Filed 3/4/13 Marathon Funding v. Paramount Pictures CA2/8
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
MARATHON FUNDING, LLC, B240723
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC436412)
v.
PARAMOUNT PICTURES
CORPORATION, a Delaware corporation,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los Angeles County.
Mark Mooney, Judge. Affirmed.
Hillel Chodos for Plaintiff and Appellant.
Kendall Brill & Kleiger, Richard B. Kendall and Nicholas F. Daum for Defendant
and Respondent.
__________________________
Plaintiff Marathon Funding, LLC, appeals from the judgment entered for
defendant Paramount Pictures Corporation in this action for breach of fiduciary duty.
The claim arose from a contract by which Marathon invested in several motion pictures
produced by Paramount. Because the trial court correctly determined that the parties‟
agreement did not give rise to any fiduciary duties, we affirm the judgment. We also
affirm the postjudgment order awarding Paramount attorney‟s fees.
FACTS AND PROCEDURAL HISTORY
In December 2006, Marathon Funding, LLC, agreed to invest in a slate of
14 motion pictures to be produced and distributed by Paramount Pictures Corporation,
including what would become the Oscar winner for best picture in 2007 – “No Country
For Old Men” – which starred Tommy Lee Jones and Javier Bardem. Pursuant to that
agreement, Paramount issued an accounting statement to Marathon in late 2009 that
deducted a little more than $2 million from Marathon‟s account. Marathon later
determined that Paramount did so to cover a portion of a $15 million payment Paramount
made to Jones due to a drafting error Paramount made in its contract with Jones.
Marathon sued Paramount for breach of fiduciary duty, contending that Paramount
should not have charged Marathon for Paramount‟s error. The trial court granted
Paramount‟s motion to hold a bench trial, not a jury trial, finding that this was the proper
course because the gist of Marathon‟s action was equitable in nature. The parties
stipulated that no extrinsic evidence would be introduced concerning the formation or
interpretation of the investment agreement, and that no extrinsic evidence would be
introduced concerning their conduct under that agreement except as to the accounting
charges that were made. In addition, Marathon stipulated to the facts it characterized as
undisputed in response to Paramount‟s earlier unsuccessful motion for summary
judgment.
The facts showed that Paramount and Marathon signed a “Multi-Picture
Investment Agreement” dated December 15, 2006, that called for Marathon to invest in a
2
slate of Paramount motion pictures, including “No Country For Old Men”.1 Marathon is
a Delaware limited liability corporation with its principal place of business in New York
State, and was formed by Morgan Stanley Asset Funding, LLC, a subsidiary of the
international investment bank Morgan Stanley. Morgan Stanley put up $150 million
through a separate agency it created to finance Marathon‟s investment. Morgan Stanley
also acted as the exclusive agent for refinancing of that credit by allowing other investors,
including financial institutions and hedge funds, to invest in Marathon‟s right to receive
profit payments under the investment agreement.
Under the investment agreement, Marathon received a 50 percent share of
Paramount‟s copyright interest in each of the movies covered by the agreement (the
covered pictures). Because other financing was obtained for No Country, Marathon and
Paramount each ended up with a 25 percent share of that film‟s copyright while the
remaining 50 percent went to the new investor, Disney/Miramax. Marathon‟s
“Investment Price” in each movie was based on its proportional copyright share of the
movie‟s estimated production costs. In exchange, Marathon would receive the same
proportional percentage of each movie‟s net receipts. Paramount was responsible for all
the marketing and distribution costs of the covered pictures, which, because of their low-
budget nature, greatly exceeded the actual production costs. Paramount would advance
all direct costs for the movies and, “[a]s between Paramount and Investor, Paramount
shall control all decisions (i.e., business, creative, or otherwise) relating to the
development and production of each Covered Picture as well as the decisions whether to
pursue and consummate any Co-Financing Transaction, and Investor shall have no
consultation or approval rights thereto.”
The term “net receipts” was contractually defined to mean the gross receipts from
the distribution and exhibition of a movie, minus deductions for certain expenses and
fees, including third party profit participation payments that might be owed to the
1 Some of the movies, like “No Country For Old Men,” had already been made,
while others had not. For ease of reference we will refer to that motion picture as No
Country.
