JAMS ARBITRATION CASE REFERENCE NO. 1220052735

TWENTIETH CENTURY FOX FILM
CORPORATION, a Delaware corporation; FOX
ENTERTAINMENT GROUP, LLC, a Delaware
limited liability corporation; TWENTY-FIRST
CENTURY FOX, INC., a Delaware corporation;
and FOX BROADCASTING COMPANY, a
Delaware corporation,

Claimants,

VS.

WARK ENTERTAINMENT, INC. f/s/o BARRY

TEMPERAN CE BRENNAN, L.P.
f/s/o KATHLEEN SNOOKER DOODLE
PRODUCTIONS, INC. f/s/o EMILY
and BERTHA BLUE, INC. f/s/o
DAVID BOREANAZ,

Respondents.

WARK ENTERTAINMENT, INC. f/s/o BARRY
TEMPERANCE BRENNAN, L.P.
f/s/o KATHLEEN SNOOKER DOODLE
PRODUCTIONS, INC. f/s/o EMILY
and BERTHA BLUE, INC. f/s/o
DAVID BOREANAZ,

Counter-Claimants,

VS.

TWENTIETH CENTURY FOX FILM
CORPORATION, a Delaware corporation; FOX
ENTERTAINMENT GROUP, LLC, a Delaware
limited liability corporation; TWENTY-FIRST
CENTURY FOX, IN C., a Delaware corporation;
and FOX BROADCASTING COMPANY, a
DelaWare corporatiOn,

Counter-Respondents.

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Amended Final Award

AMENDED FINAL AWARD

The Undersigned Arbitrator, having been designated by the parties, and having read
and considered the submissions, documentary and testimonial proof, arguments and allegations
of the parties, ?nds, concludes and issues this Final Award, as follows:

I.
INTRODUCTION
Summary of Contentions

At issue in this Arbitration are the claims of Respondents Wark Entertainment, Inc. f/s/o
Barry Josephson (?Josephson?), Temperance Brennan, L.P. f/s/o Kathleen Reichs (?Reichs?),
Snooker Doodle Productions, Inc. f/s/o Emily Deschanel (?Deschanel?), and Bertha Blue, Inc.
f/s/o David Boreanaz (?Boreanaz?) (collectively, ?Respondents? or ?Participants?) against
Twentieth Century Fox Film Corporation Fox Entertainment Group, LLC 
Twenty-First Century Fox, Inc. and Fox Broadcasting Company 
(collectively, ?Claimants? or ?Fox?) relating to the television series ?Bones.? The series was
based on the best-selling ?ction novels by Reichs, and the characters were played by Deschanel

and Boreanaz. Josephson served as the executive producer who developed the Series.

The claims emanate from Respondents? agreements with (?Agreements?) which
include ?backend? contingent compensation. Respondents contend that Fox breached its
obligations under these Agreements in multiple licensing transactions domestic broadcasting,
international licensing, and streaming - and they assert claims for breach of contract, fraud,
tortious interference with contract and inducing breach of contract. Fox denies the claims
brought by Respondents and asserts that it carried out all of its contractual obligations and duties.
Fox further contends that contrary to the allegations and assertions of Respondents, its
comportment and business decisions affecting the show actually secured the show?s future and at

the same time enhanced the remuneration ultimately paid to its Participants.

In that regard, Fox determined that it did not make business sense to exercise a full cost
of production option for Season 5 as it would have resulted in a loss of millions of dollars if
those fees were paid over the two-season period. To quote Fox?s opening brief: ?Bones was a

middling show with middling ratings? and did not justify a license fee of that magnitude. Rather,

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Fox declined its option for Bones and negotiated a new license fee with The parties

eventually agreed on a $2 milliOn per episode fee, along with for two seasons.

Fox argues that the evidence demonstrates unequivocally that its only viable business
alternative was to pay a $2 million per episode license fee or let the show be cancelled.
Moreover, the license agreement ?nally negotiated for Bones Seasons 5 and 6 the
$2,000,000 per episode amount) actually kept the show alive and in the end generated millions
more in revenue for Respondents. Fox is adamant that the license fee eventually agreed upon
and negotiated for the show was on ?monetary terms comparable? to ?similar transactions? for

licenses between itself and third parties for ?comparable programs.?

Fox believed that not one of its competitors would pay a higher license fee and in Fox?s
View, it was better off losing Bones than risking millions of dollars with a full cost fee.
Additionally, Fox contends that Josephson and Reichs are barred from challenging the license

fees for Seasons 5 and 6 as they both knowingly and willingly executed a Release.

While each side has proffered many more contentions and defenses than outlined above,

their respective arguments will be addressed in further detail below.
11.
PRELIMINARY ISSUES
All Claims Presented Are Arbitrable

At the outset, the Arbitrator ?nds it necessary to address an issue that was long ago put to
bed and long ago the subject of a painstakingly detailed stipulation by and among counsel.
Astonishingly, Fox, now for the ?rst time, takes the position that certain critical issues presented
and argued by Respondents are not arbitrable and as such outside the purview and authority of

this Arbitrator and the matters before him. 1

 

1 To provide perspective as to the timeliness of this contention, it is to be noted that Fox raised this argument for the
?rst time in the ?nal hour of closing arguments, after 4+ weeks of hearings and 2 &1/2 years of proceedings. Not
one word of arbitrability was ever mentioned or addressed in any pre-trial hearings or in Fox?s opening briefs.

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To highlight the Arbitrator?s dismay as well as ox?s indefensible position in this regard,
a chronology of Fox?s actions will be discussed. It must be noted that the following facts are

incontrovertible.

First, it was Fox that ?led the Demand for Arbitration which gave rise to the proceedings
herein. Fox did not wait to compel arbitration; it actually proceeded with its demand and initiated
the arbitration prior to any motion and always took the position that all claims presented were

and are arbitrable, save and except Respondents? claims for an audit.

Second, and perhaps most interesting to this analysis is that while counsel for
Respondents did pursue a State Court action attempting to avoid arbitration, it was Fox who,
once again, took the position that arbitration of Respondents? claims was mandated per the terms
of the agreements between and its Participants. In fact, ox doubled down on this
position before the Honorable Richard E. Rico when it ?led its motion to compel arbitration. Fox
prevailed, and arbitration was ordered, and the State Court action was stayed. Accordingly, the

doctrine of judicial estoppel precludes any late proffered position to the contrary.

Third, having prevailed in State Court with its motion to compel and once again raising
this issue with the Arbitrator at the ?rst Arbitration Management Conference, the parties not only
stipulated that the claims presented here are to be arbitrated but in addition thereto highlighted by
hand those pleadings and causes of action that are the subject of these proceedings so as to avoid
the very issue and argument now being proffered at the stroke of midnight. The parties did
exactly what was ordered by the Arbitrator. Not only was a stipulation entered into, but with
their own hands, the parties highlighted all claims subject to these proceedings and the
jurisdiction of the Arbitrator so as to leave no doubt that this argument should not have been

brought.
Hence, Fox, in presenting this belated contention, must overcome the following:

1. Judicial estoppel which precludes any and all assertions to the contrary;
2. A Stipulation that it willingly entered into; and

3. Waiver with respect to any argument to the contrary.
Each of these points will be addressed below so as to leave no doubt that Fox?s position is

disingenuous at best and specious at worst.

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Fox speci?cally addresses two claims which it argues are not arbitrable:
1) Respondents? ownership claim related to Hulu, and
(2) Respondents? ?reasonable and nondiscriminatory? claim.

Under California law, ?parties may expressly agree to arbitrate: in a contract signed
before a dispute arisesbinding stipulation to arbitrate entered into after a dispute
has arisen.? Douglass v. Serenivisiom Inc., 20 Cal. App. 5th 376, 387 (2018). In this instance,

both a signed contract and a binding stipulation are present and cannot be argued to the contrary.

In January 2016, Fox submitted its Statement of Claim to JAMS. In its Statement of
Claim, Fox set forth the claims alleged in the Complaint: against TCF TV for breach of contract,
breach of the covenant of good faith and fair dealing, and declaratory judgment; against FBC,
EG and 21CF for inducing breach of contract and intentional interference with contract; against
BC and FEG for unfair competition; and against all Claimants for fraudulent
inducement, ?audulent concealment, and an accounting. (Statement of Claim, 11 25.) Fox?s
demand went on to state: ?All of the claims raised in those Complaints, however, are subject to
the parties? agreements to arbitrate. Indeed, binding and applicable arbitration provisions are
found in the very Agreements that the Respondents claim they want enforced. (Statement of
Claim, 26.) (Emphasis added.)

Fox explicitly states that through its Demand, it ?seeks to enforce the parties? agreement
to arbitrate these disputes.? (Id. at 1] 32.) It went on to state that the extent that
Respondents seek to raise any additional claims against Fox in their Superior Court
Complaints on the basis of those Agreements, Fox also seeks to resolve those disputes in this
binding arbitration before JAMS. added)

Thereafter, Fox moved to compel arbitration of the claims brought by Respondents in the
Superior Court. On April 8, 2016, Judge Rico issued an Order granting Fox?s motion to compel
and staying the non-arbitrable claims. More speci?cally, he found that the Self-Dealing, 2009
Release, and Non-Contractual Claims are all subject to arbitration, and the Contingent
Compensation Claims are not subject to arbitration. (553 4/8/16 Order, pp. 3-7.) Fox, having
obtained the relief it sought in Superior Court, is now prevented from currently asserting an

inconsistent position under the doctrine of judicial estoppel.

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Even beyond Judge Rico?s Order, during the Arbitration Management Conference held
on April 26, 2016 (a mere 18 days after the Court?s order), the Arbitrator, in a desire to ensure
that all parties were clear about the issues subject to arbitration and the claims to be resolved,
raised this very issue so as to put to rest the potential for a later claim that the arbitrator resolved
a matter reserved for the court. As a result, the Arbitrator ordered the parties to meet and confer
to reach a formal stipulation as to each and every claim that is the subject of the Cross Demands

for Arbitration. (Scheduling Order No. 1 dated May 2, 2016)

Subsequently, the parties submitted such a stipulation entitled ?Stipulation Regarding
Claims in Arbitration? and to it is attached the Statement of Claim. The parties set forth their
understanding of Judge Rico?s April 8, 2016 Order regarding the claims subject to arbitration.
As they represent in the Stipulation:

[T]he parties understand the April 8 Order to pertain to four categories of claims
alleged in the KBTF Respondents? Complaint: (1) ?Self-Dealing Claims,? which
are claims related to the allegations that entered into transactions with
af?liates on terms that were not comparable to the terms on which the af?liated
entity entered into similar transactions with unrelated third parties; (2) ?2009
Release Claims,? which are claims related to 2009 release agreements concerning
Seasons 5 and 6 of Bones; (3) ?Contingent Compensation Claims,? which are
claims that miscalculated, misclassi?ed, or improperly allocated the
contingent compensation to which the KBTF Respondents are due or failed to
negotiate their contingent compensation to which the KBTF Respondents are due
or failed to negotiate their contingent compensation de?nitions in good faith; and
(4) ?Failure to Permit Audit Claims,? which are allegations by the KBTF
Respondents that failed to provide the auditor with documents it was
contractually obligated to provide.

(Stipulation, 11 2.) The parties then state: ?The Self-Dealing and 2009 Release Claims are
arbitrable; the Contingent Compensation and Failure to Permit Audit Claims are not.? (Iii)

They even highlighted the exact claims in the Complaint that ?are fully arbitrableclear, Fox belatedly challenges only two claims. In its Reply Brief re Arbitrability,
it argues that it was the Superior Court ruling that set the scope of the arbitration and cannot be
challenged. It is interesting to note that it was Fox that sought the Superior Court ruling and
entered into the very stipulation it now seeks to disavow. Having initiated the Demand for
Arbitration and having likewise stipulated to arbitrate the very claims presented by the

Respondents, Fox now argues that Judge Rico?s order actually circumscribes these proceedings

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and somehow likewise circumscribes/nulli?es the stipulation it entered into. Judge Rico?s order

does no such thing and does not void the operative stipulation.

Simply put, the two claims challenged by Fox are clearly within the scope of this
Arbitration, as they relate to the Self-Dealing Claims which the parties explicitly agreed to
arbitrate - in both a signed agreement before a dispute arose and in a ?binding stipulation to

arbitrate entered into after a dispute has arisen.?

As analyzed herein, the Hulu ownership claim is part of Respondents? claim that Fox
licensed in-season streaming rights for Bones to its af?liate Hulu on arti?cially low monetary
terms in Violation of the self-dealing protections. More speci?cally, the issue of whether CF TV
or BC owned the in?streaming rights to Bones must be decided as a factual predicate to the self-
dealing claim. Respondents? claim to their share of $95.9 million that should have been included
in Gross Receipts presupposes that possessed the in?season streaming rights

for Bones on Hulu.

The reasonable and nondiscriminatory claims look at the same conduct by in its
licensing that is challenged by Respondents and examines whether it also breached 
obligation to distribute Bones ?on a reasonable and non-discriminatory basis.? ?Several
contracts relating to the same matters, between the same parties, and made as parts of
substantially one transaction, are to be taken together.? Cal. Civ. Code 1642. Here, the
?reasonable and non?discriminatory? standard of Paragraph VII.BB applies to the ?distribution . .
. of the Program directly or by any Subsidiary, Af?liate, or other Party,? and thus modi?es the
?complete, exclusive and unquali?ed discretion and control as to time, manner, and terms of 
distribution? standard found in Paragraph 10(a) of the Agreements. To determine whether Fox
breached its contractual obligations through self-dealing, it is necessary to look at Paragraph

VII.BB in conjunction with Paragraphs 10(a) and to ascertain what those obligations were.

Certainly, the Hulu ownership and reasonable and non-discriminatory claims do not fall
within the ambit of the Contingent Compensation and Failure to Permit Audit Claims which are
the only claims remaining in Superior Court. Judge Rico?s order distinguished between claims
that ?challenge Fox?s calculation or reporting of Plaintiff contingent compensation under . . .
the MAGR De?nition,? which are not arbitrable, and claims that ?challenge Fox?s decision to

broadcast the series on Fox,? which are arbitrable.

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Even if the parties? explicit agreements to arbitrate are not enough, which the Arbitrator
?nds that they are, Fox has waived the right to make jurisdictional challenges regarding any of
the claims. Under JAMS Comprehensive Arbitration Rules Procedures, ?jurisdictional and
arbitrability disputes, including disputes over the formation, existence, validity, interpretation or
scope of the agreements under which Arbitration is sought, and who are proper Parties to the
Arbitration, shall be submitted to and ruled on by the Arbitrator.? JAMS Rule 11(b). The
California Court of Appeal has held that the incorporation of JAMS Rule 11 ?serves as clear and
unmistakable evidence of the parties? intent to delegate such issues [of arbitrability] to an
arbitrator? and ?authorized the arbitrator to make the ?nal decision regarding what issues were
arbitrable.? Greenspan V. LADT, LLC, 185 Cal. App. 4th 1413, 1442-43 (2010) (internal

quotations and citation omitted; emphasis in original).

?Jurisdictional challenges under Rule 11 shall be deemed waived, unless asserted in a
response to a Demand or counterclaim or thereafter, when circumstances ?rst suggest
an issue of arbitrability.? JAMS Rule Fox has waived any challenge to the arbitrability of
any of the claims in this matter by willingly participating over the past two and a half years
without contesting the Arbitrator?s jurisdiction. Not only did Fox initiate this Arbitration, but it
has willingly engaged in discovery, submitted discovery disputes to the Arbitrator, offered
witnesses for deposition, and notably, engaged in an over a month-long arbitration hearing.
During all this time, Fox has never disputed that the Arbitrator had authority to make a ?nal

disposition of all claims presented. 2

Fox asserts that the Hulu ownership claim was ?rst raised in Ms. Zigler?s April 30, 2018
expert report, yet Fox does not even attempt to explain its delay of over four months to ?rst raise
an objection to arbitrability. Moreover, as Fox points out, this issue was raised much earlier in
one of the Superior Court complaints that Fox compelled to arbitration and in the ?rst

depositions in this case. (Respondents? Arb178:9-

 

2 Fox argues that it could not have waived its arbitrability argument because the burden was on Respondents to
amend their claims. However, no amendment was needed since the claims are within the scope of arbitration.
Moreover, the burden was on Fox as the party challenging arbitrability to raise this issue ?when circumstances ?rst
suggest an issue of arbitrability.? Clearly, Fox did not do so and likewise Fox gave no hint of any arbitrability issues
at any time during this case as it cannot point to any time prior to the closing hours of the hearing wherein it even
suggested such an issue.

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179:2.) Similarly, Fox was aware of Respondents? Paragraph VII. BB breach claims before the
hearing yet failed to raise any objections. (Respondents? Pre Hrg. Br. at 2, 4.)

Not only is a ?nding of waiver compelled by JAMS Rules, but it is also supported by
case law independent of Rule Fox, relying on Ficek v. S. Pac. Co., 338 F.2d 665, 657 (9th
Cir. 1964), suggests that waiver can only apply if a party waits until after the arbitrator?s decision
to raise an objection. However, the Ninth Circuit held that is ?equally applicable? to
objections raised before the arbitrator?s decision, reasoning that would be unreasonable and
unjust to allow [the defendant] to challenge the legitimacy of the arbitration process, in which he
had voluntarily participated over a period of several months.? Fortune, Alsweet Eldridge, Inc.
v. Daniel, 724 F.2d 1355, 1357 (9th Cir. 1983) (per curiam).

