Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 1 of 22 Page ID #:122 1 Peter L. Haviland (Bar Number 144967) havilandp@ballardspahr.com 2 Scott S. Humphreys (Bar Number 298021) humphreyss@ballardspahr.com 3 Tanya M. Taylor (Bar Number 312881) taylortm@ballardspahr.com 4 BALLARD SPAHR LLP Century Park East, Suite 800 5 2029 Los Angeles, CA 90067-2909 Telephone: 424.204.4400 6 Facsimile: 424.204.4350 7 Attorneys for Plaintiffs 8 9 UNITED STATES DISTRICT COURT 10 CENTRAL DISTRICT OF CALIFORNIA Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 12 CENTURY OF PROGRESS PRODUCTIONS; CHRISTOPHER 13 GUEST; ROB REINER PRODUCTIONS; UNITED HEATHEN; 14 and SPINAL TAP PRODUCTIONS, 15 Plaintiffs, 16 17 v. 18 VIVENDI S.A.; STUDIOCANAL; RON HALPERN, an individual; and 19 DOES 1 through 10, inclusive, 20 Defendants. 21 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. 2:16-cv-07733-DMG-AS FIRST AMENDED COMPLAINT FOR: (1) Breach of Contract; (2) Breach of the Implied Covenant of Good Faith and Fair Dealing; (3) Fraud; (4) Accounting; and (5) Declaratory Relief Re: Trademark (28 U.S.C. § 2201) DEMAND FOR JURY TRIAL 22 23 24 25 26 27 28 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 2 of 22 Page ID #:123 PRELIMINARY STATEMENT 1 2 1. The initiation of a lawsuit against Vivendi to vindicate the rights of the 3 creators of This Is Spinal Tap has generated widespread attention. As reflected on 4 the website, www.fairnessrocks.com, the suit has already been successful in 5 inspiring other artists to speak out for fairness in the film, music and merchandising 6 industries. Harry Shearer is now joined by Christopher Guest, Rob Reiner, 7 Michael McKean and Spinal Tap Productions to file this First Amended Complaint. 8 2. Harry Shearer, creator of the radio and podcast program "Le Show," 9 and voice of some twenty-three characters on "The Simpsons," is co-creator of 10 the movie classic This Is Spinal Tap, in which he performed as the musician Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 Derek Smalls. 12 3. Christopher Guest co-created This Is Spinal Tap and performed as the 13 musician Nigel Tufnel. Mr. Guest is also known for having written, directed and 14 starred in films including "Waiting for Guffman," "Best in Show," "A Mighty Wind," 15 "For Your Consideration," and "Mascots." 16 4. Rob Reiner co-created This Is Spinal Tap and performed as its director 17 Marty DiBergi. Mr. Reiner is known for his work in notable films and television 18 series, including his Emmy Award winning performances in "All in the Family" and 19 as director of, among others, "Stand by Me," "The Princess Bride," "When Harry 20 Met Sally…," "Misery," "A Few Good Men," and "The American President." 21 5. Michael McKean co-created This Is Spinal Tap and performed as the 22 musician David St. Hubbins. Mr. McKean is also known for his performances in the 23 films "Best in Show" and "A Mighty Wind" (in which he reunited with Guest and 24 Shearer as The Folksmen), on "Saturday Night Live" and in the television series 25 "Laverne & Shirley" and "Better Call Saul." 26 6. This Is Spinal Tap and its music, which Shearer, Guest, McKean and 27 Reiner co-wrote, including such songs as "Sex Farm" and "Stonehenge," have 28 2 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 3 of 22 Page ID #:124 1 remained popular for more than thirty years, and have earned considerable sums for 2 the French conglomerate Vivendi S.A. 3 7. But not for the creators. Defendant Vivendi and its agents, including 4 StudioCanal executive Ron Halpern, have engaged in anti-competitive business 5 practices by manipulating the accounting between Vivendi film and music 6 subsidiaries and have engaged in fraud to deprive the Spinal Tap creators of a fair 7 return for their work. 8 8. To address this fraud, Mr. Shearer through his company Century of 9 Progress Productions ("CPP"), Mr. Guest, Mr. Reiner through his company 10 Rob Reiner Productions, Mr. McKean through his company United Heathen and Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 Spinal Tap Productions ("Plaintiffs") bring the present action seeking not less than 12 four hundred million dollars ($400,000,000) in compensatory and punitive damages. 13 CPP has also issued notices of copyright termination and has filed trademark 14 applications to secure creative rights. CPP seeks a judicial declaration vindicating 15 those rights, which have been abandoned by Vivendi. 16 9. Since the movie’s release in 1984, This Is Spinal Tap music, 17 merchandise, classic phrases and images have become ubiquitous in popular culture. 18 The movie itself had two theatrical releases and has been re-sold in a number of 19 commercial formats. A series of companies has profited from merchandising, 20 music, film, television and video rights. For many years, Vivendi and its 21 subsidiaries, including Canal Plus, StudioCanal, StudioCanal Image and Universal 22 Music Group ("Vivendi"), have claimed and administered many of these rights and 23 have been responsible for accounting to Plaintiffs. 24 10. But according to Vivendi, the four creators’ share of total worldwide 25 merchandising income between 1984 and 2013 was $81 (eighty-one) dollars. 