Marathon Funding, LLC v. Paramount Pictures Corporation

Marathon Funding, LLC (Marathon) (plaintiff) was an investment company with its principal place of business in New York that agreed to invest in 14 films produced and distributed by Paramount Pictures Corporation (Paramount) (defendant). The agreement was that in exchange for investing, Marathon would receive a percentage of each film’s net receipts. The net receipts were the gross receipt amounts minus deductions for expenses and participation payments. The agreement expressly disclaimed any fiduciary duty imposed on Paramount and contained a choice-of-law clause applying New York law. As an investor, Marathon did not have any control over the production of the films. One of the films under the agreement, No Country for Old Men, contained a certain participation payment known as a box-office bonus for the film’s star Tommy Lee Jones. Paramount negotiated and drafted the agreement, which contained a mistake that led to Jones being owed an additional $15 million. Consequently, Paramount reduced the amount of net receipts owed to its investors, causing Marathon to receive $2 million less than it would have without the error. Marathon filed suit against Paramount in California state court, alleging that the agreement gave rise to a joint venture and thus created a fiduciary duty. The trial court did not address the merits of the alleged breach because under New York law, the disclaimer of a fiduciary duty was effective. Paramount was awarded attorney’s fees, and Marathon appealed.