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On Monday, Jen Arnold and Bill Klein, married stars of TLC’s The Little Couple, lost a big chunk of their lawsuit over the reality series when a California federal judge rejected their fraud and conversion claims. The two also won’t be able to rescind intellectual property rights — undercutting the idea that reality TV stars can regain the ability to control their name and image if not fully paid.
Back in 2017, Arnold and Klein made their move as producer LMNO fought with Discovery Communications over rights to The Little Couple and other shows amid an accounting scandal. While LMNO and Discovery eventually arrived at a settlement agreement, the married couple continued to pursue contingent compensation upon word of inflated expenses and other falsified accounting documents.
To get a jury to hear allegations of fraud, however, they needed to show that they were doing more than alleging non-payment under the contract. The two argued they weren’t merely tortifying a contract breach claim. They alleged incurring emotional distress and out-of-pocket costs in investigating what had happened.
U.S. District Court Judge John Kronstadt rules that Arnold and Klein haven’t shown enough to have their fraud claim survive the economic loss rule. For example, here’s how the judge distinguishes the result here from one over profits to This Is Spinal Tap.
“Here, unlike Century of Progress, Defendants’ alleged fraudulent conduct that forms the basis of Plaintiffs’ fraud claim does not go beyond Defendants’ contractual obligations,” states the summary judgment opinion. “Plaintiffs’ fraud claim is premised on the defendants’ alleged misrepresentations made in connection with the profit participation statements, which were provided to Plaintiffs as part of defendants’ contractual obligations. Although Plaintiffs allege that Defendants ‘created fictional financial books to deceive Plaintiffs, … Plaintiffs have not offered any evidence that they viewed, accessed or were given these fictional financial books as part of the alleged fraudulent scheme. Thus, Plaintiffs’ fraud claim is distinct from the one addressed in Century of Progress. Further, as discussed below, Plaintiffs’ claim that they suffered out-of-pocket expenses investigating Defendants’ alleged fraud does not align this case with Century of Progress because any out-of-pocket expenses incurred by Plaintiffs do not constitute a harm beyond the alleged contract breach.”
Later, in the decision, in examining whether rescission of IP rights conveyed in an option agreement is available as a remedy, Kronstadt rules in the negative partly because Arnold and Klein have failed to show a triable issue as to whether they were fraudulently induced into the contract. Further, the judge adds, “rescission is an inappropriate remedy because its application, given the substantial amount of time that has passed since the Option Agreement was entered, would prejudice third parties, including Discovery.”
Read the full opinion here. The case moves forward on a contract breach claim from Arnold and Klein, although in light of the latest decision, the litigation is a decent bet to be settled.
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