26 Between 1989 and 2013 total income from music sales was $98 (ninety-eight) 27 dollars. Over the past three years, Vivendi has failed to provide accounting 28 statements at all. 3 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 4 of 22 Page ID #:125 1 11. Vivendi has engaged and is continuing to engage in anti-competitive 2 and unfair business practices and has abandoned its obligations to enforce 3 intellectual property rights in This Is Spinal Tap, unlawfully depriving Plaintiffs of 4 substantial revenues. Vivendi has also failed, and continues to fail, to account 5 honestly for income actually received from This Is Spinal Tap. THE PARTIES 6 7 12. Plaintiff Century of Progress Productions ("CPP") is a California 8 corporation with its principal place of business in Sherman Oaks, California. 9 13. Plaintiff Christopher Guest ("Guest") is a citizen of California, 10 residing in Los Angeles. Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 14. Plaintiff Rob Reiner Productions ("RRP") is a California corporation 12 with its principal place of business in Beverly Hills, California. 13 15. Plaintiff United Heathen (“UH”) is a California corporation with its 14 principal place of business in Woodland Hills, California. 15 16. Plaintiff Spinal Tap Productions ("STP") is a California corporation 16 that was incorporated on May 6, 1982 and at all times was entirely owned by CPP, 17 Guest, RRP and UH. Defendants have an ongoing duty to account and pay to STP 18 and its owners all royalties and other monies due under the May 7, 1982 Agreement 19 at issue in this lawsuit. STP was dissolved in or about June 1986, and brings this 20 action pursuant to California Corporations Code § 2010 to collect and distribute to 21 its owners all royalties and other monies owed by Defendants. 22 17. Defendant Vivendi S.A. ("Vivendi") is a French corporation 23 headquartered in Paris, France, doing business in and engaging in acts affecting 24 Plaintiffs within this judicial district. 25 18. Defendant StudioCanal ("Canal") is a subsidiary of Vivendi, 26 headquartered in Paris, France, doing business in and engaging in acts affecting 27 Plaintiffs within this judicial district. 28 4 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 5 of 22 Page ID #:126 1 19. Defendant Ron Halpern ("Halpern") is an executive of Canal, resident 2 in Paris, France, doing business in and engaging in acts directed at persons and 3 entities within this judicial district. 4 20. Does 1 through 10 are persons and/or entities whose true names and 5 capacities are unknown to Plaintiffs and who participated in, conspired with, and/or 6 caused Defendants to engage in the fraud and breaches of contract as alleged herein 7 and who are otherwise responsible and liable to Plaintiffs for the wrongful acts 8 alleged herein. Plaintiffs will amend this Complaint to allege the true names and 9 capacities of said defendants as they become known. JURISDICTION AND VENUE 10 Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 21. This Court has jurisdiction under 28 U.S.C. § 1332 as the matter in 12 controversy exceeds the sum or value of $75,000 exclusive of interest and costs, 13 and is between citizens of a State and citizens or subjects of a foreign state. 14 22. This Court has jurisdiction pursuant to 28 U.S.C. § 1331 and 1338(a) 15 because this action seeks declaratory judgment that Defendants lack rights to enforce 16 abandoned trademarks under the Lanham Act, 15 U.S.C. § 1051 et seq. 17 23. Venue is proper in this district under 28 U.S.C. § 1391(b) because a 18 substantial part of the events that the claims are based upon occurred in this district. 19 24. Jurisdiction and venue are proper in this Court because Defendants, 20 through their predecessor-in-interest Embassy Pictures, a California joint venture, 21 contractually consented to submit to the jurisdiction of the District Court of the 22 Central District of California. 23 ALLEGATIONS COMMON TO ALL CAUSES OF ACTION 24 The Genesis and Success of "This Is Spinal Tap" 25 25. Christopher Guest ("Guest"), Michael McKean ("McKean") and 26 Harry Shearer ("Shearer") first performed together live as "Spinal Tap" in a 27 television show in the 1970's. They later, with Rob Reiner ("Reiner"), developed the 28 characters in the "Spinal Tap" band and made a short film with improvised scenes 5 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 6 of 22 Page ID #:127 1 and seven songs. In the process of attempting to turn that short film into a feature2 length movie, they formed a joint partnership, "Spinal Tap Productions" ("STP"), 3 which they incorporated on May 6, 1982. On the strength of this work, on May 7, 4 1982, Guest and the personal services corporations of Reiner, Shearer, and McKean, 5 as co-owners of STP, signed an agreement (the "Agreement") with Embassy Pictures 6 ("Embassy") for production, financing, and distribution of the motion picture 7 This Is Spinal Tap ("TIST" or "the Film"). 8 26. Under the terms of the Agreement, STP and the personal services 9 corporations of its principals Reiner, Shearer, Guest and McKean were to receive 10 fixed, deferred and contingent compensation for their services in the form of profit Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 participation payments based on all sources of revenue, including, without 12 limitation, merchandise and music. 