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B. Lewis Productions, Inc. v. Angelou

April 22, 2008

B. LEWIS PRODUCTIONS, INC., PLAINTIFF,
v.
MAYA ANGELOU, DEFENDANT.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION & ORDER

This diversity action concerns a dispute over whether the defendant Maya Angelou ("Angelou") owes plaintiff B. Lewis Productions, Inc. ("BLP") any portion of an advance she received for drafting greeting card text. Partial summary judgment was granted in favor of Angelou on BLP's breach of contract claim by an Opinion and Order of August 10, 2007 ("2007 Opinion"). Angelou has now moved for summary judgment on BLP's sole remaining claim, fraud. Angelou's motion for summary judgment is granted. As explained below, when the plaintiff's misapprehension of the terms of a written settlement agreement could be easily corrected through a reading of either the agreement or the documents incorporated in it, the plaintiff is unable to show that its reliance on the defendant to clarify the facts is reasonable.

BACKGROUND

The following facts are undisputed or taken in the light most favorable to the plaintiff. On June 28, 2000, Angelou entered into a License Agreement ("License Agreement") with Hallmark Cards Incorporated ("Hallmark") to permit Hallmark to use language provided by Angelou in greeting cards and related products (collectively, "Hallmark/Angelou products"). The License Agreement provided in part that Hallmark would pay Angelou royalties ranging from five to nine percent on its net revenues from the sale of the Hallmark/Angelou products. It also provided for an advance of $1 million, payable on Angelou's execution of the License Agreement and "recoupable from royalties otherwise payable to" Angelou.

The License Agreement expired on December 31, 2004, and by letter agreement dated January 1, 2005 ("Amendment"), Hallmark and Angelou amended it and extended its term for four years, through December 31, 2008. Among other things, the Amendment increased royalty rates, so that Angelou would receive ten percent of net profits for the years 2006 through 2008. Hallmark also agreed to pay Angelou an advance of $800,000 "recoupable from royalties otherwise payable" to Angelou under the Amendment on the condition that Angelou delivered twenty-eight writings to Hallmark by April 15, 2005. Angelou promptly supplied the twenty-eight writings and Hallmark paid the $800,000 advance on February 22, 2005.

BLP is a company involved in the sports and entertainment business. It has been owned and operated by Ronald E. "Butch" Lewis ("Lewis") since 1978. The initial relationship between BLP and Hallmark is not described in the parties' evidentiary submissions, but BLP claims that in 1994 Angelou signed an exclusive agreement authorizing BLP to promote her writings for use in greeting cards. BLP claims that it subsequently obtained a license agreement for Angelou with Hallmark but that Angelou refused to execute the agreement. In 2000, BLP discovered that Angelou had entered into an agreement with Hallmark that excluded BLP. By a complaint filed in January 2001 and amended in September 2004, BLP -- represented by attorney Jethro Eisenstein ("Eisenstein") -- sued Angelou and Hallmark for, respectively, breach of contract and tortious interference. BLP obtained a copy of the License Agreement and in 2002, Eisenstein's firm deposed Angelou, with Lewis in attendance. Angelou testified, inter alia, that "no document I have ever signed has been in my mind a complete document until there is an advance" and "any person who wants my work offers me an advance."

BLP settled its lawsuit against Hallmark in an agreement dated December 1, 2005 ("BLP/Hallmark Settlement Agreement") which specifically identified the Amendment and which linked future payments to BLP to Hallmark's revenues and its schedule of royalty payments to Angelou. The BLP/Hallmark Settlement Agreement provided for a lump-sum payment of $456,018.96 and quarterly payments going forward of 1.25% of "Net Revenues," made "on the same schedule as Hallmark pays royalties to Angelou pursuant to the License Agreement, as amended." (Emphasis supplied.) The third "WHEREAS" clause of the BLP/Hallmark Settlement Agreement similarly recited that "Hallmark and Angelou executed a License Agreement, dated June 28, 2000 (as subsequently amended, the 'License Agreement')." (Emphasis supplied.)

In the course of settlement discussions leading up to the BLP/Hallmark Settlement Agreement, Eisenstein, on BLP's behalf, had twice requested via e-mail to Hallmark's counsel "up-to-date information" about Hallmark's sales under the License Agreement. Hallmark's replies identified the categories of payments to Angelou as royalties, advances, and guarantees. For example, in an e-mail reply on October 4, 2004, Hallmark's counsel stated that net sales "from inception through 2Q 2004 total $39,865,112.42," and that the "royalty/advance payments to Dr. Angelou during that period total $2,769,492.73." (Emphasis supplied.) The second e-mail reply on July 1, 2005 stated that net sales "from inception through 1Q 2005 total $44,318,102.73," and that "Hallmark's royalty/advance/guarantee payments to Dr. Angelou during that period total $4,310,724.46." (Emphasis supplied.) The $800,000 advance paid to Angelou on February 22, 2005 was included in the $4,310,724.46 figure. The first e-mail showed that Angelou had received payments amounting to just under 7% of Hallmark's net sales through mid-2004. The second e-mail showed $4.45 million in net sales and $1.54 million in payments to Angelou in the three most recent quarters. Thus, Angelou's earnings over those three quarters totaled nearly 35% of Hallmark's net sales. BLP, however, never asked Hallmark for a breakdown of royalty, advance, and guarantee payments made to Angelou.

