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Case 2:17-cv-00308-JAK-AFM Document 21 Filed 05/05/17 Page 1 of 11 Page ID #:352

1 John Shaeffer (SBN 138331)


jshaeffer@foxrothschild.com
2 Jeff Grant (SBN 218974)
jgrant@foxrothschild.com
3 Amanda Murray (SBN 305018)
amurray@foxrothschild.com
4 FOX ROTHSCHILD LLP
1800 Century Park East, Suite 300
5 Los Angeles, CA 90067-1506
Telephone: 310-598-4150
6 Facsimile: 310-556-9828
7 Attorneys for Defendant and Counterclaimant
ANIMAL LOGIC ENTERTAINMENT, LLC,
8 Counterclaimants
9 ANIMAL LOGIC LLC, and
ANIMAL LOGIC ENTERTAINMENT PTY LTD
10 and Defendant ZAREH NALBANDIAN
11 UNITED STATES DISTRICT COURT
12 CENTRAL DISTRICT OF CALIFORNIA
13 JASON LUST, an individual, Case No.: 17-CV-00308-JAK-AFM
14 Plaintiff, Hon. Judge John A. Kronstadt
15 v. ANIMAL LOGIC
ENTERTAINMENT, LLC, ANIMAL
16 ANIMAL LOGIC ENTERTAINMENT, LOGIC LLC AND ANIMAL LOGIC
LLC, a California limited liability ENTERTAINMENT PTY LTDS
17 corporation; ZAREH NALBANDIAN, an COUNTERCLAIMS AGAINST
individual; and DOES 1 through 20, JASON LUST FOR:
18 inclusive,
1. BREACH OF CONTRACT
19 Defendants. 2. BREACH OF CONTRACT
3. TORTIOUS INTERFERENCE
20 ANIMAL LOGIC ENTERTAINMENT, WITH CONTRACT
LLC, a California limited liability 4. TORTIOUS INTERFERENCE
21 corporation; ANIMAL LOGIC LLC, a WITH PROSPECTIVE
California limited liability corporation, and ECONOMIC ADVANTAGE
22 ANIMAL LOGIC ENTERTAINMENT
PTY LTD, an Australian company, JURY TRIAL DEMANDED
23
Counterclaimants,
24
v.
25
JASON LUST, an individual; SAJ
26 PRODUCTIONS, LLC, a California
limited liability company,
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Counterclaim-Defendant.
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COUNTERCLAIMS
ACTIVE\45594794.v3-5/5/17 1
Case 2:17-cv-00308-JAK-AFM Document 21 Filed 05/05/17 Page 2 of 11 Page ID #:353

1 For its Counterclaims against Plaintiff and Counter-Defendant Jason Lust


2 (Lust) and Counter-Defendant SAJ Productions, LLC (SAJ) (collectively,
3 Counter-Defendants), Defendant and Counterclaimant Animal Logic Entertainment,
4 LLC (ALE LLC), Counterclaimant Animal Logic LLC (AL US) and
5 Counterclaimant Animal Logic Entertainment Pty Ltd (ALE AU) (collectively,
6 Counterclaimants) hereby state and allege as follows:
7 1. Defendant and counterclaimant ALE LLC, is, and at all times relevant
8 herein was, a limited liability company organized under the laws of California and
9 qualified to conduct business in the State of California. Until March of 2016, ALE
10 LLC was registered to do business in California under the name Animal Logic
11 Interactive LLC. ALE LLC is affiliated with the Australian entity ALE AU.
12 2. Counterclaimant AL US, which has done business in the United States
13 under the name Animal Logic Entertainment US, is, and at all times relevant herein
14 was, a limited liability company organized under the laws of California and qualified
15 to conduct business in the State of California. AL US is affiliated with the Australian
16 entity ALE AU.
17 3. Counterclaimant ALE AU is and at all times relevant herein was, an
18 Australian company headquartered in Sydney, Australia. ALE AU is a feature film
19 development company that focuses on developing a slate of feature films.
20 4. Counterclaimants are informed and believe and based thereon allege that
21 Jason Lust is, and at all times relevant herein was, a citizen of the State of California,
22 residing and doing business in the County of Los Angeles.
23 5. Counterclaimants are informed and believe that SAJ Productions, LLC is,
24 and at all relevant times herein was, a California limited liability company and is the
25 loan-out company through which Lust provides his services.
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COUNTERCLAIMS
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Case 2:17-cv-00308-JAK-AFM Document 21 Filed 05/05/17 Page 3 of 11 Page ID #:354