13 27. TIST was released in 1984. The renowned Chicago Sun film critic 14 Roger Ebert described TIST as "absolutely inspired" in a 1984 review that well 15 summarized the Film’s appeal: 16 17 18 19 20 21 22 23 24 25 26 27 28 Rock musicians never die, they just fade away, and “This Is Spinal Tap’’ is a movie about a British rock group that is rocketing to the bottom of the charts. It also is one of the funniest, most intelligent, most original films of the year. The movie looks like a documentary filmed during the death throes of a British rock band named Spinal Tap. It is, in fact, a satire. The rock group does not really exist, but the best thing about this film is that it could. The music, the staging, the special effects, the backstage feuding and the pseudo-profound philosophizing are right out of a hundred other rock groups and a dozen other documentaries about rock. The group is in the middle of an American tour. The tour is not going well. Spinal Tap was once able to fill giant arenas, but its audiences have grown smaller and smaller, and concert dates are evaporating as the bad news gets around. No wonder. Spinal Tap is a bad rock ‘n’ roll band. It is derivative, obvious, phony and pretentious, and it surrounds itself with whatever images seem commercial at the moment (a giant death’s head on stage, for one). 6 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 7 of 22 Page ID #:128 The movie is absolutely inspired in the subtle way it establishes Spinal Tap’s badness. The satire has a deft, wicked touch. Spinal Tap is not that much worse than, not that much different from, some successful rock bands. A few breaks here or there, a successful album, and they could be back in business. (Proof of that: A soundtrack album, “Smell the Glove,’’ is getting lots of airplay with cuts like “Sex Farm’’). 1 2 3 4 5 6 7 28. TIST was quickly recognized as a unique film with long-term appeal, 8 as shown in its later inclusion in "best ever" lists such as The New York Times Guide 9 to the Best 1,000 Movies Ever Made; Entertainment Weekly’s 100 Greatest Movies 10 of All Time where it appeared on the "Just Too Beloved to Ignore" list; and the Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 100 Greatest Movies of All Time list published by Total Film. Confirming TIST’s 12 strong international appeal and following, in 2011 Time Out London named the film 13 number one on its list of The 100 Best Comedy Movies. In 2002, the National Film 14 Registry of the Library of Congress designated TIST as a culturally, historically, or 15 aesthetically significant film. TIST still enjoys popularity on television, home video, 16 and other media, including a 25th Anniversary Blu-Ray DVD release in 2009. 17 29. TIST was produced on a shoestring budget of approximately $2.25 18 million dollars. On information and belief, TIST’s enduring popularity has 19 generated tens of millions of dollars in revenue in the thirty years since its original 20 theatrical release, and its associated intellectual property has substantial value. The Terms of the Original 1982 Production Agreement 21 22 30. The Agreement was drafted in several sections, including an eleven- 23 page letter agreement with details of overall rights, personal services, and 24 compensation; a one-page Exhibit A Instrument of Transfer; a 48-page Exhibit B 25 Standard Terms and Conditions, a fourteen-page Exhibit 1 to Exhibit B Formula 26 for Computing Net Receipts, and a four-page Exhibit 2, Standard Delivery Items. 27 The Agreement is signed by Guest as President of STP, and includes Inducement 28 Letters on behalf of their personal services corporations from Shearer (on behalf of 7 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 8 of 22 Page ID #:129 1 Century of Progress Productions), Reiner (on behalf of Rob Reiner Productions), 2 Guest (on behalf of himself), and McKean (on behalf of United Heathen). 3 31. Paragraph 12 of the Agreement acknowledges that STP "is entirely 4 owned by Rob Reiner Productions, United Heathen, Century of Progress 5 Productions and Christopher Guest" and the Inducement Letters acknowledge that 6 Rob Reiner Productions, United Heathen, Century of Progress Productions and 7 Christopher Guest each "own one quarter (1/4) of all the shares of [STP]." 8 Paragraph 13 of the Agreement further provides that "Embassy shall endeavor to 9 add [STP], Rob Reiner Productions, United Heathen, Century of Progress 10 Productions, Reiner, Shearer, McKean and Guest as additional named insureds in its Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 errors and omissions insurance policy." 12 32. The Agreement includes identification of the creative team’s essential 13 services as screenwriters, composers/songwriters and actors, and in the case of 14 Reiner, additional directorial duties. 15 33. The Agreement specified various sums of fixed compensation for the 16 creative team, as well as contingent compensation calling for a split of Net Receipts 17 60% to Embassy and 40% to STP (¶ 4a and 4b). With respect to the songs in the 18 Film, all of which were composed by Shearer, Guest, McKean and Reiner, 19 the Agreement calls for payment of 50% of the gross receipts from said music as 20 well as a 6% performers’ royalty plus a 3% producer royalty of the retail price of 21 any soundtrack albums (¶ 6). 