Wolf v. Superior Court

Decision Date21 January 2004
Docket NumberNo. B169265.,B169265.
Citation8 Cal.Rptr.3d 649,114 Cal.App.4th 1343
CourtCalifornia Court of Appeals Court of Appeals
PartiesGary K. WOLF et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent; Walt Disney Pictures and Television, Real Party in Interest.

JOHNSON, J.

An author seeks a writ of mandate to compel the trial court to vacate its order granting summary adjudication of issues in favor of an entertainment industry conglomerate on its cross-claims for a declaration it was not required to pay royalties on the value of promotional agreements with third parties for which it received no cash. At issue is whether the term "gross receipts" as used in the royalty agreement is reasonably susceptible to an interpretation urged by the author to mean other valuable in-kind consideration as well as cash. The trial court found the term "gross receipts" clearly and unambiguously meant "cash" only, and rejected expert extrinsic evidence indicating the term in the entertainment context meant money as well as the value of other consideration received. We conclude the trial court erred in concluding the term "gross receipts" was not reasonably susceptible to the interpretation urged by the author. Accordingly, we grant the petition for writ of mandate with directions for the trial court to vacate its order granting summary adjudication and remand for further proceedings.

FACTS AND PROCEEDINGS BELOW

Gary K. Wolf and his company Cry Wolf!, Inc. (Wolf), are the petitioners in this case. Petitioner, Gary K. Wolf, is the author of an original novel entitled, Who Censored Roger Rabbit? In his novel Wolf created characters such as Roger Rabbit, Jessica Rabbit, Baby Herman and Detective Eddie Valiant. Wolf's novel also created and introduced the concept of Toontown as the place where these cartoon characters lived.

Shortly after the book's release in 1981, real party in interest, Walt Disney Pictures and Television (Disney), reached an agreement with Wolf to option nearly all rights to Who Censored Roger Rabbit? Disney memorialized the terms of the parties' oral agreement in a letter dated May 1981. According to this "deal memo," if Disney exercised its option, Wolf would be entitled to a five percent royalty on children's story books, children's story-telling records and on merchandise based on the characters he had developed in Who Censored Roger Rabbit? as well as other rights.

In 1983, Disney exercised its option to purchase the rights to Who Censored Roger Rabbit? The parties thereafter executed a "long form" purchase agreement. This 1983 agreement superceded the 1981 "deal memo" and expanded on the parties' respective rights regarding motion picture rights, television series rights, and other matters. In the 1983 agreement, Wolf also assigned to Disney the right to exploit the characters he created in his novel.

Not one of the parties who played a role in, or who helped negotiate the terms of, the 1983 agreement could recall any discussion they held at the time regarding the meaning of the term "gross receipts" as used in paragraph 21 governing royalty rights to character merchandise.

Thereafter, Disney developed and co-produced the motion picture Who Framed Roger Rabbit? with Steven Spielberg's Amblin Entertainment. Disney released the movie in June 1988. It proved to be an extraordinarily successful feature combining cartoon and live action actors.

By 1989 a dispute arose among the parties regarding use of Wolf characters at theme parks and in movie cels, auditing rights, and other matters. The parties resolved their dispute by entering into another agreement in 1989 which clarified and/or modified certain terms of the 1983 agreement. However, Wolf's right to a five percent royalty on merchandise depicting his characters remained intact. Again, none of the negotiating parties to the 1989 agreement could recall any discussion regarding the meaning of Wolf's right to a royalty on "gross receipts" from character merchandise.

In order to promote the theatrical and home video releases of the film (and at various times thereafter to promote and sustain the Roger Rabbit franchise), Disney entered into alliance agreements with corporate entities such as Kodak, Coca-Cola, and Burger King licensing them to use Roger Rabbit and Disney characters in their advertising and promotions. The terms of Disney's promotional agreements with these third parties varied: sometimes Disney received money from the other company; sometimes Disney paid the other company, and in still other situations, no cash exchanged hands. An example of this latter type of agreement is a Disney/McDonald's agreement entered into in 1988 in connection with the picture's release. In this agreement Disney allowed McDonald's to use Wolf as well as Disney characters in a "tie-in" promotion between its menu items and the motion picture Who Framed Roger Rabbit? Under this agreement McDonald's agreed to: (1) conduct a promotion featuring the licensed characters on 18 million collector cups; (2) purchase $12 million worth of specified advertising themed to the motion picture; and (3) place approximately $100 worth of point-of-purchase materials at each of the McDonald's stores throughout the United States. Disney received no cash directly from McDonald's under this particular licensing agreement.

In 1991, Disney entered into another so-called alliance agreement with Eckerd/Kodak. The agreement called for Eckerd Drug Company to fund and produce television and radios ads, print ads, in-store advertisements and to undertake other promotional efforts. The agreement required Kodak to underwrite the cost of producing hundreds of thousands of Walt Disney World collector pins depicting Disney as well as Roger Rabbit characters. In exchange, Disney provided six grand prize travel packages to Walt Disney World. Disney received no cash directly from this arrangement.