The Arbitrator disagrees entirely with Fox?s assertions, which represent a transparent
attempt to derail this Arbitration before the ?nal award is issued. Nghiem v. NEC Elec.,
25 F.3d 143 7, 1440 (9th Cir. 1994) (af?rming arbitrator?s decision where claimant initiated
arbitration, attended hearing with representation, presented evidence, and submitted closing brief
before getting cold feet and ?ling suit in state court prior to decision; stating ?[o]nce a claimant
submits to the authority of the arbitrator and pursues arbitration, he cannot suddenly change his
mind and assert lack of authority?). It is frivolous for Fox to claim belatedly that certain claims
have arisen that suggest an issue of arbitrability. These very same arguments and issues have
been heavily litigated throughout this case and certainly during the month and a half arbitration

hearing.

In sum, from the inception of this case, Fox sought to compel arbitration of the present
claims, and its attempt to offer last-minute arguments otherwise is unsupported factually and
legally. Accordingly, all claims presented herein are arbitrable and the Arbitrator has the power

to issue a binding award as to the claims presented herein.
Punitive Damages Are Available for the Tort Claims

Another issue raised by Fox for the ?rst time during its closing argument and in its Post-
Hearing Brief is the availability of punitive damages. Fox argues that the Agreements expressly

bar Participants? claim for punitive damages. Fox relies on the following from Paragraph 1003):

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Each of Company and Artist agrees that Company?s and Artist?s sole remedy
against Fox for any alleged failure by Fox to comply with the terms of this
paragraph shall be actual damages, and Company and Artist hereby waive any
right to seek or obtain preliminary or permanent injunctive relief or punitive relief
in connection with any such alleged failure (Emphasis added).

The Arbitrator ?nds that this limit on punitive damages in Paragraph 10(b) does not apply
to the alleged tortious conduct of Fox. To begin with, on its face, the waiver applies only to ?any
alleged failure by Fox to comply with the terms of [Paragraph In other words, it applies
to the contract claims only, and Respondents do not seek punitive damages related to the contract

claims.

Furthermore, ?Fox? as used in Respondents? agreements is de?ned as ?Twentieth
Century Fox Television, a unit of Twentieth Century Fox Film Corporation.? Therefore, the
?alleged failure? referenced in the waiver is the Studio?s failure to comply with Paragraph 10(b).
The waiver does not apply to Respondents? tort claims against the non-studio Claimants and

fraud claim against 

Even beyond the plain language of the waiver and its inapplicability to the tort claims
here, California Civil Code 1668 provides:

All contracts, which have for their object, directly or indirectly, to exempt anyone

from responsibility for his own fraud, or willful injury to the persons or property

of another, or violation of law, whether willful or negligent, are against the policy
of the law.

As courts have found, ?This section made it clear that a party could not contract away
liability for his fraudulent or intentional acts . . . Gardner v. Downtown Porsche Audi, 180
Cal. App. 3d 713, 716 (1986). Indeed, is now settled?and in full accord with the language
of the statute?that notwithstanding its different treatment of ordinary negligence, under section
1668, a party [cannot] contract away liability for his fraudulent or intentional acts or for his
negligent violations of statutory law, regardless of whether the public interest is affected.?
Health Net of Cal., Inc. v. Dept. of Health Servs., 113 Cal. App. 4th 224, 234 (2003) (internal
quotations and citations omitted). Thus, any alleged waiver of tort claims and punitive damages
in Paragraph 10(b) is barred by Section 1668. Ting v. 182 F. Supp. 2d 902, 925
(N .D. Cal. 2002) (contractual provision limiting recovery to direct damages, but precluding

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punitive damages, was impermissible under section 1668), aff?d in part, rev?d in part on other
grounds, 319 F. 3d 1126 (9th Cir. 2003).

Fox seeks to argue that it ?does not matter that Participants are alleging tort, rather than
contract, claims as the basis for punitive damages.? It relies on Judge Rico?s order that tort
claims are only arbitrable because they arise out of Paragraph 10(b) as ?self-dealing claims.?
Fox?s reliance on Judge Rico?s ?nding regarding the arbitrabiligz of the tort claims is sorely
misplaced. In no way can Judge Rico?s determination that tort claims that arise out of the
contractual relationship are subject to the parties? arbitration provision be twisted to bar available

remedies at law for intentional torts.

Thus, ox overreaches with its argument based on the language of Paragraph 10(b). The
plain language of Paragraph 10(b) does not apply to prevent an award of punitive damages
against the non-Studio Claimants for intentional torts and against for fraud.


BREACH OF CONTRACT THROUGH THE RELEASE AND FRAUD
The Claim for Breach of Contract

Respondents argue that (also sometimes referred to as the Studio) breached the
Af?liate Transaction Protection provision in all of Respondents? Agreements for Seasons 5-8.
They argue that not only did fail to transact with its af?liates on comparable monetary
terms to its transactions with unrelated third-party distributors for comparable programs, but that

it likewise had no intention of complying.

Fox, on the other hand, argues that FBC (also sometimes referred to as the Network)
determined that it did not make business sense to exercise the full-cost option for Season 5
because Bones was a middling show with middling ratings. Instead, Fox claims, FBC declined
its option for Bones and negotiated a new license with the Studio. It asserts that the Bones
Seasons 5 and 6 license agreement not only permitted Bones to stay on the air and continue
generating millions in revenue for Respondents, but it was also on ?monetary terms comparable?
to ?similar transactions? for licenses between FBC and third parties for ?comparable programs,?
as were the licenses for Seasons 7 and 8. These assertions, however, do not comport with the

evidence presented.

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As early as January 2009 there is no doubt, based on the email sent by Peter Ligouri
dated January 1 1, 2009 (Exhibit 417A), that FBC had already decided, resolved and determined
that it was not going to pay a full cost-of-production license fee for the ?fth and sixth seasons of
Bones. As far as FBC was concerned, Bones was not worth the cost or effort of further
production on a full cost-of-production basis. Or so it led its talent to believe. These facts are
undisputed and con?rmed by both the documentary evidence and the testimony of the FBC
witnesses themselves. Additionally, this was con?rmed by the Fox Studio witnesses who were

supposed to be aligned with Respondents.

Hence, with zero surprise, FBC declined its option. While FBC takes the position that it
knew it might risk losing the show to another network the real question is, did BC truly intend
on cancelling the show or was another strategy in play? Once again and without any
controverting evidence, the Fox Studio executives knowing the fate of its show as
early as January 2009, did absolutely nothing to ensure its survivability until the stroke of
midnight whereupon the testimony demonstrates a feckless effort to protect its own interests and

the interests of Respondents.

While feigning protest and an inability to do nothing other than capitulate, the Studio
executives (TCF TV) became willing partners with the Network (Fox) to lead its talent into a deal
that was not only favorable to the its parent network but likewise assuring itself no participant
leakage. The parties did eventually agree on a $2 million per episode license fee, along with a

-for two seasons, but the cost of doing so for Respondents came at the cost of a

release and a complete disregard for the contractual obligations owed by 

The analysis begins with the Af?liate Transaction Protection provision found in

Paragraph 10(b) of the Participant Agreements (?Paragraph which provides:

b. Dealings with Af?liates: Each of Company and Artist acknowledges that
Fox is part of a diversi?ed, multi-faceted, international company, whose af?liates
include, or may in the ?lture include, among others, exhibitors, television
?platforms?, networks, stations and programming services, video device
distributors, record companies, internet companies, so called Commerce
companies?, publishers (literary and electronic) and wholesale and retail outlets
(individually or collectively, ?Af?liated Company or Companies?). In
consideration thereof, Fox agrees that Fox?s transactions with Af?liated
Companies will be on monetary terms comparable to the terms on which the

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Af?liated Company enters into similar transactions with unrelated third-party
distributors for comparable programs.

The Arbitrator agrees with Respondents that not only did fail to comply with
Paragraph 10(b) but that it also never intended to comply with Paragraph 10(b).

Fox?s documents and testimony establish that had no intention or ability to
transact with its af?liates ?on monetary terms comparable to the terms on which [Fox Af?liates]
enter[ into similar transactions with unrelated third party distributors for comparable
programs.? The evidence in this regard is uncontroverted by both the Fox Studio Witnesses and
the Network witnesses. Every witness from both TCF TV and FBC testi?ed that 
executives did not have access to, or they did not seek, information concerning 
transactions with unaf?liated third-party studios at the time they entered into any of the

agreements for Bones.

First, Mr. Howard Kurtzman, head of Business Affairs for testi?ed that he has
no recollection of ever having conversations with FBC about comparable programs. 12/1 8 Tr.
at 800:9-801:17; 905215-90726; 942: 14-943z23; 950: 9-951 907 He testi?ed that he had
no access to license fee information with third party distributors. (E- at 94325-12.) When
asked whether ever asked for third party agreements in connection with Seasons 5 and 6
license negotiations, Kurtzman responded, don?t believe so. We weren?t - - we weren?t privy

to those agreements.? (E. at 
Next, Ms. Dana Walden, Co-President of testi?ed as follows:

Q. In fact, you didn?t make any effort as part of the negotiations over Season 5 of
Bones to learn what FBC paid any unaf?liated third-party studio for any other
series in Seasons 5 and 6; correct?

A. We were not allowed to get that information from the Network.
16/ 8 Tr. at 1307 :20-1 308: 8.) In fact, she testi?ed that she never read or understood the
participant agreements. at 

Although Ms. Walden claimed that she was more on the ?creative? side as Co-President
of her complete lack of knowledge of the agreements of those Whose interests she
represented is either shocking if true, or disingenuous if false. Her understanding of the Studio?s

obligation to participants under the Af?liate Transaction Protection clause is that the ?deals must

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be as good as marketplace deals. So that when we?re making a deal with a sister company, we
are making a deal that we feel is a fair marketplace dea (1g. at 1265: 1-7.) Ms. Walden, at this
point in time in 2009, had been a co-head of the Studio for ten years and had absolutely no idea

what the standard was with respect to dealing with af?liates.

Mr. Barron, the Studio CFO, similarly testi?ed that he had no access to the information
and no insight to share. (8/13/18 Tr. at 5169:8-20; He was not involved in anything
at FBC, so there was no comparability analysis involving FBC numbers. at 

This testimony of the Studio was consistent on the Network side. Mr. Ira Kurgan, Head
of Business Affairs for FBC, testi?ed that nobody ever mentioned the comparable terms
standard. When'asked whether the Studio ever told him that he was obligated to pay the license
fee for Bones on monetary terms comparable to what the Network was paying for other shows,
he said ?that never came up?:

Q. And nobody from the Studio ever said the license fee for Bones has to be on

comparable terms to your agreements with unaf?liated studios because we have a
contractual obligation to the participants, right?

A. Yeah, that never came up.
(7/18/18 Tr. at As a result, he never told the Studio what FBC was paying for
comparable programs. (E. at 1815: 22-25.)

Mr. Peter Rice, Chairman of FBC, testi?ed that he did not look at comparable programs
or ask anybody to do so:
Q. I?ll do this one slowly again. At any time during the year 2009, did you

personally ever embark upon the task of trying to ?gure out if there was a show
that was comparable to Bones?

A. Not that I recall.
Q. Did you ever instruct anybody to do that?
A. Not that I recall.

Q. At any time during the time you were negotiating the license fee for Seasons 5
and 6 of Bones, did you ever embark upon the task of trying to ?nd out what
comparable programs of Bones here were on other networks?

A. Not that I recall.
(7/13/18 Tr. at 

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As Respondents point out, it is necessary to address Mr. Gary Newman?s testimony last
since everybody pointed to Mr. Newman as the person who would know about the comparability
standard. Mr. Newman, the other Co-President of TCF TV, testi?ed he did not recall whether he
asked anybody at the Network for the requisite comparable information, and he did not recall
whether anybody from the Network ever provided him with that information. (7/23/18 Tr. at
2381: 5-18.)

Then, Mr. Newman revealed that he was involved in the group that conceived of
Paragraph 10(b):

Q. Now, from being involved in the group that conceived this paragraph, do you
have an understanding of what the goals were in terms of this particular language?

A. Yes.
Q. What are the goals?

A. You know, as we were trying to come up with a standard of dealing that, that
would be as objective as we could make it, we decided to utilize the comparable
terms that the af?liated company, so in our case it would have been the Fox
network, had entered into with third parties.?

(E. at 

In direct contrast to Ms. Walden?s understanding of the Studio?s obligation to
participants, Mr. Newman stated that the goal of Paragraph 10(b) was to make an objective
standard. He explained why:

[W]e felt that was a better standard than the more subjective ones, like fair market

value or other such things. We wanted something that you could actually go ?nd
data and be able to draw your conclusions ?om, from that data.

(13. at 

Not only do each of the co-presidents of the Studio initially vary widely in their
understanding of the obligations the Studio had toward its talent, Ms. Walden actually attempted
to provide a completely different interpretation, enabling Fox to defend itself on the basis of fair

market value. This concept nowhere appears in the contract.

Ironically, when Mr. Newman was recalled to the stand on behalf of Fox, he then tried to
adopt Ms. Walden?s concept of fair market value and move away from the very language of the

provision itself and one he helped develop. By attempting to morph the language of the

Amended Final Award
1 5

operative contract to one of fair market value, both the Network and the Studio are in with
one another in their defense of the breach claims. However, this attempt to adopt the same

understanding only serves to highlight the breach and their impeachment.

Even after stating that the standard was an objective one requiring data, Mr. Newman did
not recall whether he himself ever did any research or asked anybody to do research to aid in the
Studio?s negotiations with the Network. (E. at 4088: 14-24.) Instead, Mr. Newman claims he
went to agents to get marketplace information regarding Season 5. (13. at 4087: 1 5-408924.)
Essentially, this ?marketplace information? was gathered from a single lunch conversation about
renegotiation on Ghost Whisperer with ABC Studios. (Respondents? Ex. 2159-0001.)
Not only did this testimony lack any speci?city, but more importantly, to reiterate, ?market

information is not the standard under Paragraph 10(b).

Fox?s own witnesses from the Studio and the Network - establish that Fox did not even
attempt to comply with Paragraph 10(b). In fact, there is no evidence that even one Fox
employee asked for, received, or reviewed a ?similar transaction[] with unrelated third party

distributors for comparable programs.?

The testimony of both Mr. Newman and Ms. Walden regarding ?marketplace
information? is not only troubling but extremely disconcerting. The more these individuals
testi?ed the more incredulous their testimony appeared. Speci?cally, their testimony was not
only at odds with the Network but actually served the interests of the Network, meaning
if they could successfully morph the standard of third party comparables to some marketplace
value it would then serve to argue that no breach occurred since the value of Bones was fairly

calculated and achieved.

This is not a case of insuf?cient, questionable, or unreliable information. Rather, this is a
case of a complete absence of information, and the plain words of Paragraph 10(b) require that
Fox look at ?similar transactions with unrelated third- party distributors for comparable

programs.? This was not done, and Fox cannot deny this fact.

While admitting that it did not look at similar transactions at the time it negotiated for
Seasons 5-6, 7 and 8-9 of Bones, Fox argues that the express language of Paragraph 10(b) allows

it to look to later transactions. In other words, faced with an undisputed and undeniable breach,

Amended Final Award
1 6

Fox now asserts an interpretation that strains credulity and devoid of common sense. Fox argues
that it can look both prospectively and presently ?in the event of any dispute? - to other similar

transactions between itself and a third-party to justify what it plainly did not do.

Fox relies on the word ?enters? in Paragraph 10(b). However, Fox?s interpretation
ignores the words ?will be? ?Fox?s transactions with Af?liated Companies on monetary
terms comparable . . . This mandatory language does not mean the challenged transaction
?was? on comparable monetary terms with third-party deals. Furthermore, ?enters? is present
tense, not future tense, and plainly refers to other transactions existing at the time of the af?liate
transaction when read in conjunction with the promise that the monetary terms of future af?liate

transactions ?will be comparable? to those of third-party transactions.

Both parties contend that the language of Paragraph 10(b) is not ambiguous. It is well?
settled that the interpretation of a contract involves a two-step process whereby the court
provisionally receives evidence concerning the parties? intentions to determine ?ambiguity,? i.e.
whether the language is ?reasonably susceptible? to the interpretation urged by a party. 
Wolf v. Superior Court, 114 Cal. App. 4th 1343, 1351 (2004) (describing two-step approach to
consideration of extrinsic evidence). It is hardly surprising that Fox argues that the language of
Paragraph 10(b) is not ambiguous since the extrinsic evidence from its own witnesses directly

contradicts Fox?s interpretation and unequivocally establishes the breach.

In this regard, it is interesting to note that Fox, in both of its closing briefs, distances itself
greatly from the testimony of its own witnesses. In fact, the post-hearing briefs submitted
resemble a motion for summary adjudication rather than a closing brief. Fox goes to great
to ignore the testimony of its witnesses, as it must, since to do otherwise would

unquestionably establish the breach Respondents assert.