3
director, producers, or certain actors.2 Jones‟s contract for No Country included a type of
third party profit clause known as a box office bonus which is at the heart of the present
litigation. So too did the contracts of directors Joel and Ethan Coen and producer Scott
Rudin. These talent contracts were negotiated in early 2006, well before the investment
agreement was signed. Production of No Country had also concluded before the
investment agreement was signed.
The box office bonuses negotiated for Jones, Rudin, and the Coen Brothers
provided that each would receive fixed bonuses when either the domestic box office
receipts reached certain levels, or when worldwide box office receipts reached twice the
domestic level. Paramount hired outside legal counsel to prepare agreements that
conformed with the negotiated terms, as reflected in deal memos provided by
Paramount‟s in-house negotiator. However, the lawyer mistakenly drafted the
agreements to provide that bonuses would be paid once worldwide box office receipts,
when multiplied by two, reached the levels prescribed for domestic box office bonuses.
As a result, the contracts between Paramount on the one hand, and Jones, Rudin, and the
Coen Brothers on the other hand, provided for an unintended increase in their bonus
compensation.3
Outside counsel discovered her mistake in June 2006 but apparently did not notify
Paramount. Although drafts of the agreements were distributed to various departments
within Paramount, including to the legal department and the contract negotiator, a highly-
placed Paramount legal executive testified that it was not Paramount‟s policy to review
such drafts to be sure they were consistent with the negotiated terms. Instead, Paramount
relied on its outside counsel, whom it had used without problems before. According to
2 The formula was more complicated than this, and included something called an
Investor Corridor Payment, which was a percentage of gross receipts that would be paid
as an advance against net receipts. The full details of this formula are irrelevant to the
issues on appeal.
3 The attorney made another error that inflated their share of home video revenues,
but that error did not affect Marathon and is therefore not relevant to the issues on appeal.
4
Paramount, it did not discover the errors until 2008, at about the same time as did one of
Rudin‟s attorneys.
Once Paramount learned of the error in the box office bonus provision, it
contacted Rudin, Jones, and the Coen Brothers. Rudin and the Coen Brothers
acknowledged that the provision as it appeared in the contract did not reflect the terms
they had in fact negotiated and agreed to reform their contracts accordingly. Jones
refused to do so, and the dispute was eventually heard by a panel of arbitrators, who ruled
2-1 in Jones‟s favor.
Under the higher, erroneous, formula, Jones was entitled to a box office bonus of
$17.5 million. According to Carmen Desiderio, Paramount‟s senior vice president in
charge of contract accounting, if the correct formula had been applied, Jones would have
been entitled to a box office bonus of just under $5 million as of October 2011. That
figure would have increased over time, however, Desiderio testified. Using Paramount‟s
standard accounting methodology, Desiderio testified that Jones would most likely have
earned an additional $1.7 million in box office bonus compensation over the movie‟s 10-
year life cycle. Because Paramount had already paid Jones $2.5 million of his box office
bonus, Paramount paid him another $15 million to make up the difference. That figure
capped the total amount of such compensation Jones could receive, however. As a result,
Jones was compensated more than $10 million above what he would have received
absent the contract drafting error.
After obtaining a settlement of $2.75 million from its outside counsel‟s law firm,
Paramount used that figure to reduce for accounting purposes to its investors the amount
of box office bonus paid to Jones, and then allocated the reduced amount among itself
and the investors according to their proportional ownership interests in the copyright for
No Country. As a result, Marathon was charged approximately $2 million more than it
5
would have been had the error not occurred.4 Marathon did receive more than
$12 million from Paramount for its investment in No Country, however.
The investment agreement contained three provisions that disclaimed the existence
of either a partnership or of any fiduciary duties by Paramount. Paragraph 8, captioned
“HOLDING OF FUNDS”, stated that “Paramount . . . shall not be considered a trustee
pledgeholder, fiduciary or agent of Investor by reason of anything done or any money
collected by it, and shall not be obligated to segregate receipts of the Covered Pictures
from its other funds.” Paragraph 14, captioned “Tax Matters,” states that “Paramount and
Investor intend and agree that neither this Agreement nor the transactions contemplated
herein shall be treated as or give rise to a partnership for federal income tax purposes or
any other purpose.” Exhibit B to the investment agreement included section “III.
