Hollywood Docket: Relativity's Breach of Contract Suit Against Netflix Moves Forward

Plus, BMG wants the court to dismiss a lawsuit over Fetty Wap's hit "Trap Queen" and a Malaysian financier's trust fights a seizure of his assets.
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Netflix convinced a Santa Clara, Calif., judge to toss two of Relativity's claims against it earlier this year — but the streamer is still facing a breach of contract complaint after the court overruled its demurrer.

Relativity sued Netflix for $1.5 billion in October over their deals for Masterminds and The Disappointments Room. Under their arrangement, Netflix would pay a license fee between $3.7 million to $20 million for each Relativity film streamed, depending on box-office performance. Netflix and Relativity executed a notice of assignment for the films in July 2014 so Relativity could obtain financing from CIT Bank and UniFi.

In 2016, Relativity asked Netflix to extend the streaming dates because the theatrical release dates had changed, but the digital content giant refused and insisted it would make them available online prior to when they hit theaters — which Relativity argued directly conflicted with their agreed method of determining the licensing fees for the films. 

Netflix has argued the remaining claim should be dismissed because Relativity's cause of action for breach of contract is barred by the doctrine of res judicata, as it was addressed during bankruptcy court proceedings.

Santa Clara County Superior Court judge Theodore Zayner disagrees, finding that "[g]iven the fundamental nature of and procedures used in bankruptcy actions, it is unclear, as a general matter, how Defendant can assert Plaintiff already litigated a claim for breach of contract on the merits."

Further, Zayner found that while the bankruptcy court addressed the streaming of the films at issue in its order, it also explicitly said that the decision is without prejudice to other proceedings. "The bankruptcy court emphatically did not order specific performance of the License Agreement," the judge writes.

Netflix also argues that Relativity can't prove it is entitled to damages, which Zayner also isn't buying. "None of Defendant’s arguments are meritorious," he writes. "As a consequence, the demurrer to the first cause of action is not sustainable on the basis the damages allegations are insufficient." (Read the decision in full here.)

In other entertainment legal news:

— The trustee of the entity that holds Malaysian financier Jho Low's music publishing assets is fighting the U.S. government's seizure case on jurisdictional grounds. This all started back in 2012, when Sony led a consortium in the $2.2 billion purchase of EMI Music Publishing. More than $100 million of that fund came from Low's Jynwel Capital Limited. The financier's assets are being seized because they are allegedly involved in an "international conspiracy to launder money" that was misappropriated from the Malaysian government. Low's trust, JW Nile, argues that a central California federal court has no jurisdiction over his assets in this matter. "[T]he Government has combined in a single omnibus Complaint the allegations against these Out-of-State Assets with allegations against eleven entirely separate assets (purchased by different parties through a distinct chain of transactions) some of which happen to have some connection to this District," writes attorney Naeun Rim in a motion to dismiss. "[T[he exercise of jurisdiction over a property that is not located in this District, has no connection to this District, and which is owned by a company that has no connection to this District would offend traditional notions of fair play and substantial justice." A hearing is set for Aug. 21.

— BMG is asking the court to toss a copyright infringement lawsuit over Fetty Wap's "Trap Queen." Lazar Lakic sued the rapper, producer Tony Fadd, BMG, Sony/ATV and others associated with the song in September. Fadd created the beat in question and in 2014 granted a non-exclusive license to the rapper's company Goodfella4life to use it in a derivative work for $49.99. Lakic claims Soren Mensberg, acting as his agent, secured exclusive rights to the beat before it was used in Fetty Wap's hit. "Plaintiff’s lawsuit is a misguided attempt to profit from a musical work in which he owns no rights," writes attorney Robert Jacobs in a motion to dismiss. "Plaintiff claims to have acquired exclusive rights to the musical beat Hello (the “Beat”) that later became part of the hit song Trap Queen, yet he is a stranger to the agreement granting such rights."

Fadd also filed a motion to dismiss the suit, alleging that Lakic lacks standing because of the anti-assignment clause in the Fadd-Mensberg agreement. "In clear terms, the Mensberg Agreement bars Mensberg from transferring any of the rights granted without Fadd’s written consent," writes his attorney Paul LiCalsi. "In direct breach of that covenant, Mensberg unlawfully assigned his purported rights to Plaintiff. Consequently, any supposed assignment is null and void, and cannot provide a basis for Plaintiff’s copyright infringement claim."

— Bloomberg wants a New York federal court to dismiss a $60 million lawsuit over its decision to back out of an African TV deal with Optima Media Group. Bloomberg claims it exercised its termination right after Optima admitted it was unable to pay employees and honor its representations and warranties. "Optima claims that the 'real' reason for termination was Bloomberg’s fear of negative publicity arising from news reports about Optima’s failure to pay its employees," writes attorney Lorin Reisner. "That argument is completely irrelevant and in no way undermines the legitimacy and appropriateness of Bloomberg’s decision to terminate. But even assuming the existence of negative news accounts relating to Bloomberg’s contract with Optima, they would provide only further support for Bloomberg’s exercise of its contractual right to terminate." Bloomberg says it took precautions in the licensing agreement to ensure Optima wouldn't "damage or diminish" its brand and that the parties agreed certain events — including insolvency — would allow immediate termination of the deal. (Read the full memo in support of Bloomberg's motion to dismiss here.)

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