About two months after the BLP/Hallmark Settlement Agreement had been executed, Angelou and BLP executed a settlement agreement ("Settlement Agreement") dated February 1, 2006, with an effective date of January 12, 2006. January 12 was the day BLP and Angelou had executed a handwritten settlement agreement ("Handwritten Agreement"). In formalizing the terms of the settlement, the Settlement Agreement made several changes to the terms contained in the Handwritten Agreement. Among other changes, the Settlement Agreement altered the description in the Handwritten Agreement of the amounts to be paid to BLP in the future, from "2.75% of net Hallmark sales commissionable to Dr. Angelou at 9% and 1.22% of net Hallmark sales commissionable to Dr. Angelou at 4%," to "30.5% of all net funds paid to Dr. Angelou as royalties." The Settlement Agreement also explicitly referred to the Amendment. For example, the Settlement Agreement recited in its third "WHEREAS" clause that "Hallmark and Dr. Angelou executed a License Agreement, dated June 28, 2000, as amended." (Emphasis supplied.)

Under the Settlement Agreement, Angelou agreed to pay BLP $1 million in four installments. Clause 1(b) of the Settlement Agreement provided for additional payments to BLP based on royalties paid to Angelou following the effective date of the Settlement Agreement as follows:

Dr. Angelou shall pay to BLP sums equal to 30.5% of all net funds paid to Dr. Angelou as royalties under the License Agreement [i.e., the 2000 License Agreement as amended in 2005] after the effective date hereof, with respect to sales of products made by Hallmark under the License Agreement from and after January 1, 2006. Dr. Angelou shall instruct Hallmark to pay such sums to BLP on the same schedule as Hallmark pays royalties to Dr. Angelou only if and when the corresponding funds are actually paid to Dr. Angelou in accordance with the License Agreement, and from such funds only. Dr. Angelou shall instruct Hallmark to make such payments by check payable to B. Lewis Productions, Inc. and sent to 250 West 57th Street, Suite 311, New York, New York 10107-0001 or to such other address as BLP shall designate in writing.

Dr. Angelou will not be responsible for any failure by Hallmark to pay in accord with her instructions, and any such failure by Hallmark to so pay will not be deemed a breach hereof by Dr. Angelou. If, notwithstanding such instructions, Hallmark fails to so pay such sums directly to BLP, and instead pays them to Dr. Angelou, then Dr. Angelou will promptly remit the applicable sums to BLP. The parties further agree that, in the event that the foregoing terms for payment of sums equal to 30.5% of all net funds paid to Dr. Angelou as royalties under the License Agreement after the effective date hereof do not comply with Hallmark's operational requirements for accounting or payment of licensing royalties, the Parties shall agree upon alternate language of instruction to Hallmark consistent with Hallmark's requirements that will allow for payment of the payments agreed-upon herein to be paid to BLP without changing the monetary amounts of such payments. (Emphasis supplied.) The Handwritten Agreement had similarly stated that the additional payments were to be made "to BLP when otherwise payable to Dr. Angelou, from such funds only." The Settlement Agreement also contains a clause titled "Additional Representations and Warranties," which provides:

a. Final and Binding Agreement. This Agreement supersedes the Handwritten Agreement and this Agreement and the documents referred to herein constitute the entire, final and binding understanding between the Parties hereto, and no other statement or representation, written or oral, express or implied, has been received or relied on by any Party in entering in this Agreement.

b. Understanding of Agreement. Each Party understands and agrees to this Agreement and the terms and conditions contained herein, and has relied on his, her or its own judgment, belief, knowledge, understanding and expertise after having the opportunity for consultation with his, her or its own legal counsel concerning the legal effect of this Agreement and all of the terms and conditions contained herein. No Party hereto has relied on any statement, representation or promise of any other party or with any other officer, agent, employee or attorney for the other party in executing this Agreement except as expressly stated herein. In resolving any dispute or construing any provision hereunder, there shall be no presumptions made or inferences drawn because the attorneys for one of the parties drafted the Agreement, because of the drafting history of the Agreement, or because of the inclusion of a provision not contained in a prior draft or the deletion of a provision contained in a prior draft.

c. Voluntary Settlement. Each Party enters into this Agreement and any documents referred to herein, knowingly and voluntarily, in the total absence of any fraud, mistake, duress, coercion, or undue influence and after careful thought and reflection upon this Agreement and any documents referred to herein; and accordingly, by signing this document and the documents referred ...


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