Judge Colin Leis, Case Number: 21STCV35648, Date: 2023-09-07 Tentative Ruling

The court considered the moving papers, opposition, and reply in connection with this motion.

On September 23, 2021, Plaintiff James Edmunds (Plaintiff) filed a complaint against Defendant Joshua Coleman (Defendant).

On February 23, 2022, Plaintiff filed a first amended complaint. In the complaint, Plaintiff alleged causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing.

On March 17, 2023, Plaintiff filed this motion for summary judgment or, in the alternative, summary adjudication.

“¿[A] motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.¿” (¿¿Code Civ. Proc., § 437c, subd. (c)¿¿.) The moving party bears the initial burden of production to make a prima facie showing that there are no triable issues of material fact. (¿¿Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850¿¿.) If the moving party carries this burden, the burden shifts to the opposing party to make a prima facie showing that a triable issue of material fact exists. (¿¿Ibid.¿¿) Courts “¿liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.¿” (¿¿Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389¿¿.)

A plaintiff moving for summary judgment must show that there is no defense to any of the asserted causes of action and do so by proving each element of the cause of action. (Code Civ. Proc., § 437c, subds. (a)(1), (p)(1).)

To prevail on this cause of action, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.) Based on their different interpretations of the Termination Agreement, the parties dispute whether Defendant is in breach. “The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.” (Civ. Code, § 1638.)

The Termination Agreement provides that, from October 1, 2017, until August 13, 2022, Plaintiff receives fifteen percent of Defendant’s gross income from musical compositions created before the termination. (Edmunds Decl., ¶ 6; Ex. 3, ¶ 2(a).) Moreover, the Termination Agreement incorporates the definition of gross income from the parties’ prior Management Agreement. (Edmunds Decl., ¶¶ 4, 6; Ex. 1; Ex. 3, ¶ A.) The Management Agreement defines gross income as all income earned and received by Defendant in connection with Defendant’s entertainment activities. (Edmunds Decl., ¶ 4; Ex. 1, ¶ 4(b).) The definition provides a non-exhaustive list of such entertainment activities, which does not expressly mention a catalog sale or the sale of Defendant’s assets. (Edmunds Decl., ¶ 4; Ex. 1, ¶ 4(b).) The Management Agreement also ties gross income to the exploitation of term products and related entertainment activities. (Edmunds Decl., ¶ 4; Ex. 1, ¶ 4(a).) The Management Agreement provides another non-exhaustive list of such entertainment activities but does not expressly mention a catalog sale or the sale of assets. (Edmunds Decl., ¶ 4; Ex. 1, ¶ 4(a).)

In his motion for summary judgment, Plaintiff claims Defendant breached the Termination Agreement because he did not pay Plaintiff 15% commission on a catalog sale in December 2019. To support his argument, Plaintiff first relies on the language of the Management Agreement and Termination Agreement. Plaintiff argues that the contractual definition of “entertainment activities” is expansive and encompasses the sale of Defendant’s catalog. However, the cases Plaintiff cites in support are unpublished and not binding on this court. And although the agreement’s list of entertainment activities is not exhaustive, they do not expressly identify the sale of assets or a catalog sale as entertainment activities.

The agreements also suggest that gross income is the exploitation of term products. But the agreements leave the term “exploitation” undefined. Plaintiff argues for a broad, dictionary definition of the term, which would cover a catalog sale. Under Civil Code section 1644, “[t]he words of a contract are to be understood in their ordinary and popular sense […] unless special meaning is given to them by usage, in which case the latter must be followed.” As further discussed below, Defendant has proffered evidence that the term “exploitation” does not include catalog sales under music industry custom. Plaintiff further argues that even if the term “exploitation” were narrow and excluded catalog sales, the agreements’ expansive definition of “entertainment activities” would still cover a catalog sale. But that is not necessarily the case, as the agreements do not expressly name catalog sales as an entertainment activity. Plaintiff also contends that such a narrow definition of “exploitation” would contradict the agreements’ definition of entertainment activities. Again, that is not necessarily so because the agreements do not explicitly name catalog sales as entertainment activities.

Lastly, Plaintiff argues that an interpretation of the terms “gross income,” “entertainment activities,” and “exploitation” that excludes catalog sales would lead to unreasonable results. That is, Defendant could have avoided his commission payment obligations to Plaintiff by selling all term products in a catalog sale the day after the termination agreement. As a result, Plaintiff could have been totally deprived of the benefit of his bargain. In support, Plaintiff cites Civil Code section 1643, under which “[a] contract must receive such an interpretation as will make it [reasonable] if it can be done without violating the intentions of the parties.” As further discussed below, though, Defendant claims Plaintiff’s interpretation of the agreement does not reflect the intentions of the parties during negotiations.

Thus, the court finds that the contractual terms “gross income,” “entertainment activities” and “exploitation” are ambiguous.