22 34. Under the Agreement, Embassy promises, inter alia, to send 23 Earnings Statements to STP showing the calculation of Net Receipts, first on a 24 monthly, then quarterly, and after approximately three years, on an annual basis. 25 But Vivendi, Embassy's successor-in-interest, has breached and continues to breach 26 these promises. 27 28 8 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 9 of 22 Page ID #:130 1 2 3 Defendants' Acquisition of the Rights and Obligations in TIST, and Fraudulent Accounting 35. The catalog of Embassy, including unsuccessful films "bundled" with 4 TIST, was acquired several times in a succession of transactions including sales to 5 the Coca Cola Company, Parafrance, a subsidiary of L’Oreal and the DeLaurentiis 6 Entertainment Group, Inc. In or around 1989, predecessors of Vivendi's subsidiaries 7 acquired pertinent TIST rights. 8 36. Vivendi is responsible for accounting under the Agreement. Some 9 profit participation statements were historically submitted to STP, c/o Creative 10 Artists Agency ("CAA"), Reiner’s agent. Those profit participation statements, Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 Plaintiffs have recently discovered, reflect anti-competitive and unfair business 12 practices in their cross-collateralization of revenues between different Vivendi 13 subsidiaries; unfairly bundle and cross-collateralized unsuccessful films in the 14 Embassy catalogue with TIST; were not delivered to other creators; and 15 fraudulently underreported the revenues owed to Plaintiffs. Over the last three 16 years, Vivendi and Canal have failed to account at all on TIST revenues, delivering 17 the last participation statement dated December 31, 2013 to STP c/o CAA on or 18 about July 2, 2014. 19 37. Revenue streams arising from the film, including sound recordings and 20 music publishing, were also included in the Agreement. The soundtrack music 21 rights are now claimed by entities including another subsidiary of Vivendi, the 22 Universal Music Group, which has an obligation to report and pay Canal, which in 23 turn has an obligation to report and pay Plaintiffs pursuant to Defendants' accounting 24 obligations. The accounting between the Vivendi subsidiaries is not at arm's-length, 25 is anti-competitive, and deprives the TIST creators of a fair reward for their services. 26 Particularly given that Vivendi has offset fraudulent accounting for revenues from 27 music copyrights against equally dubious revenue streams for film and 28 merchandising rights also controlled by Vivendi subsidiaries, Shearer has filed 9 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 10 of 22 Page ID #:131 1 notices of copyright termination for publishing and recording rights in Spinal Tap 2 songs he co-wrote and co-recorded, as well as in the film itself. 3 CPP Investigates Defendants' Accounting and Discovers their Fraudulent Conduct 4 5 38. In 2013, in anticipation of TIST's upcoming 30th Anniversary in 2014, 6 CPP commissioned a study of the accounting statements and revenue streams 7 associated with TIST. CPP learned the results of that study in or around 8 November 2013. 9 39. CPP then first discovered that Vivendi had engaged in a pattern of anti- Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 10 competitive and unfair business practices, had abandoned enforcement of valuable 11 TIST rights, and had willfully concealed and manipulated years of accountings to 12 retain monies due and owing to Plaintiffs. Guest, RRP and UH did not become 13 aware of the bases for their claims until after the initial complaint in this lawsuit was 14 filed on October 17, 2016. 15 40. Examples of Defendants’ willful misconduct designed to deprive 16 Plaintiffs of the benefit of the promises made in the Agreement include but are not 17 limited to: 18 • failure to remit statements and accountings, with gaps occurring in years that would have enhanced revenue; 20 • improper expense deductions; 21 • failure to account for monies received, including a 2004 settlement payment received from MGM Home Video totaling over $1.6 million dollars for underreported VHS and DVD revenues, when statements for the year 2004 were never submitted to Plaintiffs by Defendants; • undocumented marketing and promotion expenses allegedly incurred years after release totaling over $2.5 million dollars; • undocumented charges to "Freight and other Direct Costs" totaling over $500,000 over several years, allegedly incurred almost twenty years after the film’s initial release; 19 22 23 24 25 26 27 28 10 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 11 of 22 Page ID #:132 1 • failure to account for monies under the terms of the Agreement as "actually received by Embassy in the United States"; • failure to collect revenue on merchandise and for use of material protected by Spinal Tap trademarks and copyrights. 41. Ron Halpern, during his management of the exploitation of TIST, 2 3 4 5 6 repeatedly assured Plaintiffs’ manager at the time, Harriet Steinberg, that he and his 7 staff were fully complying with the underlying Agreement, were providing accurate 8 and reliable accountings to Plaintiffs, and were using all available means to promote 9 Spinal Tap assets and enforce Spinal Tap intellectual property to maximize revenue 10 for the Spinal Tap creators. These assurances by Mr. Halpern and Vivendi have Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 continued to the present day. Plaintiffs have reasonably relied on these assurances. 