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A&E Television Networks, LLC and v. Pivot Point Entertainment

January 18, 2011

A&E TELEVISION NETWORKS, LLC AND
D&D TELEVISION PRODUCTIONS, INC., INTERPLEADER PLAINTIFFS,
v.
PIVOT POINT ENTERTAINMENT, LLC, DUANE CHAPMAN, AND
ALICE BARMORE-SMITH CHAPMAN,
DEFENDANTS.



The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.:

MEMORANDUM OPINION & ORDER

On December 17, 2010, Plaintiffs A&E Television Networks, LLC and D&D Television Productions, Inc. filed this interpleader action seeking authorization to deposit certain monies into the Court's registry claimed by Defendants Pivot Point Entertainment, LLC ("Pivot Point"), and Duane and Alice Barmore-Smith Chapman. Plaintiffs also request that Defendants be enjoined from prosecuting any action against Plaintiffs for recovery of these monies. On December 17, 2010, this Court entered an Order to Show Cause directing Defendants to demonstrate why interpleader relief should not be granted.

Pivot Point opposes the interpleader action, alleging that it was brought by Plaintiffs "in concert with the Chapmans . . . to stall adjudication of [Plaintiffs'] obligation to pay Pivot." (Pivot Dec. 28, 2010 Br. 2) The Chapmans do not object to the interpleader action, but request that any order granting Plaintiffs' application "not insulate Plaintiffs from liability" for entering into what the Chapmans allege is an illegal agreement with Pivot Point. (Chapman Dec. 22, 2010 Br. 2-3) On January 5, 2011, the Court conducted a hearing to address the issues raised in the parties' submissions.

For the reasons stated below, this interpleader action will be permitted to proceed.

BACKGROUND

A&E broadcasts "Dog the Bounty Hunter," a television program starring Duane "Dog" Chapman and his wife Alice Barmore-Smith ("Beth") Chapman (the "Program"). (Houts Decl. Ex. C) In December 2003, Boris Krutonog and Hybrid Films, Inc. entered into a co-producer agreement for the Program under which Hybrid was to pay Krutonog fees for each episode. (Id. at ¶ 3) Hybrid Films and Krutonog each created a special purpose corporate entity for the purpose of producing the Program -- Hybrid created D&D, and Krutonog created Pivot Point. (Id. at Ex. A)

In December 2005, Pivot Point, D&D, and A&E entered into an agreement (the "Pivot Point Agreement" or "Agreement") under which the two co-producers (Krutonog and Hybrid) each assigned all of their rights to Pivot Point and D&D, respectively. (Id.) A&E's responsibilities under the Agreement are to render accountings and pay Pivot Point royalties for any video distribution and broadcasts of the Program on other networks. (Id.)

Pivot Point now claims that it is entitled to certain royalties and fees under the Pivot Point Agreement. The Chapmans, however, claim that the Pivot Point Agreement violates the California Talent Agencies Act ("TAA") and that they, and not Pivot Point, are entitled to the royalties and fees due under the Agreement.

This is the fourth lawsuit arising out of the parties' disputes concerning the Pivot Point Agreement. On March 23, 2007, the Chapmans commenced an administrative proceeding against Krutonog and Pivot Point before the California Labor Commissioner. In that action, the Chapmans seek an order declaring that the Pivot Point Agreement, and a "Life Rights Agreement" between the Chapmans and Krutonog, violate the TAA, and declaring that any amounts due under the Agreement should be paid to the Chapmans. (Id. at Ex. C) In a June 1, 2007 letter to A&E and D&D, the Chapmans' counsel directed Plaintiffs to "immediately cease and desist paying any further sums to Boris Krutonog or Pivot Point Entertainment in connection with the Program," and warned Plaintiffs that the Chapmans "intend to hold you fully responsible for damages . . . from any future payments to these entities." (Id. at Ex. B) The California Labor Commissioner has not yet issued a decision as to whether the Agreement violates the TAA.

After the filing of the California administrative proceeding and receipt of the Chapmans' letter, A&E and D&D informed Krutonog and Pivot Point that they would hold in escrow any amounts due under the Agreement. (Id. ¶ 7) On May 19, 2008, Krutonog and Pivot Point commenced an action against A&E and D&D in the Supreme Court for the State of New York, New York County (the "New York Action")*fn1 seeking damages for breach of the Agreement and a declaration that the Agreement is valid and that they are entitled to fees and royalties due under the Agreement. (Edel Decl. ¶ 7) A&E and D&D moved to dismiss or stay the New York Action pending the outcome of the California administrative proceeding, but on June 8, 2010, those motions were denied. Pivot Point's claim for declaratory relief was dismissed, however, because the court found that "the validity of the agreement is before . . . the California board and is not clearly before me." (Id. Ex. C at 9)

Asserting that they were "at risk of inconsistent judgments" -- "[a] determination by the California Labor Commissioner that the Pivot Point Agreement is invalid under the TAA and a determination in the New York Action enforcing the Pivot Point Agreement in favor of Pivot Point" (id. ¶ 12) -- on July 7, 2010, Plaintiffs filed an interpleader action pursuant to 28 U.S.C. § 1335 in the United States District Court for the Central District of California.*fn2

Plaintiffs sought authorization to deposit the disputed fees and royalties in that court's registry and a discharge from liability. (Id. ¶¶ 13-14) On September 27, 2010, Pivot Point moved to dismiss on grounds of improper venue, based on a forum selection clause in the Agreement designating "any court or courts in the state of New York or of the United States of America, in New York County, New York" as the exclusive jurisdiction for "any matter arising under the . . . Agreement." (Houts Decl. Ex. A, ¶ 9) Pivot Point's motion was granted on December 10, 2010. The instant action was then filed in this District on December 17, 2010.

DISCUSSION

I.LEGAL ...


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