Lust V Animal Logic MSJ Opposition

Case 2:17-cv-00308-JAK-AFM Document 110 Filed 03/26/18 Page 1 of 34 Page ID #:4768
1 Neville L. Johnson (SBN 66329)

Ron Funnell (SBN 209897)
2 Alec Govi (SBN 313243)
3 JOHNSON & JOHNSON LLP
439 North Canon Drive, Suite 200
4 Beverly Hills, California 90210
Telephone: (310) 975-1080
5 Facsimile: (310) 975-1095
Email: njohnson@jjllplaw.com
6 rfunnell@jjllplaw.com
7 agovi@jjllplaw.com
8 Attorneys for Plaintiff/
Counterclaim-Defendant,
9 Jason Lust and Third-Party Defendant
10 SAJ Productions, LLC
UNITED STATES DISTRICT COURT
11
CENTRAL DISTRICT OF CALIFORNIA
12
13 JASON LUST, an individual, Case No.: 17-CV-00308-JAK-AFM
14 Plaintiff, Hon. Judge John A. Kronstadt
15 v. **REDACTED** - PUBLIC
VERSION
16 ANIMAL LOGIC ENTERTAINMENT
US, a California limited liability PLAINTIFF, COUNTERCLAIM-
17 corporation; ZAREH NALBANDIAN, an
individual; and DOES 1 through 20,
DEFENDANT, AND THIRD-PARTY
DEFENDANT’S OPPOSITION TO
18 inclusive, MOTION FOR SUMMARY
JUDGMENT OR, IN THE
19 Defendants. ALTERNATIVE, FOR PARTIAL
SUMMARY JUDGMENT;
20 ANIMAL LOGIC ENTERTAINMENT, MEMORANDUM OF POINTS AND
LLC, a California limited liability AUTHORITIES IN SUPPORT
21 corporation; ANIMAL LOGIC LLC, a THEREOF
California limited liability corporation, and
22 ANIMAL LOGIC ENTERTAINMENT Date: June 18, 2018
PTY LTD, an Australian company,
23 Time: 8:30 a.m.
Counterclaimants, Place: Courtroom 10B
24 First Street Courthouse
v.
25
JASON LUST, an individual,
26
Counterclaim-Defendant.
27
Continues on next Page
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PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

ANIMAL LOGIC ENTERTAINMENT,

1 LLC, a California limited liability
corporation; ANIMAL LOGIC LLC, a
2 California limited liability corporation, and
ANIMAL LOGIC ENTERTAINMENT
3 PTY LTD, an Australian company
4 Third-Party Complainants,
5 v.
6 SAJ PRODUCTIONS, LLC, a California
limited liability company,
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Third-Party Defendant.
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1 TABLE OF CONTENTS
2 MEMORANDUM OF POINTS AND AUTHORITIES ................................................ 1
3 I. INTRODUCTION.................................................................................................... 1
4 II. STATEMENT OF FACTS ...................................................................................... 2
5 A. Background of Jason Lust, Zareh Nalbandian, and Animal Logic ........................ 2
6 B. Lust and Defendants Form a “Producing Partnership” .......................................... 2
7 C. Lust Sets Up a Feature Film Slate for ALE ........................................................... 4
8 D. Peter Rabbit Enters the Development Phase and Lust, Animal Logic, and
9 Columbia Pictures Negotiate a Producer Agreement ............................................ 6
10 E. Animal Logic Proposes Changes to the Peter Rabbit Producer Agreement
Affecting Lust’s Credit Without Informing Him; Lust Signs the Peter Rabbit
11
COE ........................................................................................................................ 6
12
F. Lust, Nalbandian, and Animal Logic Part Ways ................................................... 7
13
G. ALE and Columbia Pictures Finalize the Peter Rabbit Producer Agreement and
14
Reduce Lust’s Credit to Executive Producer ......................................................... 8
15
H. Other COEs ............................................................................................................ 9
16
III. LEGAL DISCUSSION ............................................................................................ 9
17
A. ALE Is Not Entitled to Summary Judgment on Its Contract Claim. ..................... 9
18
B. ALE has Waived the Argument that It Is Not a Party to the Contract................. 13
19
C. Defendants Are Not Entitled to Summary Judgment of Lust’s Breach of Contract
20
Claims. .................................................................................................................. 13
21 D. Defendants Are Not Entitled to Summary Judgment of Lust’s Claim for Breach
22 of the Covenant of Good Faith and Fair Dealing. ................................................ 15
23 E. Defendants Owed and Breached a Fiduciary Duty to Lust.................................. 15
24 F. Defendants Are Not Entitled to Summary Judgment of the Fraud Claims. ........ 20
25 1. Defendants Did Not Seek Summary Judgment of Constructive Fraud. ....... 20
26 2. Misrepresentations Tied to Execution of the COEs Are Actionable. ........... 20
27 3. The Economic Loss Rule is Not a Shield for Fraud...................................... 21
28 4. Lust Can Establish Reasonable Reliance. .....................................................22
i
1 5. Intent Can and Will Be Proved by Circumstantial Evidence. .......................23

2 6. Lust Has Been Damaged by Defendants’ Fraud. ..........................................24
3 G. Lust Still Owns IP Rights on Projects as to Which He Did Not Sign a COE. 24
4 H. Lust Has a Legally Sustainable Claim for an Accounting. .................................. 25
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ii
1 TABLE OF AUTHORITIES
2 Cases
3
4 Addiego v. Hill,
5 238 Cal.App.2d 842 (1965) ...................................................................................... 11
6 Bank of the West v. Valley Nat. Bank of Arizona,
7 41 F.3d 471 (9th Cir. 1994) ...................................................................................... 20
8 Barrett v. Bank of America,
9 183 Cal.App.3d 1362 (1986) .................................................................................... 20
10 Brawthen v. H&R Block, Inc.,

11 28 Cal.App.3d 131 (1972) .................................................................................. 12, 14
12 California and Hawaiian Sugar Co. v. Sun Ship, Inc.,

13 794 F.2d 1433 (9th Cir. 1986) .................................................................................. 20
14 Chou v. University of Chicago,

15 254 F.3d 1347 (Fed. Cir. 2001)........................................................................... 19, 20
16 DuBeck v. California Physicians’ Service,

17 234 Cal.App.4th 1254 (2015) ................................................................................... 12
18 Effects Associates, Inc. v. Cohen,

19 908 F.2d 555 (9th Cir. 1990) .............................................................................. 11, 25
20 Eisenbaum v. Western Energy Resources, Inc.,

21 218 Cal.App.3d 314 (1990) ...................................................................................... 15
22 Erlich v. Menezes,
23 21 Cal.4th 543 (1999) ............................................................................................... 21
24 Fleet v. Bank of America,

25 229 Cal.App.4th 1403 (2014) ................................................................................... 25
26 Frankish v. Federal Mort. Co.,

27 30 Cal.App.2d 700 (1939) ........................................................................................ 12
28
iii
1 Garcia v. Google,
2 786 F.3d 733 (9th Cir. 2015) .................................................................................... 24
3 George v. Automobile Club of Southern California,
4 201 Cal.App.4th 1112 (2011) ................................................................................... 14
5 In re Agricultural Research and Technology Group, Inc.,
6 916 F.2d 528 (9th Cir. 1990) .................................................................................... 23
7 In re Estate of Neilson,
8 57 Cal.2d 733 (1962) ................................................................................................ 17
9 Kent v. First Trust & Savings Bank of Pasadena,
10 101 Cal.App.2d 361 (1950) ................................................................................ 16, 17
11 Krantz v. BT Visual Images, LLC,
12 89 Cal.App.4th 164 (2001) ................................................................................. 17, 18
13 Le Clercq v. Michael,
14 88 Cal.App.2d 700 (1948) ........................................................................................ 12
15 Locke v. Warner Bros.,
16 57 Cal.App.4th 354 (1997) ....................................................................................... 23
17 Main v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
18 67 Cal.App.3d 19 (1977) .......................................................................................... 16
19 Paramount Productions v. Smith,
20 91 F.2d 863 (9th Cir. 1937) ...................................................................................... 24
21 Poe v. Michael Todd Co.,
22 151 F.Supp. 801 (S.D N.Y 1957) ............................................................................. 24
23 Rader v. Thrasher,
24 57 Cal.2d 244 (1962) ................................................................................................ 16
25 Riverisland Cold Storage, Inc. v. Fresno-Madera Productions Credit Association,
26 55 Cal.4th 1169 (2013) ....................................................................................... 22, 23
27
28
iv
1 Robinson Helicopter, Inc. v. Dana Corp.,

