Weddington Productions, Inc. v. Flick

• Decision Date: 07 January 1998
• Docket Number: No. B099986,B099986
• Citation: 60 Cal.App.4th 793,71 Cal.Rptr.2d 265
• Court: California Court of Appeals Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 218, 98 Daily Journal D.A.R. 223 WEDDINGTON PRODUCTIONS, INC., Plaintiff and Respondent, v. Stephen FLICK, Steve Flick's Creative Cafe and Dean Belville, Defendants and Appellants.

Page 265

71 Cal.Rptr.2d 265

60 Cal.App.4th 793, 98 Cal. Daily Op. Serv. 218,

98 Daily Journal D.A.R. 223

WEDDINGTON PRODUCTIONS, INC., Plaintiff and Respondent, v. Stephen FLICK, Steve Flick's Creative Cafe and Dean Belville, Defendants and Appellants.

No. B099986.

Court of Appeal, Second District, Division 2, California.

Jan. 7, 1998.

Certified for Partial Publication ^*

Rehearing Denied Jan. 26, 1998 and Jan. 28, 1998.

Review Denied April 22, 1998.

Doniger & Fetter, Thomas Doninger and Henry D. Fetter, Los Angeles, for Defendants and Appellants.

Levy, Small & Lallas, Tom Lallas and Theodore A. Cohen, Los Angeles, for Plaintiff and Respondent.

ZEBROWSKI, Associate Justice.

The primary issue on this appeal involves an entertainment industry ADR (alternative dispute resolution) procedure gone seriously awry. The ADR procedure took place in two phases. After a preliminary injunction and related contempt proceeding, the parties stipulated to a voluntary mediation. The mediation yielded a one-page memorandum covering many material terms, but also providing that the parties would "formalize" additional material terms later. Anticipating possible dispute over these additional terms, the parties also agreed to "reserve jurisdiction" in the mediator "to resolve any dispute" over the "documentation" of their settlement and to "administer any process, including fact-finding, for a full implementation of the settlement."

When the parties attempted to "formalize" the additional terms, numerous disputes became apparent. Respondents then filed a "Motion to Specifically Enforce Settlement" pursuant to Code of Civil Procedure section 664.6 ("section 664.6") This "motion" was filed not with the court, but rather with the mediator (hereafter "private judge"). The second ADR phase then followed pursuant to the clause quoted above. The exact nature of this second phase was disputed. Appellants regarded it as a continuation of mediation. Respondent and the private judge regarded it as a binding dispute resolution process authorized by section 664.6. No one contended that the further ADR proceedings were a form of arbitration, and no one has made that contention on appeal.

The second ADR phase took place in several lengthy sessions. Most of these sessions were recorded by a court reporter, and transcripts are in the record. The transcripts clearly show lack of agreement on many material terms. Appellants--who regarded the process as a continuation of voluntary mediation--then declined to participate further. Respondent and the private judge, relying upon section 664.6 as authority, then continued the process in appellants' absence. The private judge then signed a thirty-three page "ORDER ENFORCING SETTLEMENT AGREEMENT, ETC. AND AWARDING ATTORNEYS' FEES." This "order" purported to impose upon appellants numerous material settlement terms to which appellants had never agreed.

Respondent then moved in the Superior Court to enforce the "order" as a settlement agreement, again relying on section 664.6. The Superior Court granted the motion. By this method, a one-page memorandum which appellants signed after the initial mediation session became a thirty-five page judgment containing numerous material terms to which appellant had never agreed.

Section 664.6 authorizes none of this. Neither a mediator nor a judge may select and impose settlement terms on the authority of section 664.6. Section 664.6 creates only a summary procedure for specifically enforcing certain types of settlement agreements by converting them into judgments. It provides that "the court, upon motion, may enter judgment pursuant to the terms of the settlement." (§ 664.6, end of first sentence.) Before judgment can be entered, two key prerequisites must be satisfied, both of which were missing in this case. First, there must be contract formation. The litigants must first agree to the material terms of a settlement contract before a judgment can be entered "pursuant to the terms of the settlement." If no meeting of the minds has occurred on the material terms of a contract, basic contract law provides that no contract formation has occurred. If no contract formation has occurred, there is no settlement agreement to enforce pursuant to section 664.6 or otherwise. Second, there must be a "writing signed by the parties" that contains the material terms. Here there was no writing signed by the parties containing the material terms, which the private judge placed into his order and which later appeared in the judgment. Section 664.6 therefore provided no basis for the judgment entered. Moreover, a section 664.6 motion must be made to "the court." (Section 664.6, first sentence.) The "motion" made by respondent before the private judge did not constitute a "motion" to "the court" within the meaning of section 664.6, and hence adds nothing to the section 664.6 analysis.