Mr. Newman testi?ed that was looking for the most ?objective? standard of
dealing possible, so that ?when we make a deal with an a?iliatedparly we ?re going to be able to
anticipate whether or not we ?re opening ourselves up for liability from claims pro?t
participants. (7/23/18 Tr. at 2543 Mr. Chernin (another high-ranking executive)
also con?rmed his understanding that the standard ?will be applied at the time Fox enters into
self-dealing transactions so that [participants] will be paid fairly when the accounting statements

arrive.? (7/16/18 Tr. at 1392:5-1394:1, Upon a review of this extrinsic evidence,

Amended Final Award
1 7

the Arbitrator determines that the language of Paragraph 10(b) is not reasonably susceptible to
the interpretation proffered by Fox, and no extrinsic evidence is needed to aid in the

interpretation of the contract. SE W_olf, 114 Cal. App. 4th at 1351 (?If in light of the extrinsic
evidence the court decides the language is ?reasonably susceptible? to the interpretation urged,

the extrinsic evidence is then admitted to aid in the second step interpreting the contract?).

According to Fox?s present assertion, the standard of Paragraph 10(b) will only be
employed if a particular transaction is challenged. Under this scenario, then, there is no metric
by which the Studio and Participants have to measure the fairness of the transaction, no certainty
that what the Network indeed agreed to was fair, and no way for the Studio to belatedly bring the
transaction into compliance. In fact, under Fox?s construction, a transaction that complies with
Paragraph 10(b) at the time of licensing could subsequently become non-compliant if 
af?liates thereafter enter into benchmark agreements on more favorable monetary terms. Fox
cannot seriously contend that any party, let alone the Studio and Participants, actually agreed to
unknown, subsequently occurring ?similar transactions? standard to be the controlling standard.

This interpretation is illogical and untenable.

Following this assertion that later transactions can be examined, Fox claims that Bones?
license fees are comparable to those of Fringe. However, having determined that Fox?s
interpretation of Paragraph 10(b) is not proper, the Arbitrator does not reach the parties?
arguments regarding the comparability of Fringe. Once again, the Arbitrator is somewhat
surprised by this latest contention by ox since Fringe premiered three years after Bones. As
such, its ?fth- year license fee could not have been considered at the time of licensing. To state it
plainly, Fringe was not even in existence at the time the parties were negotiating Seasons 5 6

of Bones. How could Fringe be used for anything in this analysis? It can?t.

With respect to House, both parties presented arguments regarding the comparability of
House. Respondents claim that House is the only comparable program to Bones since its
Seasons 5-8 each preceded Bones by one year. However, the evidence shows that Fox did not

even request information regarding House during the requisite time period.

Ms. Walden stated that she never requested information regarding House. 16/ 1 8 Tr. at
Mr. Rice stated that he did not discuss House with Mr. Newman or Ms. Walden.
(7/13/18 Tr. at Mr. Newman testified that he did not analyze House as a

Amended Final Award
1 8

comparable program. (7/23/18 Tr. at 2404: 14-19.) He stated that Mr. Kurtzman would have
done research, but he didn?t know whether Mr. Kurtzman ever asked for any House information.

(In. at 

Moreover, Fox erroneously argues that Respondents have not carried their burden to
establish a breach of Paragraph 10(b) because they do not properly evaluate Bones and House by
taking into account differences in ratings, rankings, advertising revenue, awards and brand
impact that affect their relative values and overall pro?tability. Again, this is no; the test the
test is measured by Fox?s actions in entering into transactions with Af?liated Companies on
comparable monetary terms to transactions with unrelated third-party distributors for comparable

programs.

Thus, it is undisputed that the Studio had the contractual obligation set forth in Paragraph
10(b) and simply did not comply. More speci?cally, this meant that Ms. Walden, Mr. Newman
and Mr. Kurtzman were obligated to protect the Participants? interests when negotiating withthe
Network by ensuring that the license fees for Bones were comparable to the license fees entered

into with third parties. This was not done.

Interestingly, both Ms. Walden and Mr. Newman testi?ed that they engaged in tough
negotiations and fought for the Participants. However, the evidence belies these assertions.
How could they ?ght if they were not properly armed with the requisite information? What
negotiations were there if the information mandated by the contract was not examined, called for

or even investigated?

Moreover, additional and troubling evidence reveals that not only did the Studio know
that it would be in breach of the ?Dealing with Affiliates? provision, but that it sought indemnity
from FBC to cover the breach.

On May 6, 2009, Mr. Kurtzman wrote to Mr. Kurgan reminding him tha 

(Respondents BX-

490.) Similarly, in the later negotiations, there was an email regarding splitting liability of

Season 7. (Respondents BX. 762.) On May 2, 2011, Mr. Kurtzman wrote that and FBC

Amended Final Award
1 9

 

Seasons 8-9, there also appears to have been consideration of extending the 
from Season 7 to Seasons 8-9, though it is unclear whether that occurred.
(Respondents BX 863.)

There is no doubt that the Studio realized that it was not going to win the ?ght with its
af?liate and therefore not only capitulated to the wishes of the Network but also became an
accomplice to fraud with respect to the Network?s desire to limit both the Studio?s and
Network?s exposure for its breach and failure to negotiate in accord with the operative
contractual standards. A breach occurred, was known to have occurred, and was attempted to be

papered over by way of a release.
The Release and Fraud

Fox argues that Josephson and Reichs are barred from challenging the license fees for
Seasons 5 and 6 since they both signed a release. ?In general, a written release extinguishes any
obligation covered by the release?s terms, provided it has not been obtained by fraud, deception,
misrepresentation, duress, or undue in?uence.? Skrbina V. Fleming Companies, 45 Cal. App. 4th
1353, 1366 (1996). However, as argued by Respondents and established at the Hearing, the
release was procured by fraud and is a nullity on its face. To prove fraudulent inducement,
Josephson and Reichs must prove: (I) a ?fraudulent statement? by (2) that
BC ?knew that the representation was not true?; (3) that BC ?made the
representation to persuade [Respondents] to agree to the [Release]?; (4) that Respondents
?reasonably relied on this representation?; and (5) that Respondents ?would not have entered into

the contract if [they] had known that the representation was not true.? CACI No. 334.3

As a starting point, there is no reasonable dispute that executives and lawyers from both
TCF TV and BC told Participants that Fox would cancel Bones unless it received a signed

release from all Participants. This point is simply incontrovertible.

On May 13, 2009, Josephson got a call from Mr. Newman and Ms. Walden and another
call from Mr. Rice saying the show will be cancelled if all Participants do not sign off on the
license fee. (Respondents Ex. 2202.) However, Mr. Rice testi?ed that a deal was already in

 

3 The elements of fraudulent concealment are identical, except instead of making a fraudulent statement, the
defendant must have ?concealed or suppressed a material fact.? Prakashpalan v. Lipscomb Lack, 223
Cal. App. 4th 1105, 1129 (2014).

Amended Final Award
20

place with the Studio to put the show on the air before he called Josephson. (7/13/18 Tr. at
1138:21-113925; 

On May 15, 2009, Ms. Bowles sends the draft release (?Release?) to all Participants.
(Respondents Ex. 2253.) ?Participants? is a de?ned term inclusive of all pro?t participants, and
the Recital provides:

The Participants accept the terms for renewal of the Series for the ?fth and

sixth production seasons (?Renewal?) as follows: an order for 2 full seasons, the

?fth and sixth production seasons, at a license fee of $2,000,000 per episode. The

de?ned term indicates that all pro?t participants agree to the terms. The signature
page contains lines for all Participants.

The Participants acknowledge that Fox has consulted with them regarding
the Renewal and accordingly will not and hereby expressly waive any right to
assert any claim in connection with the Renewal, the license fee and Fox?s
acceptance thereof, with the exception of claims for the enforcement of the terms
and conditions of the Renewal.

As Respondents point out, ?Participants? includes Boreanaz and Deschanel, and at the
time this document was prepared and signed, Fox knew that Boreanaz and Deschanel were not
going to sign the prepared release. Boreanaz and Deschanel did not agree to waive any right to

assert any claim in connection with the renewal of the license fee.

On May 15, 2009 (the same date as set forth above), Mr. Sam Bramhall said Participants
need to approve the Release that day but have the weekend to execute the release itself. (Fox Ex.
2254.) Ms. Lauren Whitney, Mr. osephson?s agent, testi?ed that it was made very clear by Mr.
Bramhall that the series would not be picked up unless all Participants signed. 10/ 1 8 Tr. at
426:6- 1 0.)

Again, on May 15, 2009, there was an email exchange between Mr. Newman and Mr.
Bramhall. (Respondents Ex. 578.) Mr. Newman knew full well that Boreanaz was not signing.
Interestingly, and contrary to the representations made by Mr. Bramhall to the Participants?
representatives, Mr. Newman took a contrary View and made it clear that he did not care if
Boreanaz and Deschanel signed the Release. Yet, Mr. Newman was the very person who called
Josephson on this date and told him everybody had to sign. (See also 7/23/18 Tr. at 2467:13-
246828)

Amended Final Award
21

Mr. Bramhall was concerned that others would balk if Fox went forward without
Boreanaz signing. (Respondents EX. 578.) Once again, on May 15, 2009, Mr. Bramhall told
Boreanaz? representatives good luck in ?nding Boreanaz another job. (Respondents BX. 573.)
This was either a statement of total dissatisfaction (at best) or a veiled threat of consequences (at

worst). There can be no other inferences drawn from such a statement.

On May 16, 2009, Mr. Bramhall tells Ms. Whitney and Mr. Collier, osephson?s attorney,

changes were and he did not want to open a by putting another

version out. (Respondents BX. 587.) He concludes that 
Again, this is misleading, at best. Mr.

Bramhall does not correct the recitals, nor does he remove the signature blocks for Boreanaz and

Deschanel. As will be discussed below, the failure to remove the signature blocks is critical.

While Mr. Bramhall claims that he told Whitney and osephson?s representatives that the
actors were not signing, this statement is without any documentary proof and stands directly
contrary to the testimony from other witnesses and is both troubling and incredulous when
juxtaposed with Mr. Rice?s testimony below. Nobody corroborates this testimony. 10/ 1 8 Tr.
at 428: 12-1 8, 433:21-434:18 (Whitney); 7/10/18 Tr. at 497:5-498:9 (Collier); 7/25/18 Tr. at
317322-3174210 (Schenkman).)

Unlike Mr. Bramhall, Mr. Rice admits that he knew that Deschanel and Boreanaz were
not signing the Release, but he did not tell Josephson or Reichs or instruct anyone to inform
them. (7/13/18 Tr. at 1149: 1 7-1 150: 13.) Both Josephson and Reichs testi?ed that they would
not have signed the Release had they known that not all Participants were signing. (7/9/18
Reichs Tr. at 171 :8-16; 7/9/ 18 Josephson Tr. at 27225-19.) They had no desire to risk
cancellation of the Show. Ms. Whitney, agent for both Reichs and Josephson, testi?ed that had
she known that Boreanaz and Deschanel were not going to sign the Release, ?it would have

changed the conversation completely.? (7/10/18 Tr. at 

Notwithstanding the insurmountable evidence that Fox did, in fact, mislead Participants,
Fox takes the position that it did not hide anything and the lack of signatures on the Release itself
clearly demonstrates that Boreanaz and Deschanel did not sign the Release. Hence, Fox proffers

and concludes that the evidence is quite plain, unambiguous and straightforward: Anyone signing

Amended Final Award
22

would have seen blank signature spaces and could only conclude that someone was not signing.
Once again, Fox presents a very troubling argument both in terms of credibility and intent. The
mere fact that the copy sent to Josephson and Reichs did not contain all the executed signatures
of Participants but did contain the signature blocks for the missing signatories is simply not

enough and is quite sophomoric.

As is often the case with a document requiring the signatures of many individuals in
various locations, it is signed in counterparts. This is especially true when, as in the case here,
signatures are needed in a very short time frame from signatories that are scattered throughout
the state or country. In fact, unless the parties are to sign altogether in the same room and at the
same time, virtually all transactional matters nowadays are signed in counterparts. This is the

rule and not the exception. 4

Again, as already set forth above, Mr. Bramhall represented that he did not circulate a
revised version (which would have clearly shown a deletion of signature blocks for Boreanaz and
Deschanel) because, as he stated, only insubstantial changes had been made. But the question
that is most critical to this part of the case is the following: How were Josephson and Reichs to
divine that Boreanaz and Deschanel did not sign when they were explicitly told the opposite, and
the signature blocks for those individuals still remained on the circulated Release? The answer
is simple. They could not have known such a fact from the document itself. To argue or proffer

to the contrary is specious.

There was no way to infer such a fact by the document itself since the original version
was circulated with signature blocks for all Participants and that version had never been changed
or edited to re?ect the true state of intentions by Boreanaz and Deschanel. Nor is there any
evidence to support Mr. Bramhall?s assertion that he had informed their representatives. To the
contrary, the executives from the Network and the Studio all stated the opposite. All along,

Fox?s representation had been that all Participants had to sign, or the show would be cancelled. It

 

4 For the same reasons, Fox?s assertion that the fraud claims should be barred by the three-year statute of limitations
is without merit. The receipt of an agreement signed in counterparts would hardly put Josephson and Reichs on
constructive notice that they had been defrauded.

Amended Final Award
23

was safe for the signatories to assume that if Boreanaz and Deschanel were not signing, the

Show would be cancelled.5

In conjunction with the evidence discussed above, there is an additional disturbing
nuance supportive of fraud. Mr. Hart Hanson, the showrunner for Bones, was likewise presented
with the Release. However, Josephson testi?ed that initially both he and Mr. Hanson spoke of
the Release, and Mr. Hanson had expressed his reservations about the document since it clearly

impacted each?s participation points.

It was clear to Josephson that Mr. Hanson was, in all likelihood, not going to sign the
Release. Josephson testi?ed that in their initial conversation(s) Mr. Hanson simply did not want
to sign. Yet somehow, as the Network?s deadline to sign the release was approaching, Mr.
Hanson changed his position and so indicated to Josephson, which undoubtedly, put more

pressure on Josephson since not to sign would put many jobs at risk.

While there is no one to refute the testimony of Josephson about these conversations (Mr.
Hanson did not testify at the hearing) and while Fox argues that Josephson knew Mr. Hanson
was seeking a bene?t based on a May 14, 2009 email, wherein he stated that ?other participants
have and are negotiating to gain? (Ex. 3650-0002), there is one fact that is immutable and cannot
be denied. Mr. Hanson, on the eve .of signing the Release, received from Fox a new ?overall

agreement? that was clearly to his liking and was kept hidden from the other Participants. -

Respondents argue that the secret Hart Hanson modi?cations make the language of the
Release false. In the Release, the integration clause provides:
No covenants, agreements, representations or warranties of any kind whatsoever

have been made by any party hereto with respect to the subj ect matter of this
Agreement, except as speci?cally set forth in this Agreement.

(Release, 11 8.) However, as was revealed at the very end of the Arbitration Hearing, Fox was, in
fact, negotiating with Mr. Hanson at this critical time ?with respect to the subject matter of this

Agreement.?

 

5 Another ?'aud claimed by Respondents is Fox?s failure to disclose material changes in the Release regarding de?cit
recoupment and ranking bonuses. The Release makes no reference to elimination of de?cit recoupment and ranking
bonuses. (Respondents Exs. 561, 2680.) Ms. Whitney testi?ed that she didn?t learn about removal of the de?cit
recoupment until the Audit Report. (Tr. 7/1 1/ 18 at 616: l6-6l7z4.) Similarly, Ms. Felker testi?ed that Bramhall
never mentioned the de?cit recoupment term going away. (7/11/18 at 616: 6-617z4.)

Amended Final Award
24

On May 15, 2009, Jeanne Newman, Mr. Gary Newman?s wife, sent an email to Mr.

Bramhall stating that Hanson 

  
  

 

(Respondents BX.
566; see also Respondents Ex. 1483.) To reiterate, Mr. Gary Newman was co-president of
After claiming privacy and objecting to producing this document throughout the
Arbitration, Respondents ?nally produced Hanson?s Overall Amendment dated May 18, 2009.
This is the very same date that Hanson and Josephson signed the Release. There is no doubt that

Mr. Hanson?s Overall Amendment violated Paragraph 8 of the Release.

It is clear that Fox had no intention of cancelling Bones. It could not proceed without the
creator, writer and producer of the Show. It had no choice but to agree to Mr. Hanson?s
in order to get him to agree to the Release language which, in turn, would set in
motion an assurance for the signatures of both Josephson and Reichs. Hence, another critical,
yet rhetorical question which highlights this point is: Why would the Network and Studio go to
all the trouble of negotiating a new deal with its showrunner and at the same time make sure that

the creator and producer signed a release if the show was truly going to be cancelled?

The answer is self-evident: The show was not going to be cancelled and there never was
an intent to do so. The intent was to continue with the show and at the same time bar any chance

for a lawsuit to be brought.