1 JURISDICTION AND VENUE


2 6. This Court has subject matter jurisdiction over these Counterclaims
3 alleged herein pursuant to 28 U.S.C. 1367, which provides that the Court has
4 supplemental subject matter jurisdiction over all claims related to claims in an action
5 within this Courts original jurisdiction. Lust, in his First Amended Complaint in this
6 action, asserts this Courts subject matter jurisdiction over his claims arising under the
7 copyright laws of the United States as set forth in 17 U.S.C. 101, et seq. Each of the
8 claims assert in this Counterclaim relate to that claim asserted by Lust.
9 7. This Court has personal jurisdiction over Lust because Lust has invoked
10 the jurisdiction of this Court by filing a Complaint with this Court.
11 8. This Court has personal jurisdiction over SAJ as SAJ is headquartered in
12 Los Angeles, California.
13 9. Venue is proper in this District pursuant to 28 U.S.C. 1391.
14 FACTS LEADING TO DISPUTE
15 10. Zareh Nalbandian (Nalbandian), Chief Executive of ALE US, AL US
16 and ALE AU first met Lust in 2009 when Lust was working at The Jim Henson
17 Company. ALE was discussing the potential of developing Monster Blood Tattoo
18 with The Jim Henson Company. In late 2012, after he had left The Jim Henson
19 Company, Lust approached Nalbandian about the possibility of Lust working with
20 ALE AU on future projects. Rather than launching into a long-term business
21 relationship, however, Lust and Nalbandian discussed a termed relationship whereby
22 Lust would provide services to ALE AU to identify, acquire and subsequently develop
23 projects to pitch to studios and financiers for greenlighting into production consistent
24 with achieving an agreed Business Plan. For his services, Lust would receive
25 monthly advances recoupable against an agreed share in any producer fees and profit
26 participations received by ALE AU or any of its affiliates on such productions. Lust
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COUNTERCLAIMS
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1 and ALE AU at this time both hoped this initial termed relationship would go well and
2 that it would lead to a longer term relationship.
3 11. These discussion cumulated in an agreement whose terms are
4 documented in a February 28, 2013, letter agreement between Lust and AL US (the
5 Agreement) a copy of which is attached hereto as Exhibit A. The Agreement sets
6 forth a two-year term and furthermore specifies that the relationship at will. The
7 Agreement sets forth the monthly advances receivable by Lust and the basis for
8 recoupment of such advances from Lusts agreed share of any producer fee or profit
9 participation subsequently received by AL US for the eligible projects. The
10 Agreement also specifies the credit he will receive on such projects. Under the
11 Agreement, Lust is obligated to transfer to AL US any copyrights or other intellectual
12 property rights he has or may have with regard to any projects he works on under the
13 Agreement. The Agreement also contemplates the parties rights and obligations if
14 either party terminates or AL US decides not to renew the Agreement beyond the
15 initial two year term.
16 12. The Agreement contemplates a more formal long-form agreement, but
17 the parties acknowledged that the Agreement sets forth the basic terms of their
18 agreement. Specifically, the Agreement contemplated a long-form contract between
19 Animal Logic Interactive LLC (now ALE LLC) and SAJ, Lusts loan out company.
20 The parties agreed that Lusts loan out company, SAJ, would be responsible for all
21 employment related taxes for his services and all insurance. In the absence of the
22 subsequent long-form contract, AL US has continued to perform the Animal Logic
23 Entertainment US obligations of the Agreement.
24 13. Although the Agreement provided that Lust would receive from AL US
25 monthly advances against his agreed share of any producer fees or profit participation
26 received by ALE AU, Lust needed more money. Pursuant to a December 19, 2013
27 Retainer Advance Agreement (Loan Agreement), AL US advanced to SAJ, at
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COUNTERCLAIMS
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Case 2:17-cv-00308-JAK-AFM Document 21 Filed 05/05/17 Page 5 of 11 Page ID #:356