12 But the statements by Ron Halpern and Vivendi were knowingly false when made. 13 Despite Plaintiffs’ reasonable diligence, CPP was unaware until in or around 14 November 2013, and the remaining plaintiffs were unaware until after the initial 15 complaint in this lawsuit was filed in October 2016, that Mr. Halpern, Vivendi and 16 its subsidiaries had intentionally engaged in an extended and outrageous pattern of 17 fraud and misconduct. 18 42. In advance of the theatrical re-release of the film in 2000, managed 19 for Canal by Ron Halpern, Mr. Shearer was asked to fly to London to meet with 20 Halpern. During that meeting, a luncheon at the Groucho Club, Mr. Halpern 21 informed Mr. Shearer that, in accord with Mr. Shearer's preferences to support 22 "indies" – independent, creative, entrepreneurial companies – the United Kingdom 23 re-release rights were being assigned to a small "boutique" distributor, who would 24 welcome Shearer's personal involvement in marketing and advertising advice for 25 the re-release. Mr. Shearer responded by sharing ideas with Halpern at that meeting. 26 When Shearer returned to Los Angeles, he learned that in fact the United Kingdom 27 distributor was not an independent "boutique," but a subsidiary of Metro-Goldwyn28 Mayer. Mr. Shearer knew then that Ron Halpern was mendacious. But Shearer 11 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 12 of 22 Page ID #:133 1 never imagined, until his review of a report in or around November 2013, that 2 Halpern was capable of the level of deception and willingness to subvert 3 contractual obligations that characterized Halpern's mistreatment of the Spinal Tap 4 creators. 5 43. On information and belief, the conduct described here, including 6 financial accounting, intellectual property and legal policies and practices of Canal 7 and Universal Music Group, as well as the personal practices of Ron Halpern, are 8 coordinated, controlled and directed by Vivendi. Canal, Universal Music Group and 9 Ron Halpern are both ostensible and actual agents for Vivendi, and Vivendi has 10 liability for the acts of each of these agents. Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 44. Vivendi is also liable for the conduct of Canal, Universal Music Group 12 and Ron Halpern as alleged herein under an alter ego theory of liability because, 13 at all relevant times, there existed a unity of interest and ownership between them 14 such that any separate corporate personalities no longer exist and adherence to the 15 fiction of their separate existence would permit an abuse of the corporate form and 16 would sanction fraud and promote injustice against Plaintiffs. 17 45. Vivendi touts itself as "an integrated media and content group" which 18 "operates businesses throughout the media value chain, from talent discovery to the 19 creation, production and distribution of content" though its "main subsidiaries" 20 Canal and Universal Music Group. 21 46. Vivendi’s subsidiaries do not have interests independent from Vivendi 22 with respect to the exploitation of media and accounting obligations owed to 23 Plaintiffs. They operate in practice as arms or divisions of Vivendi, responsible for 24 administering Vivendi’s accounting obligations under the direction and control of 25 Vivendi. As reported in November 2015, Canal and Universal Music Group both 26 "boosted Vivendi’s results … as the French conglomerate continues its 27 transformation into a global media and entertainment company." 28 12 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 13 of 22 Page ID #:134 1 47. Vivendi, Canal and Universal Music Group have abused the corporate 2 form to defraud Plaintiffs by, inter alia, engaging in anti-competitive and unfair 3 cross-collateralization between Vivendi subsidiaries; cross-collateralizing 4 unsuccessful films bundled with TIST in their accounting; failing to remit 5 accounting statements; failing to respond to enquiries and information requests; 6 failing to keep accurate records; failing to include revenues in accounting 7 statements; claiming undocumented and false expenses as part of a fraudulent 8 scheme to deprive Plaintiffs of their contractual rights; and failing to diligently 9 exploit available revenue streams. 10 48. Vivendi also exercises direct control over its subsidiaries through the Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 appointment of overlapping executives. For example, Vivendi’s Chief Executive 12 Officer, Arnaud de Puyfontaine, who serves as Chairman of Vivendi’s Management 13 Board, also serves as a Member of the Supervisory Board for both the Canal+ Group 14 and StudioCanal. In 2011, Vivendi appointed Lucian Grainge as the new Chairman 15 and Chief Executive Officer of Universal Music Group, who Vivendi announced 16 would continue to report to Vivendi’s Chief Executive Officer and serve as a 17 member of the Vivendi Management Board. 