Parol or extrinsic evidence is admissible to resolve an ambiguity. (Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 435.) In such cases, the court employs a two-step process: (1) the court provisionally receives all credible evidence concerning the parties’ respective intentions to determine the ambiguity and (2) given the extrinsic evidence, if the court decides the language is reasonably susceptible to the interpretation urged, the extrinsic evidence is then admitted to aid in contractual interpretation. (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165.)

To bolster his interpretation of the contract, Plaintiff first relies on the opinion of the Termination Agreement’s neutral broker, who claims both parties’ conduct during negotiations suggested they understood that the catalog sale would result in commissionable income to Plaintiff. (Spielman Decl., ¶ 16.) This neutral broker adds that he did not hear Defendant or his attorney state that income from a catalog sale would not be commissionable to Plaintiff. (Spielman, Decl., ¶ 9.) Moreover, Plaintiff points out that Defendant did not recall taking steps to limit the definition of “gross income” to exclude a catalog sale and acknowledged that the agreements do not include his proposed narrow definition of “exploitation.” (Bach Decl., ¶ 4; Ex. 4, at 125:20-126:4, 126:16-25, 199:16-200:3.) Defendant also could have disclosed his narrow definition of “exploitation” during negotiations or demanded a carveout for catalog sale income but failed to do so. (Spielman Decl., ¶ 9; Bach Decl., ¶ 4; Ex. 4, 126:16-25.) Lastly, Plaintiff claims Defendant’s post-agreement conduct further supports his contractual interpretation. That is, Defendant allegedly hid the catalog sale from Plaintiff to avoid paying him the commission. (Edmunds Decl., ¶ 9; Spielman Decl., ¶ 12; Ex. F.) But if Defendant did not think the catalog sale was commissionable, he would not have believed he had to inform Plaintiff of it.[1]

Defendant in turn contends that the contractual terms “gross income,” “entertainment activities,” and “exploitation” do not encompass a catalog sale. In support of his interpretation, Defendant questions Plaintiff’s extrinsic evidence and provides his own. Defendant first notes that the neutral broker’s declaration does not identify statements by the parties themselves that indicate they understood a catalog sale would result in commissionable income. Rather, Defendant never stated that he understood a catalog sale to count as gross income during negotiations. (Coleman Decl., ¶ 9.) Nor did Defendant and his representatives in the negotiations believe a catalog sale would be commissionable by Plaintiff. (Coleman Decl., ¶ 9; Goodman Decl., ¶ 6; Rothenberg Decl., ¶¶ 5-7.) Moreover, Defendant’s attorney in the negotiations did not recall any discussions related to a potential sale of Defendant’s catalog. (Rothenberg, ¶ 5.) True, Defendant concedes that he did not negotiate to carve out a catalog sale from the definition of gross income. But Plaintiff for his part has provided no evidence he took specific steps to ensure that a catalog sale was listed among the commissionable entertainment activities in the agreements. (Edmunds Decl., ¶¶ 4, 6; Ex. 1, Ex. 3.)

Moreover, Defendant relies on an expert, who opines on the music industry usage of the terms “gross income” and “exploitation.” According to the expert, “exploitation” of compositions does not mean sale in this context. (Sloane Decl., ¶¶ 8-12.) Instead, the word refers to broadcast, streaming, or live performance. (Sloane Decl., ¶¶ 8-12.) Given this evidence of trade usage, in addition to evidence of Defendant’s intent during negotiations, the court finds the contractual language at issue is also susceptible to Defendant’s proposed interpretation. “When two equally plausible interpretations of the language of a contract may be made […] parol evidence is admissible to aid in interpreting the agreement, thereby presenting a question of fact which precludes summary judgment if the evidence is contradictory.” (Walter E. Heller Western, Inc. v. Tecrim Corp. (1987) 196 Cal.App.3d 149, 158.) Thus, the court denies Plaintiff’s motion for summary adjudication for this cause of action.

Second Cause of Action – Breach of Implied Covenant of Good Faith and Fair Dealing

Plaintiff also seeks summary adjudication as to Defendant’s duty to pay the commission at issue. (Code Civ. Proc., 437c, subd. (f) [“A party may move for summary adjudication as to […] one or more issues of duty, if the party contends that […] one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs.”].) However, whether the Termination Agreement requires Defendant to pay Plaintiff commission on the catalog sale is a triable issue of fact. Thus, the court denies Plaintiff’s motion for summary adjudication as to this issue of duty.

Since the court has denied summary adjudication as to the causes of action, it need not address Defendant’s affirmative defenses.

Based on the foregoing, the court denies Plaintiff’s motion for summary adjudication for the first cause of action, the second cause of action, and the issue of duty.

[1] In his reply, Plaintiff has submitted supplemental evidence for his claim that Defendant concealed the catalog sale. However, new evidence is not permitted with a moving party’s reply. (Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537.)