LIBRARY RIGHTS COMPANY (UK)... vs INITIAL ENTERTAINMENT GROUP...

CASE NUMBER: 21STCV44716 CASE NAME: LIBRARY RIGHTS COMPANY (UK)... vs INITIAL ENTERTAINMENT GROUP... MOVING PARTY: CONTENT PARTNERS, LLC; CP IEG HOLDINGS LP; and GK FILMS, LLC OPPOSING PARTY: LIBRARY RIGHTS COMPANY (UK) LTD. and Ray Reyes PROCEEDING: Motion to bifurcate RULING SUMMARY: Defendants and Cross-complainants Content Partners, LLC; CP IEG Holdings, LP; and GFK Distribution, LP's Motion for Bifurcation regarding the issue of standing is denied.

Background

On December 7, 2021, plaintiff Library Rights Company (UK) LTD. ("LRC") filed this action against defendants Initial Entertainment Group, Inc. ("IEG"), GK Films, LLC ("GK Films"), Graham King ("King"), and GKF Distribution ("GFK"), LLC, Content Partners, LLC ("Content Partners") and CP IEG Holdings LP ("CP IEG") for breach of contract and accounting of gross proceeds from three films "Ali," "Gangs of New York," and "Traffic" (collectively the "Pictures").¿¿¿ The Court denied defendants Content Partners, CP IEG, and GFK's Motion for Summary Judgment, or in the alternative, Summary Adjudication on March 20, 2024.¿ ¿¿ On June 21, 2024, Plaintiff filed the operative Third Amended Complaint ("TAC") alleging four causes of action for (1) Breach of Contract, (2) Breach of the Implied Covenant of Good Faith and Fair Dealing, (3) Common Count, and (4) Intentional Interference with Contract.

Defendant GFK was renamed in the TAC as GFK Distribution, LP. The Court refers to GFK Distribution LP as "GFK." ¿ Defendant/Cross-Complainant CP IEG Holdings LP ("CP IEG") filed a Cross-Complaint against LRC, Ray Reyes, and Roes 1 to 10. On March 5,2024, cross-complainant CP IEG filed the operative First Amended Cross-Complaint ("FACC"). The FACC asserts three causes of action for (1) Fraud, (2) Negligent Misrepresentation, and (3) Declaratory Relief.¿¿¿ On May 6, 2025, plaintiff/cross-defendant LRC and Cross-Defendant Ray Reyes (collectively "LRC Parties") filed a Special Motion to Stike the fraud and negligent misrepresentation causes of action in the FACC.

On October 6, 2025, the Court granted

Cross-Defendants' Special Motion to Strike as to the first and second causes of action for fraud and negligent misrepresentation in the FACC pursuant to Code of Civil Procedure section 425.16. On December 4, 2025, Content Partners, CP IEG, and GFK filed an appeal regarding the ruling on the Special Motion to Strike. On January 13, 2026, Content Partners, CP IEG, and GFK filed a Motion to Stay the Action Pending the Outcome of Appeal, which was denied on March 10, 2026. On April 9, 2026, Content Parters, CP IEG, and GFK filed a Motion for Summary Judgment.

On April 10, 2026, LRC filed a Motion for Summary Adjudication, which was later amended, and, ultimately, denied by the Court. On July 1 2026, Content Parters, CP IEG, and GFK (collectively "CP Parties") filed one Motion to Bifurcate regarding standing, and another Motion to Bifurcate regarding punitive damages. The parties stipulated to bifurcation as to punitive damages. The Motion to Bifurcate regarding the issue of standing remains on calendar. On July 23, 2026, LRC Parties filed their Opposition.

On August 18, 2026, LRC Parties filed their Reply. motion to bifurcate LEGAL STANDARD "The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any cause of action, including a cause of action asserted in a cross-complaint, or of any separate issue or of any number of causes of action or issues, preserving the right of trial by jury required by the Constitution or a statute of this state or of the United States." (Code¿Civ.¿Proc.,¿Sec. 1048(b).)

