Planete Bleue Television, Inc., et al. v. A&E Television Networks, LLC, et al.MEMORANDUM OF LAW in Support re: 60 MOTION to Dismiss . . DocumentS.D.N.Y.January 5, 20184830-8944-3916v.7 0052023-000068 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK PLANÈTE BLEUE TÉLÉVISION, INC. and PLANÈTE BLEUE TÉLÉVISION II, INC., Plaintiffs, - against - A&E TELEVISION NETWORKS, LLC, and AON/ALBERT G. RUBEN INSURANCE SERVICE, INC., Defendants. X : : : : : : : : : : : : : X Case No. 16 Civ. 9317 (PGG) MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT A&E TELEVISION NETWORKS, LLC’S MOTION TO DISMISS THE COMPLAINT Sharon L. Schneier Geoffrey S. Brounell DAVIS WRIGHT TREMAINE LLP 1251 Avenue of the Americas, 21st Floor New York, New York 10020-1104 Tel: (212) 489-8230 Fax: (212) 489-8340 sharonschneier@dwt.com geoffreybrounell@dwt.com Attorneys for Defendant A&E Television Networks, LLC Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 1 of 32 i 4830-8944-3916v.7 0052023-000068 TABLE OF CONTENTS Page TABLE OF AUTHORITIES .......................................................................................................... ii PRELIMINARY STATEMENT .................................................................................................... 1 FACTUAL BACKGROUND ......................................................................................................... 3 A. The Parties and the Agreement ............................................................................... 3 B. PBTV’s Purported “Rights of First Refusal” .......................................................... 6 C. Procedural History .................................................................................................. 8 LEGAL STANDARD ..................................................................................................................... 8 ARGUMENT ................................................................................................................................ 10 I. PBTV’S CLAIMS EACH FAIL AS A MATTER OF LAW AND SHOULD BE DISMISSED ..................................................................................................................... 10 A. Breach of Contract ................................................................................................ 10 B. Breach of Implied Duty of Good Faith and Fair Dealing ..................................... 15 C. Specific Performance ............................................................................................ 17 D. Reformation, Unilateral Mistake/Fraud ................................................................ 18 CONCLUSION ............................................................................................................................. 25 Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 2 of 32 ii 4830-8944-3916v.7 0052023-000068 TABLE OF AUTHORITIES Page(s) Federal Cases Alexander & Alexander v. These Certain Underwriters, 136 F.3d 82 (2d Cir. 1998).......................................................................................................11 Alter v. Bogoricin, No. 97 Civ. 0662 (MBM), 1997 WL 691332 (S.D.N.Y. Nov. 6, 1997) ..................................16 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...............................................................................................................8, 9 ATSI Commc’ns v. Shaar Fund, 493 F.3d 87 (2d Cir. 2007).......................................................................................................21 Banque Arabe v. Md. Nat’l Bank, 57 F.3d 146 (2d Cir. 1995).......................................................................................................23 Bell Atl. v. Twombly, 550 U.S. 544 (2007) ...............................................................................................................8, 9 BLD Productions, LLC v. Viacom, Inc., No. 10 Civ. 2625 (PGG), 2011 WL 1327340 (S.D.N.Y. Mar. 31, 2011) ..........................14, 15 Chapman v. N.Y. State Div. for Youth, 546 F.3d 230 (2d Cir. 2008).....................................................................................................11 Compagnie Financiere v. Merrill Lynch, 232 F.3d 153 (2d Cir. 2000).....................................................................................................11 Cortec Indus. v. Sum Holding, 949 F.2d 42 (2d Cir. 1991).........................................................................................................9 Creative Waste v. Capitol Envtl., 429 F. Supp. 2d 582 (S.D.N.Y. 2006) ......................................................................................23 Farkas v. Farkas, No. 95 Civ. 8464 (HB), 1997 WL 411920 (S.D.N.Y. July 23, 1997) .....................................22 Harsco Corp. v. Segui, 91 F.3d 337 (2d Cir. 1996).......................................................................................................14 In re JP Morgan Auction Rate Sec. (ARS) Mktg. Litig., 867 F. Supp. 2d 407 (S.D.N.Y. 2012) ......................................................................................23 Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 3 of 32 iii 4830-8944-3916v.7 0052023-000068 In re Livent, Inc. Noteholders Secs. Litig., 151 F. Supp. 2d 371 (S.D.N.Y. 2001) ........................................................................................9 In re Mid-Island Hosp., Inc., 276 F.3d 123 (2d Cir. 2002).....................................................................................................23 Int’l Audiotext Network v. AT&T, 62 F.3d 69 (2d Cir. 1995) ..........................................................................................................9 Jordan v. Verizon Corp., No. 08 Civ. 6414 (GEL), 2008 WL 5209989 (S.D.N.Y. Dec. 10, 2008) ................................16 Jurgensen v. Felix Storch, Inc., No. 12 Civ. 1201 (KBF), 2012 WL 2354247 (S.D.N.Y. June 14, 2012) ................................22 K. Bell & Assocs. v. Lloyd’s, 97 F.3d 632 (2d Cir. 1996).......................................................................................................11 Loreley Fin. v. Wells Fargo, No. 12 Civ. 3723 (RJS), 2013 WL 1294668 (S.D.N.Y. Mar. 28, 2013), rev’d in part on other grounds, vacated in part, 797 F.3d 160 (2d Cir. 2015) .................................24 Mfrs. Hanover Trust Co. v. Yanakas, 7 F.3d 310 (2d Cir. 1993) ........................................................................................................14 Nat’l Util. Serv., Inc. v. Tiffany & Co., No. 07 Civ. 3345 (RJS), 2009 WL 755292 (S.D.N.Y. Mar. 20, 2009) ...................................12 Negrete v. Citibank, N.A., 187 F. Supp. 3d 454 (S.D.N.Y. 2016) ......................................................................................14 Neitzke v. Williams, 490 U.S. 319 (1989) ...................................................................................................................8 New York ex rel. Khurana v. Spherion Corp., No. 15 Civ. 6605 (JFK), 2016 WL 6652735 (S.D.N.Y. Nov. 10, 2016) .................................22 Newmont Mines Ltd. v. Hanover Ins. Co., 784 F.2d 127 (2d Cir. 1986).....................................................................................................12 OHM Remediation Servs. Corp. v. Hughes Envt’l Sys., 952 F. Supp. 120 (S.D.N.Y. 1997)...........................................................................................15 Readco, Inc. v. Marine Midland Bank, 81 F.3d 295 (2d Cir. 1996).......................................................................................................11 RJ Capital, S.A. v. Lexington Capital Funding III, Ltd., No. 10 Civ. 24 (PGG), 2011 WL 3251554 (S.D.N.Y. July 28, 2011) .....................................17 Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 4 of 32 iv 4830-8944-3916v.7 0052023-000068 RJE Corp. v. Northville Indus. Corp., 329 F.3d 310 (2d Cir. 2003).....................................................................................................12 Robinson v. Deutsche Bank Trust Co. Americas, 572 F. Supp. 2d 319 (S.D.N.Y. 2008) ......................................................................................21 Rombach v. Chang, 355 F.3d 164 (2d Cir. 2004).....................................................................................................21 San Leandro v. Philip Morris, 75 F.3d 801 (2d Cir. 1996).........................................................................................................9 Sarinsky’s Garage Inc. v. Erie Ins. Co., 691 F. Supp. 2d 483 (S.D.N.Y. 2010) ......................................................................................12 Sayers v. Rochester Tel. Corp., 7 F.3d 1091 (2d Cir. 1993).................................................................................................12, 13 Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425 (2d Cir. 1992).....................................................................................................12 