ACCOUNTING,” which applied to accounting statements and allocation of funds to
Marathon. Under subdivision G. of this section, beneath the caption “Creditor-Debtor”, it
said that “There is a creditor-debtor relationship between Paramount and Investor with
respect to the payment of amounts due Investor under the Agreement and nothing
4 Marathon contends the figure is higher, but the difference is not important to our
analysis. We also note that paragraph 4.1 of the investment agreement expressly
permitted Paramount to deduct from its gross receipts calculations the amount of any
expenditures or liabilities it incurred in connection with a covered picture. (Italics
added.) Paragraphs 7.1 and 7.2 gave Marathon the right to audit financial records and
related agreements for covered pictures, rights which were spelled out in Schedule B.
Under “NET PRODUCTION INVESTMENT AUDITS”, audit information was to
include “[c]ontracts for all „above the line‟ personnel entitled to receive main title credit.”
A sample exhibit (Exhibit X-1) that listed the information supplied to the auditor
included a statement that the auditor “obtained and read contracts for significant above-
the-line talent (writers, producers, directors or actors earning more than US $100,000 in
basic compensation throughout the entire production as identified to us by Paramount
management) and verified that the contracts were signed and payments reflected in the
Production Cost Detail Report agree with the terms of those contracts.” This meant that
Marathon could have inspected the Jones contract if it had wanted to. Finally,
paragraph 11.2 stated that Paramount had not made any express or implied warranties or
representations concerning the amount of money any of the movies might make or that
there would be any money payable to Marathon at all, and that Marathon would not
“make any claim that Paramount has failed to realize receipts or revenues which should
or could have been realized in connection with the Covered Pictures . . . .”
6
contained in the Agreement shall be construed to create an agency, trust or fiduciary
obligation with respect to such amounts . . . .”
Marathon contended that the investment agreement gave rise to a joint venture
between it and Paramount, which therefore made Paramount its fiduciary. Marathon also
contended that a fiduciary duty arose from the fact that it entrusted its money with
Paramount and gave Paramount full control over the use of those funds. According to
Marathon, Paramount breached its fiduciary duty in several ways: By failing to catch the
box office bonus drafting error in Jones‟s contract; by not notifying Marathon once
Paramount learned of the error, even throughout the arbitration with Jones; by rejecting
Jones‟s $3 million settlement offer; by not pursuing a legal malpractice claim against
another lawyer who worked on the Jones compensation agreement; and by not disclosing
in its accounting statement why it had deducted the sum of money that Marathon later
learned was attributable to the drafting error in the Jones contract.
The trial court never reached those issues, however, finding instead that, under
New York law, the investment agreement‟s disclaimers of fiduciary duty were effective
because the agreement did not operate to create a joint venture. The trial court later
granted Paramount‟s posttrial motion for attorney‟s fees, awarding it more than $690,000.
DISCUSSION
1. New York Law Applied to Interpretation of the Investment Agreement
The investment agreement stated that “THE TERMS OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
WITHIN, AND TO BE PERFORMED WITHIN, SUCH STATE, EXCLUDING
CHOICE OF LAW PRINCIPLES OF SUCH STATE THAT WOULD REQUIRE THE
APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN NEW
7
YORK.”5 Pursuant to this provision, the trial court applied New York law when
construing that agreement. Marathon contends the trial court erred by doing so.
