ELIZA GILKYSON et al., Plaintiffs and Appellants, v. DISNEY ENTERPRISES, INC., et al., Defendants and Appellants.
B300971
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN
Filed 7/21/21
CERTIFIED FOR PUBLICATION; (Los Angeles County Super. Ct. No. EC061586)
APPEALS from a judgment of the Superior Court of Los Angeles County, William D. Stewart, Judge. Reversed with directions.
Hunter Salcido & Toms, John L. Hunter; Law Office of Craig Barker and Craig Barker for Plaintiffs and Appellants Eliza Gilkyson, Tony Gilkyson and Nancy Gilkyson.
Sidley Austin, Rollin A. Ransom, David R. Carpenter and Sheri Porth Rockwell for Defendants and Appellants Disney Enterprises, Inc. and Wonderland Music Company, Inc.
On appeal Disney contends it was entitled as a matter of law to judgment in its favor because its agreements with Gilkyson require payment of royalties only in an amount equal to 50 percent of net sums received by Wonderland for exploitation of the mechanical rights to the material Gilkyson composed and no such sums were received for the home entertainment releases of The Jungle Book after July 2009. Alternatively, Disney argues the trial court erred in awarding contract-based damages as part of the declaratory relief cause of action.
In a cross-appeal the Gilkyson heirs argue the trial court erred in denying their request for prejudgment interest. They also conditionally appeal the trial court‘s denial of their motion for a new trial on damages alone and for additur, in which they had argued the amounts awarded by the jury and the trial court were inadequate and not supported by substantial evidence. However, explaining they are prepared to accept the judgment as entered (plus prejudgment interest) to put an end to the litigation, the Gilkyson heirs ask us to reverse the ruling on their new trial motion only if we reverse the damage award on their declaratory relief cause of action.
We agree with Disney that interpretation of its agreements with Gilkyson is subject to de novo review; Gilkyson‘s right to receive royalties from exploitation of the mechanical reproduction rights in “The Bare Necessities” and other songs he wrote for The Jungle Book was dependent on Wonderland receiving payment for such exploitation; and the express language of the contracts granted Disney sole discretion to decide how to exploit the material, including whether a fee should be charged for Disney‘s own use of the material in home entertainment releases. Accordingly, we reverse the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Songwriting Agreements
Walt Disney Productions, Disney Enterprises‘s predecessor-in-interest, commissioned Gilkyson in 1963 to write songs for potential use in its
(referred to at trial as the deleted songs) were ultimately used with bonus features in certain of the home entertainment releases of The Jungle Book.
Each contract provided “the material,” defined as “original lyrics and/or music (including any and all melodies, lyrics and music written by you hereunder),” was written as a work for hire, which meant Walt Disney Productions was the author and owned all rights. The contracts authorized Walt Disney Productions to assign the material to its wholly owned subsidiary, Wonderland. As consideration, Gilkyson received an initial fee of $1,000 and specified royalties for sales of sheet music and for licensing or other disposition of the mechanical reproduction rights. Specifically, paragraph 6 of each agreement provided, “We agree that in the event any of such material so written by you as a work made for hire shall be published by us or be licensed by us to be published in any of the media set forth in Subparagraphs (a), (b) and (c) below, you shall be entitled to receive (in addition to the amount mentioned in Paragraph 5 hereof) royalties from the publication of such material, as hereinbelow set forth: [¶] (a) Five cents (5¢) for each regular piano copy and/or orchestration that is sold and paid for at wholesale in the United States of America and Canada; [¶] (b) An amount of money equal to Fifty Percent (50%) of all net sums received by our music publisher in respect of regular piano copies and orchestrations sold and paid for in any foreign country other than Canada; [and] [¶] (c) An amount of money equal to Fifty Percent (50%) of the net amount received by our music publisher on account of licensing or other disposition of the mechanical reproduction rights in and to material so written by you.”
Paragraph 7 of the agreements described the limited nature of Gilkyson‘s royalty rights: “You shall be entitled to receive as royalties only the moneys and/or royalties stipulated in and in accordance with Paragraph 6 above; specifically excepting, excluding and reserving to us all revenue, emoluments and/or receipts received by and paid to us by virtue of the exercise of the grand rights, dramatic rights, television rights and other performance rights, including the use of the material in motion pictures, photoplays, books, merchandising, television, radio and endeavors of the same or similar
Paragraph 10 again stated the limited nature of Gilkyson‘s rights and granted Disney sole discretion as to exploitation of the material: “You shall have no interest in any of the material other than your right to receive the royalties specifically agreed herein to be paid to you. Nothing contained in this agreement shall be construed as obligating us to publish, release, exploit or otherwise distribute any of the material, and the same shall be always subject to our sole discretion.”