In addition to all of the above, it needs to be pointed out and likewise asked: Why is Fox
the Network requesting releases from Participants who have no contractual relationship with it?
There is no privity between the Network and Participants and the contractual obligations set forth
in the Agreements run only between the Studio and Participants. In a vertically integrated set up
between the Studio and the Network, the release became essential so as to continue on with the

Show and likewise eliminate any potential liability previously discussed.

It is convenient, coincidental and suspicious that Fox entered into a last-minute overall
deal with Mr. Hanson that was not disclosed to the other Participants. In fact, this new overall
agreement was not disclosed until the actual arbitration hearing was underway and only upon the
issuance of an order from the Arbitrator. All inferences point to a false, hidden and duplicative

scenario being presented by Fox.

Amended Final Award
25

As a result of the above, Respondents argue that the threat to cancel Bones was
fraudulent in and of itself and was the actual launch point for the ?aud. To evidence and support
this, the Studio, on January 10, 2008, made a presentation of Bones when they were attempting
to syndicate the show. (Respondents BX. 287.). The presentation is quite telling because the
Studio sets forth compelling data and reasons as to why the show should continue and clearly

establishes the basis as to why Fox had no intent to cancel the show.

In this presentation, Bones was portrayed as the darling of the Network and not the middling

show with middling ratings that every Fox witness testi?ed to at the Arbitration hearing.

 

As the evidence progresses from this point in time, it is revealed that no one seriously

contemplated cancelling the Show. For example,

a On January 5, 2009, Mr. Ligouri wrote in an email that Bones, along with Idol and
House, were being used to launch new shows. (Respondents BX. 413.)

On January 13, 2009, an BC internal email, copying Kurgan, Ligouri and Beckman,
states that Bones is the only show on entire network with an upward trajectory.
(Respondents Ex. 419.)

I Mr. Reilly, President of the Network, admits that it ?would be highly unusual? not to pick
up a show that was on an upward trajectory, and he could not think of a single example
where it happened. (7/26/18 Tr. at 

- On March 3, 2009, Mr. Reilly sent an email to Mr. Rice regarding discussion of a three
season pick up. (Respondents BX. 457.)

This would not have been discussed if the Show was being cancelled. (Reilly Tr. 7/26/18
at 3256: 2-22.)

0 On March 20, 2009, Mr. Beckman explained to Mr. Rice that Bones is a 

(Respondents BX. 449.)

Amended Final Award
26

On March 24, 2009, the Network orders six scripts for Season 5, noting the series has
boosted Thursday 18-49 age group by 43%. (Respondents Ex. 451.)

On May 6, 2009, a Bones presentation took place. Among many glowing statements, it

   

9

  

states:

66

(Respondents Ex. 510.)

On May 7, 2009, Which is the same day BC sends the cancellation letter, Kurgan and
Beckman exchange emails discussing whether Bones will air on Thursday or move to
Friday and noting that Bones will stay on Thursday due to sales success. (Respondents
Ex. 53 1.)

Mr. Kurgan testi?ed that he has no recollection, despite the May 7 letter, of any
discussion of replacing Bones with another show (7/18/18 Tr. at 1882: 2-5) or about
actually cancelling Bones (IQ. at 1921 

On May 13, 2009, Mr. Acosta tells Norma Ceres, which

is the no-Bones version. (Respondents Ex. 2208.)

Ms. Ceres emails the team which is the
version with Bones. (Respondents Ex. 549.)

Mr. Acosta acknowledges that he must have been told by Rice or Kurgan that there was
an af?rmative decision to go with Bones as of May 13, 2009. (8/7/18 Tr. at 3958:24-
3960: 14.)

On May 13, 2009, Mr. Rice tells Earley to book Deschanel?s upfront travel, after Earley

Finally, Respondents point to another exhibit that was presented at the last minute. This

exhibit (Exhibit 1456) shows that American Dad, which was in the Li gouri memo, was picked up

or ?08-?09, ?09-?10, ?10-?11, ?11-?12, and ?12-?13. In every single one

of those years, Bones? rankings were superior. (ILL)

When viewed in totality, the evidence surrounding the Release, from its inception and

design to its presentation to Participants, supports a ?nding of fraud with the intent to get

Participants to sign off on their points and at the same time preclude litigation and Participant

leakage. Bones was not going to be cancelled, and the Release was procured through a series of

Amended Final Award
27

misrepresentations and fraudulent conduct that, in reality, had the Participants known the true
facts, they would not have signed since to do so would have cut off their back-end points. The
only parties to have gained from the Release were the Studio and the Network, which in a non-

vertically integrated world would never have happened.

Accordingly, the Release is void ab initio. The Arbitrator ?nds that Respondents have

established their claims for breach of contract and fraud.
IV.
INTENTIONAL INTERFERENCE WITH AGREEMENTS

Respondents claim that the conduct of FBC, FEG and 21CF concerning the license
negotiations and the Release constitute intentional interference with the Participants? agreements
with To establish a tortious interference claim, a plaintiff must prove: (I) a valid
contract between plaintiff and a third party; (2) defendant?s knowledge of this contract; (3)
defendant?s intentional acts designed to induce a breach or disruption of the contractual
relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting
damage. Paci?c Gas Electric Co. v. Bear Stearns Co., 50 Cal. 3d 1118, 1126 (1990). The
elements of inducement of breach of contract require an actual breach. Contemporary Invs..

Inc. v. Safeco Title Ins. Co., 145 Cal. App. 3d 999, 1002 (1983).

The Arbitrator once again ?nds and concludes that the facts presented at the Hearing
meet these elements. Speci?cally, the ?Legal Action Plan? and the Release support intentional

interference by the Network and CF.
The Legal Action Plan

On January 12, 2009, Mr. Ligouri sent an email to Mr. Chemin, the Chairman and CEO

?the new? referencing 

He then outlines the
?Issue,? including 
(Li) This re?ects his knowledge that the Studio has

 

Amended Final Award
28

agreements with Participants that will be affected. As a result, Mr. Ligouri outlines ?Next

Steps:?

 

(Li)

In response, Mr. Chernin forwarded this email to Mr. Gelfan stating, 

(Li) Mr. Chemin also copied this email to Studio executives,

including Ms. Walden, Mr. Newman and Mr. Kurtzman. (E) When asked why he forwarded
this email. to both the Network and the Studio, Mr. Chemin replied:
Because I, I read Mr. Ligouri?s thing, it sounded like there were issues coming to

these intercompany license fees, speci?cally, and I wanted to make sure that my
directives were being listened to, . . . .

I wanted everybody to ?gure out a way to have these negotiations, to do the best
they could for their individual divisions, to honor the pro?t participants, and have
us pay market, market-level license fees.

16/ 8 Tr. at 1401 :12-1402zl.) Nonetheless, when asked why the Studio, Network and Parent
were involved in this memo, Mr. Rice testi?ed that he thought it was ?unusual.? (7/13/18 Tr. at
Mr. Kurtzman stated he thought it was ?odd.? (7/12/18 Tr. at 890215-891: 6.)

On January 13, 2009, two days after this directive from Chernin, Mr. Barron of the
Finance Department ran an analysis calculating the effect on pro?tability for Season 5
of Bones of: (1) full-cost license fees (based on the then-estimated cost of production of 
million/episode), which would have resulted in over $.million in payments to Participants; (2)
the Breakeven? license fee the lowest license fee CFTV could receive without
incurring any losses of $-episode; and (3) the ?Participant Breakeven? license fee the
highest license fee could receive without triggering any leakage to Participants 
calculated as million/episode. (Respondents BX. 418; 8/13/18 Tr. at 514827-21, 5149:20-
24, 51 50: 13 -21, 5151 :2-51 53 :4 (Barron).) Interestingly, the Participant Breakeven license fee is
virtually identical to the $2 million/episode license fee that TCF TV and FBC eventually agreed
to for Seasons 5?6 of Bones. (8/13/ 18 Tr. at 5153:5-24 (Barron).)

Amended Final Award
29

Other evidence reveals that the Network was aware of the Studio?s contractual duty to
Participants. On January 23, 2009, Mr. Gelfan reached out to Mr. Kurtzman, Mr. Kurgan, Mr.
Kender and Mr. Chemin regarding a meeting on 5th year license fees for Bones and American
Da 

(Respondents Ex. 424A.) On April 3, 2009, Mr. Acosta asked Mr. Mayberry
whether the parent is up to speed on the Bones license fee issue, and Mr. Mayberry responds,
(Respondents BX. 456.) On May 6, 2009, Mr. Kurtzman and Mr. Kurgan had

an email exchange regarding their discussions of whether the Network had made an offer to the

 

 

Studio regarding Bones. (Respondents Ex. 490.) The discussions included splitting liability to
the Participants (ILL) Mr. Kurtzman could not think of
other shows between the Network and the Studio wherein the Network ?oated the idea to cover

the participants? claims. (7/12/18 Tr. at 929:10-930:6, 95921-961 

Finally, Mr. Newman was asked whether he took any measures to try to build leverage in
his negotiations with the Network. He responded:

Yes. We did everything that we knew how to do, from threatening to take the

show to other networks to quoting him deals that other networks were paying,

Ghost Whisperer being at the time the most recent deal. You know, telling him

he was going to end up getting us sued by the participants because the license fee
wouldn?t stand up to the standard of dealing.

(7/23/18 Tr. at 2597: 2-14.)

Despite full knowledge of the terms of the license agreement and Bones? relatively strong
performance, there is no indication that anyone from ever asked FBC to renew Bones
under those terms even though there was no precedent for FBC paying anything less than full-
cost license fees with de?cit recoupment and rankings bonuses to any third-party studio for any
series licensed for Season 5 or beyond. (7/l7/l 8 Tr. at 1538:23-1543215 (Walden); 7/18/18 Tr.
at 1856:23-1859:5 (Kurgan); 7/23/18 Tr. 2441 :23-2443z2. 2457 :23-2459z7, 2594:19?2595215
(Newman); 7/26/18 Tr. 3333:11-15 (Y ounger).) Indeed, Walden was aware that ?the network
was setting a new precedent,? that ?there were different terms that the network was trying to
create, a different deal they were trying to create on the ?fth season of Bones.? (7/17/18 Tr. at
1541 12-20, 1542:6-1543:11, 

Amended Final Award
30

This can only be explained by the fact that BC and sought to induce TCF TV
to accept license fees that were inconsistent with Paragraph 10(b) and custom, and they
knew that entering into below-market licensing agreements with was ?certain or
substantially certain? to cause interference or disruption of Respondents? expectations under

their contracts with 

Fox attempts to argue that Mr. Ligouri?s ?legal action plan? email is ?ultimately
innocuous.? However, Fox?s own actions surrounding this email belies its argument. Fox
originally produced this document in redacted form, and then during the ?rst week of Arbitration
and after a warning from the Arbitrator, it produced the unredacted document. Further, it should
be noted that shortly after Mr. Liguori?s Legal Action Plan memo in 2009, Mr. Liguori left Fox
and Mr. Peter Rice stepped to be Mr. Liguori?s replacement. Somehow, Mr. Liguori does not

surface again on Fox?s radar until just after January of 201 8.

For some reason, Fox now takes another look at Mr. Li guori and believes they need his
talent as a producer. This quizzical interest leads to a ?First Look Agreement? between FX (a
Fox af?liate) and Mr. Liguori. However, this document is never produced and during Mr.
Liguori?s ?rst trip to the witness box is never mentioned. Yet, near the conclusion of the

Arbitration hearing, the Ligouri ?First Look Agreement? was revealed.

In this First Look Agreement, FX provided Ligouri with?
and ?xed episodic fees and contingent compensation far exceeding

that of top executive producers in Hollywood. (Ex. 1454; 8/9/18 Tr. at 4605:20-4620:4 (Cline).)

Why and how did this come about? Mr. Li guori had virtually no experience whatsoever as a

 

Producer, yet the First Look Agreement, when compared to those of top producers in

Hollywood, rivals those and in some instances surpasses those deals.

President John Landgraf, who reports to Mr. Rice, directed his head of business
affairs to make this unprecedented deal with Ligouri right after January 1, 2018 9/ 1 8 Tr. at
4563:21-4564210, 4637:21-24 (Cline)), while Respondents? motion to compel production of the

Amended Final Award
3 1

Li gouri memo and related documents was pending.6 Despite the fact that-

FX apparently issued as areas eealse

reporting its deal with Ligouri. (8/9/18 Tr. at 461627-4617 :23 (Cline).)

When viewed in light of these circumstances, the Ligouri ?legal action plan? is far from
innocuous. If one juxtaposes the First Look Agreement with Mr. Liguori?s testimony at the
hearing (wherein he downplays the signi?cance of the plan itself), it seems coincidental that Mr.
Liguori disappears for 9 years (from Fox?s radar) and then magically reappears with a First Look
Agreement 7 months before he is to testify in these proceedings with a deal in hand that most

producers in Hollywood have strived to have their entire entertainment career.

The contents of the Legal Action Plan were followed by both the Studio and the Network
from January 2009 through May 2009, and the conduct of each clearly re?ects the key

components of that plan.
The Release in Relation to the Intentional Interference Claim

Respondents also argue that the evidence surrounding the Release supports intentional
interference. Mr. Rice testi?ed that the Release was his idea. 13/ Tr. at 1123 :17-1 124:7;
1218: 14-20.) He claimed that he suggested the Release because he had conversations in which
concerns about liability to Participants came up. (7/13/18 Tr. at 1029:21-1031 Speci?cally,
he stated, think I must have had conversations about potential liability because that must --
that was my motivation for asking for the release to be signed.? (Id) This begs the question of

why Mr. Rice would be concerned about the Studio?s liability to Participants.

In an email exchange between Mr. Kurgan and Mr. Kurtzman, Mr. Kurgan actually

suggests ts 

(Respondents Ex. 2152.) Then, on May 7, 2009, Ms. Minna Taylor sent a letter to Mr. Kurtzman
which stated:

 

 

6 The Agreement itself is dated three days after Fox agreed to produce the redacted version of the Ligouri memo and
related documents. (Ex. 1607; Ex. 1606-0011-12.)

Amended Final Award
32

(Respondents BX. 518.) During the testimony, this became known as the ?cancellation letter?
and was shown to be highly unusual, to say the least. Mr. Newman testi?ed that this letter was
unprecedented in his career. (7/23/18 Tr. at Ms. Walden testi?ed that she had never
seen a letter like it before in her career. (7/16/18 Tr. at 1353 12-21 .)

Clearly, an unaf?liated network would not have needed to send this letter because
cancellation would have occurred by telling the studio that the show would not be renewed or by
allowing the option deadline to expire. Here, however, this unprecedented letter was part of the

legal action plan.

The sharing of this ?legal action plan? between the Studio and the Network evidences the
beginning of the Network?s process to ensure the Show continued at less than a ?ill-cost of
production license fee. When it received the legal action plan memo, the Studio should have
realized that the Network had no intention of paying a full-cost of production license. The
Network suggested the Release, but it was the Studio?s contractual exposure to Participants, not
the Network?s. The Network had no privity with the Participants with any contractual

agreements.

So why is the Network interested in a release that could only be between the Studio and
its talent? For example, if NBC netWork was negotiating with about a license fee, why
would NBC be interested in making sure the participants of the show issue some sort of
contractual waiver or release of claims? The answer is they would not. However, if the Studio
and the Network are integrated (as is the case here) then the con?ict and the reasons therefor

become obvious.

Moreover, it is unclear why Mr. Rice made the phone call to Josephson about the
Release when it was the Studio?s responsibility to look out for its participants. An unaf?liated
network would never have an interest in a contract between talent and the studio, and certainly, it
would not seek a release ?om the talent or speak to talent about such a document. To reiterate,
there is simply no privity between the participants and'the network. An unaf?liated studio would
have no interest or reason to seek a release from its talent. It would present the following options

to its participants:

Amended Final Award
3 3

(1) they can proceed with a less than full-cost license knowing that their backend points
would be delayed;

(2) inform them that the network is seeking a release, and they can decide what they want

to do; or

(3) negotiate hard with the network as to the license fee and actually represent the

participants.

However, here, the Studio knew in January 2009 that the Network was not going to pay
the full cost of production license. Yet, as alluded to above with respect to the breach of contract
claim, the Studio not only failed to apply the standard set forth in the Agreement, but it also
failed to zealously negotiate on behalf of its Participants. As the evidence developed, it became

dif?cult to distinguish between the actions of the Studio and the Network.

Thus, the Arbitrator determines that both the ?legal action plan??originated by 
and origination of the Release make abundantly clear that BC and 21 CF pulled the
strings and guided the sham ?renegotiations? of the Bones license agreement to the detriment of

the Series? license fees and Respondents? pro?t participation interests.

The Arbitrator ?nds Respondents have established their claim for intentional interference

with contract and are entitled to recovery on this claim.
V.

BREACH OF AGREEMENTS BASED ON THE INTERNATIONAL
TRANSACTIONS

The same Paragraph 10(b) standard applies equally in the international marketplace, and
Respondents allege breaches of Paragraph 10(b) with respect to licensing of Bones to
foreign af?liates. Speci?cally, Respondents claim that breached the Agreements in the
United Kingdom, Italy, Spain and other territories. As set forth below, the Arbitrator agrees with
Respondents regarding the UK, Spain and Italy but ?nds that Respondents have not established

their claim regarding the other territories.