2 34 Cal.4th 979 (2004) ............................................................................................... 21
3 Shafer v. City of Los Angeles,
4 237 Cal.App.4th 1250 (2015) ................................................................................... 18
5 Shorter v. Los Angeles Unified School District,
6 2013 WL 6331204 (C.D. Cal. December 4, 2013) ................................................... 13
7 Spray, Gould & Bowes v. Associated Internat. Ins. Co.,
8 71 Cal.App.4th 1260 (1999) ............................................................................... 18, 19
9 Strategic Diversity, Inc. v. Alchemix Corp.,
10 666 F.3d 1197 (9th Cir. 2012) .................................................................................. 13
11 Tamarind Lithography Workshop, Inc. v. Sanders,
12 143 Cal.App.3d 571 & fn. 6 (1983) .......................................................................... 24
13 Tenzer v. Superscope, Inc.,
14 39 Cal.3d 18 (1985) .................................................................................................. 23
15 Teselle v. McLoughlin,
16 173 Cal.App.4th 156 (2009) ..................................................................................... 25
17 Twomey v. Mitchum, Jones & Templeton, Inc.,
18 262 Cal.App.2d 690 (1968) ...................................................................................... 16
19 U.S. v. Milovanovic,
20 678 F.3d 713 (9th Cir. 2012) .................................................................................... 16
21 Union Bank v. Superior Court,
22 31 Cal.App.4th 573 (1995) ....................................................................................... 25
23 Union Bank v. Winnebago Industries, Inc.,
24 528 F.2d 95 (9th Cir. 1975) ...................................................................................... 10
25
Statutes
26
27 17 U.S.C. § 101 ............................................................................................................. 24
28
v
1 17 U.S.C. § 102(a) ........................................................................................................ 24

2 Cal. Civ. Code § 1654 ................................................................................................... 10
3 Cal. Civ. Code § 1573 ................................................................................................... 20
4 Cal. Civ. Code, § 1691(b) ............................................................................................. 12
5 Cal. Civil Code § 1691(a) ............................................................................................. 12
6 Cal. Evid. Code, § 1221 ................................................................................................ 17
7 Other Authorities
8
Australian Law Dictionary (2d. ed. 2013) at
9
http://www.oxfordreference.com/view/10.1093/acref/9780195518511.001.0001/acref-
10
9780195518511-e-0741?rskey=4emrxz&result=738 ................................................... 16
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vi
1 MEMORANDUM OF POINTS AND AUTHORITIES

2 I. INTRODUCTION
3 Only in Hollywood would a production company swindle a creative out of his
4 intellectual property, development work, and producer credit, then terminate his
5 contract, and claim that an incomplete 3-page agreement authorized the fraud.
6 In 2012, Animal Logic (“ALE”), whose history is explained at is explained at
7 Doc. 90 at 2:28-3:12, was an animation house seeking expand its production of
8 animated feature films. In furtherance of this goal, ALE’s Zareh Nalbandian
9 (“Nalbandian”) and Plaintiff Jason Lust (“Lust”) entered into a short form agreement
10 (SFA) under which the parties formed a “producing partnership.” The SFA, inexpertly
11 drafted by non-lawyers, was a recipe for litigation. Lust repeatedly attempted to have
12 ALE provide the promised longform agreement which would fully explain the
13 ambiguous and incomplete terms in the SFA. In particular, Lust was concerned about
14 his credit and attachment rights under the agreement.
15 Defendants led Lust down the garden path – they promised to make Lust an
16 active producer on Peter Rabbit, obtained his intellectual property, and then changed
17 the deal, allowing him to be demoted to an executive producer. Rather than negotiate a
18 longform in good faith and complete the two-year term stated in the SFA (or the five-
19 year term discussed by the parties), Nalbandian terminated the SFA and completely
20 shut Lust out from active production work on the entire ALE/Lust slate of films.
21 Lust sued ALE and Nalbandian for breach of contract, breach of the implied
22 covenant of good faith and fair dealing, breach of fiduciary duty, fraud, declaratory
23 relief and an accounting. As discussed below and in Lust’s separate statement,
24 summary judgment is not appropriate. Not only are there are genuine issues of material
25 fact precluding summary judgment on each issue Defendants raise, Defendants’ motion
26 is simply incorrect on a variety of legal issues. For the reasons stated below, Lust
27 requests that the Court deny Defendants’ motion in its entirety, set a trial date
28 immediately, and require Defendants to answer to a jury for their wrongdoing.

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Case 2:17-cv-00308-JAK-AFM Document 110 Filed 03/26/18 Page 10 of 34 Page ID
#:4777
1 II. STATEMENT OF FACTS

2 A. Background of Jason Lust, Zareh Nalbandian, and Animal Logic
3 Lust received his MFA from the USC. Plaintiff’s Separate Statement of
4 Additional Material Facts (“AF”), ¶ 1. Thereafter, he was a founding and producing
5 partner at Circle of Confusion, where he set up a slate of films as a producer. Id. He
6 was then the executive of the feature film division of the Jim Henson Company for
over six years. Id. He then became an Executive VP at Prana Studios. Id. Throughout
7
his career, Lust both creatively developed projects and worked on business affairs. Id.
8
Prior to founding ALE, Nalbandian worked at a film laboratory and post-
9
production house in Australia where he worked on optical effects. AF ¶ 2. In 1991 he
10
founded ALE in Australia as a digital post-production effects and animation company.
11
Id. Nalbandian received one Producer credit and several Executive Producer credits for
12
ALE’s visual effects services. Id.¶3. ALE did not have extensive experience in
13
creatively developing concepts and selling and producing them as feature films with
14
major L.A. studios and production companies. Id.¶4. While at the Henson Company,
15
Lust brought a project to Nalbandian who decided to produce it. Id.¶5.
16
B. Lust and Defendants Form a “Producing Partnership”
17
In September 2012 Lust and Nalbandian reconnected, and that December, they
18 met at Lust’s home in Los Angeles where they discussed working together to develop
19 various feature films. AF¶6. Lust explained that he wanted to be a 50-50 partner with
20 Nalbandian/ALE, and Nalbandian responded that he would consider that as a future
21 possibility. AF¶7. For now, Lust and Nalbandian agreed, the two would be producing
22 partners and produce feature films together. Nalbandian sent Lust proposed terms,
23 expressing his excitement about a “great collaborative partnership” with Lust in which
24 he referenced his and Lust’s “mutual goals,” and believed they would work well
25 together “on a business and personal level.” They understood that this agreement
26 would lay the groundwork for any agreement after the two-year deal. DF ¶ 5; AF ¶ 8.
27 In response to Nalbandian’s enthusiasm and his proposed terms for the
28 producing partnership, Lust traveled to Australia, where he stayed at Nalbandian’s

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1 home, to formalize the agreement, discuss a long-term business plan, and continue
2 discussions about various feature film projects. Lust believed their relationship to be
3 the “perfect marriage” of his and Nalbandian’s respective skills. AF ¶ 9. The parties
4 entered into a short-form agreement (the “SFA”) on March 14, 2013. Defendants’
5 Separate Statement of Undisputed Facts (“SS”) ¶ 2. Per the agreement, Lust
6 understood he had entered into a producing partnership with ALE. DF ¶ 5, AF ¶ 10-11.

1. Services to Be Provided and Term
7
The SFA provided for a two-year term for Lust. AF¶10. It also provided it was
8
“at will” and required a four-month notice for either party during the term. Id. Lust was
9
to provide services “consistent with achieving the attached business plan,” a five-year
10
plan that the parties had developed. Id. The SFA defined Lust’s role as “Producer” to
11
conform with the “producing partnership” and distinguish Lust from an employee. Id.
12
Lust always referred to himself as a “partner” with Nalbandian/ALE, and Nalbandian
13
called Lust his partner. AF¶11.
14
2. Compensation
15
Lust was paid an annual salary in the form of advances to be recouped against
16
ALE’s net revenues. AF¶12. For films to which Lust was “entitled to be attached”
17
greenlit for production during the two-year term, Lust would get 25% of ALE’s
18 Producer Fees, and for those greenlit outside the two-year term, 12.5%. Id. Lust is also
19 entitled to 12.5% of ALE’s profit participation for ALE’s pre-existing projects to
20 which Lust is “entitled to be attached,” subject to his actual provision of services on
21 production during the two-year term. Id. For all other projects to which Lust is
22 “entitled to be attached,” Lust is entitled to 12.5% of ALE’s profit participation. Id.
23 3. Credit
24 Lust is entitled to a Producer or Executive Producer credit depending on his
25 involvement, studio approval, and the Australian Producer Offset. AF¶13. For ALE’s
26 pre-existing projects Lust is “entitled to be attached” to, ALE must use best efforts for
27 Lust to receive Executive Producer credit. Id. For all other projects to which Lust was
28 “entitled to be attached,” ALE must ensure Lust receives Executive Producer credit. Id.