2. Home Entertainment Release of The Jungle Book
Over the years Wonderland paid Gilkyson and subsequently his heirs2 a share of royalties based on licensing “The Bare Necessities” for soundtracks, album and single-song sales in media that included phonograph records, audiocassette tapes, compact discs and audio-file digital downloads and streaming. However, Disney paid no royalties when, beginning in 1991, The Jungle Book was first released in a home videocassette (VHS) format or thereafter when it was released on
LaserDisc, DVD, Blu-ray or other digital video formats for home entertainment use.
3. The Gilkyson Heirs’ Lawsuit and the First Appeal
In 2013 the Gilkyson heirs sued Disney alleging Disney had breached its contractual obligation to pay the Gilkyson heirs per-unit royalties in connection with the use of Gilkyson‘s songs in the DVD version of The Jungle Book released in 2007 and on VHS tapes, which had been released at an earlier date.3
Disney demurred to the complaint. While insisting its contractual obligation to pay mechanical reproduction royalties excluded use of Gilkyson‘s songs in any audiovisual medium, for purposes of its demurrer it confined its arguments to claiming the Gilkyson heirs’ causes of action were time-barred under the applicable statutes of limitations. In particular, emphasizing the allegation the DVDs had been released in 2007, Disney argued the Gilkyson heirs’ claim for breach of written contract accrued no later than 2007, thus making the claim, first filed in 2013, untimely under the governing four-year statute of limitations. In addition, the release of VHS tapes had occurred decades prior to 2007. Accordingly, Disney argued any claim for failure to pay royalties accrued at the first breach of contract in the 1990‘s, leaving all claims time-barred.
On April 30, 2014 the Gilkyson heirs filed a first amended complaint asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing and declaratory relief. The amended complaint contained similar allegations as the original complaint but added that Disney had released The Jungle Book 2 in 2008 and re-released The Jungle Book (a Diamond Edition) on Blu-ray format, digital download format and DVD in 2014. Specifically, with respect to the 2007 DVD the Gilkyson heirs alleged they were entitled to royalties for the use of “The Bare Necessities” in the film itself, the instrumental versions of “The Bare Necessities” that played when navigation menus were displayed, and a bonus feature in which the demo recordings of the Gilkyson-composed deleted songs played. As to the 2014 release, the Gilkyson heirs again alleged they were entitled to royalties for the use of “The Bare Necessities” in the motion picture and for use of music in certain bonus features, including a “Bear-E-Oke sing-along” that displayed the lyrics of “The Bare Necessity” over a clip of the motion picture in which the characters sing the song. The breach of contract allegations omitted any reference to the 1991 release of The Jungle Book in VHS format.
The cause of action for breach of the implied covenant of good faith and fair dealing, which had not been included in the
original complaint, was based on essentially identical allegations. The cause of action for declaratory relief requested a determination that the Gilkyson heirs were entitled to royalties in connection with sales of The Jungle Book and Gilkyson-composed songs on DVD, Blu-ray and via digital download or any similar medium.
The trial court again sustained Disney‘s demurrer, this time without leave to amend, and dismissed the lawsuit. The court ruled omission of allegations relating to the release of the film in VHS format created a sham pleading intended to avoid the limitations bar. In any event, the Gilkyson heirs’ claims accrued no later than 2007 with the first release of DVDs; and thus their claim for royalties, filed well after the expiration of the four-year statute of limitations applicable to written contracts, was time-barred. With respect to the cause of action for breach of the implied covenant of good faith and fair dealing, the trial court sustained Disney‘s demurrer not only on the ground the claim was duplicative of the breach of contract claim and barred by the
We reversed the judgment of dismissal, holding the continuous accrual doctrine applied to the Gilkyson heirs’ contract claims. (Gilkyson v. Disney Enterprises, Inc. (2016) 244 Cal.App.4th 1336, 1342 (Gilkyson I).) “Disney‘s obligation to pay royalties based on its licensing or other disposition of the mechanical reproduction rights to Gilkyson‘s songs was unquestionably a continuing one. . . . The result is that, while portions of the Gilkyson heirs’ contract claim are undoubtedly
time-barred, the action is timely as to those breaches occurring within the four-year limitations period preceding the filing of the original lawsuit.” (Id. at p. 1343, fn. omitted.)4 We declined to reverse the order sustaining the demurrer to the cause of action for breach of the implied covenant of good faith and fair dealing, however, explaining, “[T]he Gilkyson heirs provide no argument on appeal to challenge that alternate justification for sustaining the demurrer to this cause of action.” (Id. at p. 1347.) We left it for the trial court to decide whether to grant leave to the Gilkyson heirs to add that cause of action if it was requested following remand. (Ibid.)
