Warner Bros. Entm’t Inc. v. Superior Court, No. B289109 (D2d8 Nov. 20, 2018)
Actors and other talent sometimes get an interest in the “profits” to movies and TV shows. Unless you've got huge juice, however, “profit” does not mean actual profit, like how the IRS or Scrooge McDuck would calculate it. “Profit,” instead, is contractually a defined term that permits a studio to deduct all sorts of “costs.” Under this Hollywood accounting, projects that made large amounts of money wind up being in the red forever, at least so far as the accounting for the participation interests of the talent go.
One of the more egregious practices, which isn’t expressly spelled out in most of the contracts, is how the studios treat home video revenue. Based on some estimation dating from the ’80s, they assume that 80 percent of home video revenues are eaten up by the costs of making the media. E.g, the cost of copying VHS tapes. Which don’t exist any more. Indeed, by the early 2000s, burning a DVD cost maybe a dollar, probably less. And now, there’s basically zero marginal cost for “home video.” But the studios keep helping themselves to that 80 percent deduct.
So back in 2013 someone filed a class action challenging the practice. The case, however, drifted along for years. As of March 2018, class cert had yet to be decided. Defendants moved to dismiss for failure to bring the case to trial within five-years under Code of Civil Procedure § 583.310. The trial court denied the motion, finding that the five years was tolled under § 583.340 (b) and (c) for two periods: (1) 43 days at the beginning of the case, when the case was designated complex and discovery and responses to the pleadings were stayed pending an initial complex case status conference; and (2) 32 days between the death of the original lead plaintiff and the substitution of a new one.
But at the time the motion was denied, there were only three weeks left on the five-year clock, as calculated by the court. So the trial court granted Plaintiffs’ motion for trial preference and—notwithstanding the fact that class cert had yet to be ruled on and no merits discovery taken—set the case for a trial six days before the deadline.
Defendant took a writ. The Court of Appeal asked for briefing on both the denial of the five-year motion and on the trial preference.
First, the Court holds that 43-day complex case stay shouldn’t have given rise to tolling. Under a pair of California Supreme Court cases—Gaines v. Fidelity National Title Ins. Co., 62 Cal. 4th 1081, 1087 (2016) and Bruns v. E-Commerce Exchange, Inc., 51 Cal. 4th 717, 730 (2011)—the five-year clock gets tolled under § 583.340(b) only for a complete stay that stops the prosecution of the case altogether. Although the complex CMC order stayed discovery and pleadings, it also instructed the parties to take various steps to come with a case management and discovery plain. That is not a complete stay. So the 43 days shouldn’t have counted, and the time thus ran before the motion was heard.
Second, the trial court also erred in granting a preference motion and setting a trial date two weeks later. What happened was problematic for a number of reasons. Since class cert hadn’t been decided, Defendants were forced into a one-way intervention scenario where if they proceeded and won, their victory could not bind the class. It is for that very reason why class cert generally needs to be decided before a decision on the merits of the case. Indeed, earlier cases have upheld dismissals of class claims under the five-year rule even before the time had formally run, recognizing that there wasn’t enough time remaining to give notice to the class.
The trial court’s move was also a problem because it didn’t appear to have any idea how the trial it ordered was to proceed. Plaintiffs suggest the court could have severed out their claim for declaratory relief for a bench trial, sworn the first witness, and then adjourned the trial indefinitely until class cert was decided and discovery complete. But there was no basis in the record or the law that would justify the trial court making such a move. It is true that, back in the day, courts sometimes would convene and recess a trial for the sole point of satisfying the five-year rule. But that was to relieve the plaintiff when the delay was caused by the court. Clogged dockets made it impossible for plaintiffs to get trial dates, even if they were diligent and ready to go to trial. That is not the case here; Plaintiffs here were neither diligent nor ready.
Finally, the Court rejects the idea that Defendants’ various requests for extensions and delays in the schedule over the course of the case somehow estopped them from seeking a five-year dismissal. Section 583.330 permits parties to stipulate to extend the five-year limit either in writing or on the record in open court. But the stipulation must expressly extend the five years. An ordinary extension of other deadlines does not imply a stipulation under § 583.330.
Writ granted.
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