18 49. This is not the first time that Vivendi has directed and engaged in 19 fraudulent accounting involving its subsidiaries. In 2003, Vivendi paid $50 million 20 and its former chief executive officer relinquished claims to a €21 million severance 21 package to settle a civil fraud action that the United States Securities and Exchange 22 Commission (SEC) prosecuted against Vivendi and its top executives concerning 23 alleged financial fraud involving Vivendi’s subsidiaries. The SPINAL TAP Trademark 24 25 50. In 1984, Defendants' predecessor, Embassy, filed a trademark 26 application with the United States Patent and Trademark Office (USPTO) for the 27 mark SPINAL TAP. The federal registration for that mark was cancelled by the 28 USPTO in 1991. In early 2000, Defendants' predecessors filed certain other federal 13 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 14 of 22 Page ID #:135 1 trademark registration applications with the USPTO for the mark SPINAL TAP as 2 shown in Exhibit 1 hereto. In or about March 2002, as shown in Exhibit 2 hereto, 3 the rights to those marks were conveyed to StudioCanal Image, a Vivendi subsidiary 4 that subsequently merged into Canal, which is still identified by the USPTO as the 5 last listed owner for those federal registrations. 6 51. Defendants subsequently abandoned, with no intent to resume, all rights 7 to the SPINAL TAP marks, and the federal registrations for those marks were 8 cancelled by the USPTO in 2011 and 2012 as shown in Exhibit 1 hereto. As 9 additional evidence of such abandonment, Defendants did not oppose a trademark 10 application filed on December 27, 2013 by Heretic Brewing Company to register Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 the mark SPINAL TAP in connection with "beer" products, and that mark was 12 registered by the USPTO on April 7, 2015 as shown in Exhibit 3 hereto. 13 52. Because the SPINAL TAP marks have been abandoned by Defendants, 14 CPP has filed applications for federal registrations of the marks SPINAL TAP and 15 DEREK SMALLS as set forth in Exhibits 4 through 7 hereto. 16 COUNT I 17 Breach of Contract 18 (Against Vivendi and Canal) 19 53. Plaintiffs repeat and reallege the allegations set forth in Paragraphs 20 1 through 52 above, as if fully set forth herein. 21 54. Defendants Vivendi and Canal, through their predecessor-in-interest 22 Embassy entered into the May 7, 1982 Agreement with Spinal Tap Productions 23 ("STP") which was entirely owned by CPP, Guest, RRP and UH. Defendants have 24 an ongoing duty to account and pay to STP and its owners all royalties and other 25 monies due under the Agreement. STP, although dissolved in or about June 1986, 26 has the right to prosecute this action against Defendants to enforce the Agreement 27 and collect and distribute to its owners all royalties and other monies owed them 28 pursuant to California Corporations Code § 2010. 14 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 15 of 22 Page ID #:136 1 55. Plaintiffs CPP, Guest, RRP and UH are each intended third-party 2 beneficiaries to the 1982 Agreement because it was made expressly for their benefit 3 as acknowledged in Paragraph 12 of the Agreement; the Inducement Letters 4 executed by CPP, Guest, RRP, and UH; and in the various provisions of the 5 Agreement calling for CPP’s, RRP’s, UH’s, Shearer’s, Guest’s, Reiner’s and 6 McKean’s services, which granted them rights including fixed, deferred and 7 contingent compensation, all of which would be paid to them if Defendants had 8 honored their accounting and other obligations in the Agreement. As intended 9 third-party beneficiaries, CPP, Guest, RRP and UH are each entitled to enforce the 10 Agreement pursuant to California Civil Code § 1559. Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 56. At all times, Plaintiffs performed their obligations under the 12 Agreement. 13 57. Defendants have breached and are in continuing breach of their 14 obligations under the Agreement by, inter alia, engaging in anti-competitive and 15 unfair cross-collateralization between Vivendi subsidiaries; cross-collateralizing 16 unsuccessful films bundled with TIST in their accounting; failing to remit 17 accounting statements; failing to respond to enquiries and information requests; 18 failing to keep accurate records; failing to include revenues in accounting 19 statements; claiming undocumented and false expenses as part of a fraudulent 20 scheme to deprive Plaintiffs of their contractual rights; and failing to diligently 21 exploit available revenue streams. 22 58. Plaintiffs have been and continue to be damaged by Defendants' illegal 23 acts and contractual breaches in amounts to be proven at trial. 24 COUNT II 25 Breach of the Implied Covenant of Good Faith and Fair Dealing 26 (Against Vivendi and Canal) 27 59. Plaintiffs repeat and reallege the allegations set forth in Paragraphs 28 1 through 58 above, as if fully set forth herein. 15 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 16 of 22 Page ID #:137 1 60. The 1982 Agreement, governed by California law, contains an implied 2 covenant of good faith and fair dealing. Defendants breached this implied covenant 3 by their acts, including the anti-competitive and unfair business practices among 4 Vivendi subsidiaries alleged herein. 