Marathon‟s primary argument is based on the applicability of Nedlloyd Lines B.V.
v. Superior Court (1992) 3 Cal.4th 459 (Nedlloyd). The Nedlloyd court considered a
choice of law provision in a stock purchase agreement, which stated, “This agreement
shall be governed by and construed in accordance with Hong Kong law and each party
hereby irrevocably submits to the non-exclusive jurisdiction and service of process of the
Hong Kong courts.” (Id. at p. 463.) The Supreme Court rejected a claim that the
provision did not apply to a cause of action for breach of fiduciary duty on the theory that
such a claim was independent of the shareholders‟ agreement and outside the intended
scope of the clause. The Supreme Court applied Hong Kong law. Marathon contends
that Nedlloyd does not apply to its fiduciary duty claim because the choice of law
provision in the investment agreement with Paramount –stating that “the terms of this
agreement” would be construed under New York law – is narrower than the one at issue
in Nedlloyd – which stated that “this agreement” (not “the terms of this agreement”)
would be construed under another forum‟s law. We disagree.6
Nedlloyd held that “[w]hen two sophisticated, commercial entities agree to a
choice-of-law clause like the one in this case, the most reasonable interpretation of their
actions is that they intended for the clause to apply to all causes of action arising from or
related to their contract.” (Nedlloyd, supra, 3 Cal.4th at p. 468.) In reaching this
conclusion, the Nedlloyd court focused on the provision‟s statement that the agreement
would be “governed by” Hong Kong law. That phrase “is a broad one signifying a
relationship of absolute direction, control, and restraint. Thus, the clause reflects the
parties‟ clear contemplation that „the agreement‟ is to be completely and absolutely
5 The agreement also provided for the nonexclusive jurisdiction of the New York
state courts or of the United States District Court for the Southern District of New York.
6 We apply California law because the parties have never addressed the applicable
New York law and have instead relied solely on the law of California. (Nedlloyd, supra,
3 Cal.4th at p. 469, fn. 7.)
8
controlled by Hong Kong law. No exceptions are provided.” (Id. at p. 469.) Because the
defendant‟s alleged fiduciary duties could arise and exist only because of the parties‟
agreement, Hong Kong law must govern the legal duties “created by or emanating from”
that agreement in order to completely control the agreement of the parties. (Ibid.)
This conclusion “comports with common sense and commercial reality,” the
Nedlloyd court held, because no “rational businessperson[] attempting to provide by
contract for an efficient and business-like resolution of possible future disputes, would
intend that the laws of multiple jurisdictions would apply to a single controversy having
its origin in a single, contract-based relationship.” (Nedlloyd, supra, 3 Cal.4th at p. 469.)
We see no meaningful difference between the choice-of-law provision at issue
here and the one at issue in Nedlloyd. Construing “this agreement” necessarily includes
construing its terms. Most important, the Nedlloyd court focused on the phrase
“governed by,” which is also present in the investment agreement with Paramount. As in
Nedlloyd, the agreement was made by sophisticated commercial entities. In order to
govern their agreement, New York law must apply to Marathon‟s breach of fiduciary
duty claim, which is both created by and emanates from the investment agreement. 7
Marathon challenges the choice-of-law ruling on two other grounds that appear to
stem from Nedlloyd. The Nedlloyd court established certain guidelines for trial courts to
follow when determining whether a contractual choice of law provision is enforceable.
The court must first determine whether the chosen state has a substantial relationship to
the parties or their transaction, or whether there is any other reasonable basis for the
parties‟ choice of law. If neither test is met, the court need not enforce the choice of law
provision. (Nedlloyd, supra, 3 Cal.4th at p. 466.) If either test is met, however, the court
must then determine whether the chosen state‟s law is contrary to a fundamental policy of
California. If no such conflict exists, then the court shall enforce the choice of law
provision. If there is a fundamental conflict with California law, the court must then
7 Marathon relies on the dissent in Nedlloyd to undermine its rationale. Even a
strongly worded dissent such as the one in Nedlloyd does not negate our duty to abide by
the majority ruling.
9
determine whether California has a materially greater interest than the chosen state in the
determination of the particular issue. The choice of law provision will not be enforced if
California has such an interest. (Ibid.)
Marathon contends that the New York choice of law provision is not enforceable
because: (1) Paramount has its principal place of business in California and the actions
giving rise to the complaint took place in California; and (2) Marathon filed suit in
California and is therefore entitled to the application of California law “as a matter of
California public policy.” Although Marathon does not cite Nedlloyd or any other
authority to back up these contentions, we view them as an attempt to assert Nedlloyd’s
tests concerning whether there is a substantial relationship between the parties or their
transaction to New York law and whether the choice-of-law provision is contrary to a
fundamental policy of California law.
