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On March 8, 2013, the California Court of Appeal ruled in favor of ABC in an idea submission lawsuit regarding the television series LOST.  Spinner v. American Broadcasting Companies, Inc., 215 Cal. App. 4th 172 (2013).  The lawsuit centered on Anthony Spinner’s allegations that an implied-in-fact contract was created when he submitted scripts to ABC in 1977, 1991 and 1994 (although Spinner’s 1991 and 1994 scripts dealt with a spaceship crash, which he admitted were not substantially similar to LOST).  Ruling that the uncontradicted evidence showed that ABC independently created the TV series LOST, the Court of Appeal affirmed the trial court’s earlier decision granting summary judgment against Spinner.

Spinner’s 1997 script was tentatively entitled “L.O.S.T.” and revolved around a plane crash similar to LOST.  The 1977 script focused on eight survivors connected to the U.S. Olympic team, who crawl through a mountainside tunnel and emerge in a prehistoric world inhabited by dinosaurs and primitive humans – interestingly, an idea itself reminiscent of a different show, Land of the Lost.  In addition to the survival aspect of the show, several of the characters in the 1977 script bore some similarities to those in LOST (i.e. a former military man and a spoiled rich girl).  The script was deemed too expensive for ABC to produce at the time and thus, was not developed.  Spinner alleged that ABC did use his ideas in the 1977 script years later when it developed and produced LOST in 2004.

Ordinarily, an idea can be the subject of an express or implied contract if 1) the plaintiff can show that he clearly conditioned the submission of his idea on an obligation by the defendant to pay for any use, 2) defendant voluntarily accepts submission of the idea knowing of the condition, and 3) the defendant actually uses the idea.  When the plaintiff cannot show direct evidence of actual use, an inference of use can be raised by showing defendant had access to the ideas and that the defendant’s work is substantially similar to plaintiff’s ideas.  If the plaintiff is able to raise this inference, the defendant can try to dispel the inference with evidence that conclusively demonstrates that the defendant independently created the project.  If the defendant can show this, it is appropriate for a court to grant summary judgment on an implied-in-fact contract claim.  In this case, the Court rested its holding on 1) Spinner’s insufficient showing of access and 2) ABC’s uncontroverted and conclusive evidence of independent creation.

When analyzing access, the Court assumed for the sake of argument that there were substantial similarities between the 1977 script and LOST.  The Court borrowed from the reasoning of copyright infringement cases and concluded that Spinner had only “shown a bare possibility of access based on speculation, supposition, and guess work.”  None of the executives involved in the creation of LOST had a reasonable opportunity to view the 1977 Script because there was no evidence that ABC kept a “script library” with old, unreturned scripts.  Further, the nexus between the creators of LOST and the people to whom Spinner submitted the 1977 script was weak – none of the individuals around in 1977 were still employed by ABC when LOST was developed.

The Court then summarized the evidence of independent creation assuming that an inference of use had been successfully raised:  LOST was originally conceived as the melding of TV show Survivor and the movie Cast Away, the idea was transcribed by ABC during an initial brainstorming session, and various writers wrote and revised the script.  Thus, the evolution of the creation process of LOST was well-documented.  Additionally, the Court gave weight to uncontradicted declarations by the creators of LOST that they had no connection to or knowledge of Spinner or his 1977 script.  Concluding that ABC independently created LOST, the Court put an end to years of litigation nearly three years after the series aired its final episode.

On January 24, 2013, the California Supreme Court decided the case Aryeh v. Canon Business Solutions, Inc., 55 Cal. 4th 1185 (2013), and clarified the common law theory of continuous accrual as it pertains to statutes of limitation.  The Court also settled a split of authority among appellate courts and held that continuous accrual does apply to causes of action arising under California’s unfair competition law codified in the Business and Professions Code § 17200 et seq. (UCL).

The ability to bring a lawsuit depends on whether the time period on a statute of limitations has run on a particular cause of action.  The statute of limitations begins to run when a cause of action accrues.  Under the common law “last element” accrual rule, this typically occurs when the elements of wrongdoing, harm and causation are complete.  Because certain harms have the potential of recurring and repeating over time, courts and the California Legislature developed a series of equitable exceptions that modify the rules governing the initial accrual of a claim and the subsequent running of the statute of limitations period.

