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Giant Screen Sports LLC v. Sky High Entertainment

February 27, 2007

GIANT SCREEN SPORTS LLC, ET AL. PLAINTIFFS,
v.
SKY HIGH ENTERTAINMENT, ET AL. DEFENDANTS.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Plaintiff Giant Screen Sports LLC's ("Giant Screen Films) and Giant Screen Films Vikings LLC's ("Giant Screen Vikings") (collectively referred to as "Giant Screen") motion for sanctions against Defendant Sky High Entertainment, Defendant Sky High Entertainment R.S.C.S. Productions, Inc., Defendant Sky High Courage Productions, Inc., Defendant Sky High Vikings Productions, Inc. ("Sky High Vikings") (collectively referred to as "Sky High"), and Defendant Carl Samson ("Samson"). This matter is also before the court on Defendant Canadian Imperial Bank of Commerce's ("CIBC") motion for sanctions against Sky High, Samson, and Seyfarth Shaw LLP ("Seyfarth"), counsel for Sky High and Samson. For the reasons stated below, we grant in part and deny in part Giant Screen's motion for sanctions, and grant in part and deny in part CIBC's motion for sanctions.

BACKGROUND

In October 2001, Sky High allegedly entered into a contract ("Films Contract") with Giant Screen Films under which Giant Screen Films was retained to distribute two films produced by Sky High entitled "Ultimate Gs" and "Adrenaline Rush" (collectively referred to as "Films"). According to Giant Screen, under the Films Contract, Giant Screen Films was to be the exclusive distributor of the Films. In November 2002, Sky High allegedly entered into a contract ("Viking Contract") with Giant Screen Vikings under which Giant Screen Vikings was retained to distribute a film entitled "Vikings" ("Vikings Film").

Giant Screen contends that after the Vikings contract was executed, Samson falsified the terms of the Vikings Contract and forged a signature of a Giant Screen representative on the Vikings Contract so that Samson could obtain a loan from Canadian Imperial Bank of Commerce ("CIBC"). According to Giant Screen, based upon the false information in the Vikings Contract, CIBC entered into a credit agreement ("Credit Agreement") under which it agreed to advance a loan to Sky High of approximately $2.7 Million to finance the production of the Vikings Film. As part of the Credit Agreement, Sky High was allegedly required to enter into a Notice of Security, Direction of Payment and Distributor Acceptance ("Security Notice") and Giant Screen Films guaranteed Giant Screen Vikings' payment of $3 million to CIBC. In addition, as part of the Credit Agreement, Sky High entered into multi-party Pledgeholder Agreements ("Pledgeholder Agreements"). Giant Screen contends that Samson and Sky High failed to disclose the alterations to the terms of the Vikings Contract or the dealings between Sky High and CIBC.

Giant Screen contends that it has fulfilled its obligations under the Films Contract and Vikings Contract by securing leases for the Films and the Vikings Film. However, Giant Screen claims that Sky High has refused to pay the amounts owed to Giant Screen under the Films Contract and Vikings Contract. Giant Screen also claims that in October 2004, CIBC contacted Giant Screen and demanded payments pursuant to the Security Notice and Giant Screen claims to have realized at that time the alleged fraud perpetrated by Samson and Sky High. Giant Screen also claims that when CIBC requested funds from Giant Screen, CIBC made false statements about Giant Screen's breach of its contractual obligations under the Security Notice. According to Giant Screen, in April 2005, it received a letter from CIBC indicating that it had entered into a settlement with Sky High.

Giant Screen also claims that in the Spring of 2005, Sky High was promoting a film entitled "Dinosaurs 3D" and that Sky High undermined Giant Screen's effort to distribute the Films by entering into various distribution agreements and linking promotion and distribution of the Films to "Dinosaurs 3D." Giant Screen also claims that in the Summer of 2005, Sky High undermined Giant Screen's ability to distribute the Films by offering to distribute "Adrenaline Rush" for free to numerous theaters. Finally, Giant Screen claims that Samson and Sky High told large-format theaters, post production vendors, and others in the industry that Giant Screen was no longer distributing the Films, that the contracts were being terminated, and that the theaters and vendors should stop sending payments to Giant Screen and should cease communications with Giant Screen.

Giant Screen brought the instant action and includes in its second amended complaint a breach of contract claim against Sky High (Count I), a fraud claim against Sky High and Samson (Count II), a breach of the implied covenant of good faith and fair dealing claim against Sky High and Samson (Count III), an unjust enrichment claim against Sky High and Samson (Count IV), a quantum meruit claim against Sky High and Samson (Count V), a tortious interference with prospective business relations claim against Sky High and Samson (Count VI), a civil conspiracy claim against Sky High and Samson (Count VII), a defamation claim against CIBC (Count VIII), a tortious interference with prospective business relations claim against CIBC (Count IX), a declaratory judgment claim against Sky High and Samson (Count X), and a declaratory judgment claim against CIBC (Count XI). Giant Screen and CIBC ask this court to sanction Sky High and Samson pursuant to Federal Rule of Civil Procedure 37.

LEGAL STANDARD

Federal Rule of Civil Procedure 37 ("Rule 37") states, in part:

(b) Failure to Comply With Order

(2) Sanctions by Court in Which Action is Pending If a party or an officer, director, or managing agent of a party or a person designated under Rule 30(b)(6) or 31(a) to testify on behalf of a party fails to obey an order to provide or permit discovery, including an order made under subdivision (a) of this rule or Rule 35, or if a party fails to obey an order entered under Rule 26(f), the court in which the action is pending may make such orders in regard to the failure as are just, and among others the following:

(A) An order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order;

(B) An order refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting that party from ...


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