1

2
3
4

Olympic Partners, LLP

919 Albany Street
Los Angeles, CA 90015
213-787-5656
dolympic@olympic.com
Attorney for Defendants
Westcoast Productions, LLC and Reality TV Network, Inc.

5
6

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

7
8
9

LILLY RAMOS,

10

Plaintiff,

11

vs.

12
13
14

WESTCOAST PRODUCTIONS, LLC;

REALITY TV NETWORK, INC.

15
16

Defendants.

17
18
19

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

Case No. BC501234

DEFENDANTS POST-TRIAL
MEMORANDUM OF POINTS AND
AUTHORITIES
Date:
Time:
Location:

March 24, 2015

__6__ p.m.
__TBD_______

TO PLAINTIFF AND HER ATTORNEY OF RECORD:

20

Defendants WESTCOAST PRODUCTIONS, LLC AND REALITY TV

21
22

NETWORK, INC. submit this Post-Trial Memorandum of Points and Authorities

23

pursuant to this Courts Order dated January 9, 2015.

24

Date: February 22, 2015

25
26

By:

Henry Cuevas______________
Attorney for Defendants
Westcoast Productions, LLC and
Reality TV Network, Inc.

27
28

TABLE OF CONTENTS
I.
II.
III.

INTRODUCTION.1
STATEMENT OF FACTS2
THE ROYALTY PROVISION IS FAIR AND APPROPRIATE AND THEREFORE
IS NOT UNCONSCIONABLE UNDER CALIFORNIA CIVIL CODE 1670.5..5

1. Ramos Had Equal Bargaining Power With Westcoast Productions Because

She Was A University Educated Entrepreneur Operating Her Company At
A Profit At The Time She Signed The Agreement..6

1
2
3

2. Ramos Made A Meaningful Choice By Agreeing To The Royalty

Provision Because Her Choice Was A Voluntary Business Decision Made
Free Of Any Compulsion.7

4
5

B. The Royalty Provision Is Fair And Appropriate In Light Of The Risks Incurred By
Both Parties And Therefore Is Not Substantively Unconscionable...8

6
7

1. A Two Percent Royalty Provision In Exchange For Westcoast Productions

Taking All Of The Risk In Producing The Show Is Fair And Appropriate
And Therefore Does Not Shock The Conscience9

8
9

2. Even Assuming A Standard Of Reasonableness, A Royalty Provision

Asking For Two Cents On The Dollar When Ramos Expects To Make
Millions In The Near Future Is Reasonable...11

10
11
12

IV.

CONCLUSION............................................................................................................12

13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Date: February 22, 2015

By:

Henry Cuevas______________
Attorney for Defendants
Westcoast Productions, LLC and
Reality TV Network, Inc.

MEMORANDUM OF POINTS AND AUTHORITIES

1
2

I.

3
4
5
6
7

INTRODUCTION
Plaintiff Lilly Ramos (Ramos) showcased her product on Defendants (Westcoast

Productions) reality TV show (Big Idea), but when it came time for Ramos to comply with a
two percent royalty provision, things became too real. Westcoast Productions asserts royalty
provision of Big Idea Contestant Release and Agreement (the Agreement) is not

unconscionable under California Civil Code 1670.5. The court is urged to hold for Westcoast

Productions.

10

Ramos was a university educated entrepreneur who had the business acumen to start her

11
12

own company (Fangear) and the business efficacy to invent and patent her own product (the

13

Product) at the time she signed the Agreement to appear on Big Idea. In addition, Ramos was

14

under no compulsion to sign the Agreement because at the time of her signing, Fangear was

15

operating at a profit. Ramos had equal bargaining power when signing the agreement and made a

16

meaningful choice by agreeing to the royalty provision. Thus, the royalty provision is not

17
18

procedurally unconscionable.
Moreover, Westcoast Productions gifted Ramos with the opportunity to showcase her

19
20
21
22

Product on Big Idea. The show provided the Product with exposure to a large audience and
access to ready investors. Furthermore, at its sole discretion and in support of emerging
businesses, Westcoast Productions did not enforce the fifteen-year royalty provision for five

23
24

years after Ramoss appearance on the show. A royalty provision asking for two cents on the

25

dollar now that Ramos expects to make millions does not shock the conscience and is therefore

26

not substantively unconscionable.

27
28

II.

STATEMENT OF FACTS
Ramos began making her product in 2004 during her sophomore year at U.S.C.