As to the first, Marathon‟s principal place of business is in New York state, as is
the parent company of Paramount, Viacom, Inc. Thus, there is a substantial relationship
between the parties and New York. As to the second, Marathon never invokes the term
“fundamental” when mentioning California policy, and never identifies such a policy.
We therefore deem that issue waived. (Landry v. Berryessa Union School Dist. (1995)
39 Cal.App.4th 691, 699-700.) Accordingly, we conclude that the trial court did not err
by applying New York law to this dispute.
2. Paramount Was Not a Fiduciary
Focusing primarily on California law, Marathon contends that Paramount was its
fiduciary because the investment agreement effectively created a joint venture that
overcame the contractual disclaimers of fiduciary duty, or because Paramount‟s exclusive
control over Marathon‟s funds gave rise to such a duty, where Marathon reposed trust
and confidence in Paramount. As previously noted, however, New York law applies to
this dispute, making California law inapplicable. Because the parties agree that there was
no disputed evidence concerning the proper interpretation of the investment agreement,
10
we exercise our independent review when construing its provisions. (Ditmars-31 Street
Development Corp. v. Punia (1962) 17 A.D.2d 357, 361 [235 N.Y.S.2d 796].)
The language of a contract must be given a practical interpretation in order to meet
the reasonable expectations of the parties. (Petracca v. Petracca (N.Y.A.D. 2003) 756
N.Y.S.2d 587 [302 A.D.2d 576, 576-577].) The contract must be read as a whole and, if
possible, interpreted to give effect to its general purpose. Particular words should not be
isolated from the whole, but must be considered in context. (William C. Atwater & Co. v.
Panama R. Co. (N.Y. 1927) 264 N.Y. 519, 524 [159 N.E. 418, 419].) The court‟s role is
to ascertain the parties‟ intent at the time they entered the contract, which, if it is not
ambiguous, may be determined from the plain language of their agreement. (Evans v.
Famous Music Corp. (Ct. App. 2004) 1 N.Y.3d 452, 458 [775 N.Y.S.2d 757].)
Under New York law, joint venturers are fiduciaries. (Solutia, Inc. v. FMC Corp.
(S.D.N.Y. 2006) 456 F.Supp.2d 429, 442-443.) There are five requirements to the
formation of a joint venture in New York: (1) two or more persons must enter into a
specific agreement to carry on an enterprise for profit; (2) their agreement must evidence
their intent to be joint venturers; (3) each must contribute property, financing, skill,
knowledge, or effort; (4) each must have some degree of control over the venture; and
(5) there must be a provision for the sharing of both profits and losses. (Id. at p. 445.)8
Nothing in the investment agreement shows the intent to create a joint venture. To the
contrary, the agreement states in several places that the parties disclaimed any fiduciary
duties or agency, trustee, and partnership relationships. The investment agreement also
8 California law is substantially the same. The existence of a joint venture depends
on the intention of the parties and requires a joint interest in a common business, an
understanding that profits and losses will be shared, and a right to joint control.
(580 Folsom Associates v. Prometheus Development Co. (1990) 223 Cal.App.3d 1, 15-
16.)
11
expressly deprives Marathon of any control whatsoever concerning the covered pictures.