Amended Final Award
34

United Kingdom

Similar to the analysis set forth above with respect to the domestic licensing, 

never complied with Paragraph 10(b) with respect to the international licensing of Bones.

Mr. Scott Gregg, Executive Vice President of Strategic Operations for 
Distribution, testi?ed, ?We do not look at third-party studio agreements with Sky or other
af?liates, and we do not ask for them.? 19/ 1 8 Tr. at 2072:19-207319; 2074:19-2075zl3;
212829-2129211.) He stated that there were no discussions of how a negotiator would comply
with Paragraph 10(b). at 2070: 12-19.) Mr. Gregg testi?ed that determined its
license fees based on historical licensing practices in territories, not the af?liate?s
historical licensing practices, and he admitted that practice was inconsistent with the
plain language of the standard set forth in the ATP. (13. at 2070:12-19, 2072: 19-2073:11,


Similarly, Mr. Londono, COO of Fox Networks Group Europe and A?ica, testi?ed that
he had no knowledge of the Paragraph 10(b) language, and that he had never seen the standard.
(7/24/18 Tr. at He stated that he never provided agreements to the Studio. (IQ.
at Mr. Londono testi?ed that it would be dif?cult to ?nd comparable
programs, and that no one at the af?liated networks was ever told the agreements with the Studio

needed to be on comparable terms to unaf?liated deals. (E. at 2667 

Fox argues that Respondents fail to satisfy Paragraph 10(b) because there is no evidence
of third-party deals with It asserts that,because Respondents made no effort to obtain
such third-party deals, no third-party license agreements with are in the record, and

therefore, Respondents have not met their burden.

Fox?s argument turns the standard of Paragraph 10(b) on its head. To begin with,
is the party that promised to comply with Paragraph 10(b) in exchange for Respondents?
waiver of any right to challenge ability to license to its af?liates, thereby making it
duty to obtain the comparable information in order to comply. However, as testi?ed to
by its own employees, the key negotiators were not even aware of the standard or their
obligations under Paragraph 10(b). Moreover, as stated above with respect to the domestic

licenses, Fox was contractually obligated to meet this standard at the time it entered into the

Amended Final Award
35

license agreements with the af?liated studios. It therefore makes absolutely no sense for Fox to
argue that Respondents have not met their burden because Respondents did not seek third-party

deals at this time.
Spain and Italy

Similar to the UK, negotiators made no effort to comply with Paragraph 10(b)
with respect to licensing in Italy and Spain. They did not request the Fox-af?liated networks?
agreements with unaf?liated studios, and never inquired about what the Fox-af?liated networks
were paying unaf?liated studios for comparable programs. 19/ 1 8 Tr. at 2122: 18-21, 2123:15-
2124:1 (Gregg); 7/24/18 Tr. at 2665:12-2666z7, 2667 :7-20, 266824-10 (Londono).)

Other Territories

In their Post-Hearing Liability Brief, Respondents appear to specify the ?other territories?
as Latin America. Regardless, Respondents? international claim(s) concerning the remainder of
territories fails as it is based on an extrapolation analysis. This extrapolation, based on the United
Kingdom, Italy and Spain, when applied to the remainder of territories is too speculative to serve

as the basis for an award of damages.

As Fox argues, extrapolation is not compatible with a Paragraph 10(b) claim which
requires Respondents to make an evidentiary showing with respect to each territory. This is true
for both a breach and damages. With respect to the latter, the evidence showed that each
international market is unique; the buying practices and patterns in one territory cannot be used
as a proxy for the buying practices and patterns in another. 19/28 Tr. at 2149:5-17 (Gregg);
7/24/18 Tr. at 2634: 12-16 (Londono); Cornish Tr. at 416324-11; Ex. 3626-0006.) Many factors
affect the level and range of pricing and vary from territory to territory. Economies, competitive
conditions, licensing structures, and market interest in US. content all vary. (Id) As such, the

Arbitrator cannot ?nd a breach regarding the licensing in the remainder of the territories.
MundoFox

Respondents appear to have abandoned their MundoFox claim, recognizing that the
testimony was in con?ict. Steve McDonald testi?ed that he personally called Telemundo,

TeleFutura and Univision. (7/16/18 Tr. at Ms. Anjelica Cohn testi?ed that she spoke

Amended Final Award
36

to Diana Mogollan and Flavio Morales, the two executives at mun2, and these two said that they
had not been contacted about Bones, would have been interested, and would have paid $50,000.
(Cohn Tr. at However, Ms. Mogollan and Mr. Morales both testi?ed that they
never spoke to Ms. Cohn about Bones, would not have been interested, and could not have
afforded to pay anywhere near $50,000 for it. (Mogollan Tr. at 4481 15-4482224; Morales Tr. at
450021-4501 

Given this con?icting testimony and with the absence of any other testimony or proof,

Respondents have not established their claim as it pertains to MundoFox.
VI.
CLAIMS BASED ON LICENSING ARRANGEMENTS WITH HULU

Respondents also allege that Fox breached the Participant Agreements through its
licensing arrangements with Hulu. They argue that although FEG earned over $.million from
licensing Bones to Hulu, it passed less than $Imillion on to pro?t Participants, choosing instead
to minimize ?leakage? by ensuring that 100% of revenue from full current-season streaming
rights was funneled to FBC, even though had never licensed those rights to BC and,
thus, retained the right to those revenues. Respondents contend that the same sweetheart

agreements also dramatically undervalued both past and current-season rights to Bones.
Initial Inquiry: Ownership Rights

Respondents argue that is, and at all relevant times was, the copyright owner of
Bones. Inexplicably, though, permitted parent company FEG, Which had no streaming
rights, to exploit those rights anyway?and to give nearly all of the revenue from that
exploitation to FBC so that this revenue would not be shared with Respondents. Respondents
conclude that decision to license to Hulu rights worth at least -, without
receiving any of that consideration for itself, was a clear breach of its obligation to distribute the
series ?in good faith.? (Ex. 54, 1} And further, the implied covenant of good faith and fair
dealing mandates that TCF TV act in good faith toward pro?t Participants in the licensing

process.

Amended Final Award
37

The preliminary question is whether there was an agreement wherein the Network was
given the right to exploit Bones by the Studio. To begin with, testimony from both the Studio
and FBC is consistent that the Studio was the copyright owner for Bones, and FBC could obtain
the digital rights only through a grant of those rights from the Studio. 18/ 1 8 Tr. at 1922:25-
1923:11 (Kurgan); 7/12/18 Tr. at 948:2-11 (Kurtzman); 7/24/ 18 Tr. at 2678:14-19 (Pearson).)
Next, it is clear that there was no written agreement between the Studio and the Network
concerning the digital rights to Bones. (7/24/18 Tr. at 2692:11-15 (Pearson879211-18 (Kurtzman); 7/23/ 18 Tr. at 2493:7-13, 23-25 (Newman).) The question, then, is how
did the Studio give full current-season stacking rights to the Network?

To understand the arguments between the parties with respect to these digital rights
discussed above, one needs to start with what Fox represented in its Opening Statement:7

So there was a deal struck between the Network and the Studio and in this deal

they traded off rights. The Network got in-season streaming, meaning the same

year that they put the show on TV they could also put it on Hulu and get the

revenue stream from that. The Studio got something arguably even more

valuable; they got to pierce into this four-year window and sell DVDs earlier, sell

re-runs into syndication earlier than the four years, and sell out-of-season episodes
earlier than they otherwise would have in this four-year window.

19 Tr. at 147: 1 8-148z2.) The Arbitrator asked counsel when this deal, which was
represented as an ?oral deal,? was cut, and the response was ?2008/2007.? (Iii. at 
However, Mr. Pearson?s testimony at the hearing (the witness that all Fox witnesses pointed to as

the person most knowledgeable in this regard) was that this alleged ?deal? was struck in 2010.8
Speci?cally, Mr. Pearson testi?ed as follows:

Q: Now, did you testify at your deposition that with respect to digital rights, not
just this more narrow full current season, all digital rights, ?hard to say we ever
had an understanding, we had an ongoing dialogue.? Do you remember giving
that testimony?

A: Yes.
Q: And was that truthful testimony?

 

7 The Arbitrator is fully aware that opening statements are not evidence. However, Fox?s position with respect to
these digital rights has been extremely dif?cult to follow since it has been somewhat of a moving target. To evaluate
Fox?s oft times shifting arguments it is necessary to understand what its own counsel represented at the outset of the
hearings before testimony was taken under oath.

8 This differed from his deposition testimony.

Amended Final Award
3 8

A: Yes.
(7/24/18 Tr. at 

Once again, a pause here is required to acknowledge that Fox witnesses, including the
heads of the Studio and Network, testi?ed that they did not know about a digital rights
agreement, but that Mark Pearson was the person who would know. Indeed, Mr. Kurtzman, Mr.
Newman and Mr. Kurgan, among others, all deferred to Mr. Pearson, who Mr. Chemin identi?ed

as ?a middle-level strategy guy for the television studio.? (7/16/18 Tr. at 

At the hearing, Mr. Pearson, who testi?ed at his deposition that as late as May 2014 he
did not believe there was an agreement that FBC would possess the current in?season rights to
Bones, claimed to recall an ?understanding?

A: I?m recalling now speci?city as it relates to that exploitation on Hulu Plus,

that that was part of the proposal, and that in fall of 201 0 Hulu Plus was to launch
and the network needed those rights to satisfy Hulu Plus.

Q: So you?re now recalling that speci?city. When did you ?rst recall it? Was it
right here on the stand or was it sometime in between your deposition and now?

A: It was right here on the stand when I looked at that timeline and started
scrawling some notes, and I made a note to myself 2010 Hulu Plus launch.

Q: This is important for this case. You referred to that as an agreement when you
made your line. Do you want to stick with this being an agreement or is it
something different?

A: As I said, I?m not an attorney and I don?t understand the legal difference
between what an agreement is and what an understanding is. I think it was an
understanding and not an agreement, so if I can at this point in time go back and
mark it with a green marker, that?s what I would do.

(IQ. at 2709:10-25, 2710:20?23, 

Mr. Pearson con?rmed his testimony that in 2010 there was an understanding with
respect to Bones that the Network would get full-season stacking rights for Hulu Plus going
forward for the 2010/2011 season. at 2706: 15-21.) However, this testimony was
impeached by other testimony showing that the Studio, after 2010, continued to assert that there

was no digital rights agreement and that it was reserving its right. According to an email written
by Mr. Kurtzman on April 28, 2014 and con?rmed by him in his testimony, -

 

Amended Final Award
39

 (Respondents Ex. 1075; 7/12/18 Tr. at

 

87521-16.)

On May 1, 2010, Ms. Harris wrote an email to Mr. Kurtzman stating that FBC is

currently seeking ?ill stack rights for Hulu Plus subscribers on all of its licensed series going

forward. (Respondents Ex. 1075.) Mr. Kurtzman responded that 

(Respondents EX-1075-) Mr- Kurtzman again

con?rmed this in his testimony at the hearing. On the Network side, Mr. Kurgan con?rmed that

Next, an examination of Mr. Pearson?s claim of what the Studio received in exchange for
the digital rights is required. Mr. Pearson stated:
So what the studio got in return for giving the network expanded digital rights for

full stacking, the studio got 30-day, prior to subsequent premier, SVOD rights, the
studio got early repurposing, early syndication rights.

(7/24/18 Tr. at 

Again, however, this testimony is impeached because the Studio already had been
exploiting these rights. Mr. Pearson con?rmed that in 2008 Bones was licensed to Turner in
early repurpose which was more than two years before he claims the Studio had the right to
license that early repurpose, and also that the Studio licensed the syndication rights to Turner
before he claims the Studio had right to do so. (7/24/ 18 Tr. at Mr. Barron
con?rmed the Studio did not need early syndication because it was already syndicated. (8/13/18
Tr. at Finally, with respect to the past-season SVOD rights, Mr. Pearson con?rmed
that under the Net?ix deal, which was entered into prior to June 2010, the Studio already had the
right to license those past-season rights. (7/24/18 Tr. at 

After con?rming that the Studio was already exploiting all the rights related to all of the
consideration that it purportedly received in return for giving the Network the Hulu SVOD
rights, Mr. Pearson was asked what the Studio got in return for giving these rights to the
Network. Incredibly, Mr. Pearson stated, ?We got their agreement that we would be able to
continue to do that.? (7/24/18 Tr. at 2732:25-2733 Mr. Pearson ?rst testi?ed at his

Amended Final Award
40

deposition that there never was any understanding between FBC and about any Bones
digital rights. Then, at this Hearing, after all other witnesses claimed that Mr. Pearson was the
person who would know about the digital rights, Mr. Pearson recalled, at that moment, the

understanding discussed above.

Simply stated, the Studio did not get those early syndication and past-season SVOD
rights in exchange for full current-season stacking. If one were to ask why, the answer would be
simple: Because the Studio already had them and were exploiting them. Hence, it received no
consideration in exchange for the purported digital rights trade-offs. Moreover, no exhibit,
emails, or other documentary evidence was shown to support Mr. Pearson?s testimony. Only the
impeached testimony of Mr. Pearson himself is the support for this alleged agreement. More
speci?cally, Mr. Pearson had to impeach himself to arrive at some purported understanding. In a

few words, the Arbitrator ?nds Fox?s position in this regard to be patently absurd.

Based on the evidence presented, the Arbitrator ?nds no agreement between the Studio

and the Network giving the Network current in-season streaming rights.

Fox argues that the Studio?s granting to FBC of certain in-season new media rights was
?comparable? under the Distribution Controls Paragraph. It claims that the Network?s deal with
the Studio in terms of the exchange of digital rights was the same deal the Network had with
third-party studios such as NBC Universal and WB. However, again no evidence was presented

of any third-party studio granting full current-season stacking rights to FBC. Mr. Kurgan

testi?ed that?
?(7/18/18 Tr. at 2005:6-8; 

Accordingly, Respondents have established that breached the Participants?
Agreements by permitting EG to grant Hulu full current-season stacking rights, which no
unaf?liated third-party studio had ever granted to FBC, and receiving no consideration, and
instead allowing that consideration to be directed to FBC and keeping the $70,690,961 out of the

Participants ?Gross Receipts.?
Breach of Agreements Based on Self-dealing
Respondents argue that the -F BC received from the Hulu licensing agreement

for Bones was arti?cially de?ated as a result of self-dealing between Fox and its af?liate Hulu,

Amended Final Award
4 1

because those deals were based on a share of speculative advertising revenue that no third-party
distributor has agreed to when licensing a premium scripted television series to Hulu.
Respondents assert that with respect to past-season episodes (episodes from seasons not currently
airing), FEG licensed at least the entire ?rst season of Bones to Hulu Classic from 2008-2010 in
exchange for a highly speculative -share of advertising revenue with no minimum

guarantee.

Mr. Chemin testi?ed that when the -split was agreed to with Hulu, Fox had no idea
what the ad revenues would look like that it might later receive from Hulu. (7/16/18 Tr. at
1459: 19-23.) He stated that the terms were based on calculating what was needed to keep Hulu
at breakeven (meaning viable). 16/ 1 8 Tr. at The deal was negotiated between the
joint venture partners, Fox and NBC, and there was no third party to negotiate. (7/24/18 Tr.
2826: 19-24.) Ms. Zigler testi?ed how a third party dealing at arm?s length would have arrived at
the monetary terms of the Hulu content license agreements: by negotiating a ?xed license fee

that was commensurate with the exploitation of their content. (7/25/18 Tr. 2901 :12-1 8.)

However, Ms. Brennan, Fox?s PMK regarding the Hulu deals, testi?ed that EG did not
even discuss the possibility of getting ?xed episodic license fees, or any minimum guarantee, in
return for licensing its content to Hulu. (7/24/ 18 Tr. Mr. Chemin did not
recall anyone ever looking into the question of whether the -ad revenue split was
reasonable within the industry. 16/ 8 Tr. 1460: 13?17.) Indeed, when the Arbitrator asked Mr.
Chemin Where the negotiation aspect of this deal was, Mr. Chernin responded, don?t, I don?t

know whether the agreement re?ects negotiations or not.? (7/16/18 Tr. at 1447: 18-25.)

Neither of Fox?s experts was aware of any third party who had been willing to license
content to Hulu for a share 'of ad revenue. Wunderlich Testimony, 8/10/18 Tr. 4930:23-
4913 Homonoff Testimony, 8/8/18 Tr. So, when Fox contends that there is
no evidence of a better deal struck by another studio in terms of the percentage of ad revenue,
this is true because no other studio would make such a deal based on the percentage of ad

revenue.

Fox agreed to the same -ad revenue split for the full current-season stacking rights
for Bones Seasons 6 through 12 to Hulu Plus. There was no evidence that these rights had ever

been licensed to any third-party streaming platform at any price. Indeed, no witness or expert

Amended Final Award
42

was aware of any third-party studio licensing full current-season stacking rights for any scripted
drama to FBC or Hulu. Thus, it seems that Fox was able to license the current-season stacking

rights of Bones to Hulu because Hulu was a Fox af?liate.

In addition to all of the above, the Arbitrator now addresses perhaps the most shocking
piece of evidence related to the Hulu issues, which is the Fox Content License Agreement itself.
Fox actually signed both sides of this agreement. Mr. Dan Fawcett signed the Fox Content
License Agreement on behalf of both FEG and Hulu. (Respondents BX. 278.)

The signature page represents that Mr. Fawcett was President, Digital Media, of FEG and
at the same time he was Vice President of Hulu. This puzzle was never resolved at the
Arbitration Hearing since Mr. Fawcett was not called by Fox, and Respondents stated that he
could not be found since they had no idea where he could be located. When Mr. Chemin was
asked how this was possible (meaning a Fox representative signing on behalf of both parties), he
replied have no idea. (7/16/18 Tr. at 

Indeed, the self-dealing analysis is hardly surprising considering that the 
executive who negotiated and agreed to the original -ad revenue split was also representing
Hulu?s interests at the time. As already stated above, Mr. Fawcett literally signed the agreement
for both parties in his representative capacity for both sides. The obvious inferences of self-

dealing, con?ict of interest and the lack of any arm?s length negotiations leap off the page.
Claim for Tortious Interference/Inducement of Breach

Respondents argue that parent company FEG, under pressure of its own parent
News Corp/21CF, licensed Bones to Fox af?liate Hulu for highly speculative, below-market
monetary terms. Specifically, they claim that the setting of the licensing terms, the -ad
revenue split, and the allocation of the current-season revenues to the Network establish tortious

interference and inducement of breach by 21CF, FEG, and FBC.

On April 23, 2010, Mr. Newman stated in an email that he opposed splitting 50% of the
revenue from the Hulu Plus model with FBC. (Respondents BX. 669.) He stated that ?after the
initial rolling period, the availability of the episodes on Hulu+ impacts EST, DVD and

syndication all of which are studio business. Therefore, the studio ought to get the revenue.?

(BL)

Amended Final Award
43

Mr. Kurgan was asked if there was some larger corporate mandate about digital 1i ghts,
and he responded that ?[t]here were a couple of them. Obviously we had our agreements with
Hulu and what we were going to provide Hulu as a company in terms of what rights they were
going to be able to exploitfurther testi?ed that ?there
was an understanding on a corporate-wide basis that the studio was going to grant us these rights,
the network was going to exploit them . . . 18/ 1/8 Tr. at 1951: 19-25.) Mr. Chemin
con?rmed this when he testi?ed with respect to his Hulu dealing that he ?was focused on the

conglomerate at large, which included the individual divisionsundisputed that the Fox conglomerate had an equity stake in Hulu, and the evidence
established that ?Fox writ large? essentially handed over the digital rights at a low cost to build
up value of that enterprise. Even when Mr. Kurtzman was asked whether the digital rights were
owned by his company, he said, ?Well, our company, we?re a division of a bigger company, so I
would say our company is, is, you know, the big organization, 12/ 1 8 Tr. at 
Ms. Brennan was asked if she knew whether the .of the ad share revenue goes to some ox
entity, and she responded that she wasn?t sure if that mattered because from her point of View, it

doesn?t matter ?It?s Fox somewhere.? (7/24/ 18 Tr. at 2829: 1 8-24.)

While the testimony of Fox?s witnesses establish that Fox was concerned with Fox at
large, of which the Studio was a part, the fundamental problem is as stated by Ms. Zigler:

I think Peter honestly may have made a very good decision, maybe even a

brilliant decision for his parent company. I think he used the studio?s content to

build a brand new business and to raise the value of that business, but building it

on the backs of the studio he did nothing to protect the Studio or the pro?t

participants in terms of the revenue they should have received for that
exploitation.

(7/25/ 18 Tr. at 

The Arbitrator ?nds that Respondents have established their claims for tortious
interference and inducement to breach. The Parent and Network knew that the Studio had
Agreements with Participants. They knew that essentially handing over the digital rights to their
af?liate Hulu for an unprecedented ad revenue share would interfere with the Studio?s
obligations to its Participants. The ad revenue share to the Studio was less than $1 million, yet

the Network made more than $70 million in revenues for the current season.

Amended Final Award
44

VII.
DAMAGES
Breach of Participants Agreements Domestic Licensing

?Under general contract principles, when one party breaches a contract the other party
ordinarily is entitled to damages suf?cient to make that party ?whole,? that is, enough to place the
non-breaching party in the same position as if the breach had not occurred.? Postal Instant Press.

Inc. V. Sealy, 43 Cal. App. 4th 1704, 1708-09 (1996) (citations omitted).

Before calculating damages, the Arbitrator addresses Fox?s argument that Participants are
not entitled to more than they would have received but-for the breach. Under this but-for
scenario, it claims that BC would not have continued to renew Bones because it would have
lost tens of millions of dollars. Speci?cally, Fox asserts that in the but-for world of a 
license for Seasons 5?6 and in?season streaming going to TCF TV, FBC would have immediately

cancelled Bones.

However, there is no evidence that BC has ever cancelled a top 20 hit like Bones; rather,
the evidence shows that Bones was driving $.million in pro?ts to the Studio, outweighng the
network?s losses (EX. 700; Fox Closing Slides, 111). It is simply too convenient for Fox to argue
that not only did it not breach Paragraph 10(b), but if it did, there was no damage to Participants.
This is consistent with Fox?s constant refrain that it was doing Bones a favor by keeping it on air.
Had ox performed its contractual obligations, it would have looked to House as the comparable
program (explained below), negotiated fairly, and paid the license fees accordingly. Moreover,
as analyzed and established above, Fox had no intention of cancelling Bones, and its claim to the

contrary is incredulous and found to be fraudulent.

Both parties agree that House is a ?comparable? program to Bones. Indeed, both parties?
experts agree that House is the only ?comparable program? that existed at the times Bones was
licensed for Seasons 5-8. FBC paid?
-for Seasons 5?6 of House, and had never paid anything less in connection with any one-
hour scripted series licensed from any third-party distributor prior to the Seasons 5-6 license. As
such, there was no basis under Paragraph 10(b) for to have accepted lesser monetary
terms from FBC for the same seasons ofBones. (7/26/18 Tr. at 3333:11-15, 

Amended Final Award
45

The Arbitrator agrees with Respondents? position that it is not that BC should have paid
the exact same amounts for Bones as it paid for House, a higher-rated series, in order for TCF TV
to have complied with Paragraph 10(b). Instead, TCF TV should have received comparable
?monetary terms? - 

(id. at 3335:12-21, 3336:23-3338210, 3338:20-3339:17, 3422:5-

3423z6.) As was shown at the Hearing, extended-term license structure already takes into

account performance differences across series by?
Ex. 21, 1111 

?for Season 7 of House. As such, there was still no precedent for FBC

paying anything other than yet the Season 7 License
for Bones had a license fee of_ which was -of the expected production costs

BX. 816), and completely eliminated performance bonuses of any kind. (Compare Ex. 21, 1]
1(hh) with Ex. 767.)

 

As for Season 8 of House, FBC and Universal agreed in May 2011, which was
approximately a year before TCF TV licensed Season 8 of Bones to FBC, to a 

-/episode license fee without bonuses. (BX. 871.) While Fox argues that this 8.
million per episode fee did not amount to a-license fee, there was evidence to the
contrary. Regardless, the million license fee that FBC paid for Bones is not comparable to
the $5 million paid for House, and while FBC could reasonably pay less for Bones than House in
Season 8, there is no justi?cation for to have received fees at of Universal?s given
the narrowing performance gap between the two series. (7/26/18 Tr. at 3425: 1 8-3427 :23;
7/18/18 Tr. at 2014:17-2015214; Ex. 1228-0019, 0022.)

Respondents? industry expert, Laurie Younger, compared the license agreements for
Seasons 5-8 of Bones to the agreements for the same seasons of House. Her analysis ties the
-license fee to the production budget for each of Seasons 5-8 of Bones and assumes that
all breakage actually paid by BC would still have been paid under a-license fee, which

provides for payment of - approved by the network. (Amended Younger Report Ex.
1270-0030, n. 10; Exs. 118, 107 1] 

Amended Final Award
46

Fox argues that Participants fail to calibrate for differences between House and Bones.
The Arbitrator diSagrees. As Ms. Younger explains, the monetary terms of extended-term

license for House seasons 5-7 account for differences in performance by setting license fees at

7/26/18 Tr- at 3320=13-3321=9;

7/18/18 Tr. at 1808:7-18; 7/26/18 Tr. at 3275:21-3280:12; EX. 448.)

For Season 8, Ms. Younger took the relative performance of House and Bones into
account and capped the license fees that should have been paid to TCF TV at 
.for that season. In total for Seasons 5?8, could have complied with its contractual
obligations to Respondents while still being paid $.million less than Universal received from

FBC in connection with the same seasons of House. Exs. 1501, 1447-0009-13, 200-0010-
15.)

According to Younger?s analysis, if had licensed Seasons 5-8~of Bones on

monetary terms comparable to those Universal received for House, it would have been paid the

following9:

 

Monetary Season 5 Season 6 Season 7 1 Season 8

Term

 

 

9 Sources: Ex. 1270,1111 59=67; Ex. 21,1111 Ex. 1447-0009-13; Exs. 1448, 781;
Ex. 200-0010-15; Exs. 600, 624, 687, 766, 816, 898, 904.

Amended Final Award
47

In total, an additional $113,831,519 would have been added to Gross Receipts for
purposes of calculating Respondents? contingent compensation. (Ex. 1270, 11 67.) According to
Respondents? participation expert, Michael Sippel, this addition to Gross Receipts would result
in a total of $15,585,047 in payments to Respondents.10 (Ex. 1268A-0003, EX. 

Breach of Participants? Agreements International Licensing
The United Kingdom

The evidence established that Bones was a massive hit for in the United
Kingdom. In just its second week on Sky, Bones was 
and it more than doubled the total viewership of its Cold Case lead-in. (Ex. 152.) By
September 2008, Bones was ?Skyl ?s #1 series, outperforming the ?rst-four weeks of Prison
Break by (Ex. 367.) In 2010, Bones was ?s number two series. (Ex. 475.)
Nonetheless, the license fees TCF TV received were nowhere near comparable to what Sky paid

for other programming.

licensed Bones Season 1 for per episode, and it never received more
than 33- over 12 seasons. By contrast, when Sky licensed House from NBC/Universal, an
unaffiliated studio, Sky paid ?-per episode, more than double that of the highest season.
(Ex. 1260B-0015.) When Sky licensed Lost from Buena Vista Television, an unaf?liated studio,
Sky paid more than ?-per episode for Lost. (8/8/18 Tr. at 424222-19.)

Nonetheless, as Respondents point out, their expert, David took a
conservative approach to damages and instead used the series Journeyman, a much less
successful show that licensed to Sky, as a proxy for what Sky should have been paid
starting in Season 1 of Bones. received ?-per episode for Season 1 of
Journeyman, ?-more per episode than Season 1 of Bones. Mr. calculated
damages by adding the Season 1 differential, ?-er episode, to all 12 seasons of Bones.

 

1? Regarding PEG and interference in the Agreements with and FBC, Respondents seek to be
placed ?in a position substantially equivalent in a pecuniary way to that which [they] would have occupied had no
tort been committed.? (Restatement (Second) of Torts 903, cmt. a (1979).) Therefore, FBC, 21CF, and PEG share
liability for the $15,585,047 in actual damages suffered by Respondents due to its improper self-dealing in
licensing Bones to FBC.

Amended Final Award
48

With the adjustment of Bones license fees to range from - over the 12 seasons,
should have received an additional $59,811,000 in revenue. (Ex. 1260B-0016-17.)

Italy and Spain

With respect to Italy, entered into several relicense agreements with FIC Italy for
Bones which started at per episode. (Ex. 1260B-0038.) Because IC Italy was not
licensing ?rst-run episodes from Mr. evaluated relicense agreements for
several series in order ?nd apples-to-apples comparisons. (Ex. 1260B-0011.) He determined
that the NCIS licenses were the most similar transactions to the Bones licenses because IC Italy
had three relicenses for each series over the ?rst few seasons. (Ex. 1260B-0012.) Furthermore,
NCIS was one of the few series that considered a rival to Bones in the international
marketplace based on the success of each series. The license fees that FIC Italy paid CBS for
NICS averaged more than double the Bones license fees. (M) Mr. determined that
there should have been $4,662,508 in additional MAGR revenue over the ?rst six seasons, which
are the only seasons for which had licensing information suf?cient to calculate

damages.

With respect to Spain, Mr. determined that House was the most comparable
program for the ?rst eight seasons because the shows aired around the same time period, the
number of runs in the license agreements were similar, the term of the agreements were similar,
and Mr. Gregg had previously identi?ed House as an appropriate comparable program. (Ex.
1260B-006-009.) The Bones license fees ranged from $-per episode to $-per episode
during the ?rst eight seasons. The House license fees, on the other hand, ranged from -to
33- making it higher in every season and more than double the Bones license fees in several
seasons. (EX. l260B-003 6.) Mr. determined that should have obtained
approximately the same license fees for Bones ?om FIC Spain that FIC Spain paid to
NBC/Universal for House, resulting in $1,112,099 added to MAGR.

For Seasons 9-1] in Spain, IC Spain obtained the far more valuable ?rst window for
Bones, unlike in Seasons 1-8 in which La Sexta had the ?rst window. Therefore, Mr. 
determined that the most appropriate comparable license agreements were FIC Spain?s license
agreements with CBS for Blue Bloods and Hawaii Five-O, for which IC Spain obtained the ?rst
licensing window. (Ex. 1260B-008.)

Amended Final Award
49

FIC Spain paid for Season 9 of Bones with escalators for seasons after that.
(Ex. 1260B-0008.) During this same time period, FIC Spain paid license fees between 
and per episode for Blue Bloods and Hawaii Five-O, more than three times the Bones
license fees. (Ex. 1260B-0034.) As a result, Mr. determined that should
have received at least $1,852,404 more from Bones during Seasons 9-11, for a total addition to

MAGR of $2,964,503.

Thus, should have obtained $67,311,000 in additional license fees from its
af?liates in international distribution which should have been included in Gross
Receipts for purposes of properly accounting to Respondents for the MAGR. This addition to
Gross Receipts would result in a total of $7,078,327 in payments to Respondents. (Ex. 2 (1/9/19
Revised Sippel Report Exhibits), Exs. B, B-3.)

Hulu Claims

As set forth above, all revenues from all current-season streaming of Bones were credited
to FBC as though BC possessed those rights. However, the Arbitrator has found that FBC
claims to ownership to be unfounded. As such, had TCF TV properly asserted its right as the
content owner of those streaming rights, would have credited to Participants all Hulu
revenues received from the exploitation of current season streaming of the Series. As of August

8, 2018, this totaled $70,690,961. (Ex. 3840.)

The Arbitrator agrees that disgorgement is not a proper remedy. However, Respondents
are entitled to the expectation damages that will ?put [them] in as good a position as [they]
would have been in had the contract been performed.? Restatement (Second) of Contracts 347,
cmt. a (1981). Here, the $70,690,961 represents the amount of damages that will put Participants
in as good a position as they would have been in had TCF TV protected its rights.

With respect to Respondents? claim against FBC, PEG and 21CF for tortious
interference, Respondents seek compensatory damages in the same amount. If FBC, EG and
21 CF had not interfered with Respondents? contracts with and had not induced
breach of those contracts, would have received at least the 

wrongfully diverted to BC for the current-season exploitation of Bones on Hulu, and

 

Amended Final Award
50

Participants, in turn, would have received their shares of those pro?ts after appropriate

reductions.

Respondents also seek damages for Fox?s self-dealing in connection with the licensing
of Bones to Hulu. Vivica Zigler, Respondents? Hulu expert witness, calculated that had TCF TV
honored its contractual duty to the Bones participants, it would have contracted with Hulu to
receive an estimated license fee of $685,000 per episode in connection with the full current-

season stacking rights to Seasons 6-12 (140 episodes) of Bones.

Ms. Zigler examined license agreements for six CBS series and determined the most
comparable benchmarks among them are Elementary, Blue Bloods and CSI. (Ex. 1273-0021.)
She took the average of the comparable CBS deals for an approximate episodic license fee of
(Ex. 1275-0007.) The licenses for Elementary, Blue Bloods and CSI, however, relate
to past-season episodes. (Ex. 1275-0005.) The record does not contain any information
regarding what Hulu paid third parties for full current-season stacking rights because no third
party was willing to license these ?crown jewel? rights to Hulu. As such, Ms. Zigler applied a
premium as was done with initial license agreement with Net?ix for Bones and other

series. Speci?cally with respect to the Net?ix deal, premium was applied to the license

fee for any current-season episode delivered 
which is the same recency with which episodes of Bones were
made available to Hulu. (Ex. 652-0008; 7/25/18 Tr. at'2908z20-2909224; Ex. 1164-0021.) Ms.

Zigler therefore applied this premium to the average episodic license fee to account for the

additional value of current-season episodes of Bones, arriving at an estimated current-season per-

episode fee of $685,000. (Ex. 1275-0007.)