1 Lusts request, an additional $120,000. A copy of the Loan Agreement is attached


2 hereto as Exhibit B. Pursuant to the Loan Agreement, SAJ was required to fully
3 repay this additional advance by January 31, 2015. As of January 31, 2015, however,
4 SAJ had only repaid $20,000, and the remaining $100,000 remains to this date unpaid.
5 AL US has demanded that SAJ repay the advance. SAJ has refused.
6 14. At the end of the term of the Agreement, AL US exercised its contractual
7 right not to extend the Agreement.
8 15. Counterclaimants are informed and believe, and on that basis allege, that
9 following the termination of the Agreement, Lust began to publicly assert that he
10 retains intellectual property rights, including copyrights, in projects he worked on
11 during the term of the Agreement. For example, Lust for an extended period of time
12 refused the request from Columbia Pictures, Inc. (Columbia) to execute a
13 Certificate of Ownership of Results and Proceeds (Certificate) for the motion
14 picture project Peter Rabbit, that ALE AU has contracted to produce with Columbia.
15 Execution of such a Certificate is standard practice in the entertainment industry by
16 those who work on film projects. While Lust ultimately executed the requested
17 Certificate for Peter Rabbit, his delay raised a number of red flags. Serious questions
18 remain as to whether Lust will honor his obligation under the Agreement to execute
19 similar Certificates for other projects Lust worked on during the term of the
20 Employment Agreement.
21 16. Counterclaimants currently have a number of additional contracts with
22 third parties requiring similar Certificates from Lust, including, without limitation:
23 two motion picture projects with Warner Bros. entitled Claus and Nemesis; another
24 motion picture project with Columbia entitled Monkeys. Counterclaimants are
25 informed and believe, and on that basis allege, that Lust continues to assert ownership
26 of certain intellectual property rights in projects that Counterclaimants have under
27 contract with, or are in negotiations for contracts with third-parties, including, without
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COUNTERCLAIMS
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1 limitation, Columbia. Lusts refusal to sign Certificates that all intellectual property
2 rights he may have in such projects are owned by the Counterclaimants interferes with
3 the contracts one or more of the Counterclaimants have with third parties.
4 17. Similarly, Counterclaimants are in negotiations with a number of third
5 parties with respect to a number of other projects that Lust worked on during the term
6 of the Employment Agreement. Counterclaimants are informed and believe, and on
7 that basis allege, that Lusts public assertion that he continues to hold rights to and in
8 these projects has and is interfering with third parties willingness to contract with one
9 or more of the Counterclaimants with respect to these projects. Counterclaimants are
10 informed and believe, and on that basis allege, that Lusts assertion that he continues
11 to hold intellectual property rights in these projects is independently wrongful because
12 it constitutes a breach of an express term of the Employment Agreement.
13 FIRST COUNTERCLAIM FOR RELIEF
14 BREACH OF CONTRACT (THE EMPLOYMENT AGREEMENT)
15 (Against Lust)
16 18. Counterclaimants reallege and incorporate by reference all of the
17 averment set forth above.
18 19. AL US has performed all the terms and conditions required on its part to
19 be performed under the Agreement.
20 20. Lust has materially breached the Employment Agreement by, among
21 other things, refusing to assign to AL US any and all intellectual property rights in the
22 various projects he worked on during the term of the Employment Agreement.
23 21. As a direct and proximate cause of Lusts breach of the Employment
24 Agreement, AL US has sustained damages according to proof at or before trial.
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COUNTERCLAIMS
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1 SECOND COUNTERCLAIM FOR RELIEF