Dissatisfied with her education and wanting to focus on her business, she left college, moved in
with her parents, and took a job at a coffee house. Ramos was promoted twice while working at

In 2006 Ramos auditioned for the opportunity to appear on the first season of Big Idea.

The show was the original creation of Robert Gorelick (Gorelick), founder of Westcoast

Productions. Big Idea presented ambitious entrepreneurs with the opportunity to showcase their

4
5
6
7
8
9
10

products in front of a large audience and with access to ready investors. Hundreds of applicants
competed for an opportunity to appear on the show by giving a one minute pitch to a group of
mock investors. Thirty-six finalists were chosen to appear along with twenty backups in case a
finalist was unable to appear on the show. Ramos was initially selected as a backup.
A week before taping was to begin, a finalist dropped out. Gorelick contacted Ramos on
Thursday November 2 and asked her whether she wanted to appear on the show. The following

11
12

day Gorelick emailed Ramos a contract and informed her that it was required to be returned by

13

5pm the following Tuesday if she wanted to appear on the show. Gorelick also provided his

14

number in case Ramos had any questions.

15
16

On Monday November 6 Ramos spoke to Gorelick and requested that her date of
appearance on the show be changed from November 9 to November 10. Gorelick accommodated

17
18

her request and sent over a new agreement. Ramos also mentioned that she had reservations

19

about the royalty provision in the agreement but never requested that Gorelick modify the

20

provision. Gorelick advised Ramos to carefully consider the issue and made a good faith offer

21
22

for her to consult with a lawyer if she wished. However, Gorelick reminded Ramos that if she
wished to appear on Big Idea she needed to return the agreement by 5pm on Tuesday November

23
24
25
26
27

7. It was logistically impossible to give Ramos any more time to review the agreement because
the entire season was scheduled to be taped between November 8 and November 10.
Any reservations Ramos may have had about the royalty provision were overcome by her
enthusiasm to appear on the show. Ramos knew the show could expose her product to millions of

28

viewers. She knew that two previous contestants on the shows pilot had gone on to success. She
also appreciated the fact that she had been selected and knew there was no guarantee that she
would be chosen to participate the following year. Furthermore, Ramos was excited and had
already told her friends that she was going to be on the show. Ramos decided that this was [her]

1
2
3
4
5
6
7

faith offer for her to consult with a lawyer, Ramos chose not to before signing the agreement
because she could not find one at a price she deemed reasonable. Ramos Test. 6:11.
While on the show, Ramos had disagreements with the investors about her product and
failed to secure an investment. Her product continued to receive publicity for years after the
shows initial airing through reruns and video On Demand. Though Westcoast Productions was
entitled to two percent of Fangears profit, as a company policy Westcoast Productions did not

exercise its right to collect the royalty for five years until the royalty percentage equaled or

exceeded one thousand dollars. Westcoast Productions maintained this policy at its sole

10

discretion as a means of encouraging emerging businesses.

11
12

In 2011 Ramos met a business woman at a college football game who recognized both

13

Ramos and her Product from their appearance on Big Idea. Initial conversation about Ramoss

14

appearance on the show led to subsequent business meetings that eventually resulted in a three

15

hundred and fifty thousand dollar investment in Ramoss company. In 2012 Fangear made five

16

hundred thousand dollars in profit, and in 2013 the company doubled its profit. Ramos projects

17
18

her profit in the near future to be in the millions. After receiving the benefit of the shows

19

publicity and after complying with the agreement for five consecutive years by reporting her

20

companys earnings, Ramos now believes she is not obligated to pay two percent of her royalties

21
22
23
24
25
26
27
28

to Westcoast Productions.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18

III.

THE ROYALTY PROVISION IS FAIR AND APPROPRIATE AND

THEREFORE IS NOT UNCONSCIONABLE UNDER CALIFORNIA CIVIL
CODE 1670.5
If the court as a matter of law finds [a] contract or any clause of [a] contract to

have been unconscionable at the time it was made the court may refuse to enforce the
contract Cal. Civ. Code 1670.5 (West 2014). The statute does not provide a
definition of unconscionability, but courts explain it as consisting of two elements:
procedural unconscionability and substantive unconscionability. A & M Produce Co. v.
FMC Corp., 135 Cal. App. 3d 473 (1982).