4. The Gilkyson Heirs’ Motion for Leave To File a Second Amended Complaint
Our remittitur issued on June 2, 2016. The Gilkyson heirs moved for leave to file a second amended complaint, which would have expanded their contract claim to include Gilkyson-composed songs for films other than The Jungle Book and alleged a new cause of action for breach of the covenant of good faith and fair dealing, a year later, on June 20, 2017. The trial court denied the motion, citing the Gilkyson heirs’ unwarranted delay, Disney‘s
pending summary judgment motion and the approaching trial date.
5. Disney‘s Motion for Summary Judgment
As the trial court noted, the month before the Gilkyson heirs’ motion for leave to amend, Disney had moved for summary judgment. Disney‘s motion was principally premised on its position that, in 1963 when the Gilkyson contracts were executed, as well as currently, “the term ‘mechanical reproduction’ refers to audio-only uses and not to audiovisual uses such as in
Disney also asserted it was entitled to summary judgment on a third ground: “3. Royalties for mechanical reproductions are owed only when Disney‘s music publisher, Wonderland Music Company, Inc. (‘Wonderland‘), receives money on account of licensing or other disposition of the mechanical reproduction rights. Because the complained-of uses on home entertainment products are not mechanical reproductions, Wonderland has never received any money for such uses, and therefore no royalties are due Plaintiffs.” Describing this ground in its supporting memorandum as “a separate, independent reason” for summary judgment, Disney explained, “For example, although Wonderland is paid for digital downloads of the movie soundtrack and other audio-only uses, it is not paid for digital downloads of
the motion picture or other audiovisual reproductions, regardless of the format in which they may be distributed. [Citation.] [¶] Because no amounts have been paid to Wonderland for the uses at issue, no royalties are due to Plaintiffs for those uses.”5
Accordingly, since at least that time, Wonderland has not received synch fees when the Jungle Book Songs have been used in the The Jungle Book motion pictures, including without limitation in home entertainment releases of those motion pictures or in bonus features included on such home entertainment releases.” (Italics added.) Green‘s original declaration also described the following, apparent counter-example to her statement regarding synch licenses: “In 2007, Walt Disney Music Company was paid a fee to permit use of a version of ‘The Bare Necessities’ with revised lyrics in connection with a game included as a bonus feature on a home entertainment release of The Jungle Book motion picture. Although denominated a synchronization use license agreement, the fee was actually charged because the lyrics were rewritten, rather than for any synchronization license.” Her amended declaration added the following language to this paragraph, “In addition, I understand that in or around 2003, Wonderland granted Walt Disney Television Animation a synch and performance license for use of ‘The Bare Necessities’ in connection with ‘The Jungle Book 2,’ a sequel to The Jungle Book motion picture, although such a license is not in keeping with Wonderland‘s approach as described in paragraph 7 above. In any event, based on my review, since at least July 15, 2009, neither Wonderland nor Walt Disney Music Company has had occasion to issue a synch license or collect a synch license fee in connection with The Jungle Book-related home entertainment releases that include any of the Jungle Book Songs.”
law) and for purposes of the Gilkyson contracts—that is, that synchronization (“synch“) rights are a subset of mechanical reproduction rights. Alternatively, the Gilkyson heirs argued, even if mechanical rights are limited to audio-only uses, certain of Disney‘s uses of the songs fell within that more restricted definition because they played over static images in navigation menus and underneath a series of storyboards in bonus features. At the very least, they insisted, the dispute over the proper interpretation of the term presented a triable issue of material fact.
