Wednesday, December 26, 2012
C.A. Upholds Award of Attorney Fees to Producer of ‘Sahara’
Production Company Due Millions in Continued Fallout From Popular-Novel-Turned-Box-Office Flop
By JACKIE FUCHS, Staff Writer
Crusader Entertainment, now known as Bristol Bay Productions, is entitled as a matter of right to attorneys fees as a prevailing party in its ongoing dispute with author Clive Cussler over the film version of his novel “Sahara,” the Court of Appeal for this district held Friday.
Div. Three ruled that Los Angeles Superior Court Judge Coleman A. Swart did not abuse his discretion when he determined that neither Cussler nor Crusader was a prevailing party under their contract, but that Crusader was, nevertheless, a prevailing party under the Code of Civil Procedure.
The controversy arose out of a 2001 agreement under which Cussler granted Crusader the option to purchase film rights to “Sahara” and additional novels written by Cussler.
Provided certain conditions of the contract were satisfied, Crusader was obligated to pay Cussler $20 million in seven annual installments.
Crusader eventually made four of the seven payments, paying Cussler a total of $11,428,571.
But before the film was released, Cussler alleged that Crusader had made unacceptable changes to the approved screenplay.
In January 2004, he sued Crusader in Los Angeles County Superior Court, seeking $100 million in compensatory damages, punitive damages and a declaration that Crusader no longer had the option to acquire rights in any further Cussler novels.
Crusader cross-complained, alleging that Cussler unreasonably withheld his approval of changes to the screenplay and made derogatory statements about the film to the press.
It accused Cussler, among other things, of breaching both the express terms of the contract and the implied covenant of good faith and fair dealing, and sought compensatory damages in the amount of $65 million, as well as punitive damages and a declaration that it was relieved of any obligation under the contract to make any payment for rights to a second picture.
The film—which starred Matthew McConaughey, Steve Zahn and Penélope Cruz— was released in 2005 and reportedly lost about $80 million after expenses, making it one of the year’s biggest box office flops.
Trial commenced in the spring of 2007, with Crusader arguing to the jury that it was entitled to millions of dollars in damages as the result of Cussler’s alleged breach, and Cussler arguing that he, too, was entitled to millions of dollars, including $8,571,429 for the fifth, sixth and seventh installments allegedly due under the contract.
After a 14-week trial a jury found that both Crusader and Cussler had breached the contract, but that neither had sustained damages. It did find, however, that Cussler had breached the implied covenant of good faith and fair dealing and that, as a result, Crusader had incurred $5 million in damages.
It also found that Crusader no longer had the option to purchase additional Cussler novels as principal photography of “Sahara” had not commenced by the date specified in the agreement. Accordingly, the court dismissed Cussler’s first cause of action for declaratory relief as moot.
The court subsequently entered judgment providing in favor of Crusader for $5 million, prejudgment interest, and the costs of suit as the prevailing party.
Both parties appealed, and the panel, in a decision by Justice Patti S. Kitching, held that as a matter of law Crusader could not prevail on its breach of the implied covenant of good faith and fair dealing cause of action.
It reversed the award to Crusader and remanded the case for a determination of whether there was a prevailing party and, if so, whether that party was Cussler or Crusader.
On remand the court found that Crusader was the prevailing party, and ordered Cussler to pay $13,949,131 in attorney fees, an order which Cussler timely appealed.
In July, pending appeal, Cussler paid Crusader $20,907,200.14 on the judgment, which stood then at over $21 million, consisting of $5 million in damages and $13,949,131 in attorney fees, plus interest on those amounts.
In September Cussler won a summary reversal of the two fee orders, which the appellate court ruled void in light of its reversal of the jury’s award.
Crusader and Cussler then filed motions seeking to be declared the prevailing party for purposes of attorney fees and costs, and in December Los Angeles Superior Court Judge Coleman A. Swart issued an order denying both motions on the ground that there was no prevailing party. His order stated:
“[O]n balance, neither party has prevailed sufficiently to be deemed the prevailing party nor to justify an award of attorney fees. … [B]oth parties lost on their main litigation objective in seeking affirmative relief on the contract based on each of their theories.”
