Case 2:18-cv-09866-FMO-JPR Document 35 Filed 01/22/19 Page 1 of 35 Page ID #:208

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GIBSON, DUNN & CRUTCHER LLP
SCOTT A. EDELMAN, SBN 116927
sedelman@gibsondunn.com
ANDREW M. ROACH, SBN 293375
aroach@gibsondunn.com
2029 Century Park East, Suite 4000
Los Angeles, CA 90067-3026
Telephone: 310.552.8500
Facsimile: 310.551.8741
WILLIAMS & CONNOLLY LLP
JOSEPH M. TERRY (admitted pro hac vice)
jterry@wc.com
CARL R. METZ (admitted pro hac vice)
cmetz@wc.com
NICHOLAS G. GAMSE (admitted pro hac vice)
ngamse@wc.com
LAUREN A. HOWARD (admitted pro hac vice)
lhoward@wc.com
725 Twelfth Street, N.W.
Washington, DC 20005-5901
Telephone: 202.434.5000
Facsimile: 202.434.5029
Attorneys for Defendants and Counter-Plaintiffs
Fox Entertainment Group, LLC, Twentieth
Century Fox Film Corp., FoxNext, LLC, and
Defendant Twenty-First Century Fox, Inc.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

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GENTING MALAYSIA BERHAD, a
Malaysia corporation,
v.

CASE NO. 2:18-cv-9866-FMO-JPR
FOX DEFENDANTS’
COUNTERCLAIMS FOR:

Plaintiff,

1. BREACH OF CONTRACT

FOX ENTERTAINMENT GROUP,
LLC, a Delaware corporation;
TWENTIETH CENTURY FOX FILM
CORPORATION, a Delaware
corporation; TWENTY-FIRST
CENTURY FOX, INC., a Delaware
corporation; FOXNEXT, LLC, a
Delaware corporation; and THE WALT
DISNEY COMPANY, a Delaware
corporation,

2. BREACH OF THE
COVENANT OF GOOD FAITH
AND FAIR DEALING
DEMAND FOR JURY TRIAL

Defendants.

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FOX DEFENDANTS’ COUNTERCLAIMS

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FOX ENTERTAINMENT GROUP,
LLC, a Delaware corporation;
TWENTIETH CENTURY FOX FILM
CORPORATION, a Delaware
corporation; and FOXNEXT, LLC, a
Delaware corporation,
Counter-Plaintiffs,

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v.
GENTING MALAYSIA BERHAD, a
Malaysia corporation,
Counter-Defendant.

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FOX DEFENDANTS’ COUNTERCLAIMS

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Counter-Plaintiffs Fox Entertainment Group, LLC, Twentieth Century Fox Film

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Corporation, and FoxNext, LLC (collectively, “Fox”), by their attorneys, bring these

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claims to vindicate their contractual rights against Counter-Defendant Genting

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Malaysia Berhad (“Genting”), and to recover damages for Genting’s repeated and

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flagrant breaches of contract. In support thereof, Fox hereby alleges as follows:
INTRODUCTION

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1.

This dispute arises out of Genting’s failure to honor its contractual

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commitments to Fox to build and operate a “first-class, world-class” Fox-branded

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theme park (the “Park”) at Resorts World Genting in Genting Highlands, Malaysia, in

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accordance with agreed-upon approval processes and deadlines.

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2.

At the center of that contract, Fox agreed to license to Genting the right to

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use certain Fox intellectual property—including the Fox name and that of a number of

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its popular motion pictures, such as Planet of the Apes, Independence Day, Ice Age,

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Alien, and Predator—for use in the Park and its attractions. Genting, in turn, was to

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design, build, and operate the Park in accordance with certain quality standards, and to

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provide Fox with certain compensation.

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Fox World was to be Fox’s first Twentieth Century Fox-branded theme

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park. Because Fox’s business is built upon its valuable consumer-facing brands and

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intellectual property, which require substantial investment and vigilant protection

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against tarnishment, Fox insisted on obtaining, and did obtain, extensive, carefully

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negotiated approval rights, requiring its written approval for all attractions in the Park,

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at each key stage of development, in addition to a rigid milestone schedule that

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Genting was required to achieve. These contractual rights had teeth in the form of

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prompt termination if Genting failed to deliver on its many promises. The stringent

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quality and timeline requirements also served the important purpose of providing

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comfort to Fox that it could entrust its intellectual property to Genting, which, if

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successful, would be the Fox World operator and brand steward for decades to come.

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4.

Time after time, Genting failed its commitments by ignoring the quality

standards set forth in the agreement, Fox’s approval rights, and its deadlines.
5.

The fault for these failures lies with Genting, and Genting alone. As

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detailed below, Genting’s failures to adhere to its obligations and deliver on the

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agreed-upon schedule resulted from a mixture of Genting’s incompetence,

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inexperience, and rank indifference to its contractual obligations. Genting often

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constructed attractions without regard to Fox’s contractual approval rights, sometimes

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without the approved design development drawings, or even schematic drawings, that

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were required to precede construction, and at times in a manner inconsistent with

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approved designs for the attractions. Indeed, Genting began construction on all or

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nearly all of the Park’s 83 elements without first completing design development

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drawings. Because it often proceeded without plans, approval, or much thought at all,

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Genting built buildings that were too tall for the themed façades constructed to house

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them, built parade floats that were so large that they left no room on the street for

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spectators, built an attraction without including the designed (or any) evacuation route,
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and routinely had to retrofit, if not tear down, its prematurely built structures to

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accommodate either Fox’s approved plans or the intended use of the project. At other

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times, Genting simply changed approved attractions at the whim of its Chairman,

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including changing the Park’s planned central design element—the iconic Twentieth

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Century Fox logo and accompanying fountain—requiring further design, a further

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approval process, and further delays.

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6.

Fox twice granted Genting extensions for the project, and when it became

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apparent that Genting would miss even those deadlines, Fox negotiated in good faith

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for the terms of a third extension that would have provided it with additional

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protections in light of its increasing concerns about Genting’s fitness as a partner.

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When Genting declined to enter into that agreement, Fox exercised its contractual right

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to terminate the project. Genting’s repeated failure to meet its contracted-for

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deadlines, and the reasons for those failures—mismanagement, shoddy construction

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practices, and failure to seek Fox’s required approval before proceeding with

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construction—demonstrated that it lacked the commitment or competence required of

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a partner who would effectively serve as a steward of the Fox brand, potentially for

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decades. As a result of that termination, pursuant to the agreed-upon terms of the

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parties’ contract, Fox is entitled to a termination payment in excess of $45 million.

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7.

Rather than honor its contractual commitments and pay Fox, Genting filed

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a lawsuit blaming Fox for the delays and Twenty-First Century Fox, Inc. (“21CF”) and

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the Walt Disney Corporation (“Disney”) for Fox’s decision to terminate. Both claims

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are false, but it is not surprising that Genting made them. Genting has consistently

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blamed others for its own failure to adhere to its contractual obligations—whether they

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related to quality, deadlines, Fox’s approval, or its overdue termination payment to

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Fox. Genting’s strategy was laid bare in a 2018 communication from one of Genting’s

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own senior creative managers:

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“It’s very clear now [that] the chairman [of Genting] does not care about what

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Fox think[s;] he will just slap it up and fight you later.”
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8.

It is precisely because of that strategy that Fox was forced to terminate the

project and is now forced to bring these counterclaims.
THE PARTIES

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9.

Counter-Plaintiff Twentieth Century Fox Film Corporation (“TCFFC”) is

a Delaware corporation with its principal place of business in Los Angeles, California.
10.

Counter-Plaintiff Fox Entertainment Group, LLC (“FEG”) is a Delaware

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corporation with its principal place of business in Los Angeles, California. Prior to

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July 23, 2015, FEG was known as Fox Entertainment Group, Inc. Twentieth Century

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Fox Licensing & Merchandising was the signatory to each of the primary contracts

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with Genting, as a division of FEG, and as Administrator for TCFFC.
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Counter-Plaintiff FoxNext, LLC is a Delaware corporation with its

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principal place of business in Los Angeles, California. FoxNext was registered as of

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April 7, 2017. FoxNext is a subsidiary of FEG that has managed the Park development

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for Fox.