One of these exceptions is the theory of continuous accrual.  The theory posits that a series of wrongs or injuries may be viewed as each triggering its own limitations period, allowing for newer violations to come within the applicable limitations period.  Thus, although the initial violation might be time-barred because it occurred before the limitations period, events occurring within the statue of limitations are deemed timely.  Further, Aryeh clarified that in continuous accrual cases, the series of wrongs are discrete and independently actionable.  This is in contrast with the continuing violation doctrine, another exception to the “last element” accrual rule, which involves a series of small harms, any one of which may not be actionable on its own and does not trigger its own limitations period.

Following the federal trial court decision in Stutz Motor Car of America v. Reebok Intern., Ltd., 909 F. Supp. 1353 (C.D. Cal. 1995), a split of authority developed over whether continuous accrual applies in UCL cases.  Stutz held that the UCL categorically foreclosed application of another accrual rule exception – the discovery rule.  Cases following Stutz extended the reasoning to the continuous accrual rule.  The contrary view was expressed in Broberg v. The Guardian Life Ins. Co. of America, 171 Cal. App. 4th 912 (2009), where the court reasoned that it is the underlying nature of the claim, not its form, that should control.  Thus, just because a cause of action is pleaded under the UCL, application of the continuous accrual exception is not precluded.

The Aryeh case articulates and clarifies the nature of the continuous accrual exception, and distinguishes it from similar exceptions to the traditional common law “last element” accrual rule.  But beyond holding that the continuous accrual exception applies to UCL claims, the decision also has important implications for many other types of claims, such as breach of contract and employment discrimination.  After Aryeh, claims which might have been assumed to be stale in the past may have new life.

 

The California Supreme Court recently decided Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Association, 55 Cal.4th 1169 (2013), and changed the fraud exception to the parol evidence rule. The Court departed from the highly criticized Pendergrass rule, which took a narrow view of the fraud exception and limited the type of evidence that could be introduced when interpreting contracts. The Riverisland decision makes it easier to challenge a contract by expanding the type of evidence of fraud that can be introduced by a party.

The parol evidence rule is codified in Code of Civil Procedure §1856 and Civil Code §1625. It is intended to protect the integrity of written contracts by prohibiting courts from considering extrinsic evidence to alter or add to the terms of the contract itself. The fraud exception allows a party to introduce extrinsic evidence, including oral representations not included in the final written agreement, to establish that an agreement was tainted by fraud.

In Bank of America etc. Assn. v. Pendergrass, 4 Cal.2d 258, 263 (1935), the California Supreme Court imposed a limitation on the fraud exception by holding that “parol evidence of fraud to establish the invalidity of the instrument . . . must tend to establish some independent fact or representation, some fraud in the procurement of the instrument or some breach of confidence concerning its use, and not a promise directly at variance with the promise of the writing.” This effectively disallowed a party from introducing parol evidence of an alleged misrepresentation if it contradicted the written terms of the final agreement.

The Pendergrass rule received much criticism over the years. The Pendergrass rule had the potential to actually further fraudulent practices by encouraging individuals to make oral promises they never intended to perform because evidence of these promises would be inadmissible. In 1977, the California Law Revision Commission ignored the Pendergrass rule when proposing modifications to section 1856, even though it could have codified the limitation. Finally, the Pendergrass rule was a minority view in the United States, as the majority of states, the Restatements, and most commentators declined to subscribe to the limitation.

The seminal decision in Riverisland abrogates a rule that not only had little legal support, but that was also unpopular in other jurisdictions and among commentators. Proving fraud through parol evidence will still require a showing of justifiable reliance on the defendant’s misrepresentation. However, the stringent limitation that prohibited parol evidence of promises at odds with the terms of a written agreement is no longer a part of California law.

Reuben Raucher & Blum attorney Stephen Raucher’s article, co-authored with Matthew Bartek, “Vacating Arbitration Awards, Now Less Daunting of a Task?” is published in the Los Angeles Daily Journal on December 9, 2009.

Reuben Raucher & Blum attorney Stephen Raucher’s article, “Legal Malpractice: Court Must Decide for Whom Statute Tolls“, published in the Los Angeles Daily Journal on June 15, 2006