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GENTIEU v. TONY STONE IMAGES/CHICAGO

January 13, 2003

PENNY GENTIEU, ET AL., PLAINTIFFS,
v.
TONY STONE IMAGES/CHICAGO, INC., ET AL., DEFENDANTS



The opinion of the court was delivered by: Milton I. Shadur, Senior United States District Judge

MEMORANDUM OPINION AND ORDER

In a commendable effort to cabin somewhat the scope of the parties' differences in this bitterly contested litigation, defendants Tony Stone Images/Chicago, Inc. and Getty Images, Inc. (collectively "Getty," treated as a singular noun) have opted to forgo challenges to the portion of the claims that have been advanced by Penny Gentieu and Penny Gentieu Studio, Inc. (collectively "Gentieu," treated as a singular noun of the feminine gender) that relates to assertedly unpaid and late-paid license fees. As Getty describes that decision at page 2 of its Renewed 12(b)(1) Motion To Dismiss Plaintiffs' Unpaid License Fee, Interest and Audit Claims (cited "Motion"):

In a December 13, 2002 letter (Exh. 1), Gentieu provided for the first time a final figure on the unpaid and late paid license claim, namely $101,397.10 (including interest) Although Getty maintains that not all of this amount is actually due Gentieu, in the interests of amicably settling the dispute and avoiding the high costs of determining an accurate figure through litigation, Getty has tendered Gentieu a check for the full amount. (See Exh. 2).
Gentieu has now filed her "Plaintiff's Response to Defendants' Renewed 12(b)(1) Motion" (cited "Response"). Gentieu begins by "agree[ing] that the amounts owed to plaintiff under the terms of the 1993 Contract can be determined as a matter of law, and that payment to plaintiff of those amounts would render plaintiff's claims for payment of those amounts moot" (Response at 1). But Gentieu then goes on to dispute Getty's contentions (1) that any attempted claim of breach of fiduciary duty as to such nonpayments and late payments is foreclosed and (2) that the charges Gentieu seeks to collect as "all reasonable costs and expenses of such audit" of those items are excessive.

In that latter respect, here is what the relevant paragraph of the parties' contractual arrangement (entitled "Contributor's Agreement With TSI" and cited here as "Agreement") says (Agreement ¶ 7.5):

In the unlikely event of reasonable grounds for a material dispute between the Contributor [Gentieu] and TSI [Getty], regarding the licensing of her pictures, the Contributor or a designated professional representative shall have the right, upon reasonable notice and during regular business hours, to inspect TSI's books and records and to make extracts thereof as same relate to Contributor's images. The Contributor will bear the cost of such an audit. In the event, as a result of such an audit, that it is determined that TSI has underpaid Contributor by an amount equal to or in excess of five percent (5%) of all the monies due to the Contributor (or $1500.00, whichever is greater), then TSI shall bear all reasonable costs and expenses of such audit as well as remitting to Contributor all past due sums with interest to date. The foregoing shall not be deemed to be a waiver of or limitation upon Contributor's other rights or remedies in the event of such underpayment.
This opinion will first look at the contested issue stemming from that language — the amount properly chargeable to Getty for the audit — and will then turn to the fiduciary duty question.

As for the parties' dispute over "all reasonable costs and expenses of such audit," Gentieu claims that the phrase embraces each of the items that she refers to in her October 28, 2002 statement (photocopy attached), which she has labeled "Cost of the stonewalled Audit." As that statement reflects, Gentieu's modest self-evaluation of her time as worth $100 an hour beggars the amount that was charged by the professional — the accountant — whom she retained to do the work and who produced a 113-page report: By Gentieu's lights her work was worth almost twice that of the accountant ($12,800 against $6,500) — and part of her claim for payment into her own pocket includes a 32% add-on to the accountant's charges attributable to Gentieu's self-perceived need to "report" on the accountant's own report (21 hours of her time, for a claimed fee of $2,100)

Quite apart from the traits of greed as well as immodesty that are revealed by that effort,*fn1 Gentieu's position distorts the terms of the Agreement. Agreement ¶ 7.5 gave Gentieu alternative options if she felt she had been underpaid: She (as the "Contributor") could choose to review Getty's books and records herself or she could hire a "designated professional representative" to conduct that review. But what Agreement ¶ 7.5 specifically did not confer was the opportunity for the review to be conducted by both Gentieu and a professional accountant, at a cost nearly three times the accountant's $6,500 charge for generating the extensive report. That proposed approach by Gentieu unquestionably flunks the standard of "reasonable" expenses, as well as not reading literally on the disjunctive language of Agreement ¶ 7.5 itself.