As to Disney‘s contention mechanical reproduction royalties are due only if Wonderland has received a payment, the Gilkyson heirs argued it would be a breach of contract for Disney to have allowed other Disney affiliates to benefit from use of songs that Gilkyson wrote without paying his heirs the applicable royalties: “When Disney Enterprises, directly, or through one of its affiliates besides Wonderland, makes money or otherwise benefits from Gilkyson‘s songs by way of mechanical reproduction, including audiovisual and/or audio-only reproduction in home entertainment mechanical playback devices, they bear the royalty burden for receiving such benefit.”6
6. The Gilkyson Heirs’ Motion in Limine No. 5
Prior to trial the Gilkyson heirs moved to exclude evidence and argument that Wonderland had received no compensation for exploitation of the mechanical reproduction rights in home entertainment releases, contending it was both irrelevant and prejudicial. Specifically, they argued allowing evidence or argument that Wonderland had no obligation to secure royalties from its affiliates and that, as a result, the Gilkyson heirs were not entitled to royalties “is an interpretation of the contracts that is not permitted under California law and should be excluded because it would confuse and mislead the jury.” In opposition Disney responded it was entitled to present evidence and argument in support of its defense there was no breach of contract “because Defendants have no duty to pay royalties for uses for which Wonderland was not compensated.”
At the hearing on the motion in limine, Disney‘s counsel reiterated its position, “I think the fact they didn‘t receive anything is dispositive of a breach of contract claim, but surely
we need to be able to point to that language and argue from the fact that Gilkyson—Wonderland did not receive any amount.” The trial court rejected that position, “It‘s what they should have done and what they should have paid.” Disney‘s counsel replied, “But we‘ll reserve on at least that issue, Your Honor.”7
7. The Jury Trial
a. The liability theory
Through their own testimony based on their experience in the music industry and that of an industry-practice expert, the Gilkyson heirs at trial
lyrics alone of “The Bare Necessities” in the Bear-E-Oke sing-along bonus feature in the 2014 Diamond Edition. The theory of the case was that Wonderland should have charged its affiliated home entertainment division for each of these uses of Gilkyson-composed songs, music and lyrics.
Disney contested the Gilkyson heirs’ expert testimony with its own experts, who opined that mechanical reproduction rights did not include use of songs in a motion picture or other audiovisual medium. A Disney vice-president for licensing also testified, when it owned all the rights to a song in a motion picture, the policy was that Disney‘s music group, including Wonderland, would not charge an intercompany (that is, intra-Disney) fee for the home entertainment release of the motion picture.9 The Gilkyson heirs’ expert had also conceded on cross-examination that in his experience at Warner Bros., when a motion picture studio owned all rights to an original song, as here, no intercompany fee was charged for use of the music on home entertainment media.
b. Damages
The Gilkyson heirs’ damage expert calculated the amount of royalties that should have been paid on a per-use per-unit basis. That is, the expert counted the number of times any of the Gilkyson-composed songs were used on a given home entertainment release, assessed a royalty fee (50 percent of the royalty rate Wonderland should have charged) and multiplied the amount due per unit by the number of units sold. This method generated a total damage figure of $14,402,887.83 with more than $11 million in the audiovisual category. Disney‘s damage expert presented an alternate model, testifying, if Wonderland were to collect a fee for Disney‘s home entertainment division‘s use of the songs, it would have charged a one-time, lump-sum fee, rather than
c. Motion for nonsuit
After the Gilkyson heirs completed their case-in-chief, Disney moved for nonsuit on the ground the contracts required payment of royalties only as a percentage of the net amount received by Wonderland for exploitation of the mechanical reproduction rights and no testimony or other evidence had been presented that any such amounts had been received within the limitations period on account of the home entertainment releases at issue in the litigation. The court denied the motion, stating, “Oh, I don‘t think so.”
The jury answered “yes” as to both Disney Enterprises and Wonderland to the question on the special verdict form, “Did a Defendant fail to pay royalties to Eliza Gilkyson, Tony Gilkyson and Nancy Gilkyson that the contract required them to pay, arising from . . . ‘the licensing or other disposition of the mechanical reproduction rights in and to material so written’ by Terry Gilkyson?”
The damages question asked, “What amount, if any, do you find as damages arising from any or all of the following category of uses?” The question then directed the jury to indicate whether any damages awarded had been calculated on per-use per-unit, per-unit, or lump-sum basis. The jury awarded total damages of $350,000: nothing for audiovisual uses and master uses of demo sound recordings; $300,000 on a lump-sum basis for song uses with static images; and $50,000 on a lump-sum basis for the use of lyrics in Bear-E-Oke.
8. The Trial Court‘s Determination of the Declaratory Relief Cause of Action
Immediately after the jury returned its verdict and was excused on May 11, 2018, the court stated, “So based on the verdict, I don‘t think there‘s anything else for us to do, is there?” The following exchange then took place:
“MR. BARKER [counsel for the Gilkyson heirs]: Well, there‘s the dec relief they awarded in two of the categories.