Solutia Inc. v. FMC Corp., 385 F. Supp. 2d 324 (S.D.N.Y. 2005) ......................................................................................14 Thayer v. Dial Indus. Sales, Inc., 85 F. Supp. 2d 263 (S.D.N.Y. 2000) ........................................................................................14 Tierney v. Omnicom, No. 06 Civ. 14302 (LTS) (THK), 2007 WL 2012412 (S.D.N.Y. July 11, 2007) ....................17 Topps Co. v. Cadbury Stani, 526 F.3d 63 (2d Cir. 2008).......................................................................................................11 Transnational Mgmt. Sys. II, LLC v. Carcione, No. 14 Civ. 2151 (KBF), 2016 WL 7077040 (S.D.N.Y. Dec. 5, 2016) ..................................19 Travelers Indemnity v. CDL Hotels, 322 F. Supp. 2d 482 (S.D.N.Y. 2004) ......................................................................................24 United States v. BNYM, 941 F. Supp. 2d 438 (S.D.N.Y. 2013) ........................................................................................9 United States v. Szur, 289 F.3d 200 (2d Cir. 2002).....................................................................................................23 Wall v. CSX Transp., Inc., 471 F.3d 410 (2d Cir. 2006).....................................................................................................18 Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 5 of 32 v 4830-8944-3916v.7 0052023-000068 State Cases Amcan Holdings, Inc. v. Canadian Imperial Bank of Commerce, 70 A.D.3d 423 (1st Dep’t 2010) ..............................................................................................16 Apfel v. Prudential-Bache Secs. Inc., 183 A.D.2d 439 (1st Dep’t 1992) ............................................................................................15 Barclay Arms, Inc. v. Barclay Arms Assocs., 74 N.Y.2d 644 (1989) ..............................................................................................................25 Cho v. 401-401 57th St. Realty Corp., 300 A.D.2d 174 (1st Dep’t 2002) ............................................................................................17 Citibank, N.A. v. Plapinger, 66 N.Y.2d 90 (1985) ................................................................................................................20 Danann Realty Corp. v. Harris, 5 N.Y.2d 317 (1959) ................................................................................................................19 Greater N.Y. Mut. Ins. Co. v. United States Underwriters Ins. Co., 36 A.D.3d 441 (1st Dep’t 2007) ..............................................................................................18 In re Dean Witter, 282 A.D.2d 271 (1st Dep’t 2001) ............................................................................................20 J.E. Morgan Knitting Mills, Inc. v. Reeves Bros., 243 A.D.2d 422 (1st Dep’t 1997) ............................................................................................20 Jacobs Private Equity, LLC v. 450 Park LLC, 22 A.D.3d 347 (1st Dep’t 2005) ..............................................................................................16 Jaffe v. Paramount, 222 A.D.2d 17 (1st Dep’t 1996) ..............................................................................................16 Kass v. Kass, 91 N.Y.2d 554 (1998) ..............................................................................................................11 Krantz v. Chateau Stores, 256 A.D.2d 186 (1st Dep’t 1998) ............................................................................................20 L.K. Station v. Quantek Media, 62 A.D.3d 487 (1st Dep’t 2009) ..............................................................................................18 Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413 (1996) ..............................................................................................................19 Prestige Foods, Inc. v. Whale Secs. Co., 243 A.D.2d 281 (1st Dep’t 1997) ............................................................................................21 Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 6 of 32 vi 4830-8944-3916v.7 0052023-000068 Raytheon Co. v. AES Red Oak, LLC, 37 A.D.3d 364 (1st Dep’t 2007) ........................................................................................19, 20 Sheth v. N.Y. Life Ins. Co., 273 A.D.2d 72 (1st Dep’t 2000) ..............................................................................................20 Skillgames, LLC v. Brody, 1 A.D.3d 247 (1st Dep’t 2003) ................................................................................................19 Sokoloff v. Harriman Estates, 96 N.Y.2d 409 (2001) ..............................................................................................................18 Triton Partners LLC v. Prudential Secs., Inc., 301 A.D.2d 411 (1st Dep’t 2003) ......................................................................................16, 20 Rules Federal Rule of Civil Procedure 8 ...............................................................................................1, 8 Federal Rule of Civil Procedure 9(b) ...............................................................................1, 8, 21, 22 Federal Rule of Civil Procedure 12(b)(6) ..............................................................................1, 8, 21 Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 7 of 32 4830-8944-3916v.7 0052023-000068 Defendant A&E Television Networks, LLC (“AETN”) submits this memorandum of law in support of its motion to dismiss the Complaint filed by Planète Bleue Télévision, Inc. and Planète Bleue Télévision II, Inc. (referred to interchangeably in the Complaint, and in this memorandum, as “PBTV”) pursuant to Federal Rules of Civil Procedure 12(b)(6), 8, and 9(b). PRELIMINARY STATEMENT This case involves a pure question of law regarding the interpretation of an executed contract between PBTV and AETN. PBTV - a television production company - negotiated and signed a contract with AETN relating to a television series entitled Killer Kids (the “Series”). In that contract, the parties agreed to the following provisions relevant to this dispute: • PBTV would produce nine episodes of the Series for exhibition on an AETN channel for $200,000 per episode; • AETN could create “at any time and at all times” additional episodes of the Series using third-party producers in exchange for paying PBTV 4% of the per-episode budget of any such episode; • AETN would possess “exclusive options” - an “Initial Option” which, if exercised, would lead to five more exclusive and dependent options to require PBTV to produce additional episodes of the Series, while PBTV maintained corresponding rights attached to each option to back out of this obligation without being in breach of the contract; and • The contract would constitute the complete and final agreement, superseding any prior written or oral agreements between the parties. The Complaint, despite its rhetoric, sets forth facts demonstrating that the parties adhered to the material terms of the contract. PBTV produced nine episodes of the Series and a third-party company, 44 Blue, was hired by AETN to produce additional episodes of the Series. AETN never exercised its “Initial Option” under the contract, which would have required PBTV to produce additional episodes of the Series. As a result, PBTV was never in the situation to exercise its corresponding right to back out of this production obligation. Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 8 of 32 2 4830-8944-3916v.7 0052023-000068 Notwithstanding this clarity, PBTV now alleges that AETN breached the contract because it actually gave - or was supposed to have given - PBTV six “rights of first refusal” to determine whether AETN was permitted to utilize a third-party producer to produce any additional episodes of the Series. But language ostensibly affording these unconditional first refusal rights not only does not appear in the contract, the agreement explicitly contradicts this alleged obligation. The contract unambiguously states that AETN has the absolute right to use a third- party producer - “at any time and at all times” - subject to AETN paying PBTV a generous 4% of the per-episode budget of any episode produced by a third-party producer. This contractual provision vitiates PBTV’s claim that AETN breached the contract by using a third-party producer, and not PBTV, to produce subsequent episodes. In an attempt to avoid this inevitable conclusion, PBTV asserts a claim for fraudulent inducement based on the parties’ alleged pre-contractual negotiations. New York law is unequivocal, however, in holding that there is no such claim when the allegedly fraudulent misrepresentation is contradicted by an unambiguous contract entered into by the parties. That is precisely the case here. AETN had an explicit and unequivocal right under the contract to use a third-party