Switzer v. Big Ticket Pictures Inc.

• Docket Number: B320513
• Decision Date: 21 December 2023
• Parties: KAYE SWITZER et al., Plaintiffs and Appellants, v. BIG TICKET PICTURES INC. et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

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KAYE SWITZER et al., Plaintiffs and Appellants, v. BIG TICKET PICTURES INC. et al., Defendants and Respondents.

B320513

California Court of Appeals, Second District, Second Division

December 21, 2023

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of Los Angeles County No. BC690564 Kristin S. Escalante, Judge.

Cozen O'Connor, Erik L. Jackson, Thomas W. Casparian; Chesnoff &Schonfeld and Richard A. Schonfeld for Plaintiffs and Appellants.

Loeb &Loeb, James A. Curry and Daniel J. Friedman for Defendants and Respondents.

HOFFSTADT, J.

In this contract dispute, developers on the first season of the Judge Judy television show sued on the ground that a recent sale of the library of episodes triggered their right to a lump sum cash-out payment of $4.95 million (rather than continuing to receive an income stream of residuals). On summary judgment, the trial court assumed that there was a sale of the library but ruled that the undisputed facts did not establish that the developers were contractually entitled to a cash-out. This was correct, so we affirm.

FACTS AND PROCEDURAL BACKGROUND

I. Facts A. The Judge Judy show

Big Ticket Pictures Inc. (Big Ticket) produced the Judge Judy television show since its inception in 1995. Kaye Switzer (Switzer) and Sandi Spreckman (Spreckman) helped develop the show,^[1] which aired for 25 seasons. Judith Sheindlin (Sheindlin) is the titular "Judge Judy."

B. Rights of developers to share the show's residuals

1 1995 Agreement

In August 1995, Big Ticket entered into a contract with Switzer and Spreckman to compensate them for their role in developing the Judge Judy show. Big Ticket agreed to pay them $25,000 for the one-hour pilot episode, and to give them a "supervising producer" credit on all episodes in the show's first season. Big Ticket had the option to retain Switzer and Spreckman as producers for each of the next five seasons. Big Ticket promised to pay Switzer and Spreckman 10 percent of the show's "defined proceeds . . . in perpetuity" for any seasons in which they were retained as producers, and 5 percent of the show's "defined proceeds" for any seasons in which they were not retained as producers but "for the life of the series."

2. 1999 Settlement

In 1996, Big Ticket opted not to retain Switzer and Spreckman as producers on the show. In response to a lawsuit Switzer and Spreckman filed against Big Ticket and Spelling Entertainment Group, Inc. (with which Big Ticket was then affiliated), the parties to that litigation entered into a settlement agreement in April 1999 (the 1999 Settlement). Pursuant to the settlement, Big Ticket agreed (1) to pay Switzer and Spreckman $500,000; and (2) to amend the 1995 Agreement to add "Exhibit 1," which defines the residual payments Switzer and Spreckman will receive for the Judge Judy show on a going-forward basis. The 1999 Settlement also affirmed that "[a]ll terms and conditions of this Settlement Agreement shall be binding upon and inure to the parties hereto and their respective heirs, successors and assigns."

As pertinent to this case, Exhibit 1 to the 1999 Settlement:

• Defines "Producer" as Big Ticket, and defines "Producer Company" as "Producer and any subsidiary of Spelling Entertainment Group, Inc. (other than Virgin Interactive Entertainment, Inc.)" that engages in distribution of Judge Judy episodes.

• Defines "Participants" as Switzer and Spreckman, and entitles them to a percentage of the "Defined Proceeds," which is the amount left over after "Distribution Fees," "Distribution Expenses," and "Cost of Production" are deducted from "Gross Receipts." "Gross Receipts," in turn, are defined as "all monies actually received by a 'Producer Company' as consideration for the right to exhibit Episodes."

• Obligates the Producer to give Switzer and Spreckman written statements regarding their defined proceeds as well as to allow inspection of its books upon demand.

• Regulates the Producer's right to sell or dispose of the rights in the episodes of the Judge Judy show. More specifically, Exhibit 1 grants the "Producer" "the sole right and discretion to sell or otherwise dispose of any or all of its rights in the Episodes to any Person." Further, Exhibit 1 delineates that any sale of those rights must be either (1) "subject to the rights of [the] Participant[s]," which means the buyer must continue paying Switzer and Spreckman the income stream comprised of the above-delineated percentage of defined proceeds; or (2) "including any or all rights of [the] Participant[s]," which means the Producer must pay Switzer and Spreckman a lump sum cash-out constituting their percentage (between the two of them-5 percent) of the sale price. Helpfully, Exhibit 1 also spells out how to distinguish a sale "subject to" the Participants' rights from a sale "including" them-namely, a sale is "subject to" the Participants' rights if the buyer "assumes the executory obligations of Producer to Participant" (that is, if the buyer agrees to continue paying the income stream).