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1 4. “Attachment”
2 If the parties did not extend Lust’s term, he is “entitled to be attached” to
3 ALE’s pre-existing films greenlit for production within two years from the 1/29/2015
4 termination date. AF¶14. He is also entitled to be attached to all projects “agreed”
5 starting development and greenlit for production within five years of termination. Id.
6 The SFA does not define what “attachment” means, and Nalbandian and Cornish did
not know what it meant when ALE signed the SFA. DF¶11, 19. Lust believed (per
7
industry standard) that for films to which he was “entitled to be attached” that he set up
8
and helped developed, ALE would allow him to render services. AF ¶ 16.
9
5. Intellectual Property (“IP”)
10
The SFA provides “Copyright and all related IP in the services to be assigned
11
to Animal Logic.” DF¶4. This is not a customary IP transfer. Id.¶4, 11-12, 34, 44.
12
6. Expectations of a Long-Form Agreement
13
Lust and Nalbandian intended the SFA to be a precursor to a more precise
14
long-form agreement. DF¶ 2, 12. Lust relied on the written representation that a long-
15
form was forthcoming because several SFA terms are vague. Id. Specifically, Lust was
16
unsure of his attachment and credit rights: ALE’s obligation to provide Lust with
17
credit on projects, and the scope of Lust’s “attachment.” Id.¶2, 19, 21. Per industry
18 standard, Lust believed he would receive credit commensurate with his involvement
19 and that ALE would not prevent his involvement on projects he had previously worked
20 on. Id. ¶ 22. Lust wanted to finalize the agreement, so he signed the SFA. AF¶17.
21 But the draft long-form agreement, never presented to Lust, provided for
22 materially different terms than the SFA – as explained infra at § II.E. DF¶36, AF¶18.
23 C. Lust Sets Up a Feature Film Slate for ALE
24 Lust worked on projects now in development or released. AF¶20, 21. Lust’s
25 efforts benefitted ALE, which had mostly provided digital effects services. AF¶4, 20.
26 1. Possessions
27 Shortly after Lust began as a producing partner with ALE, he brought
28 Possessions to ALE. AF¶22. ALE and Lust executed an option agreement for the

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1 project with the rights-holder providing Lust with a Producer credit, subject to
2 studio/financier approval. Id. ¶ 23. Lust understood this to be consistent with the SFA –
3 that ALE would propose Lust as receiving Producer credit for projects he helped set up
4 – and it informed his understanding of his rights under the SFA. Id.¶24.
5 2. Peter Rabbit
6 Prior to signing the SFA Lust identified Peter Rabbit as being in the public
domain. AF¶25. He developed a synopsis for a feature film version and pitched it to a
7
writer he previously worked with. AF¶20, 26. Lust brought Peter Rabbit to ALE,
8
where he and ALE further developed it and pitched to Fox Studios and to director Will
9
Gluck’s company. Id.¶20, 27. Gluck, who had a “first-look” deal with Sony Pictures
10
where he had to offer Sony the first opportunity to purchase any project he wanted to
11
work on, asked Hannah Minghella, then President of Production at Columbia (a
12
division of Sony), if she wanted to purchase Peter Rabbit. Id.¶28. Minghella decided to
13
buy Peter Rabbit and immediately reached out to Lust, who had previously tried to sell
14
several projects to her and expressed excitement for working on the project. Id.¶28-29.
15
3. Other Films
16
Monkeys was Lust’s idea that he brought to ALE and pitched to production
17
company SYCO Entertainment around the same time he was developing Peter Rabbit.
18 AF¶21. Lust reached out to Minghella and pitched Monkeys with SYCO to Columbia
19 Pictures, which offered to buy it. Id. Monkeys went into development with ALE,
20 SYCO, and Columbia – and an ALE-SYCO joint venture emerged. Id.¶21, 31.
21 In May 2014 Lust identified a Japanese manga/anime property entitled Astro
22 Boy. AF¶32. Lust and Mike Callaghan, a producer Lust worked with, reached an
23 agreement in principle with the Astro Boy rights-holder, which Lust brought to ALE.
24 Id. At this juncture, it was planned that Lust would receive a Producer credit. Id. But
25 thereafter, ALE stopped involving Lust and formalized the shopping agreement on
26 November 18, 2014 without him. Id. Nalbandian and Callaghan traveled to Japan to
27 meet with the rights-holder – Nalbandian did not invite Lust – and then sold the project
28 to New Line Cinema where it is now in development. Id.

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D. Peter Rabbit Enters the Development Phase and Lust, Animal Logic,
1 and Columbia Pictures Negotiate a Producer Agreement
2 In January 2014 ALE, with Lust, negotiated the deal points of the Peter Rabbit
3 producer agreement with Columbia. AF¶33. The deal points included two Producer
4 credits for ALE for Nalbandian and Lust. Id. The first draft of the producer agreement
5 tracked the deal points. Id.¶35. This mirrored Lust’s understanding of the SFA terms,
6 like the Possessions agreement. Id.¶22-24 The parties further negotiated terms,
7 copying Lust on correspondence. Id.¶36.

E. Animal Logic Proposes Changes to the Peter Rabbit Producer
8 Agreement Affecting Lust’s Credit Without Informing Him; Lust
Signs the Peter Rabbit COE
9 On March 10, 2014 Lust asked Nalbandian to be copied on all correspondence
10 with Loeb because of his involvement. AF¶37. Nalbandian responded that Emanuel
11 and Cornish would communicate directly to expedite the process, but Lust would be
12 copied. Id. Lust responded that he preferred to be copied on all correspondence rather
13 than having to hear it second-hand from Cornish. Id. Shortly thereafter, ALE discussed
14 internally the need to clarify its relationship with Lust. Id.¶38.
15 On March 31, Columbia sent ALE the operative Certificates of Engagement
16 (“COEs”) for Peter Rabbit – transfers of IP to a studio so that the studio has all the
17 rights in the film. AF ¶ 38, SS ¶ 6. Meanwhile, Emanuel sent Cornish and Nalbandian
18 a draft of a long-form agreement on March 31, which altered the SFA as follows:
19  Lust’s services for ALE would be works made for hire. This altered the SFA’s “to
20 be assigned” language.
21  The long-form specified that it does not create a “partner, joint venture or
22 affiliate” relationship with ALE. This contradicted the SFA’s “producing

partnership” language, and the nature of the relationship.
23
 The long-form did not clarify Lust’s credit and attachment rights, instead
24
providing for no breach if Lust did not receive credits set forth in the SFA.
25
AF¶18. Lust never knew of these terms since ALE never gave him the long-form. Id.
26
Simultaneously, Columbia and ALE negotiated the Peter Rabbit producer
27
agreement. AF¶40. ALE also internally (without Lust) contemplated the scenario
28
where Lust was no longer working with ALE. Id.¶41. On March 27 ALE proposed a
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1 revision to the agreement (not copying Lust) which allowed it and Columbia to
2 designate a different producer other than Lust or Nalbandian to render services. Id.¶40.
3 Minghella at Columbia questioned ALE’s proposed change because Lust was supposed
4 to be providing non-exclusive, first-priority services due to his involvement. Id.¶42.
5 Columbia suggested that ALE be able to replace Lust only if he became unavailable.
6 Id. Internally, Nalbandian indicated he was okay waiting until Lust was unavailable to
negotiate this term. Id. ALE’s proposed revision was inserted in the next draft of the
7
agreement after Lust signed the Peter Rabbit COE. Id. ¶ 43.
8
ALE pressured Lust to sign a COE for Peter Rabbit, but as Lust and ALE had
9
not executed a long-form agreement as contemplated a year prior, Lust wanted to
10
clarify his rights under the SFA. AF¶44. Lust requested ALE for latest drafts of the
11
Peter Rabbit producer agreement and COE to send to his attorney before he signed the
12
COE. Id.¶45. ALE sent Lust the documents but did not inform him of their internal
13
discussions or their proposal to cease his involvement. Id. After consulting his lawyer,
14
Lust remained concerned that the SFA did not adequately set out his credit and
15
attachment rights. Id.¶44. Cornish told Lust he had a draft long-form agreement that
16
they could discuss shortly. Id.¶46. In reliance on this, on the draft Peter Rabbit
17
producer agreements providing Lust would receive a Producer credit and render active
18 services, and Cornish’s promise that Lust would be receive a Producer credit, Lust
19 signed the COE because ALE urged him to. Id. ¶ 47. Of course, Lust did not know
20 ALE’s long-form draft was significantly different than the SFA. Id.
21 Internally, after Lust signed the COE, Nalbandian asked Cornish to calculate
22 how much he would owe Lust upon expiration of the initial term. AF¶41. Nalbandian
23 implied that he would not be continuing the relationship with Lust. Id. Months later, on
24 June 30, 2014, Columbia sent ALE a new draft of the Peter Rabbit producer agreement
25 that allowed for Lust’s removal as an active producer. Id. ¶ 43.
26 F. Lust, Nalbandian, and Animal Logic Part Ways
27 In shock after learning that ALE and Columbia inserted this provision without
28 informing him, on July 31, 2014, Lust sent Nalbandian a letter to discuss their