“THE COURT: Lump sum though.
“MR. BARKER: Lump sum, but that‘s past damages; right? So going forward, if they sell another DVD with those units on there, what do we get? “MR. RANSOM [counsel for Disney]: Your Honor, That‘s not the way the evidence was presented. The evidence was
presented that the lump-sum alternative was a one-time fee for all uses of any sort.
“MR. BARKER: Well, based on what Mr. Zajic—
“. . . . [an exchange between the court and the court reporter]
“MR. BARKER: Actually, the testimony throughout the trial, the way the defendants presented it was this lump sum could be for each event that comes along. There wasn‘t a lump-sum buyout. They presented it specifically as a—
“THE COURT: I think we‘d better have this briefed.
“MR. RANSOM: That‘s fine, Your Honor.”
There followed a year with multiple rounds of briefing, hearings and tentative rulings by the court concerning the proper scope of the Gilkyson heirs’ declaratory relief cause of action, whether the jury‘s verdict that Disney had no liability for audiovisual uses of the Gilkyson compositions and master uses of the demo sound records was merely advisory, the propriety of any award of damages for future home entertainment sales and the appropriate method of calculating damages, if any. The Gilkyson heirs argued Disney had an ongoing obligation to pay royalties in the future for mechanical reproduction of Gilkyson-composed songs, the jury‘s award of zero damages for audiovisual use of “The Bare Necessities” did not bind the court in the equitable proceeding, and the court should declare a per-use per-unit rate of compensation for any future exploitation of the material. Disney‘s position was that the jury verdict was binding as to which categories of use were compensable under the contracts and that the lump-sum award covered potential future sales.
On June 21, 2019 the court issued its final ruling on the matter, “adopt[ing] the explicit and implicit findings of the jury
as set forth in the Special Verdict of May 11th, 2018,” and awarding the Gilkyson heirs future damages of $699,316.40. The court ordered payment only for the two categories of use for which the jury had awarded damages. As for its calculation of future royalties, based on the jury instruction that damages were for the period “July 15, 2009 and continuing to the present time,” the court determined the jury‘s lump-sum right-to-use award had been limited to that time period, rejecting Disney‘s argument it would have made a single payment for all time. The
The court reasoned, in light of its instruction, the jury award had been based on 31 three-month quarters (seven years, nine months), which equated to $9,677.42 per quarter for song uses with static images and $1,612.90 per quarter for use of the lyrics in Bear-E-Oke. The court found it likely that future generations would have continuing interest in the “collaborative audio and visual creations at issue here and will acquire access to them in various manners,” but that a looking-forward damage calculation had to include “the very real likelihood of decreased value over time.” Using those assumptions, the court calculated damages in six-year periods for what it determined was the life of the copyrights, starting with the total jury award of $350,000 for 2018-2024, the initial post-verdict period, and decreasing that amount by 50 percent for each successive six-year period, ending with $683.59 for the final three years, 2081-2083.
Judgment was entered on June 21, 2019.
9. Postjudgment Proceedings
Following entry of judgment, the Gilkyson heirs moved for an award of prejudgment interest and separately for a new trial on the issue of damages or for additur in the two categories of use as to which the jury and the court had awarded damages, challenging the lump-sum methodology, as well as the amount of both the jury‘s verdict and the court‘s additional award. The court denied both motions.10
As to prejudgment interest, the court found damages as found by the jury were not “certain or capable of being made certain by calculation” as required for an award of prejudgment interest (
As to the motion for a new trial or additur, the court noted the Gilkyson heirs’ expert had agreed the lump-sum settlement method advanced by Disney had been used by him in his position at Warner Bros. with respect to song usage in new media. After pointing out the jury‘s award was nearly 10
Disney filed a timely notice of appeal, and the Gilkyson heirs filed a timely notice of cross-appeal.
DISCUSSION
1. Principles of Contract Interpretation; Standard of Review
Disney contends, pursuant to paragraph 6(c) of its 1963 agreements with Gilkyson, the Gilkyson heirs’ royalty rights are limited to 50 percent of the “net amount received by our music publisher” for exploitation of the mechanical reproduction rights in the material Gilkyson had composed. Because no such amounts were received by Wonderland (or any other Disney affiliate) for licensing those rights for the home entertainment releases at issue in the lawsuit within the governing limitations period, Disney argues the trial court erred in denying its motion for summary judgment and its motion for nonsuit, both of which advanced this contract interpretation. The Gilkyson heirs disputed this interpretation of the contract, as did the trial court, which, as discussed, instructed the jury, “Plaintiffs claim damages for amounts they contend should have been collected and shared with them based on the use of the Jungle Book songs in home entertainment releases after the period of July 15, 2009 and continuing to the present time.”