5 61. Defendants have intentionally abused their power to frustrate Plaintiffs’ 6 right to receive the benefit of the bargain made in the Agreement, in a manner that 7 goes beyond mere breach of the Agreement, but as part of an intentional scheme 8 abusing Defendants’ discretionary power to deprive Plaintiffs of the benefits 9 contemplated in the Agreement. 10 62. Plaintiffs have been damaged by Defendants' wrongful conduct in Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 amounts to be proven at trial. 12 COUNT III 13 Fraud 14 (Against Vivendi, Canal and Ron Halpern) 15 63. Plaintiffs repeat and reallege the allegations set forth in Paragraphs 16 1 through 62 above, as if fully set forth herein. 17 64. Defendants, by and through their agent Rob Halpern, repeatedly made 18 statements to Plaintiffs’ agents that Mr. Halpern and his staff were fully complying 19 with the underlying Agreement, were providing accurate and reliable accountings to 20 Plaintiffs, and were using all available means to enforce Spinal Tap trademarks and 21 copyrights and to maximize revenue for the Spinal Tap creators. These statements 22 were knowingly false when made and were made with the intent that Plaintiffs rely 23 on them. Plaintiffs reasonably relied on these statements. 24 65. Defendants’ acts constitute intentional misrepresentation, deceit, and 25 concealment of material facts known to the Defendants with the intention of 26 unlawfully depriving Plaintiffs of financial consideration due under the Agreement. 27 66. As a direct result of Defendants’ intentional misrepresentations, 28 Plaintiffs were unaware of the true facts. CPP did not discover Defendants' 16 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 17 of 22 Page ID #:138 1 fraudulent accounting practices until approximately November 2013, and the other 2 plaintiffs did not discover the bases for their claims until after the initial complaint 3 in this lawsuit was filed on October 17, 2016. 4 67. As a result of Defendants' fraud, Plaintiffs have been damaged in 5 amounts to be proven at trial. 6 68. Defendants' conduct was willful, wanton and oppressive, and designed 7 maliciously to steal from, deceive and injure Plaintiffs. Plaintiffs are entitled to an Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 8 award of punitive damages to punish and deter this conduct. 9 COUNT IV 10 For an Accounting 11 (Against Vivendi, Canal and Ron Halpern) 12 69. Plaintiffs repeat and reallege the allegations set forth in Paragraphs 13 1 through 68 above, as if fully set forth herein. 14 70. Defendants were obligated to provide to Plaintiffs statements accurately 15 reflecting the amount of revenues derived from the distribution and exploitation of 16 This is Spinal Tap and associated music, merchandise and other rights, and to remit 17 to Plaintiffs their share of revenues. 18 71. Despite demand therefor, Defendants have failed and refused, and 19 continue to fail and refuse, to provide Plaintiffs with proper and accurate 20 accountings reflecting the amount of revenues derived from the distribution and 21 exploitation of the Film and associated music, merchandise and other rights. 22 Instead, Defendants have intentionally provided false and fraudulent profit 23 participation statements to Plaintiffs. 24 72. The false and fraudulent profit participation statements submitted by 25 Defendants are cumulative, and entitle Plaintiffs to an accurate and truthful 26 accounting showing how the current cumulative numbers were calculated. 27 73. Plaintiffs are entitled to an order requiring Defendants to provide their 28 complete books and records of account in all details. 17 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 18 of 22 Page ID #:139 1 COUNT V 2 Declaratory Judgment of Non-Infringement, 28 U.S.C. § 2201, et seq. 3 (Against Vivendi and Canal) 4 74. Plaintiffs repeat and reallege the allegations set forth in Paragraphs 5 1 through 73 above, as if fully set forth herein. 6 75. In 1984, Defendants' predecessor-in-interest Embassy filed a trademark 7 application with the United States Patent and Trademark Office (USPTO) for 8 the mark SPINAL TAP in connection with entertainment services rendered by a 9 musical group. The federal registration for that mark (Registration No. 1311537) 10 was cancelled by the USPTO in 1991 as shown in Exhibit 1 hereto. Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 76. In early 2000, Defendants' predecessor-in-interest, Canal + D.A., a 12 Vivendi subsidiary, filed certain trademark applications with the USPTO for the 13 mark SPINAL TAP in connection with, inter alia, entertainment services in the 14 nature of live musical performances by a group, videotape and film production of 15 live musical performances, and certain merchandising associated with the mark as 16 shown in Exhibit 1 hereto. 17 77. In or about March 2002, Canal + D.A. filed an instrument with the 18 USPTO stating that it had merged with StudioCanal Image, a French joint stock 19 company and Vivendi subsidiary, and that it was conveying its rights to the 20 applications and registrations for the SPINAL TAP marks to StudioCanal Image, 21 as shown in Exhibit 2 hereto. StudioCanal Image, which subsequently merged into 22 Canal, is identified by the USPTO as the last listed owner for federal registrations 23 for those SPINAL TAP marks, now cancelled, Registration Nos. 2499728, 2463576, 24 2867023, 2881983 and 2881984. 