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Counter-Defendant Genting Malaysia Berhad is a Malaysian company

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whose principal place of business is in Malaysia. Genting is the developer of the Park.

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JURISDICTION AND VENUE

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13.

This Court has subject matter jurisdiction over this action pursuant to 28

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U.S.C. § 1332 because there is complete diversity of citizenship and the amount in

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controversy exceeds $75,000.

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14.

This Court has personal jurisdiction over the Counter-Defendant pursuant

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to California Code of Civil Procedure § 410.10 by consent. Genting filed its

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Complaint in this Court. In addition, Genting consented to personal jurisdiction and

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venue in the courts of the State of California for “all actions, proceedings, or litigation

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arising from the [MOA]” and agreed that the MOA “shall be deemed executed in Los

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Angeles, California” and that it “shall be construed and enforced in accordance with

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the laws of the State of California governing contracts to be wholly performed in

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California.” MOA § 14(h).
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GENERAL ALLEGATIONS

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A.

Fox and Genting Enter into the MOA To Develop a “First-Class, World-

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Class” Fox-Branded Theme Park in Malaysia.

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On June 1, 2013, Fox and Genting entered into a memorandum of

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agreement (“MOA”) whereby Fox would license certain of its intellectual property to

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Genting, which would develop and operate a theme park in Genting Highlands,

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Malaysia, to be known as 20th Century Fox World (Malaysia).

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The Park was to be a “first-class, world-class” development, featuring

dozens of attractions based on Fox’s blockbuster films and franchises like Alien, Ice

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Age, Independence Day, Night at the Museum, Planet of the Apes, and Predator,

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among many others. MOA § 3(c).

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The MOA contained multiple provisions that were integral to the timely

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development of the Park, including provisions relating to Key Milestone deadlines,

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quality standards, and Fox’s approval rights. All of these provisions were crucial to

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ensuring the timely development of the Park at a level that was acceptable to Fox and

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commensurate with its quality and intellectual property requirements, and to serve as a

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check on whether Genting had the capability and commitment to serve as a steward for

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the Fox brand.

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a. Key Milestones. The MOA provided that “[i]t is of the essence” that

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Genting meet certain “Key Milestones” “in connection with the design, construction

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and opening of” the Park. MOA § 3(a)(i). The MOA was unmistakably clear that

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Genting’s adherence to the Key Milestone deadlines was of the utmost importance. In

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fact, the MOA gave Fox the right to terminate the contract “in its sole discretion”

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should Genting fail to meet any of these deadlines. MOA § 3(a)(ii). Specifically, the

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MOA provided that: “If any of the [Key Milestones] are not met due to any delay,

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action or omission on the part of [Genting], . . . (A) the entire Development Fee shall

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be forfeited by [Genting] and (B) Fox may elect in its sole discretion to terminate this

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Agreement . . . upon written notice to [Genting], in which case the Agreement shall

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cease to have any further force and effect . . . .” Id.
b. The original deadlines for these Key Milestones were defined in the MOA

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as follows:
i. Initial Designs and Concepts: By November 1, 2013, Genting

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was required to submit to Fox for approval the initial designs and

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concepts for the Park. MOA § 3(a)(i)(B).
ii. Design Development: By January 1, 2013, Genting was required

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to submit detailed designs of the Park for final approval by Fox.

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MOA § 3(a)(i)(C).

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iii. Beginning of Construction: By March 1, 2013, Genting was

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required to begin construction of the Park. MOA § 3(a)(i)(D).
iv. Soft Opening: By May 31, 2016, Genting was required to

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complete the “Soft Opening” of the Park, MOA § 3(a)(i)(E), i.e.,

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the “public opening of eighty percent (80%) of the combined

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attractions of the Fox Branded Theme Park,” MOA § 1(r).

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v. Official Opening: By June 1, 2017, Genting was required to
officially open the Park. MOA § 3(a)(i)(E).

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c. These deadlines, and the stringent enforcement provisions, served a dual

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purpose: (1) to motivate Genting to keep to the agreed-upon schedule; and (2) to serve

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as a check on whether Genting was performing at the level Fox would expect for a

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partner that was to serve as a steward of its brand and intellectual property for at least a

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decade.

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d. Quality Standards. Other provisions of the MOA required that Genting

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“shall design, construct, operate and maintain” a “first-class, world-class” theme park

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“in accordance with the highest standards” used in its other parks, including Universal

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Studios Singapore. MOA § 3(c), (d). Genting was contractually obligated to protect

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the Park’s quality in multiple ways, including:
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i. Standard of Operation: Genting was required to “design,

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construct, operate and maintain throughout the Term the Fox

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Branded Theme Park and, if applicable, such areas of the Resort

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that utilize the Fox Property, and otherwise utilize the Fox

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Property, in accordance with the highest standards (including,

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without limitation, health and safety standards) it generally applies

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to its own properties used in other Theme Parks operated by GENM

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or GENM Affiliates (e.g., Universal Studios Singapore).” MOA

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§ 3(d).
ii. Capital Expenditure: Genting was also required to “spend on the

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initial capital expenditure to build out the Fox Branded Theme Park

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such sums as may be necessary to create a first-class, world-class

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level themed area in accordance with the highest standards

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(including, without limitation, health and safety standards) it

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generally applies to its own properties used in other Theme Parks

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operated by GENM or GENM Affiliates (e.g., Universal Studios

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Singapore).” MOA § 3(c).

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iii. Quality Control: Genting was also required to “maintain quality

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control standards commensurate with industry practice for all

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approved elements of the Fox Branded Theme Park during all

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stages of development and mounting of the Fox Branded Theme

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Park.” MOA § 3(b)(ii).

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Approvals: One of Fox’s most important contractual checks on Park

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quality was that Genting had to secure Fox’s written approval through each of the key

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“stages of development,” including Design Firm Approval, Preliminary and Schematic

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Design Approval, Design Development, Themed Element Production, and Installation.

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MOA § 3(b). These approval rights were extensive, and they were carefully negotiated

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by Fox in order to protect its valuable intellectual property. Thus, through each of the
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key phases, Fox was required to approve in writing “all [Park] content, including all

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elements of the [Park] containing Fox Property and all elements of the [Park]

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containing generic elements, including the manner in which such generic elements are

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integrated or juxtaposed with the [Park].” MOA § 3(b)(ii) (emphasis added).

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The MOA required Genting to strictly abide by Fox’s approval rights,

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with severe penalties for noncompliance. The MOA provided that “[o]nce a schematic

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design, concept, treatment design or themed element is approved by Fox, GENM shall

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not change, alter or modify such element from the approved version” without

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“additional Content Approval by Fox . . . at GENM’s sole cost and expense.” MOA

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§ 3(b)(ii)-(iii). Similarly, Genting was permitted to install “only Fox-approved

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schematic, concept, treatment, design and themed elements,” with any required

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corrections “at GENM’s sole cost and expense.” MOA § 3(b)(iii)(A) (emphasis

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added). In addition, use by Genting of “Fox property in a manner not approved or

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deemed approved by Fox” was grounds for termination under the MOA, as was

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Genting’s “breach[ of] any of its representations and warranties or defaults with regard

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to the performance of any of its obligations provided for in this Agreement in any

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material respect.” MOA § 11(a)(i),(vii).

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B.

Genting’s Delays Require the Deadlines To Be Amended, Twice.

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The First Amendment

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From the beginning of project, Genting proved itself unable to effectively

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manage the design and construction process such that it could meet its agreed-upon

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deadlines.