C. Right of Sheindlin to share the show's residuals

1. 1996 Agreement

In June 1996, Big Ticket entered into a contract with Sheindlin regarding her salary for appearing as Judge Judy in the show (the 1996 Agreement).

2. 1999 Amendment

In April 1999, Big Ticket and Sheindlin amended the 1996 Agreement (the 1999 Amendment). Under this amendment, Sheindlin was to be compensated in part by a salary and in part by a percentage of the show's "Defined Proceeds."

3. 2015 Amendment

In February 2015, Big Ticket-which by that time was a subsidiary of CBS Studios Inc. (CBS)-and Sheindlin-who by that time was negotiating through a company called Her Honor, Inc. (Her Honor)-signed a further amendment to the 1996 Agreement (the 2015 Amendment). In that amendment, Sheindlin agreed to forego an increase in her salary for three upcoming seasons in exchange for Big Ticket "agree[ing] to transfer ownership of [the] existing [Judge Judy] episodes" and the corresponding copyrights ("the Library"). The transfer was not to occur until September 1, 2017, and could occur only after the documents "reasonably necessary to effectuate such [a] transfer" were "execute[d]" by the parties. However, that future transfer of the Library would be "subject to all financial obligations to third-party participants" such as Switzer and Spreckman.

D. Status of the Library

1. Sheindlin tries to sell the Library

Sheindlin then sought to monetize her right to acquire the Library in September 2017 by finding a buyer.

a. Sheindlin secures an amendment to expedite the possible sale

In anticipation of a possible sale, Big Ticket and Sheindlin signed a letter in January 2017 that amended the 1996 Agreement to facilitate "accelerat[ing] the ownership transfer" of the Library. In that amendment, Big Ticket promised to take "commercially reasonable efforts to have the copyright assignment paperwork" attendant to a future transfer of the Library "prepared to submit to the copyright office" once a "binding agreement" between Sheindlin and a buyer was "sign[ed]."

b. Big Ticket sends August 2, 2017 letter

By mid-2017, Sheindlin located a possible buyer- Lionsgate. On August 2, 2017, Big Ticket sent a letter "in connection" with the upcoming "assignment, transfer and sale by [Sheindlin] of all of her rights in the [Library] to a buyer to be designated by [Sheindlin]." In the letter, Big Ticket "hereby transfer[red] and assign[ed]" to Sheindlin and Sheindlin "hereby transfer[red] and assign[ed] to" the unidentified buyer all rights to the Library-although each transfer was "in each case effective at Closing." Once effective, however, both transfers would be "free and clear of any liens, encumbrances or obligations of any kind to third parties or to [Big Ticket]"-"other than . . . participation obligations to each person or entity entitled to a participation in the receipts of the Judge Judy Show." (Italics added.) Switzer and Spreckman were listed as persons whose "obligations" would continue to bind the buyer after the sale. Big Ticket also promised to "provide each Participant with participation statements," even after the sale.

Sheindlin did not execute the August 2, 2017 letter.

2. Sheindlin ultimately decides not to sell the Library, and instead to allow Big Ticket to keep the Library

In an agreement signed on August 4, 2017, Big Ticket and Sheindlin agreed to take three actions (the August 4, 2017 Agreement). First, Big Ticket paid Sheindlin approximately $99 million in exchange for Sheindlin's agreement that the 2015 Amendment be modified to delete the paragraph that would have transferred the Library to her effective September 1, 2017; Big Ticket would "continue to own the copyright" and have the "sole and exclusive right to exploit" the Library. Second, Big Ticket and Sheindlin agreed that the August 2, 2017 letter was "revoked and of no force or effect" because no sale to a third-party buyer was ever consummated. Third, Sheindlin agreed to "negotiate in good faith" to return as the talent for the 25th (and final) season of Judge Judy.

E. Status of Payments

Switzer and Spreckman continued to receive their income stream of residuals from the Judge Judy episodes. They were never paid a lump sum cash-out payment.

II. Procedural Background

A. Pleadings

On January 19, 2018, Switzer and the trustee of The Sandi Spreckman Trust (collectively, plaintiffs) filed suit. In the operative first amended complaint, plaintiffs sued Big Ticket, CBS, Sheindlin, and Her Honor (collectively defendants)^[2] for (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) intentional interference with contractual relations, (4) unjust...