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1 agreement, as it was still defined by the vague SFA. AF¶48. After the two met, Lust
2 believed they had resolved their issues. Id.¶49. However, in mid-November 2014,
3 Nalbandian told Lust to stop working with ALE immediately. DF¶24. Internally,
4 Nalbandian told Cornish he did not want Lust actively working on ALE projects. Id.
5 Shortly after Lust left ALE, Nalbandian called various colleagues with whom
6 ALE and Lust were working and informed them that Lust was no longer working with
ALE. AF ¶ 50. Nalbandian told Will Gluck, Peter Rabbit’s director and suggested that
7
Lust not provide services on Peter Rabbit anymore. DF ¶ 24. Gluck did not object. Id.
8
Thereafter, Lust was not kept informed of any Peter Rabbit developments. Id.
9 G. ALE and Columbia Pictures Finalize the Peter Rabbit Producer
10 Agreement and Reduce Lust’s Credit to Executive Producer
ALE proposed changes to the Peter Rabbit producer agreement which allowed
11
it further flexibility for Lust not to provide active services on the project. DF ¶ 24; AF
12
¶ 51. Columbia again questioned ALE’s changes – because Columbia believed Lust
13
was providing first priority services on Peter Rabbit. Id. ¶ 52. It is against industry
14
custom to make material changes to the scope of a producer’s attachment or credit after
15
that producer signs a COE for the project. Id. ¶ 53.
16
Around the same time, ALE and Columbia applied for a “provisional
17
certificate” to Screen Australia for the Australian Producer Offset, which would save
18
Columbia and ALE 40% of production costs. AF ¶ 54. The Australian Producer Offset
19 is awarded when a film is sufficiently “Australian,” based on the nationalities of cast
20 and crew and the location of filming and production. Id. ¶ 56. Catherine McDonnell, a
21 lawyer providing services for both ALE and Columbia, conferred with Nalbandian to
22 determine what credit Lust was entitled to under his agreement with ALE. DF ¶ 28.
23 Nalbandian, without consulting Lust, indicated that Lust could receive an Executive
24 Producer credit, so McDonnell and Columbia included Lust as receiving an Executive
25 Producer credit in the application. Id.; AF ¶ 55. Screen Australia granted a provisional
26 certificate in November 2015. AF ¶ 54.
27 In March 2016, Columbia created a new draft of the Peter Rabbit producer
28 agreement in light of Screen Australia’s granting of the provision certificate to revise

8
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1 Lust’s credit, allowing Lust to receive only an Executive Producer credit if necessary
2 for the Producer Offset. AF ¶ 57.
3 In May 2016, ALE requested that Lust sign the Peter Rabbit producer
4 agreement. AF ¶ 58. Lust refused to sign the agreement as drafted, indicating he would
5 sign only if it complied with ALE’s obligations to Lust under the SFA. Id. Columbia
6 moved forward with Peter Rabbit without Lust’s signature. AF ¶ 59. In October 2016,
McDonnell corresponded with Screen Australia personnel Tim Phillips to confirm that
7
ALE would qualify for the Producer Offset – but she did not ask whether according
8
Lust a Producer credit would jeopardize their chances of receiving it. Id. ¶ 60.
9
Ultimately, Screen Australia granted the Offset, and Lust received an Executive
10
Producer credit on Peter Rabbit. SS ¶ 28.
11
H. Other COEs
12
After ALE and Lust parted ways, some of the projects Lust was “entitled to be
13
attached” to moved towards development, and on January 29, 2015, ALE sent Lust
14
COEs for Nemesis and Claus. SS ¶ 6. Lust indicated that prior to signing the COEs, he
15
needed to see the producer agreements for Nemesis and Claus in light of the reduction
16
of his credit on Peter Rabbit after he signed the COE for the project. DF ¶¶ 7, 14. ALE
17
never provided Lust with producer agreements conforming with his SFA rights, so
18 Lust did not relinquish his IP to those projects. Id. ALE never asked Lust to sign a
19 COE for Fortunately, the Milk despite his role in developing and packaging. AF ¶ 61.
20 III. LEGAL DISCUSSION
21 A. ALE Is Not Entitled to Summary Judgment on Its Contract Claim.
22 The SFA was written in a shorthand form with abbreviations and acronyms and
23 without a full recitation of the terms of the agreement between the Parties. DF¶2, 11.
24 The SFA itself contemplated (and Nalbandian, on behalf of himself and Defendants,
25 promised on numerous occasions to execute) a long-form version of the agreement,
26 which was never finalized and executed. Id.; AF¶18.
27 As an initial matter, Defendants fail to meet their burden to show that Lust
28 breached the contract first, as contended in their motion. The deposition testimony they

9
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1 offer does not establish any timeline showing Lust “refused to execute” the COEs prior
2 to Defendants’ breaches. SS¶7. The claimed “refusal” could have occurred the morning
3 of Lust’s deposition, October 2, 2017, or any time after the COEs were sent in 2014.
4 Defendants failed to ask Lust the date of this “refusal” at deposition and the Court may
5 not simply assume that it occurred prior to Defendants’ breaches of contract.
6 The SFA was rife with missing and ambiguous, undefined terms, including
7 details concerning the transfer of copyright and other IP. DF¶2, 4, 11; AF¶15.
8 Defendants drafted the SFA and created these ambiguities. AF¶10. The ambiguities
9 must be resolved against the drafter. Cal. Civ. Code 1654; Union Bank v. Winnebago
10 Industries, Inc., 528 F.2d 95, 99 (9th Cir. 1975).
11 First, the SFA defined the term as being for two years, but also provided that the
12 relationship was “at-will,” and also provided for a four-month notice period by either
13 party. DF¶5. Second, the SFA described Lust as a “producing partner,” but also stated
14 that his services were being contracted for, and also described the relationship as an
15 “employment” relationship. DF¶2. Third, the SFA provided that it would form the
16 basis of a long-form agreement between the parties, and throughout the SFA, explained
17 that certain terms would be “acknowledged” in the formal agreement. Id. Fourth, the
18 SFA never defines Lust’s rights for projects he is entitled to be attached to – instead, it
19 simply identifies the projects he is entitled to be attached to. DF¶11. Finally, the SFA’s
20 transfer of IP rights provision is vague, simply providing that “Copyright and all
21 related IP in the services to be assigned to Animal Logic.” DF¶4. This is not a
22 definitive IP transfer, as discussed below. Id.
23 Under these circumstances – the continuing promises to execute a longform to
24 remedy the hopelessly ambiguous SFA – an implied condition arose to define the
25 SFA’s assignment provision in a longform agreement prior to Lust’s performance.
26 “Neither law nor equity requires that every term and condition be set forth in a
27 contract. The usual and reasonable terms found in similar contracts may be considered,
28 unexpressed provisions of the contract may be inferred from the writing; external facts

10
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1 may be relied upon, and custom and usage may be resorted to in an effort to supply a
2 deficiency if it does not alter or vary the terms of the agreement.” Addiego v. Hill, 238
3 Cal.App.2d 842, 846 (1965). There is a genuine dispute of fact as to whether a
4 condition precedent to provide a longform may be implied.
5 Given these facts, the SFA’s terse provision that “Copyright and all related IP in
6 the services to be assigned to Animal Logic” is ambiguous. Lust clearly expected,
7 asked for, and was promised, an unambiguous agreement concerning these terms, but
8 Defendants never made good on that promise. Lust’s expert’s opinion is that under
9 industry standard, the SFA’s phrase “to be assigned,” meant that IP would be assigned
10 in the future after a long form agreement clarifying all terms was executed. DF¶4.
11 All terms under the heading “Services” were to be performed in the future,
12 including the assignment of copyright. DF¶2 (“Services to be provided”; longform
13 “will acknowledge a carve out”; “Copyright … to be assigned”). Lust was ready and
14 willing to assign copyright as soon as the SFA terms were clarified, and as soon as
15 ALE sent him the applicable producer agreements, so that he could gauge whether
16 ALE was complying with its obligations under the SFA. DF¶7, 14.
17 The SFA alone was insufficient to transfer copyright to ALE, and Lust’s many
18 requests for a more detailed longform agreement on this issue were justified:
Common sense tells us that agreements should routinely be put in writing. This
19 simple practice prevents misunderstandings by spelling out the terms of a deal in
black and white, forces parties to clarify their thinking and consider problems
20 that could potentially arise, and encourages them to take their promises seriously
because it's harder to backtrack on a written contract than on an oral one.
21 Copyright law dovetails nicely with common sense by requiring that a transfer
of copyright ownership be in writing. Section 204 ensures that the creator of a
22 work will not give away his copyright inadvertently and forces a party who
wants to use the copyrighted work to negotiate with the creator to determine
23 precisely what rights are being transferred and at what price.
24 Effects Associates, Inc. v. Cohen, 908 F.2d 555, 557 (9th Cir. 1990); DF¶4.
25 ALE relies on inapplicable authority from a New York District Court for the
26 proposition that a short form agreement providing for execution of a longform
27 agreement does not render the SFA unintegrated. Doc. 90 at 27:1-4. That is not the law
28 in California. Only where the parties have agreed that a written instrument “is the