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As late as December 2013—several months into the project—one of

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Genting’s senior creative designers confided to Fox that Genting still had not obtained,

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and was trying to hire, “a professional & theme-park experienced Project &

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Construction Management team to run the project.” Because Genting lacked

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competent project management at that time, the Genting designer explained, it had

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fallen to the creative designers to “become the default project managers,” which

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prevented them from “being able to focus on delivering creativity & quality.”
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As Fox ultimately came to learn, many of Genting’s problems came from

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the top—a Chairman and senior management that tossed around deadlines with neither

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an understanding as to whether Genting could actually meet those deadlines, nor a

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commitment to deploy the resources necessary to do so. In the words of that same

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Genting designer, “the realities of time needed to do good work are completely

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ignored” by Genting and its Chairman.1
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Less than a year after entering into the MOA, Genting’s mismanagement

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had caused the project to fall so far behind schedule that the MOA had to be

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renegotiated to extend the deadlines.
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Effective June 10, 2014, Fox and Genting entered into an amendment to

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the MOA (“Amendment No. 1”) that extended each of the Key Milestone deadlines by

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several months. Specifically, the Key Milestones were extended as follows:

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(1) August 1, 2014 for Genting to submit to Fox for approval the Park’s initial designs

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and concepts (an extension of 9 months from the MOA deadline); (2) January 1, 2015

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for Genting to submit to Fox for final approval the Park’s design development plans

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(an extension of 12 months); (3) February 1, 2015 for Genting to begin construction of

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the Park (an extension of 11 months); and (4) January 1, 2017 for the Park’s Soft

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Opening (an extension of 7 months). Amd. No. 1, § 2(d). In consideration for this

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Amendment, Genting agreed to increase Fox’s annual Development and License Fees

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by $200,000 each. Amd. No. 1, § 2(c).

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The designer also noted that, because the Chairman had approved the Park’s initial
master plan so late (the first time—as described below, Genting disruptively amended
it several times thereafter) it left the team with “not enough time to produce quality
work and coordinate it all” on important design projects, including “zone POVs” and a
“full aerial” of the Park. Genting’s timing expectations for those projects were so
unreasonable that “Every known artist [Genting] approached declined based on the
time frame.”
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2.

The Second Amendment

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Unfortunately, Genting’s inability to meet its obligations persisted even

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with the extended deadlines.
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By way of example, although the Key Milestone deadline for Genting’s

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submission of a Master Plan for the Park was extended in Amendment No. 1 to August

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1, 2014, Genting struggled for nearly two years to finally agree upon and submit its

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operative Master Plan.

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The source of these delays was nothing but Genting’s own incompetence

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and indecisiveness. In fact, even when Genting submitted its Master Plan and other

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submissions to Fox for initial review and approval, Genting’s plans were so woefully

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lacking in necessary, industry-standard detail—such as written descriptions, reference

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plans and images, or notifications of changes from prior versions—that Fox was forced

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to initially reject them and request additional information.

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Even Fox’s conditional approvals could not save Genting from itself.

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Despite the fact that Fox had given conditional approval to Genting’s first version of

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its Master Plan in late August 2014, Genting decided to abruptly “start over” with

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completely new Master Plans—a process that occurred on multiple occasions

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throughout the next year. These repeated false starts caused the Park’s development to

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flounder at the planning stages, leading to a cascading effect that substantially delayed

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the Park’s design and construction.

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Many of these changes were coming straight from Genting’s Chairman,

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who took an active interest in the Master Plan, but little to none in the approval

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process, and who would demand changes to approved designs without consulting Fox.

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Each such change, regardless of how arbitrary or unnecessary, required additional

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design work by Genting employees and a new round of approvals by Fox.

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Genting’s delays had become so pervasive that although under the First

Amendment, Genting was to have submitted final design development drawings and

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begun construction of the Park in 2015, by February 2016, Genting was still proposing

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revisions to the Master Plan.
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It soon became evident to both parties that there was no hope of getting

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the project back on track and achieving any of the extended Key Milestone dates.

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Accordingly, Fox sent a senior team to Malaysia to discuss the future of the Park and

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the relationship between the parties moving forward.
32.

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During these meetings, Fox explained the broad scope of its approval

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rights under the MOA. The Fox team firmly conveyed its view that Genting was in

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breach of the Agreement, and that Genting’s inability to stick to the contractual

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schedule was imperiling the viability of the project.
33.

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Fox strongly encouraged Genting to conduct an internal review of its

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involvement in the project to date. Genting agreed to do so, and assured Fox that

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Genting was capable of adhering to its contractual responsibilities and could meet an

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extended set of deadlines.
34.

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On June 9, 2017, the parties executed the Second Amendment to the

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MOA. That Amendment made several important changes to the MOA, including the

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following:
35.

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First, the Amendment extended the deadlines for the remaining Key

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Milestones. Specifically, the Key Milestones were pushed to: (1) March 1, 2018 for

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Genting to submit to Fox for final approval of the Park’s design development plans (an

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extension of more than 3 years from the First Amendment deadline); (2) June 30, 2018

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for the Park’s Soft Opening (an extension of 18 months); and (3) January 1, 2019 for

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the Park’s Official Opening (an extension of 18 months). Amd. No. 2, § 2(e).2

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In addition, on information and belief, several of Genting’s managers, including
Steve Beyer, Anthony Reed, Marc Buczynski, and Foo Koh Poh believed that the
proposed Key Milestones were not achievable, in particular for the Soft Opening.
While negotiating with Fox, they agreed that an achievable Soft Opening date was
November 2018. Nevertheless, when Genting presented the contract for the Second
Amendment, Genting inserted a deadline of June 2018, which misled Fox into thinking
that the more aggressive timeline was possible.
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36.

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Second, the Amendment revised and increased the royalty “Guarantee

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Amounts” and “Annual License Fees” owed to Fox through the deal. Amd. No. 2,

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§§ 2(d),(g). This was effectively Genting’s consideration in exchange for Fox’s

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willingness to accept such a substantial extension.
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Third, the Amendment increased Genting’s minimum required capital

expenditure on the Park from $130 million to $600 million. Amd. No. 2, § 2(f).

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C.

The Parties Enter into a Settlement Agreement

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38.

At the same time the parties executed the Second Amendment, they

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entered into a mutual settlement and release agreement (the “Settlement Agreement”),

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which resolved all existing claims and disputes between Fox and Genting. In fact, full

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execution of the Settlement Agreement was an express condition precedent of the

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Second Amendment. Amd. 2, § 4.
39.

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The Settlement Agreement included a broad release covering the entire

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development to that point. It provided that Fox and Genting would release each other

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“from any and all claims, debts, liabilities, demands, judgments, accounts, obligations,

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promises, acts, agreements, costs, expenses (including but not limited to attorneys’

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fees), damages, actions and causes of action, of any kind or nature based on, arising

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out of, relating to or in connection with the MOA, up to but not including the Effective

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Date” of June 9, 2017. Settlement Agreement § 2.1.
40.

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The Settlement Agreement also included a “Promise Not to Sue,” in

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which the parties agreed “never to sue or otherwise bring any action, or judicial or

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other proceeding of any kind . . . regarding the Released Claims.” Settlement

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Agreement § 2.2.

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D.

Genting’s Mismanagement and Contractual Performance Failures

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Continue.

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41.

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Despite Genting’s purportedly renewed commitment to achieving both

quality and schedule, it soon returned to its old ways, missing deadlines, ignoring

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FOX DEFENDANTS’ COUNTERCLAIMS

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1

Fox’s contractual rights, and constructing the Park in a manner inconsistent with the

2

“first-class, world-class” quality standards that it was obligated to deliver.

3

1.

Genting’s Failure to “Design, Construct, Operate, and Maintain” the
Park “In Accordance with the Highest Standards.”

4
5

42.