Crusader filed a motion for clarification of Swart’s order, arguing that even if it was not the prevailing party under the contract, it was the mandatory prevailing party under Code of Civil Procedure Sec. 1032 for purposes of costs.
Cussler filed his own motion for an order of restitution of the nearly $21 million he had paid Crusader in July, plus interest at the rate of 10 percent.
Swart clarified his ruling and issued an order awarding Crusader $514,237.47 in costs as a prevailing party under the Code of Civil Procedure, and granting Cussler restitution of the almost $21 million, less the award to Crusader, plus seven percent interest.
On consolidated appeal by both parties the panel affirmed the order, finding that Swart did not abuse his discretion in ruling that Crusader was a prevailing party for purposes of attorney fees but not the contract, and in awarding Cussler seven percent interest, rather than the requested 10 percent.
Kitching, writing for a unanimous panel, first looked to Civil Code Sec. 1717, which gives the party prevailing on a contract a right to recover attorney fees, whether or not that party is the party specified in the contract.
Sec. 1717 defines the phrase “party prevailing on the contract” as “the party who recovered a greater relief in the action on the contract.” It further provides that a trial court “may also determine that there is no party prevailing on the contract for purposes of this section.”
In doing so, the trial court compares the relief awarded with the parties’ demands and litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources.
Kitching noted that the trial court has wide discretion in determining who, if anyone, is the prevailing party for purposes of attorney fees. Swart did not abuse his discretion, she said, because:
“[I]n their pleadings, at trial and on appeal, both Cussler and Crusader sought to recover millions of dollars from each other on their contract claims. … But after years of litigation both sides recovered nothing – not one dime of damages and no declaratory relief.”
She added that while both parties were successful in defending against the other’s claim, “[i]n the end, neither party obtained any affirmative relief. … The result therefore was a tie…”
Crusader argued that it was necessarily the prevailing party because its claims in its cross-complaint were “defensive” in nature. But Kitching pointed out that Crusader had sought millions of dollars of damages and said that Swart’s ruling “was not arbitrary, capricious or patently absurd. … Merely because Cussler filed his complaint before Crusader filed its cross-complaint does not make Crusader‘s claims defensive.”
Crusader also argued that Swart abused his discretion by awarding interest at a rate of seven percent, which it said was excessive. It said that Swart should have awarded interest at no more than 1.4 percent, the average rate of interest the Superior Court paid on deposits with the court during the applicable time period.
But, Kitching said:
“The average interest rate of court deposits is irrelevant because Crusader did not actually deposit the $20 million it collected from Cussler in court and provided no evidence of what it actually did with the money. The record thus does not indicate the actual interest or rate of return Crusader earned on Cussler‘s funds.”
“Absent a statutory provision specifically governing the type of claim at issue, the prejudgment interest rate is 7 percent under article XV, section 1 of the California Constitution … [and] [t]he statutory postjudgment interest rate is 10 percent. … We need not decide whether the interest awarded here was prejudgment or postjudgment because the trial court awarded the lower rate, which is to appellant Crusader‘s benefit.”
As to Crusader’s argument that interest on restitution should be treated differently than interest on damages, she said:
“Interest serves the same purpose in either case … namely to compensate a party entitled to recover a liquidated sum of money for the time value of money.”
Finally, the panel upheld Swart’s ruling that Crusader was a defendant with the meaning of Code of Civil Procedure Sec. 1032(a)(3), which defines a prevailing party to include “a defendant where neither plaintiff nor defendant obtains any relief.”
As such, Kitching said, Crusader was entitled to attorney fees as a matter of right.
Presiding Justice H. Walter Croskey and Justice Richard Aldrich concurred in the opinion.
Elisabeth A. Moriarty and Caroline S. Heindel of Greenberg Glusker Fields Claman & Machtinger and Bertram Fields represented Cussler.
Marvin S. Putnam and Jessica L. Stebbins of O‘Melveny & Myers were the attorneys for Crusader Entertainment.
The case is Cussler v. Crusader Entertainment, LLC; B230770
Copyright 2012, Metropolitan News Company