11
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1 exclusive and final embodiment of their contract” is the contract integrated. Brawthen
2 v. H&R Block, Inc., 28 Cal.App.3d 131, 137 (1972). Where the parties have not so
3 agreed, “then the writing is unintegrated, and extrinsic of parol evidence will ordinarily
4 be admitted in aid of establishing the complete agreement.” Id. Here, the parties
5 expressly stated that the SFA was not the “exclusive and final embodiment.” Lust’s
6 parol evidence concerning his understanding of the agreement concerning assignment
7 of copyright is both admissible and sufficient to create a genuine dispute of fact. AF
8 ¶15-16, 23-24, 53.
9 Finally, ALE’s motion on its claim for breach of contract is predicated on the
10 remarkable assertion that ALE can now rescind the SFA. Doc. 90 at 27:5-21. This
11 theory, raised for the first time in Defendants’ summary judgment motion, fails for
12 several reasons. First, ALE has not pleaded rescission; therefore, rescission is not at
13 issue. Stanton v. Santa Ana Sugar Co., 84 Cal.App.206, 208-09 (1927). Second, ALE
14 has failed to give Lust prompt notice of rescission as required by Cal. Civil Code
15 section 1691(a). While ALE claims Lust must restore everything of value he received
16 under the contract, rescission is a two-way street – ALE must do the same. Cal. Civ.
17 Code, § 1691(b). That means ALE must restore to Lust any and all IP, proceeds it
18 earned from Peter Rabbit, and all back-end profit participation from Peter Rabbit,
19 which has made over $150 million at the global box office at the time of this brief.
20 Third, it is entirely too late to unwind the transaction between the parties.
21 Defendants have waived the right to rescind. DuBeck v. California Physicians’ Service,
22 234 Cal.App.4th 1254, 1265 (2015). “It is the general rule in courts of equity that a
23 party desiring to rescind, must do so promptly . . . and that if, after discovering the
24 facts, he conducts himself as though the contract were valid and in full force, he waives
25 all right of election to rescind….” Frankish v. Federal Mort. Co., 30 Cal.App.2d 700,
26 708 (1939); Le Clercq v. Michael, 88 Cal.App.2d 700, 702 (1948) (“Any acts
27 indicating an intent to abide by the contract are evidence of an affirmance thereof and
28 of a waiver of the right to rescind.”) ALE claims it sought Lust’s signature on the

12
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1 COEs as early as September 2014. SS¶6. Yet ALE did not seek rescission until
2 February 2018. It has waived that right.
3 Rescission will not be granted where it is impossible or impracticable to undo
4 the contractual relationship given passage of time or where the rights of third parties
5 (such as Sony/Columbia) would be affected. Strategic Diversity, Inc. v. Alchemix
6 Corp., 666 F.3d 1197, 1207-08 (9th Cir. 2012) (finding rescission “neither feasible nor
7 practical” because “the passage of time has rendered the complete restoration of the
8 parties to the status quo ante difficult if not impossible”). Here, where the result of the
9 contractual relationship was a major motion picture released by Sony and Columbia,
10 restoration of the parties to the status quo would be impossible.
11 Lust did not execute the COEs as presented to him; however, Lust was willing to
12 sign COEs as long as the parties had fully agreed on unambiguous language
13 concerning the parties’ rights and obligations under the SFA. DF¶7, 14. Lust was
14 correct in seeking such a determination. Had he signed the COEs for any of the other
15 projects, he would have done so without clarification of his rights and ALE’s
16 obligations to him under the SFA.
17 B. ALE has Waived the Argument that It Is Not a Party to the Contract.
18 Defendants assert in their notice of motion that AL and ALE are entitled to
19 summary judgment because they were not a party to the SFA. Doc. 90 at 4:6-7 and
20 4:16-17. Defendants have waived this argument, as Defendants’ answer admitted that
21 ALE and Lust entered into the SFA. Doc. 20 at 3:19-20. Defendants’ opposition also
22 identifies ALE as the contracting party. Doc. 90 at 13, note 1.
23 Defendants have not provided any argument or evidence in support of this issue
24 and have conceded the issue. Shorter v. Los Angeles Unified School District, 2013 WL
25 6331204, *5 (C.D. Cal. December 4, 2013). To the extent the Court finds this
26 argument persuasive, Lust requests that the Court deny the motion, and grant leave to
27 amend to name to the correct Animal Logic entity.
C. Defendants Are Not Entitled to Summary Judgment of Lust’s Breach of
28 Contract Claims.

13
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1 ALE breached the contract by not allowing Lust to be attached as producer, and
2 by preventing Lust from being attached to projects. There is a genuine dispute of
3 material fact on this issue based on the parties’ different definitions of the word
4 “attachment.” The SFA is not an integrated contract. DF¶2; Brawthen, 28 Cal.App.3d
5 at 137. Parol evidence is admissible to assist in establishing the intended meaning of its
6 terms, including trade usage. George v. Automobile Club of Southern California, 201
7 Cal.App.4th 1112, 1125 (2011).
8 It is custom in the entertainment industry that when a producer sets up a project
9 and participates in its development, he will be credited as a producer, and his
10 “attachment” to the project would entail rendering producing services on the film.
11 DF¶22. Lust believed that for projects he was “entitled to be attached” to under the
12 SFA, ALE would do its best to ensure that Lust would render active services on the
13 project, subject to the studio’s discretion. Id.
14 While ALE may disagree with Lust’s understanding, that understanding is
15 supported by expert opinion concerning “trade usage” in the movie industry:
when a producer is attached to a movie, that producer will be the creative force
16 leading the production of the movie. To use an analogy, the producer is the
“quarterback” of the team involved in the production. The producer will interact
17 with all talent, cast and crew, above the line and below the line, and be involved
in all facets of the making of the movie, including, without limitation, have a
18 meaning[ful] voice in distribution strategy. DF¶8, 22.
19 Lust’s expert’s opinion, based on the facts of this case, was that “Lust would
20 produce the movie Peter Rabbit, and any other productions that were part of his
21 agreement with ALE.” Id. Although Defendants now characterize this construction as
22 “absurd,” the fact is that Cornish, who drafted the SFA, admitted he had no idea what
23 attachment meant. AF¶15. Further, when Nalbandian and Cornish were discussing
24 Lust’s right to payment and credit upon the dissolution of his relationship with ALE,
25 neither of them knew what rights Lust’s “attachment” accorded him. Id.
26 The SFA is not integrated. Lust’s understanding of the term “attachment,”
27 supported by expert opinion, is sufficient to raise a genuine issue of fact as to the
28 parties’ understanding and meaning assigned to the term “attachment” in the SFA.