The MOA required Genting to “design, construct, operate and maintain”

6

the theme park “in accordance with the highest standards” that it used at other parks,

7

including Universal Studios Singapore, MOA § 3(c), to deliver a “first-class, world-

8

class” facility, id. § 3(d), and to “maintain quality control standards commensurate

9

with industry practice for all approved elements of the Fox Branded Theme Park

10

during all stages of development and mounting of the Fox Branded Theme Park,” id.

11

§ 3(b)(ii).

12

43.

13
14

Despite these requirements, Genting engaged in a design and construction

process that delivered a product inconsistent with those standards.
44.

Genting repeatedly constructed buildings and attractions either without

15

any concern for approved plans or without plans at all. This approach required

16

Genting to tear down, retrofit, or modify buildings to conform to plans. Rather than

17

“measure twice, cut once,” Genting’s approach was essentially to cut without

18

measuring at all, wait for someone to point out its errors, and then cut again and again

19

until Genting either got it right or shrugged it off as close enough. Even when its

20

errors were ultimately fixable, they nevertheless caused cascading delays in the

21

construction schedule. For example:

22

a. Epic Boat Ride: The retail building associated with this ride was built

23

two meters too tall, contrary to the approved plan, and too tall to fit within

24

the specially constructed façade. Genting went through an extensive

25

redesign process, ultimately deciding to lop off the top two meters of the

26

building. The error caused months of delay.

27
28

b. Night at the Museum: Genting built the ride facility for this attraction
one meter smaller than the approved design. That error had a domino
14
FOX DEFENDANTS’ COUNTERCLAIMS

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1

effect, as the designers had to reconfigure the props in the smaller space

2

and reconfigure the queue into a space so narrow it barely passed safety

3

requirements, which caused substantial delay.
c. Expedition Thin Ice: Genting incorrectly built the building housing this

4
5

attraction, which was based on the popular Ice Age animated films.

6

Genting built the ceiling for the room housing the first “scene” two meters

7

short and failed to account for the addition of MEP (mechanical,

8

engineering, and plumbing), all of which required the characters to be

9

dropped down one level, thus requiring further redesign and approval

10

submissions. In addition, Genting did not properly install the “super-flat”

11

floor required so that the ride vehicle could operate smoothly, apparently

12

believing that a “somewhat-flat” floor was close enough. It was not. As a

13

result, Genting was forced to regrind the floor, causing a delay of several

14

weeks.
d. California Thunder Run: When Fox approved a 3D design for this

15
16

interior attraction, it clearly featured an evacuation route for passengers in

17

case of emergency. However, during construction, Genting incredibly

18

neglected to build out any evacuation route. As a result, Genting had to

19

go back and manually cut out rockwork to fix its mistake and create an

20

evacuation exit, which caused a months-long delay. Those patchwork

21

holes, not surprisingly, were inconsistent with the approved design and of

22

poor quality. Fox also noticed massive paint leaching due to improper

23

curing time of concrete, which adversely affected the painting surface.3

24

And the ride construction was further delayed by Genting’s failure to

25
26
3

27
28

Genting had unacceptable paint quality problems throughout the Park. These also
included, for example, ride vehicle paint issues (such as visibly bubbling paint) on the
Hummingbird Flyers, Robots Rivet Town, Colonial Fighter Pilots, Rio Carnaval
Chaos, and AVP Descent into Darkness attractions.
15
FOX DEFENDANTS’ COUNTERCLAIMS

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1

install the structural steel in a manner that would accommodate the ride

2

vehicle and a safe passenger perimeter (the “ride envelope”) together with

3

the approved theming elements, necessitating further change.

4

45.

As shown both in these examples and further below, Genting’s shoddy

5

construction process fell far short of “first-class, world-class” construction practices

6

“in accordance with the highest standards.”

7
8
9

46.

In other instances, Genting simply failed to deliver quality product or

failed to understand the intellectual property that it was putting to use. For example:
a. Parade Floats: One planned attraction at the Park was a large parade

10

with elaborate floats featuring various characters from Fox films. During

11

the approval process, Fox expressed concerns about the size of the floats

12

and the amount of street space they would occupy, but Genting assured

13

Fox that the floats would fit. They did fit in the streets, but only to the

14

exclusion of any pedestrians or viewers, defeating the purpose of the

15

floats. Genting’s operations personnel admitted the problem, but its Live

16

Entertainment team still refused to fix it.

17

b. Alien vs. Predator Dance Show: Demonstrating how little thought it

18

gave to the integrity of Fox’s intellectual property, Genting proposed

19

taking some of Fox’s most significant science fiction film properties—

20

Alien, Predator, and Alien vs. Predator—and using the main characters in

21

a cruise ship-style dance show, featuring a dancing Alien and Predator.

22

c. Fox Plaza: The construction of Fox Plaza was not only out of

23

conformance with approved design, but the quality was so poor that even

24

Genting’s own art directors agreed it was unacceptable, and refused to

25

approve it. Nevertheless, as was often the case, Genting declined to fix

26

the quality problems for months after Fox raised them.

27
28
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2.

1

Genting’s Repeated Design Changes and Failure To “Use Only Fox-

2

Approved Schematic, Concept, Treatment, Design and Themed

3

Elements.”
47.

4

The MOA explicitly provided that “GENM installation at the Fox

5

Branded Theme Park shall use only Fox-approved schematic, concept, treatment,

6

design and themed elements.” MOA § 3(b)(iii)(A) (emphasis added). Thus, as a

7

fundamental requirement set forth in this provision and others like it, Genting was

8

required to obtain Fox’s complete written approval on designs before construction

9

could commence on any particular attraction.
48.

10

Despite this requirement, Genting repeatedly made material changes to

11

approved designs and, at times, began building the new designs without obtaining Fox

12

approval, even where the changes involved core Fox intellectual property. Indeed,

13

Genting began construction on the Park before it had even a single design development

14

plan approved. This practice resulted in numerous substantial delays.
49.

15

For example, during a site walk in approximately January 2018, Genting’s

16

Chairman demanded that design changes be made to the Fox Icon Fountain in Fox

17

Plaza—specifically, modifying the search lights incorporated into a statue of the 20th

18

Century Fox logo. Ultimately, this resulted in late design changes and further delays.

19

This was but one of several personal requests from the Chairman to change the

20

fundamental Park design,4 requests that were consistent with his disregard for Fox’s

21

approval rights.

22

50.

Similarly, Genting moved forward with construction of an Independence

23

Day-based attraction (ESD Global Defenders) without first obtaining approved design

24

development plans. Not only was the construction of poor quality, but the related

25
26
27
28

4

Other examples included: the redesign of the Independence Day attraction to
accommodate an extra theater (after one was already built); a bridge from Genting’s
theme park hotel to the Fox Plaza attraction; and the addition of new VIP seating in
the façade of the California Thunder Run attraction. All of these changes were
disruptive, and caused significant delays.
17

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1

queue building was built incorrectly and conflicted with the approved conceptual and

2

schematic designs. These problems were so egregious that Genting had to tear down

3

the building and rebuild it multiple times, causing months of delay.
51.

4

Genting’s substandard practice of constructing Park elements without

5

approval, and in some cases without even design development drawings, caused

6

substantial disruption to both attraction quality and Park schedule overall. It also

7

provided increasing evidence that Genting cared little about its role in protecting the

8

integrity of Fox’s brand and its intellectual property.
52.

9

By proceeding with construction without design development plans in-

10

hand, Genting’s construction team was necessarily making dramatic assumptions about

11

how the various attractions—based on Fox intellectual properties—should look,

12

without Fox’s required creative input. Not surprisingly, and as explained further

13

below, the practice resulted in not only egregious quality problems, but also substantial

14

rework and delays.
53.

15

Genting responded to Fox’s complaints by reassuring Fox that the build-

16

and-then-wait-to-see-if-anyone-complains approach was standard local Genting

17

construction practice, and that Genting would subsequently take whatever steps were

18

necessary to conform the attractions to fit Fox’s approvals. For example, when these

19

issues came to a head in late 2017, Genting sought to reassure Fox by offering the

20

“Izwan Pledge,” which was supposed to be a commitment from Genting executive

21

Izwan Loke that the company would remediate any construction problems generated as

22

a result of Genting’s development ahead of approved designs.5
54.

