Opinion ID: 1431414
Heading Depth: 2
Heading Rank: 4

Heading: the statute of limitations, damages and prejudgment interest

Text: Neither party disputes the trial court's determination that the applicable statute of limitations is two years, as prescribed in Code of Civil Procedure section 339, subdivision 1. Universal asserts, however, that because this action was initiated in 1966, more than two years after the consummation of the first licensing agreement in 1960, plaintiffs are barred from any recovery. Universal concluded approximately 50 licensing agreements with unrelated manufacturers between 1960 and 1966 and continued to enter into new agreements, and to amend and renew existing contracts, after this action was commenced. The execution of the first agreement did not contractually or otherwise compel Universal to conclude the others. The extensions or renewals of existing contracts were not mandated by the terms of the original agreements. I, therefore, agree with the trial court that each licensing agreement and renewal thereof represented a separate and distinct invasion of plaintiffs' rights. The execution of each agreement was independent of the others and each could have supported a separate cause of action. (Cf. Nestle v. City of Santa Monica (1972) 6 Cal.3d 920, 937 [101 Cal. Rptr. 568, 496 P.2d 480].) Hence, the statute of limitations is not a complete bar to recovery. The trial court held plaintiffs were barred from recovering damages for any licensing agreement executed more than two years before the filing of this action in 1966. (Code Civ. Proc., §§ 312 and 339, subd. 1.) Plaintiffs assert that the statutory period should not be calculated from the filing of the 1966 action but from the filing of the 1963 action, which involved substantially the same claims, on the ground that the 1966 suit is merely a continuation of the 1963 suit. While a lawsuit has been construed as the continuation of an earlier action in several decisions relied on by plaintiffs (see, e.g., Bollinger v. National Fire Ins. Co. (1944) 25 Cal.2d 399 [154 P.2d 399]; Schneider v. Schimmels (1967) 256 Cal. App.2d 366 [64 Cal. Rptr. 273]), the present case is readily distinguishable. First, in contrast to those decisions, the dismissal of the 1963 suit was on plaintiffs' own motion and was not the product of Universal's conduct. Second, plaintiffs were arguably responsible for the problem which caused the dismissal. Third, the second suit was not filed until 28 months after the dismissal. Finally, the dismissal did not preclude a trial on the merits. I thus conclude that the trial court did not err in calculating the statutory period from the filing of the underlying action, February 3, 1966. After an extended trial, the court found that the plaintiffs were entitled to damages arising out of Universal's execution after February 3, 1964, of licensing agreements with approximately 35 different manufacturers. While Lugosi's portrayal of Count Dracula was the only character licensed in two of those agreements, each of the other contracts authorized the use of up to ten additional horror characters. Most of these agreements provided for the payment of a nonrefundable fee to Universal upon the execution of the licensing agreement as partial consideration for the grant of rights and as an advance against the royalties to be paid for the use of the licensed characters. Universal's royalty was usually set as a percentage of the licensee's sales. From these contracts, Universal received more than $260,000 in royalties. [41] The trial court awarded plaintiffs $53,023.23 of this amount for Universal's licensing Lugosi's portrayal of Count Dracula. Universal raises numerous challenges to this award. Because the use of Lugosi's likeness in this context resembles a copyright or patent infringement, the well developed principles for determining damages in those contexts provide a useful guide. [42] Plaintiff has the initial burden of proving the extent of the profits reaped by defendant through its misappropriation. However, where a portion of defendant's profits derives from other than the unauthorized use but defendant had commingled the sources of income, the defendant carries the burden of disentangling the contributions of the several factors which he has confused. ( Sheldon v. Metro-Goldwyn Pictures Corporation (2d Cir.1939) 106 F.2d 45, 48, affd. 309 U.S. 390 [84 L.Ed. 825, 60 S.Ct. 681].) If the defendant provides sufficient evidence, a fair division of the profits will result. Mathematical exactness in the apportionment is not required. ( Id., 309 U.S. at p. 404 [84 L.Ed. at p. 833].) However, the resulting allocation must favor the plaintiffs in every reasonable chance of error. ( Id., 106 F.2d at p. 51.) Universal's conduct prevented an apportionment of the royalty income between the Count Dracula character and the other licensed characters. Neither the licensing agreements nor Universal's accounting system allocated the royalty payments from each contract among the licensed characters. The isolated data provided by a few licensees about certain agreements was not