Therefore no joint venture was created under New York law.9
Any other potential bases for the existence of a fiduciary duty are negated by the
investment agreement‟s express disclaimers that no such relationship was created. Under
New York law, explicit and unambiguous disclaimers of a fiduciary relationship are
enforceable. (BNP Paribas Mortg. Corp. v. Bank of America (S.D.N.Y. 2012)
866 F.Supp.2d 257, 269; Valentini v. Citigroup, Inc. (S.D.N.Y. 2011) 837 F.Supp.2d 304,
326; Levine v. Murray Hill Manor Co. (A.D. 1 Dept. 1988) 143 A.D.2d 298, 300 [532
N.Y.S.2d 130]; Cathy Daniels, Ltd. v. Weingast (2012) 91 A.D.3d 431, 433 [936
N.Y.S.2d 44].) Parties in nonfiduciary relationships are free to contractually waive
prospective fiduciary duties to one another. (Cooper v. Parsky (2nd Cir. 1998) 140 F.3d
433, 439 [agreement by which shareholders gave corporate directors right to cast proxy
votes of their shares; express disclaimer of fiduciary duty and limitation of liability to
gross negligence or willful misconduct enforced]; Solutia, Inc. v. FMC Corp., supra,
456 F.Supp.2d at pp. 446-447.)10
Marathon relies on a pair of older New York decisions to show that Paramount
was its fiduciary – Martin v. Peyton (N.Y. 1927) 246 N.Y. 213 [158 N.E. 77] (Martin)
and Rubenstein v. Small (N.Y.A.D. 1947) 273 A.D. 102 [75 N.Y.S.2d 483] (Rubenstein).
Neither alters our conclusion.
9 Paramount contends there was no true sharing of profits and losses because
Paramount paid for all the distribution costs, which greatly exceeded the production costs
of the covered pictures, and because Marathon was not required to pay more than the
investment price for any covered picture even if the film lost money. Based on our
holding that a joint venture was not created because the agreement does not evidence
such an intent and because Marathon had no control over the enterprise, we need not
reach that issue.
10 The flip side of these decisions is found in N.E. General Corp. v. Wellington Adv.
(N.Y. 1993) 82 N.Y.2d 158 [624 N.E.2d 129]. In that case, New York‟s highest state
court held that although parties are free to contract for the existence of fiduciary duties
among themselves, unless the relationship between the parties is fiduciary as a matter of
law, the courts should not impose such duties if the parties have not done so themselves.
(Id. at pp. 131-133.)
12
At issue in Martin was whether the trial court properly sustained demurrers to a
complaint on the ground that the defendants were not partners of a brokerage firm to
which they had loaned money. In affirming that order, the Martin court noted that the
loan agreement which was the source of the alleged partnership disclaimed any such
relationship. However, disclaimers of that type might be a sham, the court observed, and
the true nature of the parties‟ business relationship was to be determined by the terms and
effect of their agreement. (Martin, supra, 158 N.E. 77 at p. 78.) Even though the loan
agreement imposed a complex of arrangements giving the defendants substantial control
over the firm and its principals, the court concluded that no partnership had been formed.
(Id. at pp. 79-80.)
The plaintiff in Rubenstein loaned money to the producer of a vaudeville show,
with repayment to come from unused loans, advances, and the excess of gross receipts
over production costs and operating expenses, if any. Instead of interest, the plaintiff
would be paid 10 percent of the net receipts. The defendant was supposed to furnish
regular detailed financial statements showing costs, expenditures, and receipts. The
agreement indicated that other parties might loan money to the production on the same
terms. It also stated that the parties were not partners, joint venturers, or principal and
agent. When the defendant refused to pay back any of the loan funds or to provide an
accounting, the plaintiff brought an equitable action for an accounting. The trial court
sustained the defendant‟s demurrer on the ground that the plaintiff had an adequate
remedy at law.
The Rubenstein court reversed. First, in reliance on Martin, supra, 158 N.E. 77, it
held that the disclaimer of a partnership, joint venture, or agency relationship was not
determinative, leaving it free to examine the true nature of the parties‟ relationship.
(Rubenstein, supra, 75 N.Y.S.2d at p. 485.) Next, it held that the agreement did not
create a true debtor-creditor relationship because the possibility that the plaintiff might
not be repaid meant he had not made a true loan of money. (Id. at pp. 485-486.) Instead,
a fiduciary relationship respecting the use of plaintiff‟s funds was created, placing on
13
defendant the duty to account for his use of the funds. Therefore, a cause of action for
the equitable remedy of accounting had been pled. (Id. at p. 486.)
From Martin, supra, 158 N.E. 77, and Rubenstein, supra, 75 N.Y.S.2d 483, we
derive the rule that despite any contractual disclaimers to the contrary, fiduciary
relationships such as that of partners or joint venturers may be created by the operative
effect of the parties‟ agreement. As we have already held, however, nothing in the
investment agreement here gave rise to a joint venture under New York law.
