116 F. Supp. 3d 1104
C.D. Cal.2015Background
- Gerritsen sued Katja, New Line, and WB over alleged film rights to Gravity; contract dated 1999 with Katja; alleged 2008 consolidation of WB, New Line, Katja; Gerritsen asserts alter ego, successor-in-interest, and agency theories; Gerritsen seeks breach of contract and guaranty with an implied covenant claim; court later considers documents incorporated by reference and rejects some as not incorporated; court grants motion to dismiss and allows an amended complaint limited to avoid new claims.
- Gerritsen alleges Katja and New Line were alter egos of WB, sharing offices, officers, and control; WB allegedly governed decisions, finances, and branding; 2008 consolidation purportedly transferred assets and rights to WB; 2010 assignment allegedly transferred post-2010 IP rights to WB; film Gravity produced by WB/Warner Bros. Pictures; Gerritsen claimsWB benefited from the Contract and Guaranty via the Gravity film.
- The court previously dismissed direct liability theories; in FAC Gerritsen adds theories of implied covenant breach, which the court finds to be new claims outside leave to amend and therefore strikes them.
- Court analyzes successor-in-interest, alter ego, and agency theories under California law and finds insufficient pleading of unity of interest, inequitable result, missing asset transfers, or valid agency relationship to hold WB liable.
- Clauses regarding incorporation by reference: Exhibit A (Assignment Agreement) considered; Exhibits D, E, F, G, J, K, L considered; some exhibits rejected as not incorporated by reference.
- Result: First Amended Complaint’s direct breach and guaranty claims, and alleged vicarious liability theories fail; new implied covenant claims are stricken; dismissal granted with 20 days to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Gerritsen plausibly pleads direct breach of contract and guaranty | Gerritsen asserts Katja/New Line owed payments; WB’s involvement makes WB liable. | No plausible inference that WB is party to contracts; claims fail on primary liability. | Dismissed; no plausible direct liability. |
| Whether Gerritsen plausibly pleads breach via implied covenant | Implied covenant claims arise from good-faith enforcement of the Contract. | Implied covenant claims are new and exceed leave to amend. | Stricken; not within allowed amendment. |
| Whether WB is vicariously liable under successor-in-interest theory | WB is successor/instrumentality of Katja/New Line after consolidation. | Insufficient pleadings of express/implied assumption, de facto merger, or mere continuation. | Rejected; no plausible successor liability. |
| Whether WB is vicariously liable under alter ego theory | WB dominates Katja/New Line; unity of interest and inequitable result. | Allegations are insufficient to show unity of interest/inequitable result; allegations lack specificity. | Rejected; alter ego claims not plausibly pled. |
| Whether Gerritsen's agency theory supports liability | Katja/New Line acted as WB’s agents at contracting or through ratification. | No pre-2008 agency relationship pled; ratification not plausibly alleged. | Rejected; agency liability not plausibly pled. |
Key Cases Cited
- Twombly v. Bell Atl. Corp., 550 U.S. 544 (U.S. 2007) (pleading must show plausible entitlement to relief)
- Iqbal v. Ashcroft, 556 U.S. 662 (U.S. 2009) (plausibility standard for factual allegations)
- Tellabs, Inc. v. Makor Issues & Rights, 551 U.S. 308 (U.S. 2007) (evaluation of inference-based pleadings under false-claim theory)
- United States v. Bestfoods, 524 U.S. 51 (U.S. 1998) (parent-subsidiary liability standards; agency/alter ego concepts)
- Kythera Biopharmaceuticals, Inc. v. Lithera, Inc., 998 F.Supp.2d 890 (C.D. Cal. 2014) (incorporation-by-reference doctrine in pleading context; standard for reliance on documents)