2 BREACH OF CONTRACT (THE LOAN AGREEMENT)
3 (Against SAJ)
4 22. Counterclaimants reallege and incorporate by reference all of the
5 averment set forth above.
6 23. AL US has performed all the terms and conditions required on its part to
7 be performed under the Loan Agreement.
8 24. SAJ is in default of the Loan Agreement for, among other things, failing
9 to repay the loan by the date set forth in the Loan Agreement.
10 25. As a direct and proximate result of SAJs breach of the Loan Agreement,
11 AL US has sustained damages according to proof at or before trial.
12 THIRD COUNTERCLAIM FOR RELIEF
13 INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONS
14 (Against Lust and SAJ)
15 26. Counterclaimants reallege and incorporate by reference all of the
16 averment set forth above.
17 27. At all relevant times, ALE AU had, and continues to have, a valid
18 contract with Columbia and Warner Brothers.
19 28. At all relevant times, Counter-Defendants knew of the contracts between
20 ALE AU, on the one hand, and Columbia and Warner Brothers, on the other hand.
21 29. ALE AUs ownership of the intellectual property rights for each of its
22 projects is critical to its relationships with Columbia and Warner Brothers. Counter-
23 Defendants knew at all relevant times that Columbia and Warner Brothers would not
24 proceed with the production of ALE AUs projects if ALE AU, AL US, or another of
25 ALE AUs affiliates did not own the intellectual property rights for those projects.
26 30. ALE AU is informed and believes and thereon alleges that, in an effort to
27 interfere with ALE AU contracts with Columbia and Warner Brothers, Lust refuses to
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COUNTERCLAIMS
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1 assign to AL US any and all intellectual property rights in ALE AUs projects, in
2 direct contravention of the Agreement.
3 31. ALE AU is informed and believes and thereon alleges that, in an effort to
4 interfere with ALE AU contracts with Columbia and Warner Brothers, Counter-
5 Defendants baselessly and deceptively asserted to Columbia and Warner Brothers that
6 he owned intellectual property rights in ALE AUs projects.
7 32. Counter-Defendants engaged in the conduct alleged herein with the intent
8 to harm ALE AU financially, to induce a breach of ALE AUs agreements with
9 Columbia and Warner Brothers, and/or to make the contractual relationships between
10 ALE AU, on the one hand, and Columbia and Warner Brothers, on the other hand,
11 less financially lucrative to ALE AU.
12 33. As a direct and proximate result of the conduct of Counter-Defendants as
13 alleged herein, ALE AU has sustained damages according to proof at or before trial.
14 34. The conduct of Counter-Defendants as alleged herein was purposeful and
15 intentional and was engaged in for the purpose of depriving ALE AU of property or
16 legal rights or otherwise causing injury, and was despicable conduct that subjected
17 ALE AU to cruel and unjust hardship in conscious disregard of its rights, and was
18 performed with fraud, oppression or malice so as to justify an award of exemplary or
19 punitive damages against Counter-Defendants in an amount according to proof at trial.
20 FOURTH COUNTERCLAIM FOR RELIEF
21 INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC
22 RELATIONS
23 (Against Lust and SAJ)
24 35. Counterclaimants reallege and incorporate by reference all of the
25 averment set forth above.
26 36. Prior to engaging in the aforementioned conduct, Counter-Defendants
27 was fully aware that Counterclaimants had business relationships motion picture
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COUNTERCLAIMS
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1 studios and production companies in the entertainment industry that are likely to result
2 in economically-advantageous relationships between Plaintiffs and Columbia and
3 Warner Brothers.
4 37. Counter-Defendants engaged in the conduct alleged above, and continues
5 to engage in such conduct, with the intent to interfere with and/or destroy the
6 economically-advantageous relationships between Counterclaimants, on the one hand,
7 and which motion picture studios and production companies in the entertainment
8 industry, on the other hand, and to make those relationships less financially lucrative
9 for Counterclaimants.
10 38. Counter-Defendants conduct is independently wrongful because this
11 conduct constitutes a breach of Lusts obligations under the Agreement.
12 39. As a direct and proximate result of the conduct of Counter-Defendants as
13 alleged herein, Counterclaimants have sustained damages according to proof at or
14 before trial.
15 40. The conduct of Counter-Defendants as alleged herein was purposeful and
16 intentional and was engaged in for the purpose of depriving Counterclaimants of
17 property or legal rights or otherwise causing injury, and was despicable conduct that
18 subjected Counterclaimants to cruel and unjust hardship in conscious disregard of
19 their rights, and was performed with fraud, oppression or malice so as to justify an
20 award of exemplary or punitive damages against Counter-Defendants in an amount
21 according to proof at trial.
22 PRAYER
23 WHEREFORE, Counterclaimants pray for the following relief:
24 1. For damages in an amount to be proven at or before trial;
25 2. For exemplary or punitive damages in an amount according to proof at
26 trial;
27 3. For costs of suit incurred herein; and
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COUNTERCLAIMS
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1 4. For such other and further relief as the Court may deem just and proper.
2
Dated: May 5, 2017 FOX ROTHSCHILD LLP
3
4 By /s/ John Shaeffer
Attorneys for Defendant and Counterclaimant
5 ANIMAL LOGIC ENTERTAINMENT, LLC,
Counterclaimants
6 ANIMAL LOGIC LLC, and ANIMAL LOGIC
ENTERTAINMENT PTY LTD
7 and Defendant ZAREH NALBANDIAN
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COUNTERCLAIMS
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1 DEMAND FOR JURY TRIAL


2 Counterclaimants demand trial by jury on all issues triable to a jury.
3
Dated: May 5, 2017 FOX ROTHSCHILD LLP
4
5 By /s/ John Shaeffer
Attorneys for Defendant and Counterclaimant
6 ANIMAL LOGIC ENTERTAINMENT, LLC,
Counterclaimants
7 ANIMAL LOGIC LLC, and ANIMAL
LOGIC ENTERTAINMENT PTY LTDand
8 Defendant ZAREH NALBANDIAN
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COUNTERCLAIMS
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