Section 598¿of the Code of Civil Procedure also provides in pertinent part:¿¿¿ The court may, when the convenience of witnesses, the ends of justice, or the economy and efficiency of handling the litigation would be promoted thereby,¿on motion of a party,¿after notice and hearing,¿make an order,¿no later than the close of pretrial conference in cases in which such pretrial conference is to be held, or, in other cases,¿no later than 30 days before the trial date,¿that the trial of any issue or any part thereof shall precede the trial of any other issue or any part thereof in the case,¿except for special defenses which may be tried first pursuant to Sections 597 and 597.5.¿¿The court, on its own motion, may make such an order at any time.¿¿¿ Whether there will be a severance and separate trials on issues in a single action is a matter within the discretion of the trial court.¿(Shade Foods, Inc. v.

Innovative Products Sales & Marketing, Inc. ¿(2000)¿78 Cal.App.4th 847,¿911-912, citing¿ Downey Savings & Loan Assn. v. Ohio Casualty Ins. Co. ¿(1987)¿189 Cal.App.3d 1072, 1086.)¿In support of the court's discretion, Evidence Code Section 320

provides that the court has the power to regulate the order of proof.¿¿¿ DISCUSSION The following background events are highlighted for clarity of the ruling: · A Stock Purchase Agreement dated March 18, 2004 (the "2004 SPA") whereby IM Internationalmedia AG ("IMAG") and Intermedia Film Equities USA ("IFEUSA" and collectively "Sell ers") sold all shares of IEG in exchange for $13,000,000 in gross proceeds from the Pictures after IEG has collected an initial $21,500,000. · A 2009 foreclosure sale pursuant to which LRC alleges it obtained the rights to the Pictures through its purchase of the film library of IFEUSA. · A 2014 Sales Presentation, which CP Parties contend shows that, as of February 2015, the Intermedia library no longer included the Pictures. · A 2021 Settlement Agreement between LRC and Sell ers in which LRC agreed to release all of its claims, and despite its purported damages of almost $33 million, LRC paid IMAG $20,000 in exchange for an assignment and quitclaim of those rights to the Pictures that IMAG had at the time of the settlement. · The October 13, 2023 ruling on CP Parties' prior motion for summary judgment, or in the alternative, summary adjudication, in which the motion for summary judgment was denied as Defendants did not have evidence that IMAG did not have rights to the Pictures to transfer to LRC as of the date of the execution of the 2021 Settlement Agreement. · The June 11, 2026 ruling on the motion for summary judgment, or in the alternative, summary adjudication, which determined that the issue of the rights under the 2004 SPA would need to be determined by the jury as an issue of fact.

The issue in regard to the pending motion the Court is whether the trial should be bifurcated regarding the issue of standing. In CP Parties' moving papers, they assert that in an initial phase of a trial on the issue of standing, concerning whether LRC is the successor-in interest to the Sellers in the of the 2004 SPA, either (1) the issue of standing will be decided against LRC and no second trial will be needed, or (2) the jury will find that LRC has standing, and then a trial on the LRC's claims would occur and likely last for two weeks and cover accountings for the Pictures for territories all over the world.

CP Parties contend that the issue of standing does not involve the merits of the LRC's claims, and the evidence presented would involve experts testifying on German Bankruptcy procedures. CP Parties contend that trying the issues together will confuse

the jury. LRC Parties disagree. They argue that all issues - standing, the terms of the contract allegedly breached, and the parties' obligations - stem from the 2004 SPA and, as such, standing is intertwined with the merits and the issue cannot be bifurcated under Cohn v. Bugas (1974) 42 Cal.App.3d 381. LRC Parties attempt to distinguish all cases cited by CP Parties; and contend that bifurcation would burden the judicial economy by causing three trials as the parties have stipulated to bifurcating the issue of punitive damages, duplicate proceedings, and prejudice LRC parties.