producer to produce subsequent episodes (beyond the initial nine) “at any time and at all times” conditioned only on the corresponding obligation to make an agreed-to payment to PBTV. The contract thus squarely contradicts PBTV’s argument that AETN gave it a “right of first refusal” over every subsequent production of the Series. Moreover, and as an entirely separate matter, PBTV fails to allege any fraudulent misrepresentations or omissions by AETN. For either of these two independent reasons, the fraudulent inducement claim must be dismissed as a matter of law. And without a viable claim for fraudulent inducement, parol evidence cannot be introduced to provide alternative and unsupported terms to this unambiguous and integrated Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 9 of 32 3 4830-8944-3916v.7 0052023-000068 contract. The language of the agreement must govern, and under any reading of this language, PBTV’s breach of contract claim must be dismissed. PBTV’s final two tag-along claims (for breach of the implied duty of good faith and fair dealing and “specific performance”) both fall with the untenable breach of contract claim, and must be summarily dismissed as a matter of law. Accordingly, there is no legal merit to any of the claims asserted against AETN. The Court should grant AETN’s motion and dismiss the Complaint in its entirety. FACTUAL BACKGROUND A. The Parties and the Agreement Plaintiffs are two Canadian-based corporations: Planète Bleue Télévision, Inc., and its successor, Planète Bleue Télévision II, Inc. Compl. ¶¶ 4, 7. PBTV’s executives include its president, Roberto Luca, and its vice president, Jean LeClerc. Id. ¶ 29. Defendant AETN is a New York-based media company that owns and operates cable and satellite television channels. Id. ¶ 8. Defendant Aon/Albert G. Ruben Insurance Services, Inc. (“Aon”) serves as the insurance broker for AETN’s third-party producers. Id. ¶ 10; see also infra note 8, at 16-17. PBTV’s business model is to “engage in television production, including documentaries aimed at the world market.” Compl. ¶ 7. To that end, PBTV entered into two agreements with AETN relating to the Series. Id. ¶¶ 14, 15.1 In the first agreement, which PBTV alleges is “not the subject of this litigation,” AETN purchased the right to air in the United States during the 2011-2012 television season eight episodes of the Series produced by PBTV. Id. ¶ 15. PBTV had previously contracted to air the Series in “Canada, France, and elsewhere.” Id. ¶ 14. The Series aired “to great success in the United States.” Id. ¶ 15. 1 The Series, as described in the Complaint, consists of “documentary and re-enactment episodes featuring juveniles or teens who become killers or murderers for various reasons or psychopathic urges, covering single to serial killings by individuals, duos or groups.” Compl. ¶ 14. Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 10 of 32 4 4830-8944-3916v.7 0052023-000068 The second agreement, which is at issue, may be considered by this Court. See infra at 9. In this contract - referred to in the Complaint as the “Production Agreement” or “Long Form Contract,” and in this memorandum as the “Agreement” - the parties agreed to, among other things, the following four key provisions: First, AETN agreed to purchase nine more episodes of the Series, to be produced by PBTV, for the price of $200,000 per episode. See Agreement at 1 and ¶ 8. Second, PBTV granted AETN the right to create and air additional episodes utilizing the “structures, themes, and general idea of the” Series with a different third-party production company (i.e., not PBTV) “at any time and at all times” in exchange for the payment of 4% of the per-episode budget of each such episode. See id. ¶ 2. The Agreement’s language on this point is plain and simple, as set forth in the “Ownership and Distribution” section: AETN shall be entitled, at any time and at all times, to utilize the structure, themes and general idea of the Series (the “Format”) in production of programs with another or other production companies (and without Producer’s2 involvement), subject to the terms of the sentence which follows. As compensation for the right to utilize the Format and the Series title (the sufficiency of such consideration being hereby acknowledged by Producer), AETN shall pay Producer directly an amount equal to Four Percent (4%) of One Hundred Percent (100%) of the per- episode budget of each such episode produced. Agreement ¶ 2. Third, the Agreement provided AETN with an exclusive Initial Option to require PBTV to produce 10-26 more episodes of the Series for the same $200,000 per-episode price. In the event that AETN exercised the Initial Option, however, PBTV contractually reserved the right to back out of this obligation “if [it] determines at any time that it cannot reasonably produce additional Episodes.” Id. ¶ 4. The Agreement further made explicit that PBTV would not be in breach of the 2 The Agreement defines “Producer” as PBTV. See Agreement at 1. Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 11 of 32 5 4830-8944-3916v.7 0052023-000068 Agreement by refusing to abide by AETN’s exercise of its exclusive option and that AETN, instead, would be free to proceed with a third-party producer of its choice. If AETN exercised the Initial Option, the Agreement repeated this contractual arrangement for five additional options: AETN possessed the exclusive option to require PBTV to produce five sets of 10-26 additional episodes, with PBTV maintaining a corresponding right to back out of this obligation without being in breach of the Agreement. Again, the relevant language straightforwardly sets out these rights in the “Options” section of the Agreement: AETN shall have an exclusive option (the “Initial Option”), exercisable in writing no later than the earlier of (i) one hundred twenty (120) days after the premiere telecast of the final Episode ordered hereunder, or (ii) one hundred eighty (180) days from the delivery and technical acceptance of the Delivery Materials for such Episode, to require Producer to produce a minimum of ten (10) and up to twenty-six (26) additional one (1) hour Episodes, substantially similar in look, feel and format to the Episodes previously produced, pursuant to all of the same terms and conditions as those set forth herein, and with the same per-Episode Financial Commitment as the Episode ordered herein. Notwithstanding the foregoing, if Producer determines at any time that it cannot reasonably produce additional Episodes, AETN shall be entitled to produce such Episodes with a third party of its choice and Producer shall not be in breach of this Agreement. If AETN exercises the Initial Option, AETN shall have five (5) additional exclusive and dependent options (the “Second Option,” “Third Option,” Fourth Option,” Fifth Option,” and Sixth Option,” respectively), each to engage Producer (if exercised) to produce a minimum of ten (10) and up to twenty-six (26) Episodes for each Option pursuant to the same terms and conditions contained herein . . . . Notwithstanding the foregoing, if Producer determines at any time that it cannot reasonably produce additional Episodes, AETN shall be entitled to produce such Episodes with a thirty party of its choice and Producer shall not be in breach of this Agreement.” Id. ¶ 4 (the “Exclusive Option” provision). Fourth, the parties agreed to a merger/integration clause, that “[t]his Agreement contains the entire agreement between the parties with respect to the subject matter hereof and shall Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 12 of 32 6 4830-8944-3916v.7 0052023-000068 supersede all prior written or oral agreements between [PBTV] and AETN with respect hereto. This Agreement shall not be modified, except by written instrument signed by authorized representatives of both parties.” Id. ¶ 21. Jean LeClerc initialed each page of the Agreement, which was fully executed by both parties on November 12, 2012. See Agreement at 20; Compl. ¶ 47. B. PBTV’s Purported “Rights of First Refusal” The crux of Plaintiffs’ Complaint is premised on the notion that the Exclusive Option provision (just quoted) required AETN to offer PBTV the option to produce each and every episode of the Series, with AETN being allowed to use a third-party producer only if and when PBTV refused the offer. See Compl. ¶ 57. PBTV labels this “the six rights of first refusal.” See, e.g., id. ¶ 19. The Complaint alleges AETN violated the Agreement because it produced episodes of the Series with third-party producer 44 Blue without first soliciting (and receiving) PBTV’s permission to do so. See id. ¶¶ 33-34 & Ex. A. Because this interpretation cannot be squared with the actual language of the Agreement, the Complaint further alleges that the “true agreement” was actually entered into during a June 29, 2012 conference call. Id. ¶¶ 40-41. But PBTV acknowledges that the email from AETN to Jean LeClerc following that call, which summarized “the principal