Court Opinion

ID: 2665968
Source: CourtListenerOpinion
Date Created: 2014-04-04 08:19:41.965035+00
Date Added: 2024-06-11T13:01:46.387655
License: Public Domain

UNITED STATES DISTRICT COURT
                   FOR THE DISTRICT OF COLUMBIA

Raymone K. Bain, et al.,           :
                                   :
           Plaintiffs,             :
                                   :
      v.                           : Civil Action No. 09-0826 (JR)
                                   :
MICHAEL J. JACKSON, et al.,        :
                                   :
           Defendants.             :

                              MEMORANDUM

           Prior to Michael Jackson’s death in June 2009,

Raymone K. Bain brought this case against him and his production

company, MJJ Productions, Inc., asserting claims for breach of

contract, quantum meruit, and unjust enrichment.      Bain became

Jackson’s publicist in December 2003, but the suit arises out of

the expanded role Bain took in Jackson’s affairs beginning in the

middle of 2006.   On May 30, 2006, Jackson signed a Personal

Services Agreement (“PSA”), drafted by Bain, that entitled Bain

to a ten percent finder’s fee for any agreement Jackson entered

that she or her associates generated.      [#3-1].   Around this time,

Jackson also hired Bain as his personal General Manager, [#3-2],

and as his agent to review and approve music usage requests, [#3-

3].

           Bain alleges that she initiated negotiations for

several projects on Jackson’s behalf in early 2007, including:

(1) a project with SONY Music to promote the 25th anniversary of

Jackson’s Thriller album release (“Thriller deal”); (2) Jackson’s
participation at the 2008 Grammy Awards ceremony; (3) a project

with the Anschutz Entertainment Group, Inc. for development of

the Neverland Valley Ranch, recording and film projects, and live

performances at the O2 Arena in London (“AEG project”); and

(4) Jackson’s refinancing of his loan against the SONY/ATV music

catalog (“SONY/ATV refinancing”).1     Shortly after the

refinancing, but before the other projects were finalized,

Jackson abruptly cut ties with Bain, without paying the ten

percent finder’s fee on any of Bain’s projects.     Because Jackson

ultimately cemented the agreements and earned money on them in

2008, Bain believes she is now entitled to a ten percent finder’s

fee for each deal pursuant to the PSA.     She seeks $44 million in

damages, plus attorney’s fees and costs. [#3]

           On June 18, 2009, the Jackson parties moved to dismiss

Bain’s claims, arguing that Bain’s suit was barred by a release

she signed on December 27, 2007 that discharged the Jackson

parties from any future claims and payments.     [#24].    Jackson

died eight days later, on June 26, 2009.     I stayed further

proceedings pending the appointment of an executor for Jackson’s

estate.   I also notified the parties that the motion to dismiss

would be treated as a motion for summary judgment and invited

     1
          Bain also attempts to take credit for another deal –
one involving use of Jackson’s music in a Vitamin Water
advertisement aired during the Superbowl [#49] - but I have
denied her motion to amend her complaint. [#50]

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them to submit all additional material pertinent to the motion.

[#31].   I dissolved the stay on November 20, 2009.   The parties

then filed supplemental briefing and affidavit testimony

regarding the release and addressing Bain’s new allegation that

the release was fraudulently obtained.   [#48, #54, #59, #60,

#61].

           The Jackson parties replied with their own new

(alternative) argument – that the binding arbitration clause in

the Release requires dismissal or a stay in this case.   Under New

York law, the contractual right to arbitrate may be waived, when

the requesting party “engaged in litigation to such an extent as

to manifest[] a preference clearly inconsistent with [its] later

claim that the parties were obligated to settle their differences

by arbitration and thereby elected to litigate rather than

arbitrate.”   See, e.g., Les Constructions Beauce-Atlas, Inc. v

Tocci Bldg. Corp. of New York, Inc., 294 A.D.2d 409, 410 (N.Y.