On the other hand, Disney did receive cash under its 1995 licensing agreement with McDonald's to promote Disneyland's 40th anniversary. McDonald's Disneyland 40th Anniversary Happy Meal agreement was a licensing arrangement which allowed McDonald's to give away eight toy car "premiums" featuring various Disney characters, including one car which featured two of the Roger Rabbit characters. McDonald's paid Disney $400,000 under the licensing agreement for the eight cars. Because the Wolf characters represented one eighth of this amount Disney reported $50,000 attributable to the Roger Rabbit characters and paid Wolf five percent of this amount, or $2,500.

Wolf claimed he was entitled to a five percent royalty every time Disney licensed Roger Rabbit characters for use in any merchandising venture by Disney or through its alliance agreements. He asserted he was entitled to this royalty based on the value of the licensing agreement to Disney from use of the Roger Rabbit characters, whether or not Disney chose to receive the benefit in cash. Disney countered it was not obligated to pay Wolf any royalty unless or until it received actual cash from a licensing agreement.

Unable to resolve the dispute, Wolf filed suit against Disney in May 2001. In March 2002, Disney filed a cross-complaint for declaratory relief, reformation, money had and received and unjust enrichment. In October 2002, Disney moved for summary adjudication on three of the causes of action in its cross-complaint which sought a declaration the parties' 1983 contract only obligated it to pay a five percent royalty on cash it received for character merchandising, and that it had no obligation to pay a royalty on any noncash consideration it received from licensing Wolf's characters for use in merchandise for promotional purposes.1

In its motion Disney argued it was entitled to summary adjudication of issues because the "clear and unambiguous meaning" of "gross receipts" in the contract could only mean receipt of cash money. Disney claimed the contract language was clear and unambiguous because the contract did not obligate it to account for royalties to Wolf unless and until it had received funds in the United States. In opposition, Wolf presented extrinsic evidence in the form of expert testimony to refute Disney's assertion. According to Wolf's expert, the term "gross receipts" in the entertainment industry means "money or the value of other consideration received by the studio," when not otherwise defined or limited by written agreement.

The trial court heard several hours of arguments on the motion over two court days. The trial court questioned Wolf regarding his proffered extrinsic evidence that the term "gross receipts" was interpreted in the entertainment industry to mean cash or other valuable consideration.2 The court acknowledged Wolf's expert's testimony created an ambiguity regarding the meaning of the term "gross receipts." However, the court was persuaded the contract term clearly and unambiguously meant Disney's obligation to pay Wolf royalties only arose with actual receipt of cash in connection with the merchandising of Wolf's characters. The trial court found the term "gross receipts" was not reasonably susceptible to the meaning urged by Wolf and rejected his proffered extrinsic evidence.

In its written order the trial court ruled Disney had met its burden of showing there were no triable issues of material fact and Wolf had failed to raise a triable issue of material fact. The court thus granted summary adjudication in favor of Disney on its first, fourth and seventh causes of action in its cross-complaint. The court reason...

To continue reading

Request your trial
225 cases
  • United Nat'l Maint., Inc. v. San Diego Convention Ctr. Corp.
    • United States
    • U.S. District Court — Southern District of California
    • September 5, 2012
    ...is then admitted to aid the court in its role in interpreting the contract. Pacific Gas & Electric, at 39-40; Wolf v. Superior Court, 114 Cal.App.4th 1343, 1350-51 (2004). When there is no material conflict in the extrinsic evidence, the trial court interprets the contract as a matter of la......
  • Pension Trust Fund for Operating Eng'rs v. Dalecon, Inc., C 11-02851 LB
    • United States
    • U.S. District Court — Northern District of California
    • March 12, 2014
    ...'ambiguity,' i.e., whether the language is 'reasonably susceptible' to the interpretation urged . . . ." Wolf v. Superior Court, 114 Cal. App. 4th 1343, 1351 (2d Dist. 2004) (quoting Winet v. Price, 4 Cal. App. 4th 1159, 1165 (4th Dist. 1992)). A court's determination of whether an ambiguit......
  • Fresno Motors, LLC v. Mercedes–Benz USA, LLC
    • United States
    • U.S. District Court — Eastern District of California
    • March 27, 2012
    ...Corp., 602 F.2d 866, 871 (9th Cir.1979); accord Han v. Mobil Oil Corp., 73 F.3d 872, 877 (9th Cir.1995); Wolf v. Superior Court, 114 Cal.App.4th 1343, 1351, 8 Cal.Rptr.3d 649 (2004). Even if the contract is unambiguous on its face, the trial court must consider relevant extrinsic evidence t......
  • Copart, Inc. v. Sparta Consulting, Inc.
    • United States
    • U.S. District Court — Eastern District of California
    • September 10, 2018
    ...own conclusion that the language of the contract appears to be clear and unambiguous on its face." Wolf v. Superior Court , 114 Cal. App. 4th 1343, 1351, 8 Cal.Rptr.3d 649 (2004), as modified on denial of reh'g (Feb. 19, 2004); see also Halicki Films, LLC v. Sanderson Sales & Mktg. , 547 F.......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT