## Facts

- Marathon Funding, LLC (Marathon), a New York-based investment company, entered a Multi-Picture Investment Agreement with Paramount Pictures Corporation (Paramount) to invest in a slate of 14 Paramount films.
- In exchange for its investment, Marathon was entitled to a percentage of each film’s “net receipts,” generally calculated as gross receipts minus defined deductions, including expenses and participation payments.
- The agreement contained a New York choice-of-law clause.
- The agreement repeatedly stated that it did not create a partnership, joint venture, agency, or trustee relationship, and it expressly disclaimed any fiduciary duties.
- Marathon had no right to manage or control the production, marketing, or distribution of the films; Paramount retained exclusive operational control.
- One slate film, *No Country for Old Men*, included a box-office bonus participation for actor Tommy Lee Jones.
- Paramount drafted Jones’s participation agreement and made a mistake that resulted in Jones being entitled to a substantially larger bonus than intended (reported as an additional $15 million).
- Paramount paid the increased amount and reflected the impact in the net receipts calculations, reducing distributions to investors, including Marathon; Marathon alleged it received about $2 million less as a result.
- Marathon sued Paramount in California state court, claiming the investment agreement created a joint venture and that Paramount therefore owed (and breached) fiduciary duties related to the drafting error, allocation of the loss, and disclosure of the reason for the deduction.
- The trial court, applying New York law, ruled against Marathon based on the agreement’s effective disclaimer of fiduciary duties and entered judgment for Paramount; the court later awarded Paramount over $690,000 in attorneys’ fees under the contract.
- Marathon appealed the judgment and the attorneys’ fee award.

## Issues

1. Under the agreement’s New York choice-of-law clause, did the Multi-Picture Investment Agreement create a joint venture giving rise to fiduciary duties?
2. Are express contractual disclaimers of fiduciary duties and of joint-venture or similar status enforceable under New York law in this arm’s-length investment relationship?
3. Was Paramount entitled to recover attorneys’ fees as the prevailing party under the agreement, and was the fee award properly affirmed?

## Decision

- The California Court of Appeal affirmed the judgment for Paramount.
- Applying New York law, the court held the agreement did not create a joint venture, emphasizing Marathon’s lack of any control over the film enterprise and the contract’s repeated disavowal of joint-venture or fiduciary status.
- The court enforced the agreement’s fiduciary-duty disclaimers, concluding they barred Marathon’s fiduciary-duty theory.
- The court affirmed the postjudgment attorneys’ fee award to Paramount under the agreement’s prevailing-party fee provision.

## Legal Principles

- A New York choice-of-law clause in a commercial contract will generally be enforced, and New York law will govern claims that turn on the parties’ contractual relationship.
- Under New York law, a joint venture requires, among other elements, intent to be joint venturers and some level of joint control or management; a passive investor without control is unlikely to qualify as a joint venturer.
- New York law permits sophisticated parties in an arm’s-length transaction to define their relationship by contract and to disclaim fiduciary duties through clear, express language.
- Where a contract includes a prevailing-party attorneys’ fee clause, a defendant who prevails on the contract-based dispute may recover reasonable fees, and an appellate court will generally uphold a fee award absent legal error or abuse of discretion.

## Conclusion

The Court of Appeal applied New York law to a film-slate financing agreement and affirmed judgment for Paramount, holding that Marathon’s lack of control over the films and the agreement’s express disclaimers meant the parties did not form a joint venture and Paramount owed no fiduciary duties; the court also affirmed Paramount’s prevailing-party attorneys’ fees under the contract.


Marathon Funding, LLC v. Paramount Pictures Corporation, 2013 WL 785915 (2013)