23
24

Despite Genting’s recognition that its practices were inconsistent with the

agreement, and despite regular escalation of these issues by Fox to Genting’s Park

25
26
27
28

5

Of course, this was what Genting was contractually required to do anyway. The
MOA explicitly provided: “If, during such installation, GENM seeks to change, alter
or modify an approved element, such change, alteration or modification shall require
additional Content Approval by Fox and shall be at GENM’s sole cost and expense.”
MOA § 3(b)(iii)(A) (emphasis added).
18
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1

leadership,6 they persisted. As such, Fox called for a senior executive meeting in

2

Malaysia in June 2018 to express its serious concerns to Genting’s leadership,

3

including Genting’s President. At the meeting, Fox warned Genting that its rogue

4

building practices were unacceptable, citing the following examples, among others:

5

a. Century City: Among other problems with this attraction, Fox warned

6

Genting that while there was an approved design development package,

7

Genting was conspicuously deviating from it, including, for example, with

8

an entire new added floor to the mall, terraces, and restaurants that Fox

9

had not approved. Nevertheless, Genting was permitting construction to

10

continue. Fox was concerned that these developments were intended to

11

be parasitic venues that would allow customers at an adjacent mall owned

12

by Genting to observe the Park and Fox’s intellectual property, without

13

actually entering as customers.
b. Planet of the Apes: While Fox approved a Planet of the Apes show

14
15

schematic design in July 2017, Fox warned that it had still not received a

16

schematic design for the facility that would house it. Genting

17

nevertheless completed construction on the facility in 2018. This

18

construction notably included an unauthorized elevator shaft to benefit

19

Genting’s adjacent mall, damaging the aesthetics of the attraction façade.

20

This was a shocking example of Genting’s willingness to simply “slap

21

up” buildings based on core Fox intellectual property, for Genting’s own

22
23
24
6

25
26
27
28

In late 2017, worried about Genting’s chronic, unresolved quality concerns, Fox
initiated a regular call with leadership from both sides to escalate and address these
issues. For each call, Fox prepared and shared a detailed “Issues List” spreadsheet that
tracked and prioritized problems at the Park. But even with escalation and visibility
into issues at the Park, Genting still did not appropriately manage and remediate the
pervasive quality problems. It was often the case that during the Issues List calls,
Genting’s management would simply reply that each of the issues Fox flagged was
“ongoing.”
19
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1

purposes, without providing Fox the benefit of its contractually required

2

approvals.7
c. Secondary Entrance: In September 2016, Fox approved the concept

3
4

design for a secondary entrance to the Park (at the request of Genting’s

5

Chairman). That approval was contingent in part upon it containing a

6

“major 20th Century Fox World entry statement,” which had obvious

7

brand value for Fox. Nevertheless, in 2018, Genting unilaterally, and

8

without approval, filled the space that was supposed to house the Fox

9

entry statement, again, on information and belief, at the instruction of
Genting’s Chairman.

10

d. Scrat’s Nutty Adventure: Fox repeatedly informed Genting that it had

11
12

inappropriately proceeded to build this premier attraction without

13

obtaining proper approvals, including by removing scaffolding from

14

around the mountain peak without proper review and approval from Fox,

15

which left unacceptable, visible patchwork on the mountain façade.

16

While Genting promised to eventually repair these divots, they were still

17

present at the time of termination. In addition, the primary and secondary

18

steel for the mountain, and primary steel for the ride itself, were

19

incorrectly installed inside the ride envelope. As a result, both the

20

mountain and ride steel had to be rebuilt, causing months of delay.
55.

21

In this presentation, Fox also explicitly reminded the Genting executives

22

of Genting’s contractual obligations pursuant to MOA § 3(d) to “design, construct,

23

operate and maintain throughout the Term the Fox Branded Theme Park . . . in

24

accordance with the highest standards,” and warned that Fox was seriously concerned

25
26
7

27
28

Genting also built an unauthorized IMAX facility like a pillbox directly on top of the
attraction facility, again for the apparently parasitic benefit of its mall customers,
which undermined the aesthetics of the attraction and violated the contractual
prohibition against using non-Fox IP in park boundaries.
20
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1

about Genting’s ability to fulfill its quality obligations, listing these and numerous

2

other examples.

3

56.

Genting compounded the problem by failing to take a proactive and

4

collaborative approach toward approvals. Genting delayed for years in sharing

5

information about the design of the Park, and even as the Park was under way, Genting

6

generally refused to share construction plans with Fox, even when requested.

7

57.

In July 2018, Fox learned that Genting’s promises to abide by the

8

approval terms set forth in the contract had been countermanded by the Chairman of

9

Genting himself, and his senior leadership, like Izwan Loke. In July 2018, one of

10

Genting’s experienced senior creative managers warned Fox that “It’s very clear now

11

[that] the chairman does not care about what Fox think[s;] he will just slap it up and

12

fight you later.” He added that Genting’s senior park executives Bill Collins and Greg

13

Bryant “are part of that push.” He noted that even though “I have drawings that will

14

never work,” “[B]ill demands we stop marking it up and he is instructing them to

15

build.” He emphasized that the direction to stop sharing designs with Fox was coming

16

from “[G]enting high Management and it’s all so corrupt.”

17

3.

Genting’s Failure To Spend “Such Sums as May be Necessary to

18

Create a First-Class, World-Class Level Themed Area in Accordance

19

with the Highest Standards” Used in Universal Studios Singapore.

20

58.

The MOA, as amended, also expressly required that Genting spend “such

21

sums as may be necessary to create a first-class, world-class level themed area in

22

accordance with the highest standards . . . it generally applies to its own properties

23

used in other Theme Parks operated by GENM or GENM Affiliates (e.g., Universal

24

Studios Singapore),” and in no event “less than $600 million.” MOA § 3(c); Amd. No.

25

2, § 2(f).

26

59.

On information and belief, Genting’s capital investment at its Universal

27

Studios Singapore theme park was substantially higher on both a raw basis and on a

28

per capita basis when measured against anticipated attendance.
21
FOX DEFENDANTS’ COUNTERCLAIMS

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1

60.

In addition, there were many instances where Genting made decisions to

2

skimp on necessary capital expenditures, “value-engineering” the attractions in a way

3

that deviated from the approved designs, and resulting in inferior quality that was not

4

“first-class, world-class.” For example, in December 2017, when reviewing in-process

5

design development packages, Fox learned—without prior notice from Genting—that

6

Genting had eliminated major show moments as part of a value engineering initiative

7

on both the Invasion of the Planet of the Apes and Alien vs. Predator: Descent into

8

Darkness attractions. This was an especially damaging choice for cost-cutting, since

9

the attractions were supposed to be two of the premier, anchor attractions at the Park.

10

Amd. No. 2, Ex. F (designating the attraction in a special tier of “first-class, world-

11

class level principal attractions”). It also caused several months of delay as the

12

attractions had to be reworked.

13

61.

Similarly, on the Ice Age-based attraction called Expedition Thin Ice,

14

Genting attempted to cut corners by reducing the movement functions of several dozen

15

animatronic figures in the ride, resulting in a low-quality appearance that did not

16

approach the “first-class” standards set forth in the agreement. As a result, Genting

17

was forced to send the animatronics back to the vendor, which resulted in a delay of a

18

few months.

19

62.

In addition, as Fox warned Genting in its June 2018 presentation to

20

Genting’s President and executives, the extensive rework required by Genting’s failure

21

to adhere to approved designs, and its decision to build without approved designs in

22

place, wasted a substantial percentage of its capital investment. This deprived Fox of

23

the promised value that it was entitled to receive from Genting’s capital investment in

24

the Park.

25

4.

Genting’s Failure To Professionally Manage the Project.

26

63.