The investment agreement here spelled out the nature and effect of Marathon‟s
investment in the various covered pictures. Those terms also supplied a formula by
which Marathon might receive a return on its investments, along with Paramount‟s
express duty to provide an accounting. Those same terms also clearly and explicitly
stated that no fiduciary duties were created by the investment agreement.11 Based on this,
we conclude that neither Martin nor Rubenstein is applicable, and that Marathon‟s
express waiver of any fiduciary duties by Paramount was effective.12
11 At oral argument, Marathon relied on our recent decision in Cleveland v. Johnson
(2012) 209 Cal.App.4th 1315, where we held there was substantial evidence to support a
jury‟s verdict that a business promoter owed, and breached, his fiduciary duty to
investors by using their money to fund a successor business after the one in which they
invested had failed. We reject Marathon‟s reliance on this decision for several reasons.
First, we are applying New York law, not California law. Second, the agreement did not
include the disclaimers of fiduciary duty found here or in the New York decisions we
have cited. Third, the agreement in Cleveland was not between sophisticated entities
represented by counsel, and did not include the disclaimers of fiduciary duty present here
or in decisions like City of Hope National Medical Center v. Genentech, Inc. (2008)
43 Cal.4th 375, 387, as we noted in Cleveland. Fourth, in Cleveland, we held that the
relationship imposed fiduciary duties as a matter of law because for all intents and
purposes, the plaintiffs were stockholders, as to whom promoters owe fiduciary duties.
(Cleveland at pp. 1342-1343.) There is no promoter-stockholder relationship here.
12 Because we affirm the judgment on the ground no fiduciary duty existed, we need
not reach Marathon‟s contentions that Paramount in fact breached its fiduciary duties,
that Marathon is entitled as a matter of law to judgment in the sum of more than
$3.6 million, and that we should remand the matter for a new trial as to punitive damages.
14
3. Marathon Was Not Wrongfully Deprived of Its Right to a Jury Trial
Paramount brought a pretrial motion to have this action decided at a court trial, not
by a jury, on two grounds: (1) the breach of fiduciary duty claim was equitable in
nature, meaning no jury trial was warranted; and (2) no jury trial was required because
there would be no extrinsic, disputed evidence concerning the interpretation of the
investment agreement, making the matter one for the court, not a jury. The trial court
granted the motion on the first ground. Marathon contends the trial court erred.13
Rather than parse more than 100 years of jurisprudence concerning the nature of
actions in equity, law, or chancery, we choose to affirm on the alternative ground for
Paramount‟s bench trial motion: that no jury was required because at issue was the
interpretation of a contract based solely on the contract terms and certain undisputed
background facts, which are questions of law for a court to decide. In such a case, there
is no right to have a jury resolve the dispute. (Garcia v. Truck Insurance Exchange
(1984) 36 Cal.3d 426, 439; Oceanside 84, Ltd. v. Fidelity Federal Bank (1997)
56 Cal.App.4th 1441, 1451.) Because that was the case here, we agree with Paramount
that Marathon was not entitled to a jury trial. Furthermore, Marathon did not address this
issue in either its opening appellate brief, or, after respondent‟s brief did so, in appellant‟s
reply brief. As a result, we affirm the trial court‟s order on the alternative ground that the
issue has been waived. (Landry v. Berryessa Union School Dist., supra, 39 Cal.App.4th
at pp. 699-700.)
4. Attorney’s Fees
The investment agreement provided that costs and reasonable attorney‟s fees
would be awarded to the prevailing party in “any action, suit, or other proceeding [that] is
instituted concerning or arising out of this agreement.” Marathon challenges the trial
13 On September 28, 2011, we summarily denied Marathon‟s writ petition
challenging the trial court‟s bench trial order. Our summary denial was not law of the
case and did not preclude us from considering the issue once again. (Frisk v. Superior
Court (2011) 200 Cal.App.4th 402, 415.)
