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Marcella v. Arp Films Inc.

December 3, 1985


Judgment for plaintiff in a suit against film distributor by salesman of exhibition license agreements for commissions and for the balance due under a stock buy-out agreement in the United States District Court for the Southern District of New York, Milton Pollack, Judge. Held, forfeiture defense based on alleged disloyalty not raised as such. Numerous other claims and cross-claims discussed. Judgment affirmed.

Author: Oakes

Before: LUMBARD, OAKES, and NEWMAN, Circuit Judges.

OAKES, Circuit Judge:

This case arises out of Robert Marcella's employment as a salesman of exhibition license agreements for distributors of film series (principally children's cartoons such as "Spiderman," "Incredible Hulk," and "Marvelous Super Heroes") to television stations. The appeal and cross-appeal in this diversity contract action involving sales commissions and a stock buy-out agreement presents two principal questions: (1) whether the defendant distributors were deprived of the defense of disloyalty on the part of the plaintiff salesman; and (2) whether some of the commissions found due were premature. The United States District Court for the Southern District of New York, Milton Pollack, Judge, after a jury answered special interrogatories, entered a judgment in favor of plaintiff Marcella in the sum of $176,874 against defendant ARP Films, Inc. ("ARP") for sales commissions, and $221,760 against defendant Claude S. Hill ("Hill") (the sole owner of ARP and the other two corporate defendants) for payments due Marcella under an agreement whereby Hill bought out Marcella's stock interest in defendant Westchester Films, Inc. ("Westchester").*fn1 Hill does not challenge the judgment against him. ARP claims that it was deprived of a defense of disloyalty and of affirmative relief based on Marcella's allegedly developing and promoting on his own behalf an idea for a televised animated sales promotional program known as "Ready Set Go" ("RSG") while employed by ARP and Westchester. ARP claims that Marcella has no right to some $59,386 in commissions on the "New Spiderman" series until Marvel Comics first recoups $3,000,000 in royalties per Hill's agreement with it. We also consider other claims, defenses, and the claims on Marcella's cross-appeal.

We affirm.


In 1977 Marcella began to work as an exclusive salesman for ARP and Centaur Distribution Co., Inc., two of Hill's corporations. His job was to solicit television stations to enter into license agreements for film series. He and Hill had an express oral agreement whereby Marcella would be compensated solely by payment of a commission on the gross license fees payable by the stations to ARP on the orders that Marcella solicited. These commissions were payable in installments as the license fees were collected, generally over a period of twenty-four to thirty-six months. The applicable commission rates, as the jury found, were 15% and 12-1/2% depending upon the program. These rates are reflected in some forty-six checks from ARP to Marcella in payment of commissions over the course of four years and in ARP's corresponding commission reports and ledger cards which are expressly cross-referenced on the face of the checks. These commission rates were conceded by ARP and can be mathematically computed from the commissions paid on the license revenues received by ARP.

In a separate transaction, Marcella and Hill entered a buy-out agreement involving two corporations, Westchester Films, Inc., and Westchester Merchandising Corp. (together "the Westchester companies"), which were formed by Marcella and Hill in 1978 to exploit the "Starblazers" cartoon program and related merchandising rights. Marcella and Hill each had a one-half interest in Westchester Films and a one-third interest in Westchester Merchandising. On October 9, 1981, Hill and Marcella executed the one-page agreement ("the buy-out agreement") drafted by Hill pursuant to which Hill agreed to pay Marcella $250,000 for Marcella's interest in the Westchester companies, payable $4,000 a month for the first twelve months, $5,000 a month for the next twelve months and $11,833 a month for the third twelve months. After making the first thirteen monthly installments, i.e., $53,000, Hill paid nothing. Marcella also received under the agreement certain rights in certain films and each party (Marcella and Hill) released the other from all suits or claims relative to the Westchester companies "and regarding each other."

"Ready Set Go" is a venture that Marcella created in conjunction with two individuals, Peters and Fujita, and with the information of three corporations (Ready Set Go Productions, Inc., Modern Programs International S.A. and Instant Miracles, Inc.). RSG was to take the form of five-minute animated televised inserts intended for advertising use by fast food merchandisers. Marcella conceived the idea when he was with ARP but the programs were not produced until after he left.

The parties' testimony as to RSG was in direct conflict. Marcella testified that he fully disclosed the RSG concept to ARP at RSG's inception and that he had ARP's blessing to proceed with it for his own account and to make use -- at least on a de minimis basis -- of ARP's office facilities to promote the concept. Supporting this testimony was evidence that Marcella's correspondence concerning RSG while he was a salesman for ARP was meager, that it was not kept secret but was filed at the front of his office correspondence binder kept by an employee of the Hill companies, and that telex messages concerning RSG were directed to Marcella at the office but were usually seen by Hill and his staff before they reached Marcella's desk since Marcella commuted to Manhattan from his home in Langhorn, Pennsylvania. In addition, a third-party witness testified that he, Marcella, and Hill had openly discussed RSG before the time of the April, 1980, conference when Hill claims to have uncovered Marcella's allegedly surreptitious activity with respect to RSG. Hill, on the other hand, claimed that Marcella had been disloyal to ARP and had developed RSG secretly and behind his back, using the name, prestige and letterhead(s) of both ARP and Westchester as well as their telephones, telexes, secretaries, and other office facilities. He claimed that the concept was a corporate opportunity of ARP.

ARP claimed that the buy-out agreement because Hill and Marcella effected an accord and satisfaction on the ground that the parties had intended to achieve a global resolution of their various differences, releasing "each other" from any and all claims between themselves both individually and as to their respective companies. Hill indeed testified that he had agreed on behalf of ARP to release its claims to RSG in exchange for a release by Marcella of his claims to commissions from ARP. The jury found, however, that the parties had not made any such agreement, that the buy-out agreement itself dealt only with the Westchester companies, and specifically that Marcella's commission claims against ARP were not waived nor were any claims of ARP against Marcella arising out of RSG. No specific interrogatory was directed to the jury as to whether ARP did in fact have a claim against Marcella arising out of RSG on the basis of the evidence.

ARP's amended answer had asserted four counterclaims against Marcella pertaining to RSG. ARP claimed that if the alleged accord and satisfaction were not found, ARP was entitled to a declaration that it owned RSG because Marcella had usurped a corporate opportunity and violated his executive services contract by developing RSG while an ARP salesman. ARP also sought money damages for the value of RSG, and for Marcella's use of ARP's personnel and facilities in developing RSG. But ARP did not allege in its answer that Marcella's commissions were forfeited because of disloyalty in developing RSG. When this case was before Judge Stewart, he dismissed ARP's counterclaims for failure to join the RSG co-investors and corporate entities as indispensable parties.

The jury found that there was a meeting of the minds on the essential terms of the commission agreement including renewals and future commissions after termination, which were not to be reduced from 15% and 12-1/2% to 5% as Hill had testified. The jury further found that the fair and reasonable value for commissions earned after Marcella's employment terminated was the commission percentages of the original contract, i.e., 15% and 12-1/2%. It also found that the buy-out agreement was not intended as an accord and satisfaction. One question is whether in finding that the fair and reasonable value of Marcella's services equalled the value of commissions owed Marcella under the contract, the jury implicitly found against ARP on its claims to RSG since it concluded that Marcella had done nothing that would reduce the value of his services to ARP.*fn2 The jury also found that ARP was not liable for compensation on two barter deals in which one Libov handled the licenses and that Centaur was not liable for compensation on the "Rocket Robinhood" deal in which one Acton was involved.

In a post-trial order, Judge Pollack found against ARP on its claim that the statute of frauds barred enforcement of the commissions contract on the basis of Marks v. Cowdin, 226 N.Y. 138, 123 N.E. 139 (1919) and Crabtree v. Elizabeth Arden Sales Corp., 305 N.Y. 48, 110 N.E.2d 551 (1953), which held that separate related writings will suffice to meet the requirements of the statute. He also held that the jury's finding of an express agreement does not bar the effectiveness of its verdict for quantum meruit in the same measure that it found in its verdicts on the express agreement, relying on Silberberg v. Haber, 42 A.D.2d 552, 345 N.Y.S.2d 558, 559 (1st Dept. 1973). He further held that the issue of alleged disloyalty of Marcella was resolved by the jury's ...

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