Appellants appeal from this judgment. In the published portion of this opinion, we reverse it. Appellants also appeal from the issuance of the preliminary injunction, and from the denial of a motion seeking to modify it. In the unpublished portion of this opinion, we affirm the issuance of the preliminary injunction and the denial of the motion to modify, but order an interim modification ourselves in view of the passage of time and possible changed circumstances, and remand with instructions for further proceedings.

I. FACTUAL AND PROCEDURAL BACKGROUND.

a. The parties; the business break-up.

Appellants are Stephen Flick, a corporation formed by Mr. Flick named Creative Cafe, and an employee of Creative Cafe (collectively the "Flick Parties"). Mr. Flick has long been in the business of editing sound effects for motion pictures, television, and related media. He has won Academy Awards for his sound effect editing on the movies "Speed" and "Robocop," and has been nominated for Academy Awards on three other occasions. In 1987, Mr. Flick joined with colleagues Mark Mangini and Richard Anderson to form respondent Weddington Productions, Inc., as a vehicle for conducting the business of sound effect editing. Each owned one-third of the stock of Weddington.

In 1994, disputes arose, and in July of 1995, Mr. Flick left Weddington and formed Creative Cafe.

b. The business of sound editing and Weddington's sound library.

The business of sound editing is performed by using a "library" of recorded sounds, such as guns firing, doors slamming, helicopters hovering, etc. These sounds are then mixed or modified as appropriate for a given production. Weddington had such a library. This library was jointly assembled by Messrs. Flick, Mangini and Anderson, as well as by employees of Weddington. While working as part of Weddington, Mr. Flick used this library. When Mr. Flick left Weddington and formed Creative Cafe, he took a copy of the library with him and continued to use it.

c. The preliminary injunction proceedings.

In December of 1995, Weddington obtained an injunction prohibiting the Flick Parties from using the library. In May of 1996, the Superior Court issued an order to show cause why the Flick Parties should not be held in contempt for violating the injunction by using the library to create sound effects for the movie "Twister." In June of 1996, evidence was presented at a contempt trial. Following the taking of evidence, but before the filing of closing briefs, the Flick Parties and Weddington agreed to mediate. The contempt proceeding was then abated pending the outcome of mediation. ¹

d. The mediation and the Deal Point Memorandum.

The mediation took place in August of 1996. At the end of a twelve-hour session, both sides signed a one-page document commonly referred to as the "Deal Point Memorandum." The Deal Point Memorandum began by reciting: "This Settlement Memorandum notes the significant 'deal points' with respect to all litigation now pending" between Weddington and the Flick Parties. It continued that "[a]ll parties agree to settle and dismiss on the following terms: ..." The document then specified sums that Weddington would pay to the Flick Parties, a schedule for such payments, and the agreed allocation of these sums and other sums previously paid. The document also provided that the Flick Parties would transfer to Weddington title to certain real property and also specified other terms.

The Deal Point Memorandum also contained a Licensing Agreement clause and an ADR clause, both discussed next below. The Deal Point Memorandum ended by stating: "There are no other significant terms."

e. The Licensing Agreement clause and the ADR clause.

(1) The Licensing Agreement clause.

The Licensing Agreement clause provided: "[t]he parties will formalize a Licensing Agreement recognizing the Weddington Library to remain the property of ... Weddington, but with a fully paid up license to Flick for use in sound editing services by Flick or by his corporation, or any corporation owned together with family, to use, or to devise to family members as the library existed on July 31, 1995." Neither the term "Licensing Agreement" nor "fully paid up license" was further defined. The only other terms in the Deal Point Memorandum relating to the sound library were that the parties would "cooperate to number and index" the library, that Mr. Flick would "return all masters," that Weddington would give Mr. Flick access "to replace any copy predating 7/31/95," and that "[a]ll parties will respect 3rd party restrictions (e.g., Disney)." Nothing further was said about the library and no other details of the proposed Licensing Agreement were stated in the Deal Point Memorandum.

(2) The materiality of the Licensing Agreement.

The record clearly shows that the Licensing Agreement was centrally material to both sides. The Flick Parties relied upon access to the sound library to earn their livelihood as sound effects editors. As Mr. Flick stated in his declaration, "I am a sound effects editor. That is my...