15
court‟s order awarding Paramount attorney‟s fees of more than $690,000 on two grounds:
(1) the attorney‟s fee provision in the investment agreement was not broad enough to
cover the tort claim for breach of fiduciary duty; and (2) the amount awarded was
excessive. We take each in turn.
Marathon relies on Kangarlou v. Progressive Title Co., Inc. (2005)
128 Cal.App.4th 1174, for the proposition that tort claims such as breach of fiduciary
duty do not enforce a contract and are not considered actions on a contract for purposes
of the reciprocal attorney‟s fee provision found at Civil Code section 1717.
The plaintiff in Kangarlou was a home buyer who sued her real estate agent, real
estate broker, and escrow company for breach of fiduciary duty in several respects:
failing to obtain evidence that a broker was regularly licensed before delivering
compensation to him, communicating to her facts learned about the escrow instructions
or the broker‟s license, exercising reasonable skill and diligence in carrying out the
escrow instructions, and strictly complying with her written instructions concerning the
delivery or money or documents at the close of escrow. The jury found for the plaintiff
and the trial court awarded her attorney‟s fees under a provision in the escrow agreement
which provided that if the plaintiff failed to pay fees or expenses due under the escrow
instructions, she agreed “to pay the attorney‟s fees and costs incurred to collect such fees
or expenses.”
Under Civil Code section 1717, that one-sided fee provision gave the plaintiff the
reciprocal right to recover fees in actions on, or to enforce, the contract. Although tort
claims do not ordinarily “enforce” contract terms, some tort claims may also constitute a
breach of contract as well. (Kangarlou, supra, 128 Cal.App.4th at p. 1178.) Because the
fiduciary duties which underlay the plaintiff‟s claim arose out her contract, the court held
that her tort claim was on the contract for purposes of awarding attorney‟s fees under
Civil Code section 1717. (Kangarlou, at p. 1179.)
As we read Kangarlou, it actually undercuts Marathon‟s contention. Marathon‟s
fiduciary duty claim against Paramount was based on duties that arose under the contract:
to account for and pay all sums owed pursuant to the investment agreement‟s provisions.
16
Regardless, we are reviewing a far broader provision than the one in Kangarlou. Here,
the parties agreed to pay fees to the party who prevailed on actions arising out of their
contract. Such broadly worded provisions are construed to encompass tort claims
(Santisas v. Goodin (1998) 17 Cal.4th 599, 607) and we therefore reject Marathon‟s
contention.
As for the size of the award, Paramount requested fees of $768,948.40, but the
trial court, after reviewing the billing records submitted in support of the fee motion,
determined that some of the time billed was duplicative and excessive. The trial court
therefore reduced the award to $690,548.80. The trial court also found that the hourly
rates being charged – ranging from $192 to $587 for lawyers and $60 to $150 for
paralegals – was reasonable. Marathon contends the fee award is still too high because it
represents 1,974 hours of lawyers‟ time, an amount that Marathon believes is excessive
and unreasonable.14
We review the trial court‟s order under the abuse of discretion standard, keeping in
mind that the experienced trial judge is in the best position to determine the value of legal
services rendered in his court. (Graciano v. Robinson Ford Sales, Inc. (2006)
144 Cal.App.4th 140, 148-149.) We make all reasonable presumptions in favor of the
trial court‟s order where the record is silent, and Marathon has the burden of
affirmatively showing error, along with a record adequate to do so. (Ketchum v. Moses
(2001) 24 Cal.4th 1122, 1140-1141.) Marathon does not point to a single instance where
the billing records show an unreasonable, unnecessary, or duplicative charge. As a result,
it has failed to carry its burden of affirmatively showing error and, under the applicable
standard of review, we defer to the trial court‟s reasoned assessment of the matter.
14 On appeal, Marathon does not challenge the hourly rates claimed by Paramount‟s
lawyers.
17
DISPOSITION
The judgment and the postjudgment order awarding Paramount its attorney‟s fees
are affirmed. Respondent Paramount shall recover its appellate costs.
RUBIN, J.
WE CONCUR:
BIGELOW, P. J.
GRIMES, J.
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