19
20

Ramos was an ambitious university educated entrepreneur who made a calculated

21

business decision when she agreed to the royalty provision. By signing the agreement,

22

Ramos was guaranteed exposure to a large audience and access to ready investors while

23
24
25
26
27
28

Westcoast Productions was guaranteed nothing after having made a substantial financial
investment in the shows production. A royalty provision asking for two cents on the
dollar where Ramos expects her profit to be in the millions is fair and appropriate. Thus,
the royalty provision is neither procedurally nor substantively unconscionable.
A. Ramoss Agreement To The Royalty Provision Was A Voluntary Business
Decision Made Free Of Any Compulsion, Thus The Royalty Provision Is Not
Oppressive And Therefore Is Not Procedurally Unconscionable
Procedural unconscionability consists of oppression and surprise. Id. at 487.
Oppression is defined as an inequality of bargaining power which results in no real

signed an agreement. Higgins v. Superior Court, 140 Cal. App. 4th 1238 (2006); Carboni v.

Arropside, 2 Cal. App. 4th 76 (1991); see also Ellis v. McKinnon Broad Co., 18 Cal. App. 4th

1796 (1993) (finding oppression where employee had no choice but to sign an employment

4
5

agreement after having relocated across the state).

1. Ramos Had Equal Bargaining Power With Westcoast Productions Because She
Was A University Educated Entrepreneur Operating Her Company At A Profit
At The Time She Signed The Agreement

Ramos held equal bargaining power when she signed the Agreement. A party holds equal

9
10

bargaining power when they have the ability to engage in real negotiation that results in a
meaningful choice. American Software, Inc. v. Ali, 46 Cal. App. 4th 1386,1392 (1996). In

11
12

American Software, Inc. the court found that an employee maintained equal bargaining power

13

with an employer when she signed an employment agreement. The court reasoned that the

14

plaintiff had the benefit of consulting with a lawyer prior to signing the agreement and that she

15

was able to negotiate for more favorable terms. Additionally, the court reasoned that the plaintiff

16

was knowledgeable with such employment agreements as a result of her previous employment.

17
18

Similarly, Ramos had the opportunity to consult with a lawyer prior to signing the

19

Agreement but chose not to as a result of not finding one at a price she deemed reasonable.

20

Ramos Test. 6:11. Like the plaintiff in American Software, Inc., Ramos was able to change the

21
22

terms of the agreement by modifying her date and time of appearance. Ramos was a university
educated entrepreneur who had the intellect and ambition to create and patent her own product.

23
24

She was also operating her company at a profit at the time she signed the Agreement to appear on

25

the show. Thus, Ramos held equal bargaining power when she signed the Agreement to appear

26

on Big Idea.

27

This case is distinguishable from other cases where the court has found oppression as a

28

result of unequal bargaining power. Higgins v. Superior Court, 140 Cal. App. 4th 1238 (2006);
Carboni v. Arrospide, 2 Cal. App. 4th 76 (1991). Ramos was not an orphan in need of shelter nor
was she under any pressure to pay for medical expenses at the time she signed the Agreement.
Ramos was not an unsophisticated party whose vulnerabilitymade [her] attractive to

1
2
3
4
5
6
7

to appear on Big Idea. Thus, Ramos held equal bargaining power when she signed the
Agreement.
2. Ramos Made A Meaningful Choice By Agreeing To The Royalty Provision Because
Her Choice Was A Voluntary Business Decision Made Free Of Any Compulsion
Ramoss agreement to the royalty provision was a meaningful choice she made free of
any compulsion. A party makes a meaningful choice when their actions are made without being
under any compulsion or immediate pressure to act. Morris v. Redwood Empire Bancorp,

8
9

128 Cal. App. 4th 1305 (2005). In Morris, the court held that a one hundred and fifty dollar

10

termination fee provision in a merchant bank account agreement was not unconscionable. The

11

plaintiff argued the provision was unconscionable because the termination fee imposed a cost

12

that was six times the monthly account processing fee on the plaintiff. The court reasoned that

13

the termination fee was not oppressive because the plaintiff was under no compulsion to open a

14
15

merchant bank account and because he had the option to bargain with other companies for more

16

favorable terms. The court reasoned that the contract provision was not imposed upon the

17

plaintiff because the plaintiff was on a business venture and not in pursuit of lifes

18

necessities. Id. at 1321.