While many of Genting’s delays and failures can be traced to its

27

construction processes, capricious design changes, and failure to obtain approval

28

before building, nearly all aspects of the project were adversely affected by Genting’s
22
FOX DEFENDANTS’ COUNTERCLAIMS

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1

failure to engage competent, professional project management talent and follow best

2

practices.

3

64.

Genting’s failure to effectively manage the project was a breach of its

4

obligation to “design, construct, operate and maintain” the Park “in accordance with

5

the highest standards,” MOA § 3(d), as well as its obligation to “maintain quality

6

control standards commensurate with industry practice for all approved elements of the

7

[Park] during all stages of development and mounting of the [Park],” id. § 3(b)(ii).

8

There are several examples of Genting’s project management shortcomings.

9

65.

First, Genting’s project management operation was perpetually

10

understaffed and lacked sufficiently experienced and/or sufficiently empowered

11

leaders who could deliver a massive project on-time, on-quality, and on-budget. This

12

problem spanned the life of the project, despite Genting’s repeated assurances that it

13

would improve. For example, in April 2018, Genting told Fox that it was

14

implementing yet another “new project management structure.” This late-stage, high-

15

level shakeup was a telltale sign that Genting knew that its project management team

16

was still ineffective in 2018. And the change did not improve Genting’s performance,

17

perhaps because the project managers were still subservient to Genting’s Chairman and

18

Izwan Loke.

19

66.

Second, Genting’s team did not have or did not utilize basic project

20

management software. Whereas a professional project manager for a theme park of

21

this size would typically employ a detailed project plan to manage the highly complex

22

hierarchy of dependencies and dates, Genting’s project managers attempted to manage

23

the project in Excel or other general purpose software.

24

67.

In April 2018, two months before the rescheduled soft opening of the

25

Park, Genting claimed that it had finally developed “a fully integrated master schedule

26

for the entire project, which takes into account the milestones that need to be met in

27

regards to facility completion, ride installation, etc. to achieve the overall schedule.”

28

This kind of a project plan, also sometimes known as a “Gantt chart,” is a fundamental
23
FOX DEFENDANTS’ COUNTERCLAIMS

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1

tool that helps project managers at mega projects manage extremely complex

2

dependencies and timelines across multiple vendors and attractions. To be clear, the

3

creation of a master schedule for the plan five years into the project and months from

4

its scheduled completion falls well short of any professional standard. But in any case,

5

Genting’s promises were once again hollow. Genting’s most detailed Gantt chart

6

shared with Fox was no more than about a dozen pages long, presenting a superficial

7

level of specificity that underscored Genting’s lack of professional competence and

8

attention to detail. Without a suitable project plan, Genting did not have a reliable

9

methodology to manage park development against its contractual milestones, and its

10
11

schedule estimates proved to be chronically optimistic and wrong.
68.

Third, and relatedly, Genting failed to provide a system to manage the

12

approval process. Pursuant to the MOA, Fox was entitled to “approval rights over all

13

Fox Branded Theme Park content,” for every attraction, at each key stage of

14

development, such as “Schematic Design,” “Design Development,” “Installation,” etc.

15

MOA § 3(b)(ii). Genting would submit Requests for Approval packages (“RFAs”) to

16

Fox to obtain these approvals. Despite the fact that there were thousands of packages

17

submitted for approval over the course of the project, with substantial edits and

18

feedback, Genting handled the management of all this back-and-forth on an ad hoc

19

basis rather than with a professional-grade approval tool. This was such a fundamental

20

gap that Fox was ultimately forced to provide Genting with credentials to Fox’s own

21

application.

22

69.

Fourth, Genting’s team suffered from a significant lack of coordination,

23

and apparently lacked even basic tools for coordination such as shared electronic

24

drives. As a result, Genting’s art directors often did not share assets with other

25

Genting team members, and Fox was asked repeatedly for assets that it had already

26

provided. Genting’s team also lacked insight into the status of Genting’s own internal

27

work product. This repeatedly caused problems, such as Genting’s premature

28

submission of certain graphic artwork that did not match the current designs from its
24
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1

own art directors. Fox repeatedly implored Genting to better manage this process as it

2

became clear that Genting’s disorganization was causing unnecessary delay in lost

3

review time and RFA rejections. Fox’s advice went unheeded.

4

70.

Fifth, many Genting project team members lacked professional-grade

5

tools for electronic communication and distribution of large art files, relying instead on

6

their personal computers and Gmail accounts. Without these standard business

7

resources, Genting’s team members were often unable to send and receive the large

8

files that are fundamental to theme park development. In addition, Genting lost access

9

to important documents when these team members left the company and/or project.

10

71.

As a result of Genting’s failure to provide competent project management

11

personnel, methodology, and tools, Genting’s team was chronically disorganized and

12

lacked accurate information about the status of the project. These shortcomings had

13

deleterious effects on both project quality and schedule.

14

5.

Genting’s Failure To Meet Key Milestone Deadlines.

15

72.

The inevitable result of Genting’s numerous quality and project

16

management failures was extensive delays, which caused Genting to fail to achieve the

17

Key Milestones that were “of the essence” of the MOA.

18

73.

Genting’s failure to meet those Key Milestones is obvious on the face of

19

the contract and calendar and is not seriously in dispute. Genting has already missed

20

two contractual Milestone deadlines, for completion of Design Development and Soft

21

Opening, and was inevitably going to miss a third, for the Official Opening.

22

a. First Breach: Design Development Milestone (March 1, 2018):

23

Genting breached its first Key Milestone deadline when it failed to

24

complete submission of detailed design development plans of the Park for

25

final approval by Fox. Amd. No. 2, § 2(e)(i)(C). It is indisputable that

26

Genting missed this Milestone. Indeed, in meetings between Fox and

27

Genting executives on March 13 and 14, 2018, after the deadline had

28

already passed, Genting conceded that the overwhelming majority of the
25
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1

design development plans had still not been submitted to Fox and would

2

not be submitted for months to come. Genting asked for more time, and

3

proposed a revised schedule that would push the submission deadline to

4

May 1, 2018. However, even at the point of termination more than six

5

months later, Genting had still not submitted design development plans

6

for final approval for most attractions. In fact, at the time of termination,

7

fewer than five attractions had design development plans that were fully

8

approved. The fact that Genting’s executives thought in March that they

9

would have final design development plans submitted within about 1.5

10

months, but were not even close more than 6 months later, underscores

11

the extent to which they fundamentally failed to professionally manage or

12

understand the Park.

13

b. Second Breach: Soft Opening Milestone (June 30, 2018): Genting’s

14

second breach of the MOA’s Key Milestone deadlines occurred when it

15

failed to complete the Soft Opening of the Park (which required public

16

opening 80% of the total attractions) by June 30, 2018. MOA §§ 1(r);

17

3(a)(i)(E). It is indisputable that Genting missed this Milestone. During

18

the course of negotiations on a potential third amendment, Genting

19

initially proposed to push the Soft Opening date to December 1, 2018,

20

before later proposing April 1, 2019, and eventually proposing that the

21

parties should eliminate the Soft Opening Milestone altogether

22

(presumably because Genting realized that it could not credibly commit to

23

achieve a date).

24

c. Third Breach: Official Opening (January 1, 2019): Finally, at the time

25

that Fox terminated the MOA, it was also clear that Genting was going to

26

miss the Official Opening Milestone date, as Genting concedes in its

27

Complaint. See Genting Compl. ¶ 57 (admitting that it “had become

28

clear” in Spring 2018 that the Milestone was not achievable). During the
26
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1

course of negotiations on a potential third amendment, Genting initially

2

proposed to push the Official Opening Milestone date to March 5, 2019,

3

before later proposing December 31, 2019, and eventually proposing that

4

the parties should eliminate the Official Opening Milestone altogether

5

(presumably because Genting realized that it could not credibly commit to

6

achieve a date).

7

74.