14
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1 Defendants now claim they did nothing to prevent Lust from providing producer
2 services. Doc. 90 at 30:14-15. The evidence contradicts this. DF¶8, 14, 26, 27.
D. Defendants Are Not Entitled to Summary Judgment of Lust’s Claim for
3 Breach of the Covenant of Good Faith and Fair Dealing.
4 Defendants seek summary judgment on Lust’s claim for breach of the covenant
5 of good faith and fair dealing on a single ground – that this claim lives and dies by the
6 breach of contract claim. Defendants argue that the Court must agree with Lust’s
7 construction of “attachment” for this claim to survive. Doc. 90 at 31:9-14.
8 Defendants misunderstand the limits of summary judgment. The Court does not
9 have to agree with and adopt Lust’s construction of the ambiguous term “attachment.”
10 Rather, the Court need only find that there is a genuine dispute of material fact as to
11 the meaning of the ambiguous term “attachment” for both the breach of contract and
12 tortious breach of contract claims to go to trial. Lust has established the necessary
13 genuine dispute of material fact to defeat summary judgment.
14 E. Defendants Owed and Breached a Fiduciary Duty to Lust.
15 Defendants’ move for summary judgment on Lust’s claim for breach of
16 fiduciary duty on the sole ground that the SFA did not create a general partnership
17 under California law, and therefore, Defendants did not have a fiduciary relationship
18 with Lust. However, Lust alleged the SFA, combined with Defendants’ other conduct,
19 gave rise to a fiduciary relationship under California law. Doc. 19 at 22:20-23:10.
20 Defendants created a relationship with Lust based on trust and confidence. A
21 defendant who occupies a position of confidence and trust owes a fiduciary duty to
22 those they seek to entice into a venture. “‘A fiduciary relation arises whenever
23 confidence is reposed on one side, and domination and influence result on the other;
24 the relation can be legal, social, domestic, or merely personal.’” Eisenbaum v. Western
25 Energy Resources, Inc., 218 Cal.App.3d 314, 322 (1990). As California courts have
26 repeatedly held, “A confidential relationship ‘may be said to exist whenever trust and
27 confidence is reposed by one person in the integrity and fidelity of another.’
28 [Citations.] And where the person in whom such confidence is reposed, by such

15
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1 confidence obtains any control over the affairs of the other, a trust or fiduciary
2 relationship is created.” Main v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 67
3 Cal.App.3d 19, 31 (1977); Twomey v. Mitchum, Jones & Templeton, Inc., 262
4 Cal.App.2d 690, 708 (1968) (“Confidential and fiduciary relations are, in law,
5 synonymous”); U.S. v. Milovanovic, 678 F.3d 713, 722 (9th Cir. 2012) (“A fiduciary is
6 generally defined as ‘[a] person who is required to act for the benefit of another person
7 on all matters within the scope of their relationship; one who owes to another the duties
8 of good faith, trust, confidence, and candor....’ Black's Law Dictionary (9th ed.). And
9 courts have held that “fiduciary” encompasses informal fiduciaries”).
10 “‘When a fiduciary enters into a transaction with a beneficiary whereby the
11 fiduciary’s position is improved, or he obtains a favorable opportunity, or where he
12 otherwise gains benefits, or profits, it may fairly be said that an advantage has been
13 obtained.’” Rader v. Thrasher, 57 Cal.2d 244, 250 (1962). The amount of evidence
14 necessary to establish a confidential relationship ordinarily rests with the trier of fact.
15 Kent v. First Trust & Savings Bank of Pasadena, 101 Cal.App.2d 361, 370 (1950).
16 A confidential relationship was created the instant the parties entered the SFA.
17 The heading of the SFA itself designated that the agreement was “Commercial in
18 Confidence.” SS¶2. Australian Law Dictionary (2d ed. 2013) defines this term as
19 identifying information that, if disclosed, would result in damage to a party’s
20 commercial interests, IP or trade secrets. Australian Law Dictionary (2d ed. 2013) at
21 http://www.oxfordreference.com/view/10.1093/acref/9780195518511.001.0001/acref-
22 9780195518511-e-0741?rskey=4emrxz&result=738. Typically, parties privy to
23 information marked “commercial in confidence” may not disclose this information
24 without permission from the party who supplied it. Id. The SFA, and its confidential
25 nature, is the first indicia of the confidential relationship created by ALE.
26 A wealth of other evidence in this case points toward the existence of the trust
27 and confidence Lust reposed in the integrity and fidelity of Defendants, who betrayed
28 that trust. Lust stayed at Nalbandian’s home for a week while they parties worked on

16
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1 the terms of a “great collaborative partnership.” AF¶8-9. Each was contributing a

2 different type of expertise to the partnership – Lust contributed the IP to Peter Rabbit.
3 Id.¶4, 8, 47. The SFA referred to Lust as a “Producing Partner” with ALE, and
4 throughout the relationship, Lust constantly referred to himself to third parties as
5 ALE’s and Nalbandian’s partner. Id.¶10, 11. Nalbandian also referred to Lust as his
6 partner. Id.¶11. Nalbandian’s long-standing failure to deny the partnership may be
7 considered an adoptive admission of the existence of a producing partnership. Cal.
8 Evid. Code, § 1221; In re Estate of Neilson, 57 Cal.2d 733, 746 (1962).
9 In addition, Defendants undertook a duty to keep Lust informed on actions they
10 took which affected his interests in the producing partnership. AF¶37. Defendants
11 promised to use “best efforts” to protect Lust’s interests. Id.
12 The evidence cited above documents the fact that Lust reposed trust and
13 confidence in Defendants to represent and protect his interests when dealing with the
14 studios. A fiduciary duty arose on the part of Defendants to not obtain an advantage
15 over Lust. As alleged in the FAC, Defendants breached their fiduciary duties to Lust
16 by, inter alia, taking actions to prevent Lust from being attached to ALE projects,
17 usurping opportunities, preventing Lust from obtaining compensation, and convincing
18 Lust to convey valuable IP rights under false pretenses. Doc. 19 at 23:13-27.
19 Under California law, Defendants’ conduct created a fiduciary relationship with
20 Lust, based on Lust reposing confidence and trust in Defendants to represent and
21 protect his interests when negotiating with the studios. Defendants cannot evade this
22 relationship on summary judgment by simply pointing to the absence of express
23 partnership creation language in the SFA.
24 While the SFA may not expressly provide for the creation of a general
25 partnership, Lust’s expectations and understanding was that the parties had entered into
26 a producing partnership. AF¶8-11. Parol evidence of Lust’s understanding that he was
27 entering a partnership is admissible evidence that a fiduciary relationship was created.
28 In Krantz v. BT Visual Images, LLC, 89 Cal.App.4th 164, 168-69 (2001), a distributor

17
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1 alleged it entered a joint venture with a supplier of videoconferencing units and the
2 supplier breached its fiduciary duties when it shut the distributor out of participation in
3 a valuable contract. The distributor had fostered a relationship with the customer,
4 developed a custom system for the customer, and proposed to the supplier that they
5 prepare a joint bid for the customer. Despite oral assurances from the supplier that the
6 distributor would profit from the systems, the parties’ written “teaming agreement” did
7 not articulate any division of profits anticipated from servicing the customer. The court
8 agreed with the distributor that contradictions among provisions in the agreement could
9 be supplemented by parol evidence explanatory of the parties’ intention. Id. at 176-78.
10 There is parol evidence explaining the parties’ intentions. Nalbandian referred to
11 Lust as his partner. AF¶11. Lust often referred to Nalbandian as his partner. Id. The
12 SFA refers to a “producing partnership.” Id.¶8. Nalbandian described the relationship
13 as a “great collaborative partnership” and a “good fit both on a business level and a
14 personal level.” Id.¶9. The parties obviously had some sort of partnership in mind
15 when entering their relationship. Despite Lust’s repeated description of the relationship
16 as a partnership, Nalbandian never corrected Lust or denied the existence of a
17 partnership until this lawsuit. Id.¶11. As such, Defendants are estopped from denying
18 the existence of a producing partnership, with fiduciary duties owed to Lust. The
19 elements of equitable estoppel are “’(1) the party to be estopped must be apprised of
20 the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the
21 party asserting the estoppel has a right to believe it was so intended; (3) the other party
22 must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his
23 injury.’” Shafer v. City of Los Angeles, 237 Cal.App.4th 1250, 1261 (2015). An
24 estoppel may arise from silence. Spray, Gould & Bowes v. Associated Internat. Ins.
25 Co., 71 Cal.App.4th 1260, 1268 (1999). All of the elements are met. Defendants assert
26 there was no partnership but were aware that Lust believed there was a partnership.
27 AF¶11. Lust had a right to believe a partnership existed, as Nalbandian called him a
28 “partner,” and Defendants did not deny the existence of a partnership. Lust was not

