Gilkyson v. Disney Enterprises CA2/7
244 Cal. App. 4th 1336
| Cal. Ct. App. | 2016Background
- Terry Gilkyson wrote songs (notably "The Bare Necessities") for Disney's The Jungle Book under single-song contracts that granted Disney ownership and required Disney to pay an initial fee plus royalties for "licensing or other disposition of mechanical reproduction rights."
- Disney paid royalties for sheet music and audio reproductions (records, CDs, downloads) but never paid royalties for audiovisual/home-entertainment uses (VHS, DVD, Blu-ray).
- Gilkyson died in 1999; his heirs filed suit in November 2013 alleging breach of contract, asserting Disney failed to pay royalties for VHS and DVD releases (DVD release alleged in 2007; Blu-ray and re-releases alleged later in amended complaint).
- Disney demurred on statute-of-limitations grounds, contending the claims accrued at first breach (VHS in 1991 or DVDs in 2007) so the 2013 suit was time-barred under the four-year limitations period for written contracts.
- The trial court sustained the demurrer without leave to amend, ruling the claims were time-barred and that the heirs’ attempt to omit earlier VHS allegations in the amended complaint was a sham.
- The Court of Appeal reversed, holding the continuous accrual doctrine applied so royalties accrued separately for each periodic breach; claims for breaches within four years before filing are timely.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether continuous accrual applies to periodic royalty obligations | Continuous accrual applies; each unpaid royalty is a new breach with its own limitations period (heirs relying on Aryeh) | First breach started the limitations period; entire claim time-barred (accrual at VHS or 2007 DVD) | Continuous accrual applies; royalty contract is divisible and timely as to breaches within four years before suit |
| Whether heirs had to first establish a new contractual right to audiovisual royalties before invoking continuous accrual (Dillon issue) | No; heirs assert an existing contractual royalty right that recurs and is severable | Disney: Dillon requires establishing right first, so claim barred in entirety | Dillon inapplicable; post-Dillon cases (Howard Jarvis, Armstrong) permit continuous accrual where contract creates established periodic rights |
| Whether declaratory relief claim is barred | Declaratory relief derives from contract claim and is timely to the extent contract claim survives | Time-barred like contract claim | Declaratory relief revived along with contract claim |
| Breach of implied covenant claim — allowed/amendable | Heirs contend covenant claim is reasonable and related to contract breaches | Trial court ruled claim duplicative and not within leave-to-amend; statute-barred | Court of Appeal sustained demurrer to implied covenant (left to trial court whether to allow leave to amend in light of revived contract claim) |
Key Cases Cited
- Aryeh v. Canon Business Solutions, Inc., 55 Cal.4th 1185 (2013) (continuous accrual: recurring contractual breaches each trigger a new limitations period)
- Howard Jarvis Taxpayers Assn. v. City of La Habra, 25 Cal.4th 809 (2001) (tax collections: each illegal collection restarts limitations period; distinguishes Dillon)
- Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., 116 Cal.App.4th 1375 (2004) (periodic royalty payments are severable; each missed payment is separately actionable)
- Dillon v. Board of Pension Commrs., 18 Cal.2d 427 (1941) (pension claims: limitations ran from officer's death where pension entitlement required prior administrative determination)
- City of Cotati v. Cashman, 29 Cal.4th 69 (2002) (declaratory relief depends on existence of a valid underlying claim)
- Peterson v. Highland Music, Inc., 140 F.3d 1313 (9th Cir. 1998) (continuing royalty obligation held to trigger accrual on each use)