Thus, at the time of termination, Genting had failed to achieve two

8

required Key Milestones, and was aware that it would not achieve a third, as set forth

9

in the table below.

10
11

Key Milestone

12

MOA

Amd. No. 1 Amd. No. 2 Complete at date of

(6/13)

(6/14)

(6/17)

termination? (11/18)

11/13

8/14

N/A

Yes

13

Initial Designs

14

Design Development 1/14

1/15

3/18

NO

15

Construction

3/14

2/15

2/15

Yes

16

Soft Opening

5/16

1/17

6/18

NO

17

Official Opening

6/17

6/17

1/19

NO (anticipated)

18
19

75.

The MOA provides that Genting bears responsibility for managing Park

20

development and achieving the Key Milestones. Indeed Genting’s obligation to

21

achieve the Milestones was “of the essence of this Agreement.” MOA § 3(a)(i).

22

76.

The MOA provides that “Fox may elect in its sole discretion to terminate

23

this Agreement” if “any of the above milestones are not met due to any delay, action

24

or omission on the part of GENM” or “the Soft Opening of the Fox Branded Theme

25

Park fails to occur prior to the Opening Date.” MOA § 3(a)(ii) (emphasis added). As

26

such, Genting’s failure to “soft open” the Park by June 2018 gave Fox the right to

27

terminate the agreement without regard to whether Genting was at fault.

28
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FOX DEFENDANTS’ COUNTERCLAIMS

 Case 2:18-cv-09866-FMO-JPR Document 35 Filed 01/22/19 Page 28 of 35 Page ID #:235

77.

1

In any event, there can be no serious question that Genting bore

2

responsibility for these delays, in light of the many egregious project management and

3

quality failures described above—some of which individually caused delays of several

4

months.
78.

5

Genting’s efforts to blame Fox approvals for its delays are wholly

6

inconsistent with the objective facts. During the time period following Amendment

7

No. 2, Genting made several hundred submissions for Fox’s approval. Fox addressed

8

more than 95% of Genting’s submissions within its 10 Business Days target,8 with an

9

average response time of about 7 days.
79.

10

Thus, there were no “repeated unreasonable delays by Fox in exercising

11

its approval rights,” much less “repeated unreasonable delays” that “directly caused”

12

Genting to miss a Milestone. Fox was therefore entitled to terminate the MOA “in its

13

sole discretion.” MOA § 3(a)(ii).  

14

E.

Fox’s Good-Faith Attempt To Salvage the Park with Another Amendment

15

Is Unsuccessful.

16

80.

Despite Fox’s unequivocal rights to cancel, and the fact that Genting had

17

now struck out on three consecutive sets of deadlines—the MOA, the First

18

Amendment, and the Second Amendment—Fox attempted to negotiate in good faith

19

for a Third Amendment that would allow the project to go forward with new deadlines

20

but with additional protections for Fox to reflect its mounting concerns about

21

entrusting its brand to a partner that had repeatedly shown it could not be trusted. 
81.

22

Genting’s responses made clear that Fox’s fears were correct and that

23

Genting had no intention of operating a first-class Park, much less one with Fox’s

24

approval. For example, in exchange for a small increase in Fox’s guarantee, Genting

25

proposed an extension that would, among other things, limit the number of “first-class,

26
27
8

28

Genting was presented with this data as of June 2018, prior to termination. It neither
disputed the data nor presented any alternate statistics.
28
FOX DEFENDANTS’ COUNTERCLAIMS

 Case 2:18-cv-09866-FMO-JPR Document 35 Filed 01/22/19 Page 29 of 35 Page ID #:236

1

world-class principal attractions” that Genting had to open to meet its Soft and Official

2

Opening Milestone deadlines—a proposal so extreme that Genting would not have had

3

to open a single anchor attraction for the Soft Opening. This proposal only confirmed

4

to Fox that Genting could not meet its basic commitments, and could not be trusted to

5

deliver a quality product for the most important attractions at the Park, much less

6

protect Fox’s intellectual property generally.  

7

82.

After extensive negotiations, in June 2018, Fox proposed two options to

8

Genting, which reflected its substantial skepticism about Genting’s capability as a

9

steward of Fox’s valuable intellectual property rights, but also a willingness to let the

10

parties gracefully exit from the dispute. The first option would have added a gate

11

royalty to compensate Fox for the growing risk to its brand, with a gate royalty

12

minimum to begin upon Genting’s Official Opening Key Milestone date.

13

Alternatively, the second option would have facilitated the inclusion of non-Fox

14

intellectual property from other licensors, but required the Park to take a more generic

15

name (thereby mitigating the substantial risks to the Fox brand from ongoing schedule

16

and quality problems).  

17

83.

Genting sat on Fox’s proposal for some time, leading Fox to threaten

18

termination if Genting did not respond by September. Ultimately, Genting rejected

19

both of Fox’s compromises, and instead responded with another extreme and

20

unworkable proposal: a complete elimination of the Key Milestone deadlines for both

21

the Soft and Official Openings (which, again, were “the essence” of the MOA), a

22

reduction in the number of world-class attractions required at the time of the Official

23

Opening, an extension of the term of the MOA, and a dramatic reduction in Fox’s

24

approval rights (which, again, were central to the Park’s success), all in return for a

25

lump sum payment of $1 million, which would not be payable until Genting opened

26

the Park.  

27
28
29
FOX DEFENDANTS’ COUNTERCLAIMS

 Case 2:18-cv-09866-FMO-JPR Document 35 Filed 01/22/19 Page 30 of 35 Page ID #:237

1

F.

Fox Terminates the MOA.
84.

2

Faced with pervasive unresolved quality problems and delays that

3

Genting was not taking steps to resolve, and unable to come to terms on a good-faith

4

amendment that might salvage the parties’ relationship, Fox was left with no choice

5

but to terminate the MOA, which it promptly did. On October 4, 2018, Fox provided

6

Genting with written notice that Genting was in default of its obligations and that the

7

MOA would terminate pursuant to its terms in 30 days (the “Notice of Default”).
85.

8
9
10

On November 2, 2018, Fox provided Genting with a formal Notice of

Termination, which reminded Genting of the impending termination, effective
November 3, 2018 (the “Notice of Termination”).9
86.

11

Once the MOA terminated on November 3, 2018, Genting was

12

immediately required to cease all use of Fox property in connection with the Park.

13

Fox’s Notice of Termination also laid out these deadlines. For example, Genting was

14

required to “[i]mmediately cease operation of all attractions in the Park until all Fox

15

property is removed,” MOA § 12(a)(i), and to “remove all signage utilizing any Fox

16

property from the Park, the First World Theme Park, the Resort, and any Authorized

17

Retail Outlets,” by December 4, 2018. Id. § 12(a)(ii). Genting was also required to

18

“[i]mmediately cease all sale of Fox merchandise and provide a statement of all

19

merchandise that Genting has on hand and a description of all advertising and all

20

promotional materials related to this merchandise,” by December 4, 2018. Id. § 12(b).

21

To date, Genting has failed to provide such an inventory.
87.

22

As a result of the termination, “any and all payments of any Development

23

Fees, License Fees, Guarantee Amounts or Royalties then or later due from [Genting]”

24

were “immediately due and payable in full.” MOA § 11(b), Amd. No. 2, § 2(c)(i).

25
26
27
28

9

Fox provided Genting with the Notice of Default pursuant to Section 11(b) of the
MOA on October 4, 2018 (Pacific Daylight Time) corresponding to October 5, 2018
(Malaysian Standard Time). Accounting for differences in time zones, the MOA
officially terminated as of November 3, 2018 (Pacific Daylight Time) or November 4,
2018 (Malaysian Standard Time).
30
FOX DEFENDANTS’ COUNTERCLAIMS

 Case 2:18-cv-09866-FMO-JPR Document 35 Filed 01/22/19 Page 31 of 35 Page ID #:238

1

Fox’s Notice of Termination demanded that Genting pay $9,000,000 in Annual

2

License Fees, Amd. No. 2, § 2(g), $37,216,667 in Guarantee Amounts or Royalties,

3

Amd. No. 2, § 2(d)(ii)(A)(4), and $250,981.39 for outstanding travel reimbursement,

4

MOA §§ 3(b)(i)(F)(2), 3(b)(iii)(C); Amd. No. 2, § 2(i). To date, Genting has paid only

5

$54,825.21 towards travel reimbursement.
88.