Absent any conflict in extrinsic evidence, we review de novo issues regarding the proper interpretation of a contract. (See City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 395; Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 439 [“[i]t is solely a judicial function to interpret a written contract unless the interpretation turns upon the credibility of extrinsic evidence, even when conflicting inferences may be drawn from uncontroverted evidence“]; Hanna v. Mercedes-Benz USA, LLC (2019) 36 Cal.App.5th 493, 507 [“in the absence of any conflict in extrinsic evidence presented to clarify an ambiguity,” written agreements are interpreted de novo].)11
2. Disney‘s Contract Argument Is Properly Before This Court
The Gilkyson heirs advance several different reasons why we should decline to consider Disney‘s net receipts contract interpretation argument. None has merit.
First, they assert Disney failed to properly raise this issue in the trial court, contending that in Disney‘s summary judgment motion the argument was derivative of its claim concerning the limited nature of mechanical reproduction rights (that is, Disney argued, because there was no exploitation of mechanical reproduction rights in the home entertainment releases, Wonderland had collected no licensing fees). But the heading for this portion of Disney‘s memorandum of points and authorities in support of summary judgment plainly stated the issue in broader terms: “Defendants are entitled to
The Gilkyson heirs perhaps misunderstood Disney‘s argument, asserting in their opposition memorandum that, if a Disney affiliate other than Wonderland received licensing fees from the home entertainment division for exploitation of the mechanical reproduction rights, they would still be entitled to a share of royalties under the agreements. However, no evidence was presented, either at the time of the summary judgment motion or at trial, that any such fees were ever collected by any Disney affiliate during the limitations period. Moreover, elsewhere in their opposition the Gilkyson heirs argued it would be contrary to the parties’ intent to interpret the contracts to allow “self-dealing” that permitted any Disney entity to benefit from the use of mechanical reproduction rights without paying the Gilkyson heirs royalties—precisely the contract interpretation (without the pejorative descriptor) advanced by Disney. In any event, Disney‘s reply memorandum clearly defined the issue, emphasizing it was undisputed that neither of Disney‘s music publishing entities had received any revenue for the use of Gilkyson-composed songs in home entertainment releases during the limitations period and arguing, “The alleged failure to pay money ‘received by [Disney‘s] music publisher’ during the limitations period is a critical element of Plaintiffs’ breach of contract claim. Because no amounts were received, there were no royalties to pay, and therefore no breach of the Contracts. Summary judgment should be granted on this basis as well.”
Disney‘s argument concerning the proper interpretation of the Gilkyson heirs’ right to recover royalties was subsequently addressed in connection with their motion in limine no. 5. As discussed, the trial court rejected Disney‘s analysis, stating the issue in the case was not about Wonderland‘s actual receipts. “It‘s what they should have done and what they should have paid.”
The oral motion for nonsuit, although succinct, was also sufficient to once again identify the issue, which had previously been fully articulated before the court. The summary denial of the motion reflected the court‘s lack of agreement with Disney‘s motion, not any lack of understanding of the issue of contract interpretation it raised.
Similarly misplaced is the contention Disney is estopped from making its contract interpretation argument because Disney objected in discovery to producing certain financial information and thereafter successfully moved in limine to preclude the Gilkyson heirs from introducing evidence of the wealth of the Disney enterprise or the gross revenues or profits generated by the theatrical and home entertainment releases of The Jungle Book or its songs.
Finally, the Gilkyson heirs argue Disney waived its net receipts argument because it proposed the language instructing the jury that the plaintiffs sought damages for amounts they contend should have been collected for use of the Gilkyson-composed songs and did not request an instruction on its own contract interpretation theory. But Disney‘s position in the trial court, as it is on appeal, was that “net amount received” is not a disputed term that can only be construed after resolution of conflicting extrinsic evidence by the finder of fact; rather, the meaning of the contract was a question of law for the court, not the jury. As for the jury instruction that was given, having unsuccessfully advanced its legal position as to the meaning of the contract on several occasions, Disney was entitled to propose instructions that embraced the court‘s view of the legal landscape. (See Mary M. v. City of Los Angeles (1991) 54 Cal.3d 202, 212-213 [“[a]n attorney who submits to the authority of an erroneous, adverse ruling after making appropriate objections or motions, does not waive the error in the ruling by proceeding in accordance therewith and endeavoring to make the best of a bad situation for which he was not responsible,” internal quotation marks omitted]; American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1472-1473 [the doctrine of invited error does not apply when a party, while making the appropriate objections, acquiesces in a judicial determination].)