App. Div. 2002) (internal quotations omitted).   To avoid waiver,

a party must raise its desire to arbitrate promptly and must

decline to avail itself of pre-trial discovery and other attempts

to litigate on the merits.   Id.

           The Jackson parties’ first filing did not raise the

arbitration issue.   Rather, they elected to address the merits of

Bain’s claim, and did not invoke their right to arbitration -

presumably realizing that the case would not be resolved quickly

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on the merits - until filing a reply brief on the motion to

dismiss on July 10, 2009.    [#29, at 4-6].   I find that the

Jackson parties’ initial filings invoked the judicial process to

such an extent that their right to arbitrate has been waived.

          Therefore, I must determine whether the Release covers

the fees Bain now demands, and, if it does, whether the Jackson

parties had a duty to disclose the status of those deals at the

time Bain signed the release.2

          The Release, which the parties agree is governed by New

York law, states that Jackson “shall render a payment made

payable to you in the amount of [$488,820.05] as full and final

satisfaction of any all [sic] monies, known or unknown, to be

owed to you by the Jackson Parties with respect to any and all

agreements whether verbal or written that you may have entered

into with the Jackson Parties from the beginning of time until

December 27, 2007.” [#27-2 at 20].

          Bain argues that this language does not preclude her

from seeking a finder’s fees pursuant to the PSA, because she

intended the Release to cover only specific, past-due cash

disbursements, loans, credit card bills, and consultant fees, in

the amount of $488,820.05.    As evidence of her intent, she cites

     2
          The “tender back doctrine” is not applicable here,
where Bain is indisputably entitled to the payment she retained,
and where that amount would be credited to the defendants if Bain
were to succeed in her claim. See Goldfarb v. Wright, 40 N.Y.S.2d
705, 707-709 (N.Y. App. Div. 1943).

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her hand-written edits to the Release, itemizing the payments she

intended to release, [#27-2 at 20], and she explains that

Jackson’s attorney, Frank Salzano, represented, in his 12/03/07

email, that the Release was necessary “to clean all past debts

and liabilities of Mr. Jackson,” [#60-2].

           Under New York law, the rule is that “a valid release

which is clear and unambiguous on its face and which is knowingly

and voluntarily entered into will be enforced as a private

agreement between the parties,” even if one of the parties claims

he intended a narrower release.   See, e.g., Chaudhry v. Garvale,

262 A.D.2d 518, 519 (N.Y.A.D. 2 Dept, 1999).    Because I find no

ambiguity in the language of Bain’s Release, I may apply it

without considering Bain’s testimony about her

intent.   Consolidated Edison, Inc. v. Northeast Utilities, 332

F.Supp.2d 639, 647 (S.D.N.Y. 2004).    The Release unambiguously

covers “all monies, known or unknown,” owed under “any and all

agreements whether written or verbal.”    (emphasis added)   That

release language covers Bain’s claims about the Thriller deal,

the Grammy ceremony, the AEG project, and the SONY/ATV

refinancing, no matter what stage they were in when the release

was signed.

           But Bain goes on to argue that, even if the Release

does cover her claims, it is void because she was fraudulently

                               - 5 -
induced to sign it, or, alternatively, because she was mistaken

as to is effect.

          To establish fraud-in-the-inducement under New York

law, Bain must prove that the Jackson parties (1) made a material

representation or omission which was false and known to be false

(2) for the purpose of inducing her to rely on it, and (3) that

Bain reasonably relied upon it in entering the agreement (4) to

her detriment.   See, e.g., Lama Holding Co. v. Smith Barney,

Inc., 88 N.Y.2d 413, 421 (N.Y. 1996).    Where the claim is that

the defendant fraudulently concealed a material fact to procure

the agreement, the plaintiff must show that the defendant had a

duty to disclose the concealed information.    See, Sitar v. Sitar,

61 A.D.3d 739, 741 (N.Y. App. Div. 2009).    Absent a fiduciary

relationship between the parties, a duty to disclose arises only

where one party possesses superior knowledge of essential facts

that makes a transaction inherently unfair – if those facts are

not disclosed, those facts are not readily available to the other

party, and the first party knows that the second party is acting

on the basis of mistaken knowledge.    UniCredito Italiano SPA v.