persuasive on this matter to the trial court. Absent more compelling data, the trial court found that one-third of the income from multi-character contracts should be allocated to the use of Count Dracula. [43] This restrained apportionment reflected the trial court's assessment of Count Dracula's relatively greater public visibility and resulting commercial value when compared to the other licensed characters, such as the Mutant and the Mole Man. While most of the licensee's secured the right to use only some of the available characters, they consistently secured the right to Count Dracula. Universal's assertion, that plaintiffs are only entitled to an amount equal to the royalty from each agreement divided by the number of licensed characters, is based on the unsupported assumption that all horror characters are equally valuable. In light of Universal's burden in this case, I am not persuaded the trial court's allocation was unreasonable. [44] Universal was unable to identify the source of approximately $14,000 of the $260,000 in royalties received from horror character licensing agreements. Finding that Universal had not borne its burden of demonstrating the origin of that sum, the trial court allocated the entire sum to the licensing of Count Dracula. Universal asserts that only one-third of that amount should have been allocated to the use of Count Dracula, consistent with the one-third allocation adopted by the trial court for royalties from multicharacter agreements. However, it is undisputed that two of the agreements licensed the use of only Count Dracula. All of the royalties from those agreements were thus awarded to plaintiffs. In light of Universal's burden and plaintiffs' entitlement to all royalties from certain agreements, the trial court's resolution was not error. The trial court also awarded all royalty income received between July 1, 1972, and October 31, 1972, to plaintiffs. [45] The $4,500 at issue was apparently derived from multiple character agreements, which had otherwise been subjected to a one-third apportionment. The trial court's findings do not clearly set forth the rationale behind the different treatment accorded the royalties received during this period. Therefore, I would remand this aspect of the damage award to the trial court. On remand, the trial court would not be precluded from considering a different apportionment if the income received in this period was recorded in a separate account to prevent its discovery by plaintiffs or was the product of licensing agreements concluded in violation of the interlocutory injunction. However, absent special circumstances, royalties received under multicharacter agreements concluded before the entry of the interlocutory injunction should be divided in accordance with the one-third allocation adopted by the court. Universal also challenges the trial court's conclusion that the statute of limitations did not bar plaintiffs from recovering damages based on Universal's agreement with ABG Products Inc. The agreement was executed on January 30, 1964, with a term from March 1, 1964, to March 28, 1965. The licensee was obligated to pay Universal a $500 nonrefundable fee upon the execution of the agreement. The contract was subsequently extended to expire on March 28, 1967. The trial court found that recovery for contracts executed prior to February 3, 1964, was barred by the statute of limitations. This contract was clearly executed before that date, and Universal received an immediate payment for licensing the use of the horror characters, including Count Dracula. Since Universal's tortious conduct consisted of licensing Lugosi's portrayal of Count Dracula and that act occurred beyond the statutory period, it is inconsequential that the licensee could not begin to sell its products until after February 3, 1964. (Cf. Davies v. Krasna, supra, 14 Cal.3d at pp. 513-514.) On remand, I would direct the trial court to delete any award of damages arising from the January 30, 1964, contract. However, it is equally clear that plaintiffs remain entitled to damages based on any royalty paid under any extension or renewal of that contract after February 3, 1964. [46] The trial court awarded plaintiffs prejudgment interest under Civil Code section 3288 on the entire amount of the damages from the midpoint of the infringement, January 1, 1969. Section 3288 gives the trial court discretion to award prejudgment interest [i]n an action for the breach of an obligation not arising from contract.... An award of interest under section 3288 is not conditioned on plaintiff's damages having been liquidated at the date from which the interest is calculated. (See Bullis v. Security Pac. Nat. Bank (1978) 21 Cal.3d 801, 814-815 [148 Cal. Rptr. 22, 582 P.2d 109].) Here, Universal had the use of some of the profits from their infringement for a decade prior to the entry of judgment. In this case, I do not find that the award of interest, from the midpoint of the infringement, was an abuse of discretion. (See Amador Valley Investors v. City of Livermore (1974) 43 Cal. App.3d 483, 494-495 [117 Cal. Rptr. 749].)