6

The MOA provided that past due Royalty payments would accrue “at the

7

then-current prime rate plus three percent (3%), computed from the original due date

8

until paid.” MOA § 5(e).

9

G.

10

Genting Fails To Comply with Its Termination Obligations.
89.

The termination provision in the Agreement included strict deadlines for

11

Genting to cease using Fox’s intellectual property. For example, Genting was required

12

to “immediately . . . cease operation of all attractions within the Fox Branded Theme

13

Park until all Fox Property is removed therefrom,” and to “remove all signage utilizing

14

any Fox Property from the Fox Branded Theme Park, the First World Theme Park, the

15

Resort and the Authorized Retail Outlets within thirty (30) days.” MOA § 12(a).

16

Fox’s Notice of Termination also clearly sets forth the schedule associated with these

17

obligations.

18

90.

On information and belief, Genting failed to timely comply with these

19

obligations. For example, on information and belief, Genting failed to remove all

20

signage for the retail store by December 4, 2018.

21

91.

Genting also had deadlines associated with Park merchandise. Within 30

22

days of termination, Genting was required to deliver a merchandise inventory to Fox

23

“indicating the number and description of Merchandise items on hand, together with a

24

description of all advertising and promotional materials relating thereto.” MOA

25

§ 12(b). However, to date, Genting has failed to provide any such inventory.

26
27
28
31
FOX DEFENDANTS’ COUNTERCLAIMS

 Case 2:18-cv-09866-FMO-JPR Document 35 Filed 01/22/19 Page 32 of 35 Page ID #:239

1

COUNT I

2

(Breach of Contract)

3
4
5
6
7

92.

The Fox Counter-Plaintiffs incorporate each of the foregoing Paragraphs

as though fully set forth herein.
93.

The Fox Counter-Plaintiffs and Genting entered into a binding and

enforceable contract, as amended, to develop the Park.
94.

The Fox Counter-Plaintiffs materially performed all of their obligations

8

under the MOA—or, in the alternative, have been excused from any such further

9

performance as a result of Genting’s material breaches of the MOA.

10

95.

11

occurred.

12

96.

13
14

All conditions requiring Genting’s full performance under the MOA have

Nevertheless, as set forth above, Genting materially (or anticipatorily)

breached its contractual obligations under the MOA, including, but not limited to:
a. Quality: Genting failed to “design, construct, operate and maintain [the

15

Park] . . . in accordance with the highest standards” comparable in quality

16

to other parks operated by Genting, including Universal Studios

17

Singapore, as required pursuant to MOA §§ 3(c)-(d). Genting also failed

18

to “maintain quality control standards commensurate with industry

19

practices for all approved elements of the [Park] during all stages of

20

development.” MOA § 3(b)(ii). These failures each provided grounds for

21

termination pursuant to MOA §§ 11(a)(i),(vii).

22

b. Milestones: Genting failed to timely achieve the Key Milestones for

23

Design Development, Soft Opening, and Official Opening, due to

24

numerous mismanagement problems, including its failure to provide

25

competent project management, and also repeated quality problems that

26

required time-consuming redesign and rework. MOA § 3(a). This

27

provided grounds for termination pursuant to MOA §§ 3(a)(ii),11(a)(i).

28
32
FOX DEFENDANTS’ COUNTERCLAIMS

 Case 2:18-cv-09866-FMO-JPR Document 35 Filed 01/22/19 Page 33 of 35 Page ID #:240

1

97.

As a direct and proximate result of Genting’s breaches of the MOA, Fox

2

was entitled to exercise its right to terminate the MOA and receive all Annual License

3

Fees and Guarantee Amounts/Royalties set forth in the MOA, as well as the

4

outstanding expenses that Genting has failed to reimburse. In addition, Fox has

5

suffered and will suffer other damages, including damage to its brand as a result of

6

Genting’s failure to deliver a highly anticipated Park, and including attorneys’ fees and

7

costs in connection with this matter, in an amount to be determined by this Court.

8

COUNT II

9

(Breach of the Covenant of Good Faith and Fair Dealing)

10
11
12

98.

The Fox Counter-Plaintiffs incorporate each of the foregoing Paragraphs

as though fully set forth herein.
99.

There is a covenant of good faith and fair dealing implied in every

13

contract. This implied covenant requires each contracting party to refrain from any

14

conduct that could injure the rights of the other to receive the benefits of the contract.

15

100. Genting breached the covenant of good faith and fair dealing implied in

16

the MOA by, among other things, unfairly: (1) failing to meet the MOA’s Key

17

Milestone deadlines while misleading Fox with overly optimistic reports on progress

18

and status, and excluding Fox personnel from key meetings; (2) seeking to circumvent

19

Fox’s important approval rights by allowing (and actually endorsing) construction

20

even without the required prior approvals from Fox, including with knowledge that

21

such conduct would lead to a “fight” with Fox later regarding quality and/or Fox’s

22

approval rights.
PRAYER FOR RELIEF

23
24

WHEREFORE, the Fox Counter-Plaintiffs pray for judgment as follows:

25

1.

For monetary damages in an amount to be proven at trial, including, but

26

not limited to, the $9,000,000 in Annual License Fees, as well as $37,216,667 in

27

Guarantee Amounts/Royalties, and $196,156 in travel reimbursements that Fox is

28
33
FOX DEFENDANTS’ COUNTERCLAIMS

 Case 2:18-cv-09866-FMO-JPR Document 35 Filed 01/22/19 Page 34 of 35 Page ID #:241

1

entitled to under the terms of the MOA, plus interest, as well as consequential

2

damages;

3
4
5

2.

For reasonable costs of the suit incurred herein, including reasonable

attorneys’ fees, to the full extent recoverable under applicable law; and
3.

For such other and further relief as this Court deems just and proper.
DEMAND FOR JURY TRIAL

6
7

The Fox Counter-Plaintiffs hereby demand trial by jury on all issues so triable.

8
9

Dated: January 22, 2019
GIBSON, DUNN & CRUTCHER LLP

10
11

By: /s/ Scott A. Edelman
Scott A. Edelman

12
13

WILLIAMS & CONNOLLY LLP
JOSEPH M. TERRY (admitted pro hac vice)
jterry@wc.com
CARL R. METZ (admitted pro hac vice)
cmetz@wc.com
NICHOLAS G. GAMSE (admitted pro hac vice)
ngamse@wc.com
LAUREN A. HOWARD (admitted pro hac vice)
lhoward@wc.com
725 Twelfth Street, N.W.
Washington, DC 20005-5901
Telephone: 202.434.5000
Facsimile: 202.434.5029

14
15
16
17
18
19
20
21

Attorneys for Defendants and Counter-Plaintiffs
Fox Entertainment Group, LLC, Twentieth
Century Fox Film Corp., FoxNext, LLC, and
Defendant Twenty-First Century Fox, Inc.

22
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26
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34
FOX DEFENDANTS’ COUNTERCLAIMS

 Case 2:18-cv-09866-FMO-JPR Document 35 Filed 01/22/19 Page 35 of 35 Page ID #:242

1
2

CERTIFICATE OF SERVICE
I hereby certify that on January 22, 2019, the foregoing was electronically filed

3

with the Clerk of the Court using the CM/ECF system, which will send a notice of

4

electronic filing to CM/ECF participants in this case.

5
6

/s/ Nicholas G. Gamse
Nicholas G. Gamse

7
8
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16
17
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35
FOX DEFENDANTS’ COUNTERCLAIMS