For the past-season episodes of Bones, Ms. Zigler applied an.% ad revenue split to
these past-season episodes based on the fact that, prior to execution of the initial Hulu Classic
license, third party .refused to license its pro gramming to Hulu for anything less than that
share on top of the value of which Ms. Zigler decided not to include in
her calculations. (Ex. 1275-0002 -0004; BX. 225; 7/25/ 18 Tr. at Based on
Fox?s representation that the only past?season episodes ever exhibited on Hulu were the 22
episodes of Season 1, Ms. Zigler calculated damages of $203,452 for exhibition of past-season
episodes on Hulu. (Ex. 1275-0003; Ex. 1231.)

Amended Final Award
5 1

In accord with the above, should have included in the Gross Receipts a total of
$96,103,452 for purposes of calculating Respondents? MAGR. As a result, Mr. Sippel calculated
total damages of $10,106,099. (Ex. 1268A-0006.)

Hence, based on the determination that 21CF and FEG interfered with Respondents?
agreements with TCF TV in connection with the licensing of both current- and past-season
episodes of Bones to Hulu for an unreasonable and speculative ad revenue share, 21CF and FEG

share liability for those damages. (E Restatement (Second) of Torts 903, cmt. 
Prejudgment Interest

Pursuant to California Civil Code 3287 and 3289(b), Respondents seek prejudgment

interest on the full amount of their compensatory damages at the rate of 10% per annum.

The Arbitrator agrees with Fox that prejudgment interest is not appropriate under Section
3287(a), which provides in pertinent part: person who is entitled to recover damages certain,
or capable of being made certain by calculation, and the right to recover which is vested in the
person upon a particular day, is entitled also to recover interest thereon from that day,
except when the debtor is prevented by law, or by the act of the creditor from paying the debt.?
Under California law, prejudgment interest is not appropriate where damages are not ??certain?
or ?capable of being made certain by calculation.?? Whisper Corp. v. California Commerce
Ba_nk, 49 Cal. App. 4th 948, 958 (1996). ?Damages are deemed certain or capable of being made
certain within the provisions of subdivision of section 3287 where there is essentially no
dispute between the parties concerning the basis of computation of damages if any are
recoverable but where their dispute centers on the issue of liability giving rise to damage.?

Esgro Central, Inc. v. General Ins. Co., 20 Cal.App.3d 1054, 1060 (1971).

Here, the amount of damages is subject to a judicial determination and not capable of
being a sum certain earlier in time. As set forth above, the amount of damages is subject to
multiple methods of calculation that require a judicial determination. Experts have presented
methodologies concerning the calculation of damages, requiring the Arbitrator to discern how
damages should be calculated. Therefore, the Arbitrator declines to award pre-judgment interest
under Section 3287(a). SE St. Paul Mercury Ins. Co. v. Mountain West Farm Bureau Mutual
M, 210 Cal. App. 4th 645, 665-66 (2012) (Where ?[t]he trial court [is] asked to choose the

Amended Final Award
52

method of allocation, the basis for computation, and to calculate? damages, prejudgment

interest should not be awarded.)

However, the Arbitrator does award prejudgment interest under Section 3287(b), which
provides: ?Every person who is entitled under any judgment to receive damages based upon a
cause of action in contract where the claim was unliquidated, may also recover interest thereon
from a date prior to the entry of judgment as the court may, in its discretion, but in no event
earlier than the date the action was ?led.? The Arbitrator, in his discretion, awards prejudgment
interest on the damages based upon the contract claims from the date this action was ?led,

January 11, 2016.

Applying the California legal rate of 10% interest Cal. Civ. Code 3289(b)) to the
total award amount of $32,769,474, the average daily rate of interest is $8,978.00. The number
of days from January 11, 2016 to the date of this Award is 1,120 days. Thus, the total amount of
prejudgment interest is $10,055,360.

Punitive Damages

In addition to actual damages, Respondents seek punitive damages for certain claims. As
set forth above, contrary to Fox?s arguments, Paragraph 10(b) does not bar an award of punitive
damages for the intentional torts. Further, it is undisputed that the Arbitrator has the authority to
award punitive damages. Mastrobuono v. Shearson Lehman Hutton, Inc., 514 US. 52, 58
(1995) (?nding that if contracting parties agree to include punitive damages claims within the
issues to be arbitrated, the FAA ensures the agreement will be enforced according to its terms).

As such, the Arbitrator examines Respondents? request for punitive damages.
ortious Interference

Respondents seek punitive damages as a result of both the non-studio Claimants? acts of
interference and and acts of fraud. Punitive damages are available for tortious
interference with contract and inducement of breach. Duff v. Engelberg, 237 Cal. App. 2d
505, 508 (1965) (inducement to breach contract supports damages for ??unforeseen expenses, as
well as for mental suffering, damage to reputation, and punitive damages, by analogy to the cases
of intentional injury to person or property??) (quoting Prosser, Torts (3d ed.) ch. 26, sec. 123, pp.
972-73); see also Asahi Kasei Pharma Corp. V. Actelion Ltd., 222 Cal. App. 4th 945, 962-64

Amended Final Award
53

(2014) (holding that parent company may be liable for tortuously interfering with the contract of
its subsidiary and af?rming $30 million in punitive damages against the parent company?s

individual managers).

Respondents contend that the same evidence establishing and 21 CF 
tortious interference with, and inducement of breach of, Respondents? Agreements with 
supports an award of punitive damages. (E, g, Webber V. Inland Empire Invs., 74 Cal. App.
4th 884, 911-12 (1999) (holding that same evidence establishing liability for tortious interference

was suf?cient to award punitive damages)). The Arbitrator concurs.

The Arbitrator ?nds that the evidence concerning the legal action plan and the Release
establishes that FBC, 21CF and FEG undertook intentional acts designed to interfere with
Respondents? contractual relationships with Additionally, such acts constitute malice
and fraud and as such, warrant the imposition of punitive damages. See Cal. Civ. Code 
3294(c)(1) (de?ning ?malice? to mean conduct which is intended by the defendant to cause

injury to the plaintiff).
Fraud

Respondents seek punitive damages for and fraudulent, oppressive and
malicious acts in inducing osephson?s and Reichs?s signatures on the Release. They ask for
punitive damages in an amount that the Arbitrator deems to be an ?equitable and reasonable?
deterrent to Fox?s egregious behavior. Mahon V. Berg, 267 Cal. App. 2d 588, 590 (1968)
deterrent to fraud is equitable and reasonable. It is not afforded if the wrongdoer risks
only the fruits of his fraud. The broad equity powers invoked in an action of rescission because
of fraud should afford such a remedy?); Cal. Civ. Code 1692 claim for damage is not
inconsistent with a claim for relief based upon rescission. The aggrieved party shall be awarded

complete relief. . . 

As Respondents acknowledge, the damages awarded in connection with breach
of the ATP in connection with Seasons 5-6 License are already accounted for in the damages for
the related tortious interference claim, and therefore, Respondents do not seek dual recovery
against and FBC for the fraud claim in the form of a multiple of those damages. Rather,
they ask that share FBC, 21CF, and liability for that portion of the punitive

Amended Final Award
54

damages award arising from their tortious interference in connection with the BC licenses, and
they correctly assert that the fraud is relevant to determining the overall reprehensibility of ox?s

conduct.
Tortious interference related to Hulu licensing

Respondents seek punitive damages for 21CF ?s and tortious conduct related to the
licensing of Bones episodes to Hulu. They point to the testimony of Peter Chemin, 
President at the time of the Hulu launch, that he did not consider it ?j ob to protect [its]
old business.? (7/16/18 Tr. at 

The Arbitrator determines that the same evidence establishing 21 and 
tortious interference with contractual relations and inducing breach of contract in connection
with the agreements supports an award of punitive damages. As Mr. Chemin bluntly
stated, 21CG and EG sacri?ced business for the sake of Hulu?s success, and did so
knowingly, thereby damaging Respondents by keeping $96,104,452 from MAGR. This
constitutes a reckless disregard for Respondents? rights and as such warrants the imposition of

punitive damages.
Amount of Punitive Damages Award

?An award of punitive damages hinges on three factors: the reprehensibility of the
defendant?s conduct; the reasonableness of the relationship between the award and the plaintiff 
harm; and, in View of the defendant?s ?nancial condition, the amount necessary to punish him or
her and discourage future wrongful conduct.? Kelly v. Haag, 145 Cal. App. 4th 910, 914 (2006).
Beyond consideration of the above factors, there is no legally prescribed formula to determine
the amount of punitive damages, nor is there a bright-line ratio that a punitive damages award
may not exceed. State Farm Mutual Auto Ins. Co. v. Campbell, 538 US. 408, 424-25 (2003).
The ?nder of fact has ?wide discretion to determine what punitive damage award is proper . . . .
[T]here is a wide range of reasonableness for punitive damages re?ective of the fact ?nder?s
human response to the evidence presented.? McGee v. Tucoemas Fed. Credit Union, 153 Cal.

App. 4th 1351, 1362 (2007).

Amended Final Award
55

Reprehensibility of Fox is Conduct

To determine the reprehensibility of the defendant?s conduct, courts are to consider
whether: ?the harm caused was physical as opposed to economic; the tortious conduct evinced an
indifference to or a reckless disregard of the health or safety of others; the target of the conduct
had ?nancial vulnerability; the conduct involved repeated actions or was an isolated incident;
and the harm was the result of intentional malice, trickery, or deceit, or mere accident.? 

Farm, 538 US. at 419.

The parties agree that the ?rst two factors are not present here. With respect to the third
factor Respondents? ?nancial vulnerability, Respondents contend that while they may not be
?nancially vulnerable in the traditional sense, they depended upon OX for their careers and
livelihoods. As detailed herein, Fox held the position of relative ?nancial power and used it in
the course of negotiations by threatening to cancel the Show and put them out of work.
Respondents? vulnerability in this regard cannot be ignored. Romo V. Ford Motor Co.,
113 Cal. App. 4th 738, 755 (2003) (plaintiffs ?were ?nancially vulnerable relative to defendant?s
?nancial resources?); Shahinian v. Cedars-Sinai Med. Ctr., 194 Cal. App. 4th 987, 1005 (2011)
(?plaintiff was ?nancially vulnerable because he held surgical privileges only at Cedars-Sinai
and summary suspension of privileges without opportunity for hearing would foreseeably in?ict
severe damages to his medical career?) (internal quotation marks omitted). Furthermore, the
Arbitrator agrees with Respondents that their decision to pursue this lawsuit risked their

livelihoods, and it is unlikely that they will ever be hired by either ox or Disney again.

The fourth factor whether the conduct involved repeated actions or was an isolated
incident support a ?nding of reprehensibility. As detailed herein, Fox engaged in tortious
conduct related to license fee negotiations for four seasons with the goal of maximizing pro?ts
and minimizing participant leakage. See Bardis V. Oates, 119 Cal. App. 4th 1, 22 (2004) (?The
jury could ?nd that the kickbacks, markups and concealed commissions? proven at trial ?were
part of a systematic pattern by Oates of bilking his partners out of funds legitimately belonging
to the partnership?). The false promises began in 2005 and continued through 2008 and 2012
when Boreanaz and Deschanel negotiated new agreements, and all in accordance with the legal
action plan. In 2009, Fox fraudulently induced Reichs and Josephson to execute the Release. At

the same time, Fox entered into agreements with Mr. Ligouri (his First Look Agreement) and

Amended Final Award
56

Mr. Hanson (May 18, 2009 overall agreement) and attempted to keep these agreements secretive.
In addition and as set forth herein, the non?studio Claimants intentionally interfered with
Respondents? contracts in connection with the licensing of Bones to Hulu in self-dealing

transactions over the last decade.

Also relevant to this factor is the cavalier attitude of Fox?s witnesses. None of the
witnesses took responsibility or expressed any remorse for their actions. S_ee Ba_ndis_, 119 Cal.
App. 4th at 22 (citing the fact that defendant was ?unrepentant at trial, insisting that ?in [his]
heart? [he] believed he did nothing wrong? as relevant to the analysis of reprehensibility).
Indeed, as described herein, many of the witnesses, including Ms. Walden, Mr. Newman, Mr.
Bramhall, Mr. Ligouri, Mr. Pearson and Mr. Rice, appear to have given false testimony in an
attempt to conceal their wrongful acts.11 The Fox witnesses? testimony at the hearing

highlighted their pattern of deceit against Respondents.

Furthermore, Fox?s cavalier attitude toward its wrongdoing is further re?ected in its
Punitive Damages Brief and Reply Punitive Damages Brief, which are devoid of any
accountability, responsibility or remorse and this is even after the detailed ?ndings and
analysis of evidence and testimony set forth in the Interim Award. Instead, Fox advances
arguments that defy comprehension. It contends that since Respondents are receiving a large
amount of compensatory damages ?for purely economic harm,? punitive damages are essentially
not warranted. However, the amount of compensatory damages is large because it is the amount
of money that Fox wrongfully withheld ?om Respondents for over 12 years, in violation of the
parties? agreements. Similarly, Fox also points to the fact that Respondents, who are
?sophisticated and wealthy participants with substantial ?nancial means,? received tens of
millions of dollars over Bones?s 12 seasons. Again, however, this ignores the amount of money
that they should have earned absent Fox?s unlawful conduct. To suggest that Respondents
should somehow be grateful for What they did receive instead of focusing on what they were
deceived and cheated out of is audacious and quite frankly astonishing. Fox also states that there
is ?no evidence of a long-term pattern of reprehensible or unethical behavior? and that ?the

tortious conduct was limited to the breaking of two promises.? Does Fox really suggest that

 

11 Merely describing the testimony as false is far too generous. The Arbitrator is convinced that perjury was
committed by the Fox witnesses. Accordingly, if perjury is not reprehensible then reprehensibility has taken on a
new meaning.

Amended Final Award
57

short-term reprehensible or unethical behavior and the breaking of just two promises is alright?
By advancing these arguments, Fox seeks to divorce the detailed analysis and ?ndings set forth
herein of a pattern and practice of deceit and half-truths for its own ?nancial gain from any
punitive damage analysis, essentially asking the Arbitrator to ignore the reprehensibility of its

conduct. 12

Finally, with respect to the ?fth reprehensibility factor, the Arbitrator found above in
awarding punitive damages that Respondents? harm was the result of Fox?s intentional acts of
fraud and malice in connection with its fraudulent inducement of the Release and tortious
interference with Respondents? agreements in the licensing of Bones to FBC and Hulu. ?g
M, 119 Cal. App. 4th at 22 (?nding that ?[t]he record []overwhelmingly supports a ?nding

that the harm was caused as the result of intentional fraud, malice and deceit?).

Thus, the Arbitrator ?nds that the third reprehensibility factor leans in favor of
reprehensible conduct, and the fourth and ?fth factors in the reprehensibility analysis are clearly
met. Fox engaged in reprehensible conduct deserving of a punitive damages award at the higher

end of the spectrum. Bardis, 119 Cal. App. 4th at 22, 26.
The reasonableness of the relationship between the award and Respondents? harm

The next factor examined is the relationship between the award and the harm to
Respondents. Fox asserts that where compensatory damages are substantial, punitive damages
can and should be lower than the compensatory damages award. To begin with, a contractual
arbitration is ?a private proceeding, arranged by contract, without legal compulsion . . .. .
Consequently, the arbitration and award themselves [are] not governed or constrained by due
process, including its elements applicable to judicial proceedings to impose punitive damages.?

Ri?<ind Sterling, Inc. v. Ri?<ind, 28 Cal. App. 4th 1282, 1291 (1994). California courts have

 

12 Respondents ask the Arbitrator to consider Fox?s pattern of tortious behavior that has harmed individuals other
than Respondents. L0pez v. Watchtower Bible Tract Soc?v of New York, Inc., 246 Cal. App. 4th 566, 592
(2016) (?Although punitive damages may not be used to punish a defendant for injury in?icted on third parties, a
jury may consider evidence of harm to others in determining the reprehensibility of a defendant?s conduct toward
the plaintiff?); Johnson v. Ford Motor Co., 35 Cal. 4th 1191, 1204 (2005) process does not prohibit state
courts, in awarding or reviewing punitive damages, ?om considering the defendant?s illegal or wrongful conduct
toward others that was similar to the tortious conduct that injured the plaintiff or plaintiffs.? However, while there
was some general testimony about similar contract provisions with participants on other shows and other legal
actions against Fox, the evidence was not speci?c or suf?cient enough to allow the Arbitrator to make any ?ndings
regarding other similar tortious behavior as set forth in the guiding cases.

Amended Final Award
5 8

disclaimed any ability to review an arbitrator?s ?xing of punitive damage awards. 
Enters, Inc. V. Travelers Indem. Co., 219 Cal. App. 4th 1408, 1440 (2013) lS-to-one
ratio of punitive damages to compensatory damages does not constitute the type of legal error 
assuming it was error that warrants vacatur under the Shahinian, 194 Cal. App. 4th at
1006-07 (any claimed excessiveness of arbitrator?s punitive damages award ?would be no
different from other errors of law, which are generally not reviewable?). As such, Fox?s
assertion of federal due process standards as a limitation on punitive damages does not apply

here tothe Arbitrator?s discretion in a private arbitration, which was sought by Fox itself.