3. The 1963 Contracts Did Not Obligate Disney To Collect Fees for Intercompany Exploitation of the Mechanical Reproduction Rights or To Pay Royalties to Gilkyson When Licensing Fees Were Not Charged
a. The plain language of the 1963 contracts gives Disney the right to exploit the mechanical reproduction rights without paying royalties
The express language of the 1963 contracts limits the Gilkyson heirs’ right to receive royalties to a share of the net amount received by Wonderland for licensing or other disposition of the mechanical reproduction rights to the material written by Gilkyson. The first portion of paragraph 6 provides, whether any of the material is published by Disney (that is, Disney makes direct use of the music or lyrics) or licensed by Disney to be published in the media identified in subparagraphs (a), (b) and (c), Gilkyson was to receive royalties “as hereinbelow set forth.” Subparagraph (c) specifies with respect to mechanical reproduction rights that the royalties were to be “[a]n amount
Paragraph 7 of the agreement reinforced the limited nature of Gilkyson‘s royalty rights. That paragraph specifically provided that Gilkyson had no right to royalties in connection with the exercise of any performance rights by Disney (“grand rights, dramatic rights, television rights and other performance rights, including the use of the material in motion pictures, photoplays, books, merchandising, television, radio and endeavors of the same or similar nature“) and explicitly reaffirmed that Gilkyson “shall be entitled to receive as royalties only the moneys and/or royalties stipulated in and in accordance with Paragraph 6 above.”
Significantly for purposes of the Gilkyson heirs’ liability theory—that they are entitled to royalties based on fees that Wonderland should have collected—nothing in the language of the contracts imposed an obligation on Disney to exploit the mechanical reproduction rights at all or, if it elected to do so, to exploit them in any particular manner. Indeed, paragraph 10 states exactly the contrary: “Nothing contained in this agreement shall be construed as obligating us to publish, release, exploit or otherwise distribute any of the material, and the same shall be always subject to our sole discretion.”
Based on the language of the 1963 contracts, Wonderland had the right to permit its home entertainment affiliate to use the Gilkyson-composed songs without charging an intercompany license fee and without incurring any liability to Gilkyson or his heirs when doing so. (See Lange v. Monster Energy Co. (2020) 46 Cal.App.5th 436, 445 [“[o]rdinarily, the objective intent of the contracting parties is a legal question determined solely by reference to the contract‘s terms“]; Wolf, supra, 162 Cal.App.4th at p. 1126 [same].) Had the parties intended that Disney would use its best efforts to exploit the mechanical reproduction rights in a manner that generated royalties for Gilkyson, the contracts would not have expressly granted Disney such unfettered discretion. (See Wolf, at p. 1121 [“if the express purpose of the contract is to grant unfettered discretion, and the contract is otherwise supported by adequate consideration, then the conduct is, by definition, within the reasonable expectation of the parties“]; see also Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 374 [“[t]he general
The contrary plain-language interpretation advanced by the Gilkyson heirs is that the first portion of paragraph 6 (what they refer to as the preamble), which states Gilkyson is entitled to royalties whether the material he composed “be published by us or be licensed by us to be published,” means royalties are due whether Wonderland receives money from licensing or a Disney affiliate exploits the mechanical reproduction rights directly without an intercompany fee. That proposed interpretation of the 1963 agreements would require us to disregard the express limiting language of paragraph 6(c). Yet we are obligated in construing a contract, if possible, to give effect to all of its provisions and to give meaning to the parties’ choice of language. (Flores v. Nature‘s Best Distribution, LLC (2016) 7 Cal.App.5th 1, 9 [“[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other,” internal quotation marks omitted]; see Wolf, supra, 162 Cal.App.4th at p. 1136; Aozora Bank, Ltd. v. 1333 North California Boulevard (2004) 119 Cal.App.4th 1291, 1296; see also
b. The Gilkyson heirs introduced no extrinsic evidence that supported a different interpretation of the contracts
