Hersch and Co. v. Mattel, Inc. CA2/2

Filed 10/29/13 Hersch and Co. v. Mattel, Inc. CA2/2 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

HERSCH AND COMPANY, B236198

Plaintiff and Appellant, (Los Angeles County Super. Ct. No. BC399474) v.

MATTEL, INC.,

Defendant and Respondent.

APPEAL from a judgment of the Superior Court of Los Angeles County. Kevin Clement Brazile, Judge. Affirmed.

Greenberg Glusker Fields Claman & Machtinger, Stephen S. Smith, Rachel Wilkes Barchie; Greines, Martin, Stein & Richland, Robin Meadow and Jeffrey E. Raskin for Plaintiff and Appellant.

Kinsella Weitzman Iser Kump & Aldisert, Lawrence Y. Iser, Kristen L. Spainier; Morrison & Foerster and Miriam A. Vogel for Defendant and Respondent.

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Hersch and Company (Hersch) appeals from a judgment following a nonsuit and jury verdict in favor of Mattel, Inc. (Mattel) on contract related claims arising from an exclusive license agreement (License Agreement) to manufacture and sell a board game called Outburst. According to Hersch: Mattel breached the implied covenant of good faith and fair dealing in the License Agreement by discounting Outburst by $17 and destroying the brand; Hersch is entitled to liquidated damages to the degree that Mattel did not act reasonably and in good faith when satisfying its $2 million advertising obligation in years three to five of the License Agreement; Hersch‘s loss of future profits due to its inability to relicense Outburst to a third party constitute general damages and are therefore not barred by the proscription in the License Agreement against special damages; Hersch‘s lost future profits are neither speculative nor uncertain; and, finally, the trial court erred when it excluded evidence that was relevant to the implied covenant claim. We conclude that liquidated damages are not recoverable for breach of the implied covenant, and Hersch‘s lost future profits are special damages which are barred by the License Agreement. Thus, Hersch is entitled to nothing, and all other issues are moot. Accordingly, the judgment is affirmed. FACTS The License Agreement Hersch and Mattel executed the License Agreement in April 2004. Hersch granted Mattel the right to manufacture and sell Outburst for an initial term from 2004 through 2008. Mattel agreed to pay royalties, and guaranteed that Hersch would receive at least $400,000 in the first year, $600,000 in the second year and then $400,000 for every subsequent year. Paragraph 8 provided: ―[D]uring the first two (2) years of the Initial Term, [Mattel] shall spend a minimum of Two Million Dollars . . . for ‗Advertising‘ . . . [Outburst]. Thereafter, [Mattel] shall spend for Advertising . . . no . . . less than Two Million Dollars . . . in years three through five[.]‖ Advertising means ―the actual, direct, out-of-pocket sums actually paid by [Mattel] to unrelated third parties . . . for media buys,