18
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1 aware of Defendants’ position until after his contract was terminated. Id.¶11. Lust
2 relied upon Defendants’ conduct to his injury by contributing valuable IP to the
3 partnership. Id.¶47.
4 Finally, a plaintiff may justifiably expect a fiduciary duty of loyalty from a
5 defendant when the specific nature of the relationship leaves the plaintiff unable to
6 self-protect against the defendant’s misconduct once the relationship is formed. For
7 example, in Chou v. University of Chicago, 254 F.3d 1347, 1356-57 (Fed. Cir. 2001) a
8 graduate student and research assistant in molecular genetics and cell biology became
9 obligated to assign her inventions to the university when she accepted her appointment.
10 Her supervising professor and department chair assured her he would use care to
11 protect her inventions, with proper credit to her. Instead, patent applications filed by
12 the professor stemming from the student’s research either listed him as the sole
13 inventor or did not name the student as co-inventor. The student was damaged by this
14 conduct – under the university’s patent policy, inventors received a percentage share of
15 gross royalties and stock in new companies formed to exploit the inventions. The
16 professor eventually held stock in licensees of the resulting patents. The court held that
17 the facts alleged were adequate to plead a fiduciary duty applicable to the professor
18 with respect to the inventions, given the “disparity of their experience and roles and
19 [the professor’s] responsibility to make patenting decisions regarding [the student’s]
20 inventions.” Id. at 1362-63.
21 As in Chou, Lust could do nothing to self-protect against Defendants’
22 depredations. Nalbandian is the owner, president, CEO, and sole decisionmaker of
23 ALE. AF¶2. He directed his attorneys and agents to act on ALE’s behalf in negotiating
24 terms of producer agreements with the studios, including negotiating with Columbia
25 Pictures for Peter Rabbit, and he excluded Lust from these communications. AF¶40.
26 Nalbandian was responsible for changing Lust’s credit on Peter Rabbit, without
27 informing Lust, as he promised to do. Id.¶40-45, 52, 54-55, DF¶20, 24, 28.
28 Defendants’ secret expectations apparently were that they could harvest all of Lusts’

19
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1 valuable IP and then discard him. Under the totality of the circumstances, the Court
2 should find a fiduciary duty arising from the peculiar circumstances of the producing
3 partner arrangement between Defendants and Lust. Indeed, as in Chou, a disparity of
4 experience and roles and Nalbandian’s responsibility to make decisions on behalf of
5 ALE gave rise to a fiduciary duty owed to Lust.
6 F. Defendants Are Not Entitled to Summary Judgment of the Fraud Claims.
1. Defendants Did Not Seek Summary Judgment of Constructive Fraud.
7
Lust has alleged a claim for constructive fraud arising from a breach of the
8
fiduciary relationship between Defendants and Lust. Doc. 19 at 29:6-15. The existence
9
of a fiduciary duty is discussed fully in the above section. ““[C]onstructive fraud
10
comprises all acts, omissions and concealments involving a breach of legal or equitable
11
duty, trust, or confidence, and resulting in damages to another. [Citations.]
12
Constructive fraud exists in cases in which conduct, although not actually fraudulent,
13
ought to be so treated—that is, in which such conduct is a constructive or quasi fraud,
14
having all the actual consequences and all the legal effects of actual fraud.’” Barrett v.
15
Bank of America, 183 Cal.App.3d 1362, 1368-69 (1986); Cal. Civ. Code § 1573.
16
As set forth in above in Section D, there is a genuine issue of material fact as to
17
the existence of Defendants’ fiduciary duties to Lust. Lust has clearly alleged the way
18
Defendants breached their fiduciary duty, and therefore committed constructive fraud,
19
all to Lusts’ detriment. Doc. 19 at 23:13-28, 29:8-15. Defendants have failed to move
20
for summary judgment on this claim, and summary judgment should be denied.
21
2. Misrepresentations Tied to Execution of the COEs Are Actionable.
22
Defendants’ misrepresentations intended to induce Lust into signing the Peter
23
Rabbit COE are actionable fraud. As discussed at length in Section A above, the
24
signing of the SFA did not give rise to an immediate obligation to transfer all IP to
25
Defendants. For all the reasons stated in that Section, Lust was not induced “to perform
26
his own contract” as claimed by Defendants. Thus, California and Hawaiian Sugar Co.
27
v. Sun Ship, Inc., 794 F.2d 1433 (9th Cir. 1986) is inapposite. Defendants misrepresent
28
the holding of Bank of the West v. Valley Nat. Bank of Arizona, 41 F.3d 471, 477 (9th
20
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1 Cir. 1994). The portion of that case quoted by Defendants is from the recitation of
2 facts, not the Ninth Circuit’s conclusion and holding.
3 Further, by providing Lust with Peter Rabbit producer agreement drafts
4 providing that he would render services and receive Producer credit, and further
5 promising to keep him apprised of correspondence with Loeb, while urging Lust’s
6 expedited signing of the Peter Rabbit COE (promises not agreed to in the SFA),
7 Defendants made a new and different promise, separate and apart from the SFA.
8 AF¶33, 35-37, 40, 43-45, 47. Lust was not induced “to perform his own contract”
9 when presented with this new promise. As such, ALE’s proposed change to the
10 producer agreement that could reduce Lust’s credit and ability to provide active
11 services – not condoned by Columbia, and not disclosed to Lust until after he signed
12 the Peter Rabbit COE – is evidence of ALE’s fraudulent conduct.
13 3. The Economic Loss Rule is Not a Shield for Fraud.
14 Lust’s two omission claims not related to the COEs are also actionable fraud.
15 Defendants seek to dismiss the fraud claims based on the economic loss rule (Doc. 90
16 at 35:1-12), but this rule does not apply. As the Supreme Court of California held:
17 “Generally, outside the insurance context, ‘a tortious breach of contract ... may
be found when (1) the breach is accompanied by a traditional common law tort,
18 such as fraud or conversion; (2) the means used to breach the contract are
tortious, involving deceit or undue coercion; or (3) one party intentionally
19 breaches the contract intending or knowing that such a breach will cause severe,
unmitigable harm in the form of mental anguish, personal hardship, or
20 substantial consequential damages.’”
21 Erlich v. Menezes, 21 Cal.4th 543, 553-54 (1999); Robinson Helicopter, Inc. v. Dana
22 Corp., 34 Cal.4th 979, 990 (2004).
23 The Erlich Court continued: “Tort damages have been permitted in contract
24 cases … where the contract was fraudulently induced. [Citation.]” (21 Cal.4th at 551–
25 52.) “[I]n each of these cases, the duty that gives rise to tort liability is either
26 completely independent of the contract or arises from conduct which is both intentional
27 and intended to harm. [Citation.]” (Id. at 552.) Thus, fraud in the inducement is an
28 exception to the economic loss rule.

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1 The omissions claimed by Defendants to be barred by the economic loss rule are
2 Defendants’ failure to disclose, prior to Lust’s signing of the SFA, and to induce Lust
3 to enter the SFA, (1) that Defendants defined attachment differently than Lust and did
4 not intend to attach Lust to ALE’s non-U.S. affiliates; and (2) Defendants intended to
5 later redefine the “advances” portion of the SFA. SS¶33; FAC, Doc. 19 at 25:7-22,
6 27:13-16, 28:16-26, 29:17-30:1.
7 Lust has clearly alleged and submitted evidence that Defendants’
8 misrepresentations and omissions constitute fraud in the inducement. Fraud in the
9 inducement is completely independent of the contract and is not barred by the
10 economic loss rule.
11 4. Lust Can Establish Reasonable Reliance.
12 Defendants argue that Lust could not have reasonably relied on (1) Nalbandian’s
13 misrepresentations that they were entering a five-year agreement because the SFA
14 stated a two-year term; and (2) the notion longform agreement would materially alter
15 the SFA terms, because Lust is an experienced executive. Neither argument has merit.
16 Defendants have set up a straw man as to the second issue. Lust has not alleged
17 or stated in interrogatories that he relied on representations that the longform would
18 “materially alter” the SFA. Yet Defendants present that to the Court as Lust’s position.
19 Doc. 90 at 34:15-27. This is simply dishonest. Lust’s contention is “Nalbandian and
20 Cornish repeatedly promised that the Parties would enter into a “long form” agreement
21 that would more fully set forth the terms of the partnership relationship between the
22 Parties.” SS¶32 (Ex. 35 at 6:12-14, 6:22-7:4). Defendants cannot obtain summary
23 judgment by misrepresenting Lust’s position in this lawsuit.
24 Next, Defendants assert that parol evidence of fraud is not admissible to
25 contradict the SFA. This is an incorrect statement of the law as to Lust’s claims for
26 fraud in the inducement. In Riverisland Cold Storage, Inc. v. Fresno-Madera
27 Productions Credit Association, 55 Cal.4th 1169, 1182 (2013), the California Supreme
28 Court “reaffirm[ed] the venerable maxim” that it “was never intended that the parol