19

Similarly, Ramos was under no compulsion or immediate pressure to sign the agreement

20
21

with Westcoast Productions. Ramos held a secure job that promoted her prior to hear appearance

22

on Big Idea. Furthermore, her company was operating at a profit prior to her appearance on the

23

show. Ramoss agreement to the royalty provision was a meaningful choice she made in order to

24

benefit from the shows publicity and access to investors. Clearly, Ramos was executing an

25
26
27
28

ambition and was not in pursuit of lifes necessities. Id. at 1321.

This case is distinguishable from Armendariz v. Found. Health Psychcare Servs., Inc., 24
Cal. 4th 83 (2000) where the court held that a provision in an employment agreement binding
only the employee to arbitration was oppressive and consequently unconscionable. Ramos was
employed at the time she signed the Agreement and was under no compulsion to find
employment. Ramos was not subjected to a contract of adhesion because she was able to change
the terms of the agreement by modifying her date and time of appearance on the show.

1
2
3
4
5

Westcoast Productions had previously modified the royalty provision upon receiving input from
contestants. Thus, Ramos made a meaningful choice when she decided to sign the Agreement.
B. The Royalty Provision Is Fair And Appropriate In Light Of The Risks Incurred By
Both Parties And Therefore Is Not Substantively Unconscionable
To establish that a contract shocks the conscience a plaintiff must prove [an] inequality

amounting to fraud [which] must be so strong and manifest as to shock the conscience and

confound the judgment of any man of common sense. California Grocers Assn, Inc., v. Bank of

America, 22 Cal. App. 4th 205 (1994). Under this standard, a contract is unenforceable only

9
10
11
12
13
14

when [n]o man in his senses and not under delusion would make on the one hand, and as no
honest and fair man would accept on the other. Id. at 215.
Defendant urges the court to adopt the shock the conscience standard of substantive
unconscionability because California Civil Code 1670.5 does not define unconscionability, and
because the standard of reasonableness is [a]n amorphous standardfar too subjective to

15
16

provide adequate guidance. Id. at 215; See also American Software, Inc., at 1392 (stating that

17

unconscionability is a nebulous concept and inherently subjective); See also Morris at 1323

18

(stating that basing an unconscionability determination on the reasonableness of a contract

19

provision would inject an inappropriate level of judicial subjectivity into the analysis); Id. at

20
21

1317 (stating that the doctrines flexibilitycreates the risk [that] courts may intervene to

22

deprive one contracting party of his or her bargain); Id. at 1318 (stating that not having a

23

definition for unconscionability may sanction arbitrary or unpredictable decisions about what is

24

fair or unfair.).

25
26
27
28

1. A Two Percent Royalty Provision In Exchange For Westcoast Productions Taking All
Of The Risk In Producing The Show Is Fair And Appropriate And Therefore Does Not
Shock The Conscience
A two percent royalty provision for fifteen years simply does not shock the conscience.
To establish that a contract shocks the conscience a plaintiff must prove [an] inequality
amounting to fraud [which] must be so strong and manifest as to shock the conscience and
confound the judgment of any man of common sense. California Grocers Assn. at 215. For
example, in American Software, Inc., the court held a contract clause that withheld the

termination would be withheld. At the same time, the employment agreement guaranteed the

employee a monthly draw worth two-thirds of the employees base income to be subtracted from

earned commissions. The court reasoned that both parties were subject to proportionate risk. The

4
5
6
7
8
9
10

employer risked never recovering the substantial monthly draw if the employee quit before
earning sufficient commissions to cover it. The employee risked forfeiting commissions if clients
remitted thirty days after the employees voluntary termination.
Here, like the clause in American Software, Inc., the two percent royalty provision does
not exact disproportionate risks on the parties. Westcoast Productions took all of the risk in
creating, piloting, funding, and producing Big Idea. This substantial financial investment by

11
12

Westcoast Productions created a platform for Ramos to gain unparalleled exposure to investors

13

and a large audience. In addition, her product continued to receive publicity years after the

14

shows airing through reruns and video On Demand. Thus, Westcoast Productions committed and

15

risked an exorbitant amount of human and creative resources, while Ramos was required only to

16

give a one minute pitch about her product to participate on the show.

17
18

This case is distinguishable from Carboni where the court held an interest rate on a loan

19

ten times the market value given to a distressed home owner to be substantively unconscionable.

20

This case is not about Ramos encumbering her home with multiple deeds of trust to pay off

21
22

medical expenses. This case is about Ramos pursuing an ambition. Where the defendant in
Carboni was struggling to pay for lifes basic necessities, Ramos held steady employment and

23
24

was looking to increase the revenue of her company that was already operating at a profit.

