Opinion ID: 2791704
Heading Depth: 3
Heading Rank: 4

Heading: Wilson’s Replacement

Text: Likewise, the evidence supports the decision of unconscionability based on the fact that the 2007 and 2008 AMAs allowed Wilson to hire a replacement for himself for the remaining term of the contracts in the event he was unable to perform. And, under the 2008 AMA, Wilson’s “benefactor” received notable benefits such as compensation for the remainder of the term and the ability to choose a replacement for Wilson (with the Debtor’s approval, but at the same rate of compensation) for the remainder of the term. The 2005 AMA, which was drafted by an attorney, allowed the Debtor to terminate Wilson upon thirty days written notice if Wilson was unable to perform under the agreement. The court contrasted with that provision the sections of the 2007 and 2008 AMAs dictating what would happen if Wilson was unable to perform. The very language of the 2007 and 2008 AMAs supported the bankruptcy court’s recognition that Wilson’s changes to the AMAs rendered it unconscionable. In addition to the problems with the term, inability to terminate, Wilson’s compensation and Wilson’s replacement, the bankruptcy court appropriately stated that Wilson was more sophisticated than the Debtor and the Debtor testified that Wilson often asked him to sign documents that he had not read. The court then stated that any procedural imbalance was overshadowed by the exceptionally harsh and oppressive substantive terms of the AMAs. Wilson attacks the bankruptcy court’s use of Mickey Gilley’s testimony, the entertainment law treatise, and California Labor Code § 2855(a) in its decision regarding the term and Wilson’s compensation under the AMAs. According to Wilson, the bankruptcy court supplemented the record with these materials because it recognized that the Debtor could not meet his burden of proving unconscionability. 20 We disagree. The Debtor provided an ample basis upon which the court held the AMAs were unconscionable, and the bankruptcy court’s use of these materials as part of its analysis was proper. Moreover, any error by the bankruptcy court was harmless error. And, in addition to term and compensation of the AMAs, the court also relied on the Debtor’s inability to terminate the AMAs and the provision for them regarding a replacement for Wilson. The entertainment law treatise, the California statute and Gilley’s testimony were properly considered by the court. We see no error with the bankruptcy court’s use of its research from reputable legal authorities to support its decision. In addition, the court acted within its bounds when it allowed, credited and cited to Gilley’s testimony. The court recognized Gilley’s extensive experience in the entertainment industry and in various country music roles in particular. Gilley testified from that experience. Likewise, we disagree with Wilson’s argument that the bankruptcy court misinterpreted Gilley’s testimony (II) No loss of an investment by Wilson Wilson maintains that he is entitled to reimbursement for the funds he invested in the Debtor and that, but virtue of that investment, he is a creditor and the holder of a debt. We disagree. The bankruptcy court recognized that any right of Wilson to collect funds from the Debtor would have been property of Wilson’s own bankruptcy estate. Wilson failed to disclose in his bankruptcy case any debt owed by the Debtor. Therefore, Wilson is judicially estopped from claiming that he is owed funds from any investment in the Debtor prior to his own March 6, 2008 bankruptcy filing.7 Judicial estoppel “protects the integrity of the judicial process.” Stallings v. Hussmann Corp., 7 Wilson contends that in the 2008 AMA the Debtor acknowledged a debt of more than $100,000. However, the 2008 AMA is void. 21 447 F.3d 1041, 1048 (8th Cir. 2006). Although, the circumstances for invocation of judicial estoppel cannot be reduced to a formula, certain factors guide a court in its exercise of its discretion to apply judicial estoppel. See New Hampshire v. Maine, 532 U.S. 742, 749, 751 (2001). The factors are whether: (1) “a party's later position [is] clearly inconsistent with its earlier position;” (2) “the party has succeeded in persuading a court to accept that party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled;” and (3) “the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.” Id. at 750-751 (internal citations and quotation marks omitted). Wilson’s failure to list debt owed to him by the Debtor in Wilson’s bankruptcy case is inconsistent with his assertion in this case that the Debtor owes a debt to him. The bankruptcy court in Wilson’s case adopted Wilson’s position when it issued a Chapter 7 discharge. Stallings, 447 F.3d at 1048 (citing Superior Crewboats, Inc. v. Primary P&I Underwriters (In re Superior Crewboats, Inc.), 374 F.3d 330, 335 (5th Cir. 2004) (“For example, where the bankruptcy court issues a ‘no asset’ discharge, the bankruptcy court has effectively adopted the debtor’s position.”). Wilson would gain an unfair advantage if he were able to hide his alleged cause of action from his own creditors and then later reap the benefits of it. Wilson filed his bankruptcy case at the time when he was advising the Debtor to move to Pigeon Forge, and a couple of months before the 2008 AMA. He can hardly claim that his failure to schedule the debt he believed was owed to him from the Debtor was inadvertent or a good-faith mistake. Moreover, the record supports the bankruptcy court’s statement that all expenses and loans to the Debtor from 2007 were repaid. In addition, for Wilson’s alleged investments of $100,000, the bankruptcy court correctly stated that the documentation did not support such expenses. Moreover, as stated by the bankruptcy court, the evidence did not show a loss by 22 Wilson of an investment in the SMEC deal in 2008. The record supports the bankruptcy court’s statement that Wilson did not have significant unpaid expenses after filing his bankruptcy petition and before termination of the SMEC agreement months later. The 2008 AMA allowed Wilson to recover his expenses prior to the Debtor receiving his share of funds, but Wilson testified the parties would have received the same amount on July 15, 2008. In addition, there is evidence that, as the court stated, the Debtor and Wilson had both received approximately the same amount of the funds paid out by W&W in 2007 and 2008. And, importantly, the court recognized that Wilson’s arguments presume that the Debtor borrowed money from Wilson. This was contrary to Wilson’s position that W&W was a sole proprietorship. We agree with the bankruptcy court’s statement that any funds Wilson advanced would not have been a loan to the Debtor. Rather, they would have been an investment in his sole proprietorship. We similarly reject Wilson’s contentions that he is entitled to compensation for his efforts developing the Debtor’s career. As the bankruptcy court recognized, the Debtor has talent, and Wilson did not help or advance his career. (III) Additional arguments Wilson maintains that even if the 2007 and 2008 AMAs are void, he is entitled to a judgment under the 2005 AMA. That argument lacks merit. The 2005 AMA was superseded when the terms of the 2005 AMA were subsequently incorporated into the 2007 and 2008 AMAs (although some terms suffered drastic modifications). Neither the record nor the subsequent AMAs reflect an expression of intent that the 2005 AMA should survive or spring back. In addition, the briefs on appeal include arguments about whether the offending terms should have been severed from the AMAs and whether the AMAs were breached and terminated (including related arguments of whether the Debtor waived any claim of breach or ratified the AMAs). 23 We affirm the bankruptcy court’s decision that the AMAs were void in their entirety. Therefore, we do not consider these issues. We have considered additional arguments by Wilson, such as that the Debtor is estopped from claiming unconscionability, and hold that any such arguments lack merit. In summary, the 2007 and 2008 AMAs were unconscionable. In addition, Wilson has shown no loss of an investment in the Debtor or his career that would qualify Wilson as the holder of a debt. Moreover, none of the additional arguments asserted by Wilson show he is owed a debt. Without a debt, Wilson has no cause of action under Bankruptcy Code § 523.