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1 evidence rule should be used as a shield to prevent the proof of fraud.” In the case of
2 fraud in the inducement, “fraud undermines the essential validity of the parties’
3 agreement. When fraud is proven, it cannot be maintained that the parties freely
4 entered into an agreement reflecting a meeting of the minds.” Id. Thus, Lust’s evidence
5 that Defendants’ representations contradicted the SFA terms, and that Lust relied on
6 those misrepresentations in entering the contract, is admissible.
7 5. Intent Can and Will Be Proved by Circumstantial Evidence.
8 In a one sentence throwaway argument, Defendants claim that there is no
9 evidence that Defendants had the intent to defraud Lust at the time the SFA was
10 executed. The absence of direct evidence of fraudulent intent does not subject a fraud
11 claim to summary judgment. “[F]raudulent intent must often be established by
12 circumstantial evidence. Prosser . . . cites cases in which fraudulent intent has been
13 inferred from such circumstances as defendant's insolvency, his hasty repudiation of
14 the promise, his failure even to attempt performance, or his continued assurances after
15 it was clear he would not perform.”). Tenzer v. Superscope, Inc., 39 Cal.3d 18, 30
16 (1985); accord Locke v. Warner Bros., 57 Cal.App.4th 354, 368 (1997) (“Based on the
17 above evidence that Warner had expressed an absolute unwillingness to work with
18 Locke, a trier of fact reasonably could infer Warner never intended to give Locke's
19 proposals a good faith evaluation and that Warner entered into the agreement with
20 Locke solely as an accommodation to Eastwood, who had promised to reimburse
21 Warner for any losses under the agreement… We conclude the issue of fraudulent
22 intent is one for the trier of fact”); In re Agricultural Research and Technology Group,
23 Inc., 916 F.2d 528, 534-35 (9th Cir. 1990).
24 As in Tenzer and Locke, the issue of fraudulent intent is one for the trier of fact.
25 There are facts under which a trier of fact could conclude, by Defendants’ hasty
26 repudiation of their promises, their failure to even attempt performance, and their
27 assurances that they would perform, that Defendants intended all along to defraud
28 Lust. AF¶37, 40, 45, 47, 54-55, 60.

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1 6. Lust Has Been Damaged by Defendants’ Fraud.

2 Defendants assert that because Lust has not received a producer credit on any
3 theatrically-released feature film, they are free to defraud him without consequence.
4 Doc. 90 at 35:14-27. Not so fast. Lust has incurred serious damage to his career, his
5 “quote,” damages from the lost producer credits on Peter Rabbit and the other films on
6 the ALE/Lust slate, all proximately caused by Defendants’ fraud.
7 Lust is entitled to monetary damages from loss of the valuable producer credits
8 at issue in this case. See, e.g., Paramount Productions v. Smith, 91 F.2d 863, 867 (9th
9 Cir. 1937) (plaintiff testified that, after receiving screenwriting credit, he received as
10 much as double his previous salary); Tamarind Lithography Workshop, Inc. v. Sanders,
11 143 Cal.App.3d 571, 577 & fn. 6 (1983) (in successful attempt to enjoin defendant
12 company from distributing any films not containing plaintiff’s proper screen credits,
13 experts quantified the value of the publicity from this screen credit to be worth $50,000
14 to $100,000 [in 1983 dollars] in plaintiff’s future employment); Poe v. Michael Todd
15 Co., 151 F.Supp. 801, 803 (S.D N.Y 1957) (a writer’s reputation, which would be
16 greatly enhanced by public credit for authorship of an outstanding picture is his stock
17 in trade and failure to give credit would result in irreparable injury).
18 Lust has produced expert opinion, consistent with the above-cited authorities,
19 stating that Lust was damaged by Defendants’ fraudulent conduct. DF¶42.
20 G. Lust Still Owns IP Rights on Projects as to Which He Did Not Sign a COE.
21 Defendants point out, “[u]nder the Copyright Act, ‘[c]opyright protection
22 subsists ... in original works of authorship fixed in any tangible medium of expression
23 ... [including] motion pictures,” done “by or under the authority of the author.” 17
24 U.S.C. § 102(a); 17 U.S.C. § 101; Garcia v. Google, 786 F.3d 733, 741 (9th Cir.
25 2015). Lust fixed his IP in a tangible medium, audio recordings, in 2013-2014 – he did
26 not wait until 2017 as alleged. DF¶43. Like all Lust’s claims, this one must go to trial.
27 Defendant’s contention that Lust has no IP rights in the projects he worked on
28 would come as a surprise to the U.S. Copyright Office, which has registered Lust’s

24
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1 copyright to The Shrinking of the Treehorns, Astro Boy, Fortunately the Milk, and
2 Monkeys. DF¶43. These registrations give the lie to Defendants’ offensive suggestion
3 that Lust was of no more significance than a hairstylist.
4 Defendants’ reliance on Effects Associates, Inc., supra, 908 F.2d at 558-559 is
5 misplaced. Effects Associates holds that, at best, Defendants may attempt to prove that
6 Lust has transferred a nonexclusive license to use his copyrightable work. Id.
7 Defendants would have the burden to prove at trial that such a license was implied by
8 Lust’s conduct. Id. However, copyright ownership is a bundle of rights. Even if
9 Defendants can prove a nonexclusive license at trial, Lust retains his copyright and
10 “may license, sell or give away for nothing [his] remaining rights” in the projects. Id.
11 at 559. Those remaining rights include valuable merchandising rights.
12 H. Lust Has a Legally Sustainable Claim for an Accounting.
13 “A cause of action for an accounting requires a showing that a relationship exists
14 between the plaintiff and defendant that requires an accounting, and that some balance
15 is due the plaintiff that can only be ascertained by an accounting.” Teselle v.
16 McLoughlin, 173 Cal.App.4th 156, 179 (2009). “[A] fiduciary relationship between the
17 parties is not required to state a cause of action for accounting. All that is required is
18 that some relationship exists that requires an accounting.” Id.
19 Without citation to authority, Defendants argue that Lust’s accounting claim
20 fails because it is not a cause of action. This is simply not true:
A cause of action for accounting requires a showing of a relationship between
21 the plaintiff and the defendant, such a fiduciary relationship, that requires an
accounting or a showing that the accounts are so complicated they cannot be
22 determined through an ordinary action at law.
23 Fleet v. Bank of America, 229 Cal.App.4th 1403, 1413 (2014).
24 Even if a fiduciary relationship is required (and Lust contends it is not), Lust’s
25 evidence concerning Defendants’ breach of fiduciary duty and fraud are proper
26 grounds for an accounting claim. Union Bank v. Superior Court, 31 Cal.App.4th 573,
27 593 (1995).
28

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1
Dated: March 26, 2018 JOHNSON & JOHNSON LLP
2
3 By /s/ Neville Johnson
Neville L. Johnson
4 Attorneys for Plaintiff/
Counterclaim-Defendant,
5 Jason Lust and Third-Party Defendant
6 SAJ Productions, LLC
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Lust V Animal Logic MSJ Opposition

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Case 2:17-cv-00308-JAK-AFM Document 110 Filed 03/26/18 Page 1 of 34 Page ID #:4768

1 Neville L. Johnson (SBN 66329)

14 Plaintiff, Hon. Judge John A. Kronstadt

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

ANIMAL LOGIC ENTERTAINMENT,

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

9 Columbia Pictures Negotiate a Producer Agreement ............................................ 6

1 5. Intent Can and Will Be Proved by Circumstantial Evidence. .......................23

5 238 Cal.App.2d 842 (1965) ...................................................................................... 11

6 Bank of the West v. Valley Nat. Bank of Arizona,

7 41 F.3d 471 (9th Cir. 1994) ...................................................................................... 20

8 Barrett v. Bank of America,

9 183 Cal.App.3d 1362 (1986) .................................................................................... 20

10 Brawthen v. H&R Block, Inc.,

12 California and Hawaiian Sugar Co. v. Sun Ship, Inc.,

14 Chou v. University of Chicago,

16 DuBeck v. California Physicians’ Service,

18 Effects Associates, Inc. v. Cohen,

20 Eisenbaum v. Western Energy Resources, Inc.,

24 Fleet v. Bank of America,

26 Frankish v. Federal Mort. Co.,

1 Robinson Helicopter, Inc. v. Dana Corp.,

1 17 U.S.C. § 102(a) ........................................................................................................ 24

1 MEMORANDUM OF POINTS AND AUTHORITIES

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

1 II. STATEMENT OF FACTS

5 partner at Circle of Confusion, where he set up a slate of films as a producer. Id. He

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

5 Separate Statement of Undisputed Facts (“SS”) ¶ 2. Per the agreement, Lust

6 understood he had entered into a producing partnership with ALE. DF ¶ 5, AF ¶ 10-11.

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

7 copying Lust on correspondence. Id.¶36.

22 affiliate” relationship with ALE. This contradicted the SFA’s “producing

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

1 the terms of a “great collaborative partnership.” AF¶8-9. Each was contributing a

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

1 6. Lust Has Been Damaged by Defendants’ Fraud.

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

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