To bolster their plain-language claim, the Gilkyson heirs contend extrinsic evidence confirmed their proposed interpretation of the contracts, pointing out that Wonderland and other Disney music publishing subsidiaries had issued licenses for Disney affiliates’ use of “The Bare Necessities” in home entertainment media in periods prior to July 15, 2009. (Cf. City of Hope National Medical Center v. Genentech, Inc., supra, 43 Cal.4th at pp. 393-394 [a party‘s predispute, post-contracting conduct is powerful evidence of that party‘s intent and understanding of the contract at the time it entered into the agreement]; Crestview Cemetery Assn. v. Dieden (1960) 54 Cal.2d 744, 753-754 [same].) That evidence, however, does not in any way indicate that Disney was obligated to do so by the terms of the 1963
The Gilkyson heirs’ other extrinsic evidence is equally unpersuasive. The testimony of their industry expert cited in the combined respondents’ brief and cross-appellants’ opening brief included only the expert‘s own interpretation of the contract language (“it talks about licensing, which could be involving the music publisher or other disposition, which could be exploitation done by Disney itself“), not admissible parol evidence of industry custom or practice. (See Summers v. A.L. Gilbert Co. (1999) 69 Cal.App.4th 1155, 1180 [expert opinion on the legal interpretation of contracts is inadmissible]; Cooper Companies v. Transcontinental Ins. Co. (1995) 31 Cal.App.4th 1094, 1100 [“the meaning of the policy is a question of law about which expert opinion testimony is inappropriate“]; cf. Ermolieff v. R.K.O. Radio Pictures, Inc. (1942) 19 Cal.2d 543, 550 [“while words in a contract are ordinarily to be construed according to their plain, ordinary, popular or legal meaning, as the case may be, yet if in reference to the subject matter of the contract, particular expressions have by trade usage acquired a different meaning, and both parties are engaged in that trade, the parties to the contract are deemed to have used them according to their different and peculiar sense as shown by such trade usage“]; Wolf v. Superior Court (2004) 114 Cal.App.4th 1343, 1357 [evidence regarding trade usage and custom is admissible to prove an interpretation to which the agreements at issue were reasonably susceptible in the entertainment industry context].)
The testimony the Gilkyson heirs cite from Disney‘s vice-president of music licensing, Dominic Griffin, is equally unhelpful to their position. Griffin testified in response to a hypothetical question that, if a Disney entity sold sheet music for a Gilkyson-composed song, Gilkyson would get paid 5 cents even if no license fee had been collected.14 Even if this were not an inadmissible personal opinion on the meaning of the contracts, paragraph 6(a) provides for payment of a royalty of 5 cents for each copy of sheet music sold by Disney and paid for at wholesale in the United States and Canada; it does
Finally, the testimony of Nancy Gilkyson (a music industry executive) that it appeared from her review of the records that Disney “played shell games with the money,” and the testimony of the Gilkyson heirs’ entertainment industry damages expert that Disney benefited from not having the expense of paying the Gilkyson heirs’ royalties when Disney exploited mechanical reproduction rights in home entertainment media without an intercompany license, while unquestionably central to the Gilkyson heirs’ narrative, do not constitute extrinsic evidence of the parties’ intent when entering the 1963 contracts.
c. No principle of California law justifies disregarding the parties’ objective manifestation of their intent as expressed in the language of the contracts
While disclaiming any reliance on the implied covenant of good faith and fair dealing15—that is, insisting they are not arguing Disney had an implied obligation to exercise its discretion with respect to the manner in which it exploited the mechanical reproduction rights so as not to unfairly deprive Gilkyson and his heirs of their share of royalties (see, e.g., Carma Developers (Cal.), Inc. v. Marathon Development California, Inc., supra, 2 Cal.4th at p. 372 [the implied covenant “finds particular application in situations where one party is invested with a discretionary power affecting the rights of another. Such power must be exercised in good faith“])—the Gilkyson heirs cite several general provisions of California law to argue Disney‘s net receipts interpretation of its 1963 agreements must be rejected. As they state,
In sum, interpretation of the Gilkyson heirs’ right to receive royalties for exploitation of the mechanical reproduction rights in Gilkyson-composed material—regardless of the parties’ dispute as to the scope of those rights—was properly a question for the court; and Disney‘s net receipts interpretation of paragraphs 6 and 6(c) is the more reasonable construction of the contracts. Accordingly, the trial court erred in denying Disney‘s motions for summary judgment and for nonsuit. Judgment should have been entered in favor of Disney as a matter of law.
DISPOSITION
The judgment is reversed, and the cause remanded with directions to enter a judgment in favor of Disney. Disney is to recover its costs on appeal.
PERLUSS, P. J.
We concur:
SEGAL, J.
FEUER, J.