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Gerritsen v. Warner Bros. Entertainment

District court dismisses breach of contract and breach of guaranty claims against Warner Bros. based on Oscar-winning motion picture Gravity, holding that plaintiff Terry Gerritsen, author of novel by same name, failed to plead non-conclusory factual allegations tying Warner Bros. to underlying contract for movie rights to Gerritsen’s novel.

In 1999, plaintiff Terry T. Gerritsen published Gravity, a novel set in “orbital space” about a female astronaut/doctor left alone on a space station after her crewmates die. Prior to the novel’s publication, defendant Katja Motion Picture Corp. entered into an agreement with Gerritsen to acquire the motion picture rights to her novel. Under the agreement, Katja would pay Gerritsen $1 million for the rights, plus a $500,000 production bonus and 2.5 percent of the net proceeds of the film, if the company produced a film based on the novel. New Line Productions, Inc., guaranteed the “full and faithful performance” of Katja’s contractual obligations. In 2002, Alfonso Cuarón and his son wrote a screenplay called Gravity and, in December 2009, they granted all rights in the screenplay to Warner Bros. Warner Bros. produced the screenplay, releasing the film – which grossed over $700 million in box office revenue and won seven Academy Awards – in October 2013. Gerritsen sued Warner Bros., Katja, and New Line for breach of contract and breach of guaranty, alleging that Warner Bros. had acquired control of Katja and New Line in 2008 and therefore assumed the obligations of Katja and New Line under the agreement with Gerritsen. The court granted defendants’ motions to dismiss Gerritsen’s claims.

Beginning with “traditional contract law theories,” the court concluded that Gerritsen could not plausibly allege a claim against the defendants, because her allegations did not support an inference either that Warner Bros. was a party to the underlying agreement or that Katja produced the film. The court then addressed each of Gerritsen’s alternative theories of liability – successor-in-interest, alter-ego, and agency – in turn.

First, the court concluded that Gerritsen’s allegations were conclusory and failed to support a claim for liability against Warner Bros. based on any of the four theories of successor-in-interest: (1) explicit or implied assumption of liability, (2) the occurrence of a de facto consolidation or merger of the defendants, (3) that Warner Bros. was a “mere continuation” of Katja and New Line which did not give adequate consideration for Katja/New Line’s assets, or (4) a transfer of assets “for the fraudulent purpose of escaping liability.” Likewise, the court rejected the application of the alter-ego doctrine, finding that Gerritsen’s allegations of a “unity of ownership and interest” among the defendants were entirely conclusory and that she had not alleged any commingling of funds or undercapitalization. Moreover, Gerritsen had not plausibly plead that an inequitable result would follow if the corporate separateness of the defendants was upheld.

Finally, the court concluded that Gerritsen had not plausibly alleged a theory of agency liability, finding that she failed to plead any facts that Warner Bros. “completely dominated and controlled” Katja and New Line, and that Katja was “complicit in New Line’s business strategy.” The court granted Gerritsen leave to file an amended complaint, but only to correct pleading deficiencies, not to plead any new claims.