JPMorgan Chase Bank, 288 F.Supp.2d 485, 497 (S.D.N.Y. 2003).

          Bain’s own complaint demonstrates why the Jackson

parties had no duty of disclosure.     It paints a picture of Bain

as a savvy business woman who founded her own public relations

firm, has represented “many high profile public figures in the

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sports, entertainment and political fields,” was responsible for

essentially all of Jackson’s affairs for a period of time,3 and

in fact “spoke to [him] several times a day” during that time.

[#3 at ¶¶ 2,7-11, 18-41].   For the deals at issue here, Bain

alleges more than minor involvement; she claims that she played

an integral and substantial role in negotiating all of them.    Id.

Bain clearly knew that various deals were in the works - in fact,

she admits to initiating them and participating in on-going

discussions about them - and she does not explain why, given her

relationships with the parties involved, she could not readily

have discovered the status of the agreements before signing the

Release.   Thus, the Jackson parties had no duty to disclose the

status of the projects on which Bain bases her claims, nor, if

there were any omissions, was it reasonable for Bain to rely on

     3
          Bain appears to take credit for saving Jackson from
financial and legal ruin. If her recitation of the services she
performed for Jackson is to be believed, she must have been more
knowledgeable about Jackson’s business than he was. She claims
that, among other things, she was responsible for hiring a
creative manager for Jackson (¶ 20); she hired a legal and
accounting team (¶ 21); she facilitated an audit of Jackson’s
finances (¶ 22); she averted imminent foreclosures of his
properties (¶ 23); she arranged Jackson’s day-to-day housing and
living requirements (¶ 24); she hired a new personnel company to
pay Jackson’s employees (¶ 25); she approved music usage requests
that generated over ten million dollars in annual income for
Jackson (¶ 26); she supervised a team of accountants to address
complaints lodged with the California Department of Labor (¶ 27);
and she was responsible for paying Jackson’s creditors and other
bills (¶ 28).

                               - 7 -
them.4   See Banque Franco-Hellenique de Commerce Intern. et

Maritime, S.A. v. Christophides, 106 F.3d 22, 27 (2d Cir. 1997)

(the defrauded person need not exercise due diligence, but

reliance is not justifiable where the defrauded party exercised

minimal diligence despite being “placed on guard or practically

faced with the facts”).

           For the same reasons, Bain’s argument that the Release

is voidable under the doctrine of mistake must be rejected.    It

is illogical to believe that the Jackson parties knew or should

have known that Bain was unaware of the deals - a showing that is

required to prove unilateral mistake.    See, e.g., Kraft Foods,

Inc. v. All These Brand Names, Inc., 213 F.Supp.2d 326, 330

(S.D.N.Y. 2002).

           Bain’s equitable theories of recovery - quantum meruit

and unjust enrichment - also fail.     As to Jackson’s estate, Bain

concedes that the PSA is a valid contract, which precludes relief

under those theories.   See, e.g., Bloomgarden v. Coyer, 479 F.2d

201, 210 (D.D.C. 1973).   As to MJJ Productions, Bain provides no

support for her contention that her efforts conferred a benefit

on MJJ Productions that it unjustly retained, nor does she

describe circumstances that would have reasonably notified MJJ

     4
          Because I find the Jackson parties had no duty to
disclose the status of the deals, Bain’s request, pursuant to
Rule 56(f), for discovery on this topic and other irrelevant
issues is denied.

                               - 8 -
Productions of her expectation that she would be paid.   In fact,

Bain provides virtually no explanation of what or who MJJ

Productions is; or how it is related to this suit; or whether she

even interacted with it during her negotiations.   Such a claim

without any support or reasonable likelihood of finding support

through discovery cannot withstand summary judgment.

          An appropriate order accompanies this memorandum.

                               JAMES ROBERTSON
                         United States District Judge

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