Moreover, while Fox attempts to assert a bright-line rule requiring a 1:1 ratio between
punitive damages and compensatory damages, no such authority prohibits an award exceeding a
1:1 ratio. ?While punitive damages must bear a reasonable relation to actual damages, no ?xed
ratio exists to determine the proper proportion . . . . Rather, calculating punitive damages
involves a ?uid process of adding or subtracting depending on the circumstances.? m, 153
Cal. App. 4th at 1361. ?[T]here is a wide range of reasonableness for punitive damages re?ective
of the fact ?nder?s human response to the evidence presented.? 31. at 1362. Although there is no
speci?c formula, courts have found that cases where there are signi?cant economic
damages and punitive damages are warranted but behavior is not particularly egregious, a ratio
of up to 4 to 1 serves as a good proxy for the limits of constitutionality.? Planned Parenthood of
Columbia/Willamette Inc. v. Am. Coal of Life Activists, 422 F.3d 949, 962 (9th Cir. 2005). On
the other hand, cases with signi?cant economic damages and more egregious behavior, a

single-digit ratio greater than 4 to 1 might be constitutional.? E.

In the case relied on by Fox, the court found that a lower ratio of punitive
damages to compensatory damages was warranted because plaintiffs recovery of emotional
distress damages itself contained a ?punitive element.? Roby v. McKesson Corp., 47 Cal. 4th
686, 718 (2009) (court noted that out of a $1,905,000 compensatory damages award, only
$605,000 was for economic losses, resulting in the remaining $1.3 million awarded for plaintiff?s
physical and emotional distress and representing a punitive component). In other words, a high
amount of non-economic damages may re?ect a punitive aspect of the award. Importantly, 
State Farm, the high court suggested that a ratio of one to one might be the federal constitutional

maximum in a case involving, as [in Roby], relatively low reprehensibility and a substantial

Amended Final Award
59

award of noneconomic damages.? lg. (Emphasis added.) This is not the case here, with a

relatively high reprehensibility and no award of noneconomic damages.

Respondents argue that a punitive damages award of at least four times the amount of
Respondents? actual damages and up to nine times the amount of Respondents? actual damages is
warranted. The Arbitrator ?nds that a punitive damages award of ?ve times the amount of

Respondents? actual damages is appropriate.

In Bardis V. Oates, 119 Cal. App. 4th 1 (2004), a partner in a real estate partnership and
his corporation, which had engaged in a pattern of self-dealing designed to line the defendants?
pockets at the expense of the partnership, were found liable for intentional interference with
economic advantage, intentional misrepresentation, fraudulent concealment, breach of ?duciary
duty, and breach of the partnership agreement. m. at 9. While the harm suffered by the plaintiffs
was solely economic, the court found that the defendants? repeated and intentional self-dealing
constituted ?egregious misconduct? and held that a ?high-end punitive damages award? of nine
times compensatory damages was justi?ed due to the presence of the fourth and ?fth
reprehensibility factors alone. IQ. at 22-23. Similarly, here, Fox engaged in a pattern and
practice of ?audulent self-dealing by which it enriched itself in violation of 

participation agreements with Respondents.

BC, 21CF, and tortious interference in connection with the BC licenses caused
$15,585,047 in actual harm to Respondents, while 21CF, PEG and tortious interference in

connection with the Hulu licenses caused an additional $10,106,099 in actual harm to

 

Respondents.13 Clearly, given the precedent in Bardis for awarding punitive damages at nine-to-
one in economic damages cases involving a company-wide pattern and practice of fraudulent and
malicious conduct, punitive damages of ?ve times the amount of Respondents? actual damages is

supported, for a total of $128,455,730 ($77,925,235 in punitive damages for tortious interference

 

13 Respondents, relying on Bardis, seek to include prejudgment interest with the compensatory damages to form the
basis for the punitive damages ratio. However, the Arbitrator is not persuaded that the Bardis court included
prejudgment interest. gee Bardis, 119 Cal. App. 4th at 17 n. 7 (noting that the amount the jury awarded was the
difference between the total damages ?gure, including interest, and ?Expenses without Documentation? including
accrued interest). Furthermore, the award of prejudgment interest under Section 3287(b) and its calculation were
not determined until the Interim Award issued.

 

Amended Final Award
60

with contract and $50,530,495 in punitive damages for tortious interference with Hulu

agreement).
The amount necessary to punish and deter future wrongful conduct

Finally, with respect to the last of the three factors for determining a punitive damages
award, while ?all three factors must be satis?ed, the most important question is whether the
amount of punitive damages award will have deterrent effect without being excessive.?
m, 153 Cal. App. 4th at 1362; C011. Hosp. Inc. v. Superior Court, 8 Cal. 4th 704, 712 (1994),
as modi?ed (Nov. 23, 1994) (?Punitive damages are to be assessed in an amount which,
depending upon the defendant?s ?nancial worth and other factors, will deter him and others from
committing similar misdeeds?). ?The ultimately proper level of punitive damages is an amount
not so low that defendant can absorb it with little or no discomfort . . . nor so high that it
destroys, annihilates, or cripples the defendant.? Soto V. BorgWamer Morse TEC Inc., 239 Cal.
App. 4th 165, 192 (2015), as modi?ed (Aug. 20, 2015).

Fox has stipulated that parent company net worth is $21.924 billion, and that such
evidence is suf?cient for the Arbitrator to determine the appropriate amount of punitive damages
as to Claimants. (E Jan. 14, 2019 Joint Stipulation Regarding Financial Condition.)14 As Fox
states, punitive damages must be based on the factors set forth and not solely on the defendant?s
wealth. State Farm, 538 US. at 427 (holding the wealth of a defendant ?cannot make up for the
failure of other factors, such as ?reprehensibility,? to constrain signi?cantly an award that
purports to punish a defendant?s conduct? (quoting m, 517 US. at 585)). Here, there is no
danger of the award being based solely on the defendant?s wealth as the Arbitrator has found a
higher level of reprehensibility as well as a reasonable relationship between the award and the

harm.

Aside from the lack of any bright-line rule, Fox?s assertion that a one to one ratio should
be awarded completely ignores any deterrence factor. Indeed, even Fox?s suggestion of such a
ratio following the Interim Award re?ects its lack of contrition. Moreover, an award of ?ve

times the amount of compensatory damages represents 0.6 percent of 21CF ?s stipulated net

 

14 As set forth in the Interim Award, the Arbitrator must consider Claimants? ?nancial condition, on which the
plaintiff bears the burden of proof. Adams V. Murakami, 54 Cal. 3d 105, 119 (1991).

Amended Final Award
6 1

worth, which is well below the 10 percent cap recognized under California law. m, g, Sierra

Club Found. v. Graham, 72 Cal. App. 4?1 1135, 1163 (1999) (?Finally the award was more than 2

 

percent of Graham?s net worth, far less than the 10 percent cap generally recognized by our
courts?); Weeks V. Baker McKenzie, 63 Cal. App. 4th 1128, 1166-67 (1998), as modi?ed on
denial of reh?g (June 2, 1998) (?It has been recognized that punitive damages awards generally
are not permitted to exceed 10 percent of the defendant?s net worth?). In fact, one could
question whether a ?ve to one ratio given Fox?s ?nancial condition and lack of contrition serves
to deter the wrongful conduct at issue here, or Whether it will be considered part of the cost of

doing business.

Courts have approved punitive damages awards equaling far greater percentages of
defendants? net worth. Bigler?Engler V. Breg, Inc., 7 Cal. App. 5th 276, 309 (2017) (award
of 5% of defendant?s net worth); M, 63 Cal. App. 4th at 1166-67 (award of 5% of
defendant?s net worth). Similarly, courts have approved ratios higher than the ?ve to one ratio
here. SE Las Palmas Assocs. V. Las Palmas Ctr. Assocs., 235 Cal. App. 3d 1220, 1255 (1991)
(court preserved a 7.9 to 1 ratio of punitive damages to compensatory damages); Simon v. San
Paolo U.S. Holding Co., 35 Cal. 4th 1159, 1182-83 (2005) (court reduced a punitive damages
award from 340:1 to 10:1); Planned Parenthood of the Columbia/Williamette Inc. v. American
Coalition of Life Activists, 422 F. 3d 949, 963 (9th Cir. 2005) (court held that a 9:1 ratio did not
offend its ?constitutional sensibilities?). Fox relies on Mattel, Inc. v. MGA Entertainment, Inc.,
801 F. Supp. 2d 950 (CD. Cal. 2011) wherein the court awarded exemplary damages in ?an
amount equal to the remitted compensatory damage award.? However, the compensatory
damage award was $85 million, and the punitive damages award was ?approximately 3.6% of

Mattel?s net worth.? Mattel, 801 F. Supp. 2d at 956. The Mattel court also found that the need

 

for deterrence was low ?since other members of the close-knit toy industry have been alerted to
Mattel?s misconduct as a result of this litigation . . . E. at 955. By contrast, the need for
deterrence is greater here given the private nature of arbitration and the fact that other pro?t

participants have not been alerted to Fox?s misconduct.

As such, in light of Fox?s ?nancial condition, a punitive damages award in the amount of
$128,455,730 is reasonable and necessary to punish Fox for its reprehensible conduct and deter it

from future wrongful conduct.

Amended Final Award
62


ATTORNEYS FEES AND COSTS 
ABITRATOR FEES AND ARBITRATION COSTS

The parties submitted a Stipulation Re: Memorandum of Costs wherein the parties
stipulated that Respondents are the prevailing parties under the parties? respective Agreements.
In accordance with the parties? Stipulation, the Arbitrator ?nds as follows: (1) Josephson is
awarded attorneys? fees in the amount of $2,771,494.30 and costs in the amount of $787,1 14, for
a total of $3,558,608.30; and (2) Reichs, Deschanel and Boreanaz are awarded attorneys? fees in
the amount of $3,087,989.50 and costs in the amount of $754,953.44, for a total of
$3,842,942.94.

With respect to the Arbitrator?s fees and Arbitration costs, the Stipulation states that since
Respondents are the prevailing parties, they are entitled to ?all costs of arbitration.? As such,
Respondents are awarded the costs of arbitration in the amount of $264,707.29. This amount is

representative of Respondents? share of Arbitration fees and costs.
IX.
AWARD
Final Comments

At the outset of Fox?s closing arguments, counsel for Fox conveyed two observations
directed at the Arbitrator. First, that the Arbitrator paid close attention to the examination of the
witnesses and the evidence in general and thereon engaged in very rigorous examinations of
Fox?s witnesses at times. Second, that the Arbitrator seemed to be caught up and swayed by the
rhetoric of counsel for Respondents and felt that the Arbitrator may have been inappropriately
predisposed by the vitriolic spin, characterizations and strident presentations by counsel for

Respondents. To make it very clear, this did not occur; however further discussion is warranted.

Unfortunately, the Arbitrator believes that these two observations must be addressed. As
stated during the course of the hearing and repeated again, Respondents? case was presented and

made (virtually entirely) through Evidence Code Section 776 witnesses. Or to put it another way,

Amended Final Award
63

Respondents? case was presented and supported through the testimony of the Fox witnesses

themselves.

It is Fox and Fox alone that is responsible for the evidentiary ?ndings made herein. If this
had been a Jury trial, counsel for Fox would be decrying a runaway verdict comprised of passion
and prejudice. However, to reiterate this ignores that it was Fox?s own employees, executives

and witnesses that provided the evidence for the Arbitrator to make the ?ndings set forth above.

Since it is the purview of the Arbitrator to weigh the credibility of the witnesses and in
accordance with the testimony detailed above, it can only be concluded that the Fox witnesses
lacked credibility and at times appeared to intentionally deviate from the truth even in the face of
clear and unequivocal controverting facts. A myriad of explanations by the Fox witnesses cannot
account for their complete disregard for obvious and uncontroverted facts. There simply
appeared to be a company-wide culture and an accepted climate that enveloped an aversion for

the truth.

Yes, the Arbitrator did examine the Fox witnesses proffered. However, this became
essential so as to undertake a thorough attempt to ?nd the truth. Arbitrations and Trial Courts
are designed and tasked to ?nd the truth. The entire system of justice is designed to be a rigorous
search for the truth. The job of any trier of fact be it a judge or an arbitrator is to ?nd the truth by

any means necessary.

This was done and done without any pre-disposition, passion or prejudice. The Arbitrator
carried out his role in a dispassionate, neutral and surgical manner so as to accomplish what
Shakespeare has called: ?truth will out? (originally found in Shakespeare is play the ?Merchant
of Venice?). Meaning that the truth will eventually be made public.

This Award re?ects the evidence, the facts and the truth. Every ?nding made is supported
by the documentary evidence presented and the transcript of the testimony of the witnesses
themselves as well as the exhibits. The hearing transcript is extensively cited and quoted with

respect to all of the Fox witnesses and leaves no room for any in?ection of passion or prejudice.

Amended Final Award
64

Conclusion

Accordingly, Respondents have established their claims for breach of contract, fraud, and

tortious interference with contract, and they are hereby awarded the following:

1) For the breach of contract claim based on domestic licensing: $15,585,047 in actual

damages;

(2) For the breach of contract claim based on international licensing: $7,078,327 in actual

damages;
(3) For fraud: Rescission of the Release;
(4) For breach of contract based on Hulu agreements: $10,106,099 in actual damages;

(5) For Tortious Interference with Contract and Tortious Interference with Hulu agreements:

$128,455,730 in punitive damages;

(6) Prejudgment interest on the breach of contract damages from the date this action was ?led:

$10,055,360;

(7) Attorneys? fees and costs: $3,558,608.30 total to Josephson; and $3,842,942.94 total to

Reichs, Deschanel and Boreanaz; and
(8) Arbitrator fees and Arbitration costs representative of Respondents? share only: $13,664.66
The TOTAL AMOUNT of this Award is: $178,695,778.90.

Accordingly, Respondents are hereby awarded the sum of $178,695,778.90 as and for
those damages identi?ed above. This award is in favor of Respondents and against the
Claimants. Post-judgment interest shall accrue on the full amount of the ?nal award from the

date of issuance at the statutory rate.

Amended Final Award
65

Amended Final Award

This award resolves all claims between the parties submitted for decision in this

proceeding and is the arbitrator?s ?nal award.

Dated: February 4, 2019

Amended Final Award
66

IK 
4' ?33

 

gon. Peter . Lichtman (Ret.)
Arbitratcrf


PROOF OF SERVICE BY E-Mail

Re: Twentieth Century Fox Film Corporation et al. vs. Wark Entertainment, Inc. fso Barry Josephson et al.
Reference No. 1220052735

I, Jasmine Lu, not a party to the within action, hereby declare that on February 20, 2019, I served

the attached AMENDED FINAL AWARD on the parties in the within action by electronic mail at Los Angeles,

CALIFORNIA, addressed as follows:

Glenn D. Pomerantz Esq.
Anj an Choudhury Esq.
John L. Schwab Esq.
Munger, Tolles Olson, LLP
350 S. Grand Ave.
50th Floor
Los Angeles, CA 90071-3426
Phone: 213-683-9100
Glenn.Pomerantz@mto.com
Anjan.Choudhury@mto.com
john.schwab@mto.com
Parties Represented:
ox Broadcasting Company
Fox Entertainment Group, LLC
Twentieth Century Fox Film Corp.
Twenty-First Century Fox, Inc.

John V. Berlinski Esq.

Candace Frazier Esq.

Daniel A. Saunders Esq.

Kasowitz Benson Torres LLP

2029 Century Park East

Suite 2000

Los Angeles, CA, 90067

Phone: 424-288-7900

jberlinski@kasowitz.com

cfrazier@kasowitz.com

dsaunders@kasowitz.com
Parties Represented:
Bertha Blue, Inc. fso David Boreanaz
Snooker Doodle Productions, Inc. fso Emily 
Temperance Brennan, LP fso Kathleen Reichs

Dale F. Kinsella Esq.
Chad Fitzgerald Esq.
Aaron C. Liskin Esq.
Kinsella Weitzman Iser, et al. LLP
808 Wilshire Blvd.
3rd Floor
Santa Monica, CA 90401
Phone: 310-566-9800
dkinsella@kwikalaw.com

aliskin@kwikalaw.com

Parties Represented:

Wark Entertainment, Inc. fso Barry Josephson

Margaret H. Thompson Esq.
Jennifer Bryant Esq.
E. Martin Estrada Esq.
Munger, Tolles Olson, LLP
350 S. Grand Ave.
50th Floor
Los Angeles, CA 90071-3426
Phone: 213-683?9100
Maggie.Thompson@mto.com
ennifer.Bryant@mto.com
martin.estrada@mto.com
Parties Represented:
ox Broadcasting Company
Fox Entertainment Group, LLC
Twentieth Century Fox Film Corp.
Twenty-First Century Fox, Inc.

Anthony M. Basich Esq.

Julie A. Shepard Esq.

Jenner Block, LLP

633 W. 5th St.

Suite 3600

Los Angeles, CA 90071

Phone: 213-239-5100

ABasich@jenner.com

shepard@j enner.com
Parties Represented:
Fox Broadcasting Company
Fox Entertainment Group, LLC
Twentieth Century Fox Film Corp.
Twenty-First Century Fox, Inc.

I declare under penalty of perjury the foregoing to be true and correct. Executed at Los Angeles,

CALIFORNIA on February 20, 2019.



as ine Lu
JAMS
amsadr.com