25 78. Defendants subsequently abandoned the SPINAL TAP marks, resulting 26 in the USPTO's cancellation of the federal registrations for those SPINAL TAP 27 marks in 2011 and 2012 as shown in Exhibit 1 hereto. Defendants' abandonment of 28 the SPINAL TAP marks is reflected by their discontinuation of use or enforcement 18 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 19 of 22 Page ID #:140 1 of the marks in the ordinary course of trade for at least three consecutive years 2 without intent to resume use. 3 79. Defendants' abandonment is further evidenced by the fact that 4 Defendants did not oppose an application filed on December 27, 2013 by Heretic 5 Brewing Company to register the mark SPINAL TAP for use in connection with 6 "beer" products, which mark was registered by the USPTO on April 7, 2015 7 (Registration No. 4717603) as shown in Exhibit 3 hereto. 8 80. Despite Defendants' abandonment of any trademarks rights related to 9 This Is Spinal Tap, including in and to the mark SPINAL TAP, Defendants have 10 sought selectively to claim rights to the marks against Plaintiffs, and have sought to Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 prevent Plaintiffs from performing or selling merchandise in association with the 12 marks SPINAL TAP or DEREK SMALLS unless Defendants grant a license and 13 receive payment for such use. 14 81. CPP, rejecting Defendants’ claim of rights, has recently filed 15 applications with the USPTO for federal registration of the marks SPINAL TAP and 16 DEREK SMALLS -- which have been assigned serial numbers 87203893, 17 87203921, 87203942, and 87203958 -- for, inter alia, entertainment services in the 18 nature of live music concerts and dramatic, comedic and musical performances and 19 for certain merchandise as set forth in Exhibits 4 through 7 hereto. 20 82. A substantial controversy exists between the parties as to whether 21 Plaintiff CPP has the right to use and register the trademarks SPINAL TAP and 22 DEREK SMALLS in connection with entertainment performances and merchandise. 23 The controversy has sufficient immediacy and reality to warrant the issuance of a 24 declaratory judgment. A judicial declaration is necessary and appropriate at this 25 time in order that Plaintiff CPP may ascertain its rights and duties with respect to 26 the marks SPINAL TAP and DEREK SMALLS. 27 28 19 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 20 of 22 Page ID #:141 1 83. Plaintiff CPP seeks declaratory judgment pursuant to 28 U.S.C. § 2201 2 and Federal Rule of Civil Procedure 57, confirming that CPP’s use of the SPINAL 3 TAP and DEREK SMALLS marks in connection with the services and goods set 4 forth in its trademark applications does not infringe any abandoned trademark rights 5 of Defendants. RELIEF REQUESTED 6 7 WHEREFORE, Plaintiffs respectfully request that the Court enter an Order: 8 (a) Compelling Defendants to produce the original books and records of 9 account and to satisfactorily and accurately account to Plaintiffs with respect to all 10 expenses and revenues for the film TIST, including associated music, merchandise Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 and other revenues, and to disgorge the monies due to Plaintiffs therefrom; 12 (b) Declaring that Plaintiff CPP's registration and use of the SPINAL TAP 13 and DEREK SMALLS marks in connection with the goods and services set forth 14 in its trademark applications do not infringe on any abandoned trademark rights of 15 Defendants; 16 (c) Awarding Plaintiffs the following: (i) 17 Compensatory and punitive damages in amounts to be determined at trial; 18 19 (ii) Costs of suit; 20 (iii) Reasonable attorneys' fees; 21 (iv) Pre- and Post-Judgment Interest as allowed by law; 22 (d) Granting such other and further relief as the Court deems just and 23 proper. 24 25 26 27 28 20 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 21 of 22 Page ID #:142 JURY DEMAND 1 2 Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiffs 3 demand a trial by jury on all issues triable by right to a jury. 4 5 DATED: February 7, 2017 6 BALLARD SPAHR LLP /s/ Peter L. Haviland Peter L. Haviland 7 8 Attorneys for Plaintiffs Century of Progress Productions, Christopher Guest, Rob Reiner Productions, United Heathen and Spinal Tap Productions 9 10 Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 21 FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL Case 2:16-cv-07733-DMG-AS Document 19 Filed 02/07/17 Page 22 of 22 Page ID #:143 1 CERTIFICATE OF SERVICE 2 I hereby certify that on February 7, 2017, I electronically filed a true and 3 correct copy of the foregoing FIRST AMENDED COMPLAINT AND 4 DEMAND FOR JURY TRIAL through the Court’s CM/ECF system, which will 5 send a notice of electronic filing to all interested parties in the action through their 6 counsel of record as follows: 7 Robert M. Schwartz, Esq. Victor Jih, Esq. IRELL & MANELLA LLP 1800 Avenue of the Stars, Suite 900 Los Angeles, California 90067 rschwartz@irell.com vjih@irell.com 8 9 10 Ballard Spahr LLP 2029 Century Park East, Suite 800 Los Angeles, California 90067 Telephone: 424.204.4400 11 Attorneys for Defendants Vivendi S.A.;StudioCanal; and Ron Halpern 12 13 14 /s/ Scott S. Humphreys Scott S. Humphreys 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 CERTIFICATE OF SERVICE