business points” that AETN and PBTV had just agreed to, did not reflect PBTV’s unfettered rights of refusal regarding the production of all subsequent shows. Id. ¶¶ 42-43. Rather, this e-mail - which PBTV labels a “deal memo” - contained terms that were entirely consistent with what was set forth ultimately in the executed Agreement. In it, AETN agrees to pay PBTV $200,000 per episode for episodes of the Series it produced and, under a section headlined “EPISODES PRODUCED BY A PRODUCTION COMPANY OTHER THAN PLANETE BLEUE,” provides that “Planete Bleue and AETN have agreed that AETN may produce additional episodes of KILLER KIDS with Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 13 of 32 7 4830-8944-3916v.7 0052023-000068 another production company” in exchange for paying PBTV 4% of the per-episode budget of each such episode. Id. ¶ 43 (underlining and capitalization in original).3 The Complaint acknowledges that the deal memo made no mention of the purported “rights of first refusal.” Id. ¶¶ 43-44. AETN requested LeClerc to “please acknowledge [his] agreement to these points by return e- mail.” Id. ¶ 43. LeClerc acknowledged the agreement. Id. ¶ 44. The Complaint alleges that the final sentence in each of the two paragraphs in the Exclusive Option provision in the Agreement (beginning with “Notwithstanding”) “was drafted by AETN’s counsel to reflect PBTV’s request . . . which was to provide PBTV rights of first refusal on a per-episode basis.” Id. ¶ 60.4 PBTV also alleges that it sent an e-mail to AETN setting forth this understanding, an e-mail to which “PBTV received no contradiction.” Id. ¶¶ 66-67. Jean LeClerc signed (and initialed each page of) the Agreement on behalf of PBTV, which was fully executed on November 12, 2012. See Agreement at 20; Compl. ¶ 47. Notwithstanding the Agreement’s unambiguous language explicitly refuting the notion that PBTV possessed any 3 The straightforward language, capitalization, and underscoring of this paragraph belie the Complaint’s allegation that this memorialization of the parties’ agreement was in any way “deceptive.” See Compl. ¶ 44. 4 The actual request made by LeClerc does not support this allegation, however. LeClerc requested “the following proposed language, noting that it would need to be translated into New York legal language: ‘The Producer may decide to limit the number of episodes to be produced and if he decline A&E can offer the contract to another producer of its choice, this clause not altering any options below between the parties.’” Compl. ¶ 59. PBTV alleges that “[t]he underlined language” - i.e., the final sentence in the two paragraphs in the Exclusive Option provision beginning with “Notwithstanding” - “was drafted by AETN’s counsel to reflect PBTV’s request.” Id. ¶ 60. And, in fact, the sentence does reflect this understanding: if AETN exercises the Exclusive Option to require PBTV to produce more episodes, PBTV has the corresponding right to back out of this obligation - the conditional right set forth in the final sentence of the Exclusive Option provision. See Agreement ¶ 4 (“Notwithstanding the foregoing, if Producer determines at any time that it cannot reasonably produce additional Episodes, AETN shall be entitled to produce such Episodes with a third party of its choice and Producer shall not be in breach of this Agreement.”). Furthermore, this final sentence did “not alter[] any options [] between the parties,” as LeClerc requested - the language setting forth the Initial (and subsequent) exclusive Options were unchanged, and still belonged solely to AETN. Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 14 of 32 8 4830-8944-3916v.7 0052023-000068 sort of “rights of first refusal,” PBTV claims that it was not until June 2015 that it realized AETN did not perceive that PBTV had any such right. Compl. ¶¶ 68, 69. C. Procedural History The Complaint was filed on December 2, 2016 and alleges four claims against AETN. The claims are for breach of contract (Count 1), breach of the implied duty of good faith and fair dealing (Count 2), specific performance (Count 3), and reformation, unilateral mistake/fraud (Count 4). (Doc. No. 1.) PBTV also asserts claims for breach of contract, breach of fiduciary duty, and breach of the implied duty of good faith and fair dealing against co-defendant Aon. On June 6, 2017, this Court held a pre-motion conference, during which the Court requested that both AETN and Aon submit redacted and unredacted versions of relevant documents, including the Agreement. (Doc. Nos. 47.) Aon and AETN submitted the requested documents to the Court on June 14, 2017. (Doc. Nos. 42, 43.) On July 27, 2017, the Court held a telephone conference and set a briefing schedule for the defendants’ motions. (Doc. Nos. 46, 49.) AETN now moves pursuant to Rules 12(b)(6), 8, and 9(b) to dismiss all of the claims asserted against it in the Complaint, with prejudice. LEGAL STANDARD Federal Rule of Civil Procedure 12(b)(6) enables the Court to terminate lawsuits that are fatally flawed in their legal premises, thereby sparing the litigants the burdens of unnecessary pretrial and trial activity. Neitzke v. Williams, 490 U.S. 319, 326-27 (1989). To survive a 12(b)(6) motion, a plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). By contrast, “[a] pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 15 of 32 9 4830-8944-3916v.7 0052023-000068 of action will not do.’ Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Id. (quoting Twombly, 550 U.S. at 555, 557). The Court, in ruling on a motion to dismiss, considers the allegations of the complaint as well as “any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference.” Int’l Audiotext Network v. AT&T, 62 F.3d 69, 72 (2d Cir. 1995) (quoting Cortec Indus. v. Sum Holding, 949 F.2d 42, 47-48 (2d Cir. 1991)). When “‘a plaintiff chooses not to attach to the complaint a document . . . upon which it solely relies and which is integral to the complaint,’ the court may nevertheless take the document into consideration in deciding the defendant’s motion to dismiss, without converting the proceeding to one for summary judgment.” Id. (quoting Cortec, 949 F.2d at 47-48) (alteration omitted); see also, e.g., San Leandro v. Philip Morris, 75 F.3d 801, 808-09 (2d Cir. 1996) (permissible to consider full text of documents partially quoted in complaint). Significantly, the Court need not accept as true allegations “that are contradicted . . . by documents upon which its pleadings rely.” In re Livent, Inc. Noteholders Secs. Litig., 151 F. Supp. 2d 371, 405-06 (S.D.N.Y. 2001) (collecting cases); see generally United States v. BNYM, 941 F. Supp. 2d 438, 450 & nn.74-75 (S.D.N.Y. 2013). In this case, because the Complaint alleges a breach of the Agreement by AETN, the entire Agreement may be reviewed by the Court and not merely the selective portions set forth in the Complaint. Cf. Cortec Indus., 949 F.2d at 47 (“[W]hen a plaintiff chooses not to attach to the complaint . . . a [document] upon which it solely relies and which is integral to the complaint, the defendant may produce the [document] when attacking the complaint for its failure to state a claim, because plaintiff should not so easily be allowed to escape the consequences of its own failure.”).5 5 AETN provided the Court with both unredacted and redacted versions of the Agreement on June 14, 2017. (Doc. No. 43.) AETN re-attaches the redacted version of the Agreement as Exhibit B to the Brounell Affidavit in support of this motion, for the Court’s convenience. Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 16 of 32 10 4830-8944-3916v.7 0052023-000068 ARGUMENT I. PBTV’S CLAIMS EACH FAIL AS A MATTER OF LAW AND SHOULD BE DISMISSED A. Breach of Contract The claim for breach of contract must be dismissed because, quite simply, AETN did not breach the Agreement. Here, PBTV’s alleged contract claim is based on its unsupported - and unsupportable - assertion that the Exclusive Option in the Agreement afforded PBTV a so-called “six rights of first refusal,” which enabled it to determine who produced future episodes of the Series. See Compl. ¶ 19. The Exclusive Option provides: AETN shall have an exclusive option (the “Initial Option”), exercisable in writing no later than the earlier of (i) one hundred twenty (120) days after the premiere telecast of the final Episode ordered hereunder, or (ii) one hundred eighty (180) days from the delivery and technical acceptance of the Delivery Materials for such Episode, to require Producer to produce a minimum of ten (10) and up to twenty-six (26) additional one (1) hour Episodes, substantially similar in look, feel and format to the Episodes previously produced, pursuant to all of the same terms and conditions as those set forth herein, and with the same per-Episode Financial Commitment as the Episode ordered herein. Notwithstanding the foregoing, if Producer determines at any time that it cannot reasonably produce additional Episodes, AETN shall be entitled to produce such Episodes with a third party of its choice and Producer shall not be in breach of this Agreement. If AETN exercises the Initial Option, AETN shall have five (5) additional exclusive and dependent options (the “Second Option,” “Third Option,” Fourth Option,” Fifth Option,” and Sixth Option,” respectively), each to engage Producer (if exercised) to produce a minimum of ten(10) and up to twenty-six (26) Episodes for each Option pursuant to the same terms and conditions contained therein . . . . Notwithstanding the foregoing, if Producer determines at any time that it cannot reasonably produce additional Episodes, AETN shall be entitled to produce such Episodes with a thirty party of its choice and Producer shall not be in breach of this Agreement.” Agreement ¶ 4 (emphasis added). Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 17 of 32 11 4830-8944-3916v.7 0052023-000068 Incredibly, PBTV asserts that the underlined language “reflects the six rights of first refusal [PBTV has] on episodes of the six options.” Compl. ¶ 55; see also id. ¶¶ 51-57. In other words, PBTV alleges that the underlined language contractually requires AETN to offer PBTV six opportunities to produce “each episode in six series of 10-26 episodes,” with AETN being allowed to use a third-party producer only if PBTV refuses each such offer. Id. ¶¶ 19, 57. This strained reading of straightforward contractual language does not constitute a viable claim for breach of contract under New York law. It is black letter law that “[t]he primary objective of a court in interpreting a contract is to give effect to the intent of the parties as revealed by the language of their agreement.” Compagnie Financiere v. Merrill Lynch, 232 F.3d 153, 157 (2d Cir. 2000). In making this determination, “the initial interpretation of a contract ‘is a matter of law for the court to decide.’” K. Bell & Assocs. v. Lloyd’s, 97 F.3d 632, 637 (2d Cir. 1996) (quoting Readco, Inc. v. Marine Midland Bank, 81 F.3d 295, 299 (2d Cir. 1996)). “Included in this initial interpretation is the threshold question of whether the terms of the contract are ambiguous.” Alexander & Alexander v. These Certain Underwriters, 136 F.3d 82, 86 (2d Cir. 1998). “[T]he presence or absence of ambiguity is determined by looking within the four corners of the document, without reference to extrinsic evidence.” Chapman v. N.Y. State Div. for Youth, 546 F.3d 230, 236 (2d Cir. 2008) (citing Kass v. Kass, 91 N.Y.2d 554 (1998)). Ambiguity exists when “a reasonably intelligent person viewing the contract objectively could interpret the language in more than one way.” Topps Co. v. Cadbury Stani, 526 F.3d 63, 68 (2d Cir. 2008). The Exclusive Option reflects the parties’ intent in clear and unambiguous language. It provides AETN - not PBTV - with an exclusive Initial Option to require PBTV to produce 10- 26 more episodes of the Series for the same $200,000 per-episode price. Only in the event that AETN exercises that option - and there is no dispute that it did not - does the Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 18 of 32 12 4830-8944-3916v.7 0052023-000068 “Notwithstanding” clause provide PBTV with the twin right to back out of the obligation to produce without breaching the Agreement. If AETN fails to exercise the Initial Option (again, there is no dispute that it did not), the additional dependent options - which, like the Initial Option, belonged to AETN - do not materialize. Put differently, rather than granting “six rights of first refusal,” the Exclusive Option provision provides PBTV with a conditional escape clause, one that permits PBTV to back out of its obligation to produce episodes if - and only if - AETN opted to exercise its exclusive options under the Agreement. There is no other reasonable and logical interpretation of the Exclusive Option language. Only by employing the strained and distorted reading of the Agreement urged by PBTV can it be read to provide PBTV with the universal rights of first refusal it urges here. See Nat’l Util. Serv., Inc. v. Tiffany & Co., No. 07 Civ. 3345 (RJS), 2009 WL 755292, at *8 (S.D.N.Y. Mar. 20, 2009) (citing Newmont Mines Ltd. v. Hanover Ins. Co., 784 F.2d 127, 135 (2d Cir. 1986) (“Unless otherwise indicated, words should be given the meanings ordinarily ascribed to them and absurd results should be avoided.”)). That PBTV alleges a contrary (and entirely indefensible) interpretation does not make the Agreement ambiguous. It is black letter law that a party “may not create an ambiguity merely by urging conflicting interpretations of the contract.” Sarinsky’s Garage Inc. v. Erie Ins. Co., 691 F. Supp. 2d 483, 486 (S.D.N.Y. 2010) (citing Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992)); see also Sayers v. Rochester Tel. Corp., 7 F.3d 1091, 1095 (2d Cir. 1993) (“Parties to a contract may not create an ambiguity merely by urging conflicting interpretations of their agreement.”). Moreover, “[i]n assessing ambiguity,” courts must “consider the entire contract to ‘safeguard against adopting an interpretation that would render any individual provision superfluous.’” RJE Corp. v. Northville Indus. Corp., 329 F.3d 310, 314 (2d Cir. 2003) (quoting Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 19 of 32 13 4830-8944-3916v.7 0052023-000068 Sayers, 7 F.3d at 1095). PBTV’s purported interpretation cannot be reconciled with paragraph 2 of the Agreement that is focused on Ownership and Distribution, not Options: AETN shall be entitled, at any time and at all times, to utilize the structure, themes and general idea of the Series (the “Format”) in production of programs with another or other production companies (and without Producer’s involvement), subject to the terms of the sentence which follows. As compensation for the right to utilize the Format and the Series title (the sufficiency of such consideration being hereby acknowledged by Producer), AETN shall pay Producer directly an amount equal to Four Percent (4%) of One Hundred Percent (100%) of the per- episode budget of each such episode produced. Agreement ¶ 2. Again, the language in this provision is clear and straightforward. AETN has the right “at any time and at all times” to make additional episodes utilizing “the structure, themes and general idea of the Series” “with another or other production companies” - and, to make it even more plain, “without [PBTV’s] involvement” - in exchange for paying PBTV 4% of the per- episode budget of any such episode. This paragraph does not contain any qualifiers or conditions or references to other provisions in the Agreement, unlike other parts of the Agreement. PBTV’s interpretation should be rejected for the additional reason that it would render this paragraph superfluous.6 In an effort to avoid this inevitable conclusion, PBTV alleges facts surrounding the parties’ pre-contractual negotiations, including a supposed “true agreement” reached during a June 29, 6 PBTV’s theory is also impossible to square with the Exclusive Option provision itself: the “Notwithstanding” sentence from which PBTV purportedly derives the “rights of first refusal” is entirely dependent on the exercise of AETN’s exclusive options to require PBTV to produce more episodes. If AETN exercises the option, only then does PBTV have the derivative right to decline to move ahead. PBTV’s theory here, however, assumes that the rights of first refusal exist separately of these exclusive options. According to PBTV, the “language means that if no option is offered to PBTV and if AETN is not advised by PBTV that it cannot reasonably produce a given episode, AETN has no right to offer it to a different producer.” Compl. ¶ 57 (emphasis added). This makes absolutely no sense. Without AETN’s exercise of the exclusive options, there is nothing to trigger (or limit) PBTV’s determination “that it cannot reasonably produce additional episodes.” Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 20 of 32 14 4830-8944-3916v.7 0052023-000068 2012 conference call. See supra at 6-7. Under New York law, evidence of pre-contractual negotiations is inadmissible to vary the terms of an unambiguous written contract that contains an integration/merger clause - as this Agreement does, in paragraph 21. See Mfrs. Hanover Trust Co. v. Yanakas, 7 F.3d 310, 315 (2d Cir. 1993) (“Under New York law, . . . if a contract recites that all of the parties’ agreements are merged in the written document, parol evidence is not admissible to vary, or permit escape from, the terms of the integrated contract.); see also, e.g., Solutia Inc. v. FMC Corp., 385 F. Supp. 2d 324, 340 (S.D.N.Y. 2005) (“New York courts hold a contract fully integrated by a merger clause subject to the parol evidence rule, prohibiting the introduction of extrinsic evidence.”); Thayer v. Dial Indus. Sales, Inc., 85 F. Supp. 2d 263, 269 (S.D.N.Y. 2000) (“Where the contract clearly states that it contains the entire agreement between the parties, claims based on prior understandings that contradict the plain terms of the written contract are barred.”). Thus, for example, in BLD Productions, LLC v. Viacom, Inc., No. 10 Civ. 2625 (PGG), 2011 WL 1327340 (S.D.N.Y. Mar. 31, 2011), this Court considered an integration clause similar to the one found in the Agreement and held that it is “a fortiori true where the written agreement, as here, contains [such an] integration clause” that “the written agreement supersedes any prior oral agreement.” Id. at *13-14. PBTV is bound by the unequivocal contractual language to which it agreed, and the breach of contract claim should be dismissed as a matter of law.7 7 The Complaint appears to set forth three additional purported breaches of the Agreement, which are similarly without merit. First, PBTV alleges that AETN failed to make one final payment of the 4% royalty owed for the 44 Blue-produced episodes. Compl. ¶¶ 86-87. AETN made this payment in full on February 10, 2017, which PBTV accepted without protest. Second, PBTV alleges that AETN failed to provide proper production credits for certain episodes of the Series. Id. ¶ 28. “To state a valid claim for breach, Plaintiffs must allege valid damages,” Negrete v. Citibank, N.A., 187 F. Supp. 3d 454, 469 (S.D.N.Y. 2016), however, and PBTV fails to allege any damages in connection with this allegation. Cf. Harsco Corp. v. Segui, 91 F.3d 337, 348 (2d Cir. 1996) (plaintiff must allege damages in addition to other elements of breach of contract). Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 21 of 32 15 4830-8944-3916v.7 0052023-000068 B. Breach of Implied Duty of Good Faith and Fair Dealing The claim for breach of implied duty of good faith and fair dealing is based on the same conduct underlying the unsuccessful breach of contract claim. See Compl. ¶¶ 134-136 (reiterating the Complaint’s preceding allegations and seeking the identical amount of monetary damages as with the breach of contract claim). As this Court has recognized, “[u]nder such circumstances, the good faith and fair dealing claim must be dismissed.” BLD Prods., 2011 WL 1327340, at *14. In New York, “[a]n implied covenant of good faith and fair dealing arises out of the known reasonable expectations of the other party which arise out of the agreement entered into. The covenant does not create duties which are not fairly inferable from the express terms of that contract.” Id. (alterations, quotation marks, and citations omitted). As a result, the general rule is that a “‘cause of action alleging a breach of good faith is duplicative of a cause of action alleging breach of contract.’” OHM Remediation v. Hughes Envt’l, 952 F. Supp. 120, 124 (S.D.N.Y. 1997) (quoting Apfel v. Prudential-Bache, 183 A.D.2d 439, 439 (1st Dep’t 1992)). Courts thus consistently hold that “raising both claims in a single complaint is redundant, and courts confronted with such complaints under New York law regularly dismiss any freestanding claim Moreover, AETN investigated this issue immediately upon notice by PBTV, and as a result, the cores and masters of all episodes were correct as of July 2015. While various repeat episodes mistakenly aired thereafter without the appropriate credits, as of February 1, 2017, all episodes were confirmed revised with PBTV credits. Third, PBTV appears to allege that AETN breached the Agreement by filing for a trademark and engaging 44 Blue prior to final execution of the Agreement. See Compl. ¶¶ 25, 27. The Agreement, however, explicitly permitted AETN to engage in both of these activities. Specifically, PBTV conferred ownership of the Series’ trademark to AETN for not only the nine episodes to be produced by PBTV, see Agreement at 1, ¶ 2 (“AETN shall be the sole owner in perpetuity throughout the universe, exclusively, of any and all rights (including without limitation copyright and trademark) in and to the Episodes”), but also for any episodes of the Series that AETN created utilizing a third-party producer, see id. at 2, at ¶ 2 (“AETN will own all rights in and to any such programs produced in which Producer is not the production company”). Similarly, and as set forth repeatedly in this memorandum, PBTV granted AETN the right to hire a third-party producer “at any time and at all times.” Accordingly, PBTV’s claim for breach of contract should be dismissed in its entirety. Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 22 of 32 16 4830-8944-3916v.7 0052023-000068 for breach of the covenant of fair dealing.” Jordan v. Verizon Corp., No. 08 Civ. 6414 (GEL), 2008 WL 5209989, at *7 (S.D.N.Y. Dec. 10, 2008) (collecting cases); see also, e.g., Alter v. Bogoricin, No. 97 Civ. 0662 (MBM), 1997 WL 691332, at *7 (S.D.N.Y. Nov. 6, 1997) (noting that “one court in this district recently has observed that every court faced with a complaint brought under New York law and alleging both breach of contract and breach of a covenant of good faith and fair dealing has dismissed the latter claim as duplicative”); Amcan Holdings, Inc. v. Canadian Imperial Bank of Commerce, 70 A.D.3d 423, 426 (1st Dep’t 2010) (dismissing good faith and fair dealing claim as “duplicative of the breach-of-contract claim, as both claims arise from the same facts”); Jacobs Private Equity, LLC v. 450 Park LLC, 22 A.D.3d 347, 347-48 (1st Dep’t 2005) (“The cause of action for breach of the implied covenant of good faith and fair dealing was properly dismissed as duplicative of the insufficient breach of contract claim.”); Triton Partners LLC v. Prudential Secs., Inc., 301 A.D.2d 411, 411 (1st Dep’t 2003) (“The breach of the covenant of good faith and fair dealing claim was properly dismissed since it was merely a substitute for a nonviable breach of contract claim.”). This rule applies with force in this case. PBTV does not allege any behavior by AETN that “although not expressly forbidden by any contractual provision, [] deprive[d] the other party of the right to receive the benefits under their agreement.” Jaffe v. Paramount, 222 A.D.2d 17, 22-23 (1st Dep’t 1996). Indeed, the benefit identified by PBTV - the purported “rights of first refusal” - is explicitly contradicted by the Agreement and, for all of the reasons just set forth, is insufficient to sustain a claim for breach of contract. On these facts, PBTV’s claim under the implied covenant of good faith and fair dealing must be dismissed as a matter of law.8 8 At the pre-motion conference held on June 6, 2017, the Court raised whether the Complaint alleges that “A&E took action to delay the issuance of the necessary insurance so that plaintiff would not be in a position to provide additional episodes.” (Doc. No. 47 at 5:18-20.) PBTV does Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 23 of 32 17 4830-8944-3916v.7 0052023-000068 C. Specific Performance PBTV’s claim for “specific performance” similarly fails, for at least three reasons. First, as this Court has recognized, “‘[s]pecific performance is an equitable remedy for a breach of contract, rather than a separate cause of action.”’ RJ Capital, S.A. v. Lexington Capital Funding III, Ltd., No. 10 Civ. 24 (PGG), 2011 WL 3251554, at *16 (S.D.N.Y. July 28, 2011) (quoting Cho v. 401-401 57th St. Realty Corp., 300 A.D.2d 174, 175 (1st Dep’t 2002)); see also, e.g., Tierney v. Omnicom, No. 06 Civ. 14302 (LTS) (THK), 2007 WL 2012412, at *10 (S.D.N.Y. July 11, 2007) (“Specific performance is a remedy, and a remedy itself cannot be a cause of action.”). The claim for specific performance may be dismissed on this ground alone. Second, not allege any facts regarding AETN’s interference with PBTV’s ability to procure insurance. Nor does PBTV allege that its difficulty in obtaining insurance played any role whatsoever in AETN’s decision not to exercise the Initial Option - the provision at the heart of this dispute, which would have contractually required PBTV to produce more episodes of the Series. Indeed, any such allegation would make no sense in this context. AETN contractually requires all of its third- party producers - including PBTV and 44 Blue - to obtain insurance through its broker, Aon. See Compl. ¶ 123; see also, e.g., Agreement ¶ 17 (specifying that insurance must be obtained through Aon); see also Agreement Exs. A, A-1, B-1, and B-2 (setting forth AETN’s insurance requirements). The documents make plain that the responsibility for obtaining the insurance lies solely with the third-party producer: AETN will direct AON to contact Producer promptly after the terms for the Production have been agreed upon and Producer shall be responsible for completing the Television Production Insurance Application (set forth as Exhibit B-2), which shall be signed by an officer of Producer and forwarded by Producer to AON. AON shall send to AETN Legal and Business Affairs a confirmation of receipt . . . . Producer shall designate an individual responsible for coordinating all aspects of insurance on behalf of Producer and shall inform AON as to the name and contact information of said individual. AON shall arrange for the issuance and delivery to Producer of certifies of insurance . . . . Producer shall promptly provide to AON at least two (2) copies of each certificate issued by Producer. . . . Agreement Ex. A ¶ 3. AETN’s role is limited to: (1) notifying Aon that it hired a new producer, and (2) being notified by Aon when the application is submitted. That is it. AETN clearly would have no interest in interfering with PBTV’s ability to obtain insurance, since the result would be AETN working with an uninsured producer, which could create potentially significant downstream liabilities for AETN. Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 24 of 32 18 4830-8944-3916v.7 0052023-000068 “specific performance will not be ordered where money damages ‘would be adequate to protect the expectation interest of the injured party.’” Sokoloff v. Harriman Estates, 96 N.Y.2d 409, 415 (2001) (citation omitted). PBTV seeks “specific performance” here of an award of monetary damages, see Compl. ¶ 138, effectively pleading itself out of this claim as a matter of black-letter law. Third, the Agreement states that PBTV’s “sole remedy for a breach or alleged breach by AETN of this Agreement shall be, if any, an action at law for damages.” Agreement ¶ 16(e). PBTV is bound by this crystal clear contractual language, which serves as a further and final bar to its claim for specific performance. See, e.g., L.K. Station v. Quantek Media, 62 A.D.3d 487, 493 (1st Dep’t 2009) (affirming dismissal of specific performance claim based on similar contract language). For any or all of these reasons, the Court should summarily dismiss PBTV’s claim for “specific performance.” D. Reformation, Unilateral Mistake/Fraud In New York, “[a] claim for reformation of a written agreement must be grounded upon either mutual mistake or fraudulently induced unilateral mistake.” Greater N.Y. Mut. Ins. Co. v. United States Underwriters Ins. Co., 36 A.D.3d 441, 443 (1st Dep’t 2007). The Complaint relies on the latter theory, i.e., that AETN fraudulently induced PBTV’s signature by orally promising that PBTV would retain some purported “rights of first refusal.” See Compl. ¶¶ 3, 141, 143-144.9 This claim must be dismissed for two independent reasons. 9 PBTV also alleges that AETN represented that it would air all episodes with proper credits, when it had already “received and aired episodes from an alternate producer which did not include producer credits.” Compl. ¶ 142. This is a claim for breach of contract, not “reformation, unilateral mistake/fraud.” As the Second Circuit has made plain, “a fraud claim may not be used as a means of restating what is, in substance, a claim for breach of contract. Thus, general allegations that defendant entered into a contract while lacking the intent to perform it are insufficient to support a fraud claim.” Wall v. CSX Transp., Inc., 471 F.3d 410, 416 (2d Cir. 2006) (internal quotation marks and alterations omitted). Moreover, there is no contractual term that PBTV is seeking to alter or amend as a result of this allegation. PBTV is not alleging that “the subsequent writing does not express the intended agreement,” Greater N.Y. Mut. Ins. Co., 36 Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 25 of 32 19 4830-8944-3916v.7 0052023-000068 First, PBTV has not alleged facts rendering plausible any reliance on the allegedly fraudulent misrepresentations. It is black-letter law in New York that an essential element of a fraudulent inducement claim is reasonable reliance on the alleged misrepresentation. See, e.g., Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421 (1996) (“[T]o recover damages for fraud, the plaintiff must prove . . . justifiable reliance of the other party on the misrepresentation.”); Skillgames, LLC v. Brody, 1 A.D.3d 247, 250 (1st Dep’t 2003) (“[F]raudulent inducement claim requires [the plaintiff] to allege and prove that it reasonably relied on a material misrepresentation.”). PBTV is unable to allege such reasonable reliance where, as here, the Agreement flatly contradicts the claim for fraudulent misrepresentation. “Under New York law, a party cannot claim reliance on a misrepresentation when he or she could have discovered the truth with due diligence. A signatory to a contract has the responsibility to read the contract he or she signs and is bound by the terms that are in an executed contract.” Transnational Mgmt. Sys. II, LLC v. Carcione, No. 14 Civ. 2151 (KBF), 2016 WL 7077040, at *7 (S.D.N.Y. Dec. 5, 2016) (quotation marks, alterations, and citation omitted). The Court of Appeals has made clear that fraud and fraudulent inducement claims are foreclosed where a party disclaims reliance on fraudulent statements allegedly made to induce him to enter into the contract. See Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 323 (1959). New York courts have not hesitated to dismiss claims for fraud and fraudulent inducement when the written terms of the contract contradict the supposedly oral or written fraudulent statements. For example, in Raytheon Co. v. AES Red Oak, LLC, 37 A.D.3d 364 (1st Dep’t 2007), A.D.3d at 443, as required for a reformation claim. Rather, PBTV alleges that AETN breached the contract by failing to abide by its terms regarding the provision of production credits, a claim that should be dismissed for the reasons set forth previously. See supra note 7, at 14-15. Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 26 of 32 20 4830-8944-3916v.7 0052023-000068 defendant counterclaimed for, among other things, fraud and fraudulent inducement, based on alleged misrepresentations contained in a letter sent by the plaintiffs. The Appellate Division, First Department, upheld the dismissal of the various fraud counterclaims, holding that “[t]he very mechanical problem whose resolution defendant claims was misrepresented was specifically exempted from the releases and was included on a punch list.” Id. at 365; see also, e.g., Citibank, N.A. v. Plapinger, 66 N.Y.2d 90, 95 (1985) (holding that defendant could not allege his guaranty was fraudulently induced by an agreement to make funding of line of credit a condition precedent to its obligations where the guaranty itself stated it was “absolute and unconditional”); Triton Partners, 301 A.D.2d at 411 (dismissing claim that “defendant’s [false] promise to proceed with [a] transaction” fraudulently induced entry into an engagement letter based on the contrary terms of the engagement letter, which permitted termination of the transaction without cause); In re Dean Witter, 282 A.D.2d 271, 271 (1st Dep’t 2001) (dismissing plaintiffs’ claim for fraud because “disclosures in the written offering materials rendered any reliance on alleged contradictory oral representations unjustifiable as a matter of law”); Sheth v. N.Y. Life Ins. Co., 273 A.D.2d 72, 74 (1st Dep’t 2000) (“The purported misrepresentations relied upon by plaintiffs may not form the basis of a claim for fraudulent . . . misrepresentation since they . . . are contradicted by the written agreement between the parties.”); Krantz v. Chateau Stores, 256 A.D.2d 186, 186-87 (1st Dep’t 1998) (holding that plaintiff’s fraud claim for a percentage of defendant’s net profits must be dismissed since “the false statement [regarding] defendant’s net profits, was not collateral or extraneous to the contract,” which explicitly “provided that plaintiff would receive a bonus equal to 50% of the net profit”); J.E. Morgan Knitting Mills, Inc. v. Reeves Bros., 243 A.D.2d 422, 423 (1st Dep’t 1997) (“Plaintiffs’ cause of action for fraud, which alleges that defendants knew at the time of contract execution that their warranty therein against undisclosed liabilities burdening the Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 27 of 32 21 4830-8944-3916v.7 0052023-000068 property was false, was properly dismissed as duplicative of plaintiffs’ cause of action for breach of contract.”); Prestige Foods, Inc. v. Whale Secs. Co., 243 A.D.2d 281, 282 (1st Dep’t 1997) (“Flatly contradicting plaintiffs’ claim of reasonable reliance on defendant’s promises to proceed with the transaction, necessary to the causes of action for fraudulent . . . misrepresentation, is the provision of the letter agreements permitting defendant to withdraw.”). Where, as here, the contract plainly states that AETN has the right to use a third-party producer “at any time and at all times” subject to a payment to PBTV of 4% of the per-episode budget of any non-PBTV produced episode, and the only “option” belonged to AETN, these unambiguous contractual provisions explicitly contradict the allegedly fraudulent misrepresentation. New York courts have determined, as a matter of law, that a party’s reliance is unreasonable where the alleged misrepresentation is explicitly contradicted by the written agreement, and have dismissed such claims. Robinson v. Deutsche Bank Trust Co. Americas, 572 F. Supp. 2d 319, 323 (S.D.N.Y. 2008). PBTV cannot plead the necessary element of “reasonable reliance” and its claim for “reformation, unilateral mistake/fraud” must be dismissed. Second, the claim must fail for another reason: PBTV does not allege with any particularity the fraudulent misrepresentations or omissions supposedly made by AETN. Claims sounding in fraud must satisfy not only Rule 12(b)(6), but also Rule 9(b), and therefore must “state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). Plaintiffs must: “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.” Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004) (citation omitted). “Allegations that are conclusory or unsupported by factual assertions are insufficient.” ATSI Commc’ns v. Shaar Fund, 493 F.3d 87, 99 (2d Cir. 2007). Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 28 of 32 22 4830-8944-3916v.7 0052023-000068 PBTV satisfies none of Rombach’s requirements. It only alleges (in general terms) that the parties reached a “true agreement” during a June 29, 2012 conference call, an agreement that included these “rights of first refusal.” Compl. ¶¶ 40-41. PBTV does not identify any fraudulent statements made by AETN in connection with this supposed “true agreement,” but instead, lists the components of what it considers to be the “true agreement,” without identifying the “who, what, when, where, and how” of the alleged fraud. Elsewhere in the Complaint, PBTV just generally alleges that AETN made misrepresentations regarding the right of first refusal. See, e.g., id. ¶ 36 (alleging that AETN “orally and repeatedly assured” LeClerc that “PBTV had secured its rights of first refusal to the six television series”). These allegations - which do not even attempt to satisfy Rule 9(b)’s particularity requirements - are simply insufficient to maintain a claim for fraud in this District. See, e.g., New York ex rel. Khurana v. Spherion Corp., No. 15 Civ. 6605 (JFK), 2016 WL 6652735, at *16 (S.D.N.Y. Nov. 10, 2016) (dismissing fraud-based claims pursuant to Rule 9(b) because “Plaintiff’s allegations fail to set forth the ‘who, what, when, where and how of the alleged fraud’”); Jurgensen v. Felix Storch, Inc., No. 12 Civ. 1201 (KBF), 2012 WL 2354247, at *7 (S.D.N.Y. June 14, 2012) (dismissing claim for fraud for failure to plead adequately under Rule 9(b) where “[t]here is simply nothing alleged about the where, when, and why of [defendant’s] knowingly and intentionally misstating” to plaintiff); Farkas v. Farkas, No. 95 Civ. 8464 (HB), 1997 WL 411920, at *1 (S.D.N.Y. July 23, 1997) (dismissing claim for fraud for failure to plead adequately under Rule 9(b) because “[d]efendant fails to plead any facts in support of the conclusory allegations she asserts”).10 10 The only facts alleged with particularity relating to this “true agreement” concern a subsequent communication after the June 29, 2012 conference call when AETN produced a “deal memo” that set forth to summarize “the principal business points” just agreed upon, which contained terms similar to what was subsequently set forth in the Agreement and, most significantly, included an unrestricted right to use third-party producers with absolutely no mention of a “right of first Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 29 of 32 23 4830-8944-3916v.7 0052023-000068 PBTV’s allegation that LeClerc sent an e-mail to AETN on October 19, 2012, setting forth his understanding of the “rights of first refusal,” an e-mail to which “PBTV received no contradiction” does not further this claim. Compl. ¶¶ 66-67. As this Court has recognized, allegations of omission will not support a claim for fraud absent a duty to disclose the information. See In re JP Morgan Auction Rate Sec. (ARS) Mktg. Litig., 867 F. Supp. 2d 407, 425 (S.D.N.Y. 2012). A duty to disclose typically arises in the context of a fiduciary relationship. Id. By contrast, where, as here, two parties are involved in an arm’s length commercial transaction, “no relation of confidence or trust sufficient to find the existence of a fiduciary relationship will arise absent extraordinary circumstances.” In re Mid-Island Hosp., Inc., 276 F.3d 123, 130 (2d Cir. 2002) (citation omitted); see also United States v. Szur, 289 F.3d 200, 211 (2d Cir. 2002). In order to establish such “extraordinary circumstances,” under the so-called “special facts” doctrine, a plaintiff must plead that: “(1) one party has superior knowledge of certain information; (2) that information is not readily available to the other party; and (3) the first party knows that the second party is acting on the basis of mistaken knowledge.” Banque Arabe v. Md. Nat’l Bank, 57 F.3d 146, 155 (2d Cir. 1995); Creative Waste v. Capitol Envtl., 429 F. Supp. 2d 582, 607 (S.D.N.Y. 2006) (same). This doctrine is inapplicable in this case. PBTV acknowledges in its Complaint that it received notice of AETN’s unrestricted right to use third-party producers (with no accompanying right of first refusal) on multiple occasions before signing the Agreement, including in the June 29 “deal memo,” Compl. ¶ 43, and in subsequent draft versions of the Agreement, including those refusal.” See Compl. ¶¶ 42-43. LeClerc acknowledged his explicit agreement with the terms set forth in this deal memo, without remarking upon the lack of any language relating to a right of first refusal. Id. ¶¶ 43-44. Accordingly, rather than being indicative of fraudulent inducement, PBTV’s allegations support the notion that the parties’ initial understanding was entirely consistent with the agreement the parties subsequently executed. Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 30 of 32 24 4830-8944-3916v.7 0052023-000068 that contained the Exclusive Option language. Id. ¶¶ 47, 58. PBTV is therefore unable to plead that AETN had any “superior knowledge” that was not “readily available” to PBTV. Indeed, the language of the Agreement was available for both parties to review before executing. Judge Mukasey considered an almost identical situation in Travelers Indemnity v. CDL Hotels, 322 F. Supp. 2d 482 (S.D.N.Y. 2004). In that case, Travelers argued that an insurance broker was under a duty to disclose the terms of the final primary insurance policy because the broker was aware that Travelers mistakenly (and erroneously) believed that the final policy contained certain terms proposed by Travelers. Id. at 499. The court flatly rejected this argument, holding that Travelers had failed to satisfy the “superior knowledge” and “readily available” prongs based on the fact that Travelers had received two drafts of the agreement containing the relevant language. Id. at 499- 500 (“Therefore, Travelers not only knew of the proposed terms of the primary policy before Travelers issued its excess policy in February of 2001, but also had received at least two drafts that did not conform to what Travelers now claims were its wishes and expectations.”); see also, e.g., Loreley Fin. v. Wells Fargo, No. 12 Civ. 3723 (RJS), 2013 WL 1294668, at *11 (S.D.N.Y. Mar. 28, 2013) (“Plaintiffs here made an investment . . . while relying on terms that were expressly and exhaustively disclosed. . . . Absent an allegation that undisclosed information changed the terms of the agreement, Plaintiffs have failed to allege ‘superior knowledge’ of fraud on the part of Defendants; the “special facts” doctrine is thus wholly inapplicable.”), rev’d in part on other grounds, vacated in part, 797 F.3d 160 (2d Cir. 2015). The same common-sense holding applies in this case. AETN did not commit fraud by failing to inform PBTV what it should have already known, and what the various drafts of the Agreement -including the Agreement signed (and initialed on each page) by LeClerc - plainly stated: that AETN had the right to create “at any time and at all times” additional episodes of the Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 31 of 32 25 4830-8944-3916v.7 0052023-000068 Series using third-party producers in exchange for paying PBTV 4% of the per-episode budget of any such episode. PBTV establishes nothing more than that it misunderstood the terms of an unambiguous Agreement, and New York law does not permit reformation or rescission of a contract for unilateral mistake alone. Barclay Arms, Inc. v. Barclay Arms Assocs., 74 N.Y.2d 644, 646 (1989) (“A bare claim of unilateral mistake by plaintiff, unsupported by legally sufficient allegations of fraud on the part of defendants, does not state a cause of action for reformation.”). * * * For either of these two reasons, PBTV’s fourth and final claim for “reformation, unilateral mistake/fraud” must be dismissed as a matter of law. CONCLUSION AETN respectfully requests that the Court grant this motion and dismiss the Complaint as to AETN in its entirety with prejudice. Dated: New York, New York Respectfully submitted, September 14, 2017 DAVIS WRIGHT TREMAINE LLP By: /s/ Sharon L. Schneier Sharon L. Schneier Geoffrey S. Brounell 1251 Avenue of the Americas, 21st Floor New York, New York 10020-1104 Tel: (212) 489-8230 Fax: (212) 489-8340 sharonschneier@dwt.com geoffreybrounell@dwt.com Attorneys for Defendant A&E Television Networks, LLC Case 1:16-cv-09317-PGG Document 61 Filed 01/05/18 Page 32 of 32