LRC Parties also assert that the Court's ruling on the Motion for Summary Judgment to shows that standing is not a clean, threshold issue. In Reply, CP Parties argue that the relevance of the 2004 SPA to both inquiries does not make the issues interdependent. CP Parties contend that the evidence presented in each trial would be materially different, and they direct the Court and the Parties to Grappo v. Coventry Financial Corp. (1991) 235 Cal.App.3d 496 (" Grappo "). While standing is, generally, a threshold issue, in this action, standing turns on the 2004 SPA, which is also central to and the claim of breach.

The Court concludes that issues of standing implicate issues of liability. A determination of standing will require evidence as to the interpretation of the 2004 SPA, which, according to the CP Parties, will involve testimony of Germany bankruptcy procedures and testimony or statements surrounding the 2004 SPA. Such evidence is also needed to determine whether any breach occurred. With bifurcation, the jury would need to hear extensive evidence concerning transactions spanning two decades to become familiar with the 2004 SPA twice.

While Grappo discussed the futility of inquiring into secondary claims where standing is at issue, that case and the other cases cited by CP Parties do not address the specific circumstances of the this action. Cohn, supra, 42 Cal.App.3d 381, contrasted the proper bifurcation of a threshold release issue with the bifurcation and trial of liability before trial of damages, which the Court of Appeal held to be improper, in Cook v. Superior Court (1971) 19 Cal.App.3d 832. Under Code of Civil Procedure section 598, a trial court cannot order the separate trial of an issue of liability over a party's objection when the nature of the case makes it necessary to prove damages in order to establish that liability. (Cohn, supra, 42 Cal.App.3d 385-86.)

Cohn, too, does not address the specific issues in this action. . Section 598 of the Code of Civil Procedure authorizes bifurcation when "the convenience of witnesses, the ends of justice, or the economy and efficiency of handling the litigation would be promoted." Here, the threshold issue of standing and issue of breach and damages both implicate an interpretation of the same contractual provisions. LRC's standing to bring its claim overlaps with the extent of its rights with regard to proceeds from exploitation of the three motion pictures and resulting rights to accounting and damages.

Even if the standing issue is not entirely congruent with the issue of the extent of LRC's rights under the agreement (e.g.,

the definition of "gross proceeds" in the agreement, which appears to be disputed), those issues will presumably require testimony from some of the same witnesses that testify on standing under the agreement. To bifurcate the trial would not promote judicial economy. (Estate of Young (2008) 160 Cal.App.4th 62, 87 [discussing statutory interpretation by courts; "The words of the statute must be construed in context, keeping in mind the statutory purpose, and statutes or statutory sections relating to the same subject must be harmonized, both internally and with each other, to the extent possible."].)

Logistical issues also raise a concern for the Court in connection with the request to bifurcate and try standing first. Bifurcation will result in duplication of some testimony, and some witnesses will need to appear for testimony twice. If the same jury will hear all phases of the trial - standing, breach and damages, and punitive damages, it will be extremely difficult to give potential jurors an accurate estimate of the length of the trial. If a different jury hears each phase or one jury hears two phases and another the third phase, then the entire length of the trial will be extended by the need for multiple jury selections.

If the Court were to bifurcate and the jury found that LRC lacked standing, that finding would shorten the trial, but the Court cannot rely on such an uncertain outcome in determining whether to bifurcate. Accordingly, the Motion to Bifurcate regarding the issue of standing is denied.

Conclusion

Defendants and Cross-complainants Content Partners, LLC; CP IEG Holdings, LP; and GFK Distribution, LP's Motion for Bifurcation as to the issue of standing is denied. Date: 08/25/2026 _______________________________ William E. Weinberger Judge, Los Angeles Superior Court Case Number: 23STCV268839 Hearing Date: August 25, 2026 Dept: 413 TENTATIVE RULING HEARING DATE: Tuesday, August 25, 2026