25

Ramos was not in pursuit of lifes necessities, but was on a business venture and under no

26

compulsion to appear on Big Idea. Morris at 1321.

27

Moreover, the provisions term in light of the terms of other contracts does not shock the

28

conscience. Ramos will argue that in 2006 the average term for a royalty sharing provision was
five years and that therefore a term of fifteen years is unconscionable. Caldwell Test. 5:3-4. At
the contracts moment of making in 2006, Big Idea was the only show of its kind. Gorelick Test.
3:6. California Civil Code 1670.5 stipulates that unconscionability is assessed at the time [the

average royalty provision was five years in 2006 for other types of reality TV shows, a fifteen

year term is only three times more than the stated average. In Carboni, substantive

unconscionability was found because the interest rate on the loan was ten times the market value.

4
5
6
7
8
9
10

A two percent royalty provision for fifteen years where Westcoast Productions made substantial
investments and granted Ramos unparalleled exposure simply does not shock the conscience and
therefore is not substantively unconscionable.
2. Even Assuming A Standard Of Reasonableness, A Royalty Provision Asking For Two
Cents On The Dollar When Ramos Expects To Make Millions In The Near Future Is
Reasonable
Even assuming a standard of reasonableness, a fifteen-year term for a two percent royalty

11
12

provision is not substantively unconscionable. This standard has been applied to terms that

13

reallocate the risks of the bargain in an objectively unreasonable or unexpected manner A &

14

M Produce Co. at 488 . Applying this standard in Chretian v. Donald L. Bren Co., 151 Cal. App.

15

3d 385 (1984), the court held an employment termination clause withholding thirty-five percent

16

of a real estate agents commission not to be substantively unconscionable. The employment

17
18

termination clause stipulated that thirty-five percent of the agents commission would be

19

withheld if the agent quit prior to the close of an escrow account pertaining to the agents sale.

20

The court reasoned that the clause did not place a disproportionate amount of risk on the agent

21
22

because the employer had made a greater capital investment in establishing the business. The
court reasoned that the employer had more at stake in selling homes and that the agent had a

23
24
25
26
27

more limited economic interest. Id. at 390. Thus, the court reasoned there was sufficient
justification for the clause and held it was not substantively unconscionable.
Similarly, the royalty provision for fifteen years is fair and appropriate because an
investment in a product may take years before it begins to return a profit. Additionally, even if

28

the shows investors declined to invest in a product at the time of filming, they may have done so
at a later time. Contestants may have also benefited from the shows investors introducing them to
other investors not affiliated with the show. Caldwell Test. 5:13-16. Furthermore, in support of
emerging businesses, Westcoast Productions at its sole discretion only enforced the clause if the

1
2

simply more heavily invested in the production of Big Idea than Ramoss one-time appearance
on the show, and consequently had more at stake. Id. at 390.

3
4
5
6
7

Ramos may cite Armendariz which held that an arbitration clause drafted by an employer
and imposed on the employee was substantively unconscionable. This case is different. In
Armendariz, the court dealt with an arbitration provision of an employment agreement that only
applied to the non-drafting party and was thus concerned with a lack of mutuality. Id at 117. In

this case there is no lack of mutuality because there was a very clear reciprocal benefit to both

parties. Ramos appeared on Big Idea in exchange for two percent of her royalties. By her own

10

admission, Ramos had reservations pertaining to the royalty provision but overcame them

11
12

because of her knowledge that previous contestants had gone on to success. Ramos Test. 4:2-3. If

13

Ramos could reason that the shows exposure would make up for the royalty provision, then the

14

court is urged to do the same and to hold that the provision is not substantively unconscionable.

15

IV.

16

CONCLUSION
Ramos actively pursued an opportunity to appear on Big Idea and knew exactly what she

17
18

was getting when she signed the Agreement. She knew she would receive the benefit of a large

19

audience and access to ready investors. Her decision to sign the agreement was guided by her

20

ambition of further increasing her companys profits.

21
22

We urge the Court to consider the opportunity that Westcoast Productions granted Ramos
by allowing her to appear on Big Idea. We respectfully request that this Court enter judgment in

23
24
25
26
27
28

favor of Westcoast Productions by holding that the royalty provision is not unconscionable under
California Civil Code 1670.5.

Date: February 22, 2015

By:

Henry Cuevas______________
Attorney for Defendants
Westcoast Productions, LLC and
Reality TV Network, Inc.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28