necessitated Plaintiffs' filing of this interpleader action: “Pivot Point ... claims that it is entitled to certain royalties and fees under the Pivot Point Agreement. The Chapmans, however, claim that the Pivot Point Agreement violates the California Talent Agencies Act (“TAA”) and that they, and not Pivot Point, are entitled to the royalties and fees due under the Agreement.” A & E Television Networks, LLC, 2011 WL 182083, at *1.

In his January 18, 2011 decision, Judge Gardephe allowed this interpleader action to proceed and ordered Plaintiffs to deposit $2,400,732.59 in the Registry of the Court. Id. at *8. The Court also ordered Defendants to respond to the proposed discharge order by February 1, 2011, and to explain whether they disagreed with Plaintiffs' calculation of the amount to be deposited in the Court's Registry and what, if any, discovery they would need to resolve the issue. Id. at *7.

On January 26, 2011, the Chapmans filed a brief in response to Plaintiffs' proposed discharge order in which they voiced no objection to Plaintiffs' calculation of the amount to be deposited in the Court's Registry. Opposition Brief to Plaintiffs' Proposed Discharge Order dated January 26, 2011 (Dkt. No. 31).¹ On February 1, 2011, Pivot Point filed a declaration and memorandum of law in response to Plaintiffs' proposed discharge order. Response of Defendant Pivot Point to Plaintiffs' Proposed Interpleader Order/Judgment (“Def.'s Resp.”) (Dkt. Nos. 32–33); ² King Decl. (Dkt. No. 34). After the Court granted them leave on February 2, 2011 to address some of the issues raised by Pivot Point in its filings, Plaintiffs filed a memorandum concerning its proposed interpleader order and judgment along with two declarations. Plaintiffs' Memorandum Concerning Proposed Order and Judgment dated February 4, 2011 (“Pls.' Mem.”) at 5–6 (Dkt. No. 38); Declaration of David Houts dated February 4, 2011 (Dkt. No. 36); Declaration of Martin D. Edel dated February 4, 2011 (Dkt. No. 37). In the memorandum, Plaintiffs agreed to deposit into the Court's Registry; (1) series compensation for production cycle seven of the Program that has become due under ¶ 3(c) of the Pivot Point Agreement without prejudice to its claim that it does not owe Pivot Point this payment; (2) royalties under ¶ 3(e) of the Pivot Point Agreement for the 2nd and 3rd quarters of 2010; and (3) the 2011 exclusivity payment of $15,000 under ¶ 3(f) of the Pivot Point Agreement. Pls.' Mem. at 4 (Dkt. No. 38). On February 16, 2011, Plaintiffs deposited these amounts, totaling $545,708.83, in the Court's Registry. Order dated February 16, 2011 ( Dkt. No. 40).

By Order dated February 8, 2011, the Court referred this action to me to determine what additional amounts, if any, must be deposited in the Court's Registry (Dkt. No. 39). On February 16, 2011, I held a telephone conference with the parties to determine what issues concerning the deposits into the Registry remained in dispute in light of Plaintiffs' additional contributions. Pivot Point and Plaintiffs identified two issues—whether Plaintiffs should deposit (1) an amount equal to all compensation increases that have been granted to Mr. Chapman since the signing of the Pivot Point Agreement; and (2) interest on all interpleaded amounts deposited in the Court's Registry to be calculated from the date each amount became due. During the conference, I ordered Plaintiffs and Pivot Point to provide the Court with additional briefing regarding the first issue they identified (the parties having already briefed the second in their prior submissions). By letter dated February 23, 2011, Plaintiffs provided a letter brief in response to this Order.³ Pivot Point also filed its response on that date. Defendant Pivot Point's Brief Regarding Entitlement to Compensation Increases dated February 23, 2011 (“Def.'s Mem.”) (Dkt. No. 43). I address these two outstanding issues below and conclude that (1) Plaintiffs shall deposit into the Court's Registry an amount commensurate to all compensation increases granted to Mr. Chapman since the December 19, 2005 signing of the Pivot Point Agreement; and (2) Plaintiffs need not deposit any pre-filing interest.

II. DISCUSSION

A. Inadequate Deposit of Compensation

28 U.S.C. § 1335(a) provides federal district courts with original jurisdiction over interpleader actions in which money or property worth more than $500 is at stake, two or more adverse claimants of diverse citizenship claim or may claim that they are entitled to the money or property, and if “the plaintiff has deposited such money or property or has paid the amount of or the loan or other value of such instrument or the amount due under such obligation into the registry of the court, there to abide the judgment of the court,....” As the Second Circuit has explained, the deposit of such funds is a jurisdictional requirement:

As a general rule, when a sum of money is involved, a district court has no jurisdiction of an action of interpleader if the stakeholder deposits a sum smaller than that claimed by the claimants. Section 1335 gives the district courts jurisdiction over such actions when a stakeholder has in his possession money or property ‘of the value of $500 or more,’ if ‘two or more ... claimants ... are claiming or may claim to be entitled to such money or property’ and if the stakeholder ‘has deposited such money ... into the registry of the court.’ This language means that the court will not have jurisdiction in an action of interpleader unless the stakeholder has deposited the entire sum in its possession which the claimants claim

Metal Transp. Corp. v. Pac. Venture S.S. Corp., 288 F.2d 363, 365 (2d Cir.1961) (emphasis added); see also Fed. Ins. Co. v. Tyco Int'l Ltd., 422 F.Supp.2d 357, 396 (S.D.N.Y.2006) (collecting cases); Pine Run Props., Inc. v. Pine Run Ltd., No. 90 Civ. 6289(PKL), 1991 WL...