There were of course perfectly good reasons for Gentieu to opt (as she did) for the contractual alternative of hiring a professional. For one thing, any audit is far more readily and effectively handled by an accountant who is accustomed to such number crunching. For another, the work product of such an independent analyst would obviously be less likely to be challenged, and would be far more likely to prevail in the case of challenge, than the patently self-interested efforts of Gentieu herself. And relatedly, if the results of the audit were to give rise to the shifting of costs under the provisions of Agreement ¶ 7.5, the regular and customary charges for an accountant's time would pose none of the obvious problems as to valuation that would be presented by the other option of Gentieu's doing the job herself if the potential for shifting of costs and expenses materialized: For one thing, it would obviate the inevitable dispute as to whether the concept stated in Agreement ¶ 7.5 included any recovery for devoting one's own time (which is certainly not the normal reading of "reasonable costs and expenses") and, even if that question received an affirmative answer, it would obviate the difficulty of placing a proper value on the principal's own time.*fn2

Nor is the analysis altered by Gentieu's decision, once having chosen to hire an accountant, to work with that professional (this, it should be said, would still not provide a justification for sticking Getty with the charges covering Gentieu's "research," whatever that is, her travel or her "report" on the accountant's work product). It will be remembered that under the Agreement Gentieu had to bear the costs of the audit herself unless a disparity at a certain level were shown. It would be quite understandable, then, that she would seek to limit her own potential exposure to bearing the payment of professional tees by trying to hold down the level of those fees. But once again that choice of participation on her part does not support recovery against Getty for her own time as well once Agreement ¶ 7.5 caused the professional's fees to be shifted to Getty.

In sum, all of the proposed charges for Gentieu's own time on her October 28, 2002 statement are rejected. That leaves for consideration the item on that statement of "Legal Fees" in the sum of $6,662.50, a proposed charge that is also disputed by Getty.

That question really requires much less discussion. It would certainly represent an odd locution to treat the language "all reasonable costs and expenses of such audit" as somehow extending to lawyers' fees, when the lawyers did not participate in the audit directly. To that approach, based on the normal meaning of the Agreements language, it is surely appropriate to add the familiar concept that under the American Rule everyone bears his, her or its own attorneys' fees unless otherwise provided by statute or contract. In the latter respect, the provision in Agreement ¶ 12.8 for the recovery of attorneys fees (among other items) by a prevailing party in any action to enforce the Agreement's terms shows that the parties knew very well how to provide expressly for the recovery of such fees when they wished to do so. And when no such provision has been included in Agreement ¶ 7.5, this Court rejects Gentieu's attempt to engraft any such obligation as either implicit in or implied from a place where it is conspicuous by its absence. Hence that $6,662.50 figure is also excludable from the recoverable "costs and expenses of such audit."

When those exclusions and the corresponding interest charge are taken out of Gentieu's claims, what remains for payment is the sum of $9,658.61. And because Motion Ex. 2 (a December 17, 2002 letter from Getty's lawyers to Gentieu's lawyers) shows that Getty has in fact paid that amount as well as the $101,397.10 that constitutes Gentieu's entire claim for unpaid and late-paid license fees,*fn3 Gentieu's entire sustainable claim in this aspect of its lawsuit has been satisfied in full.

With both the quantification and payment of Gentieu's claim in this area thus having been resolved, all that is left to consider is Getty's request "for clarification as to the effect of a dismissal on Gentieu's claims for breach of fiduciary duty based on the same alleged conduct" (Motion at 1). In that regard Getty adverts in part to the statement in Jordan v. Duff & Phelps, Inc., 815 F.2d 429, 43Z (7th Cir. 1987) as to the inappropriateness of claims of breach of fiduciary duty where the litigants have (as here) entered into detailed contractual arrangements:

Because the fiduciary duty is a standby or off-the-rack guess about what parties would agree to if they dickered about the subject explicitly, parties may contract with greater specificity for other arrangements.
But even more particularly, Getty negates any purported breach of fiduciary duty in this part of the case by pointing to the manner in which ...

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