Retro Television Network, Inc. v. Luken Communications LLC, et al

Filing

OPINION FILED - THE COURT: Roger L. Wollman, C. Arlen Beam and Diana E. Murphy AUTHORING JUDGE: Roger L. Wollman (PUBLISHED) [3964607] [12-1287, 12-1838]

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 12-1287
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Retro Television Network, Inc.
lllllllllllllllllllll Plaintiff - Appellant
v.
Luken Communications, LLC; Retro Television, Inc., formerly known as Retro
Programming Services, Inc.
lllllllllllllllllllll Defendants - Appellees
___________________________
No. 12-1838
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Retro Television Network, Inc.
lllllllllllllllllllll Plaintiff - Appellant
v.
Luken Communications, LLC; Retro Television, Inc., formerly known as Retro
Programming Services, Inc.
lllllllllllllllllllll Defendants - Appellees
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Appeal from United States District Court
for the Eastern District of Arkansas - Little Rock
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Appellate Case: 12-1287

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Date Filed: 10/17/2012 Entry ID: 3964607

Submitted: September 20, 2012
Filed: October 17, 2012
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Before WOLLMAN, BEAM, and MURPHY, Circuit Judges.
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WOLLMAN, Circuit Judge.
Retro Television Network, Inc., appeals the district court’s1 dismissal of its
claims against Luken Communications, LLC and Retro Television, Inc. (collectively
Appellees) under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Retro
Television Network, Inc. appeals also the district court’s adverse award of attorneys’
fees. We affirm.
I.
In December 2005, Equity Broadcasting Corporation (Equity) entered into an
intellectual property agreement (IPA) with Retro Television Network, Inc. The IPA’s
recitals explained that Equity desired to acquire Retro Television Network, Inc.’s
noncreative rights in Retro Television Network for the purpose of developing a
national broadcast network. To accomplish this, Retro Television Network, Inc.
agreed to transfer its noncreative rights in Retro Television Network to one of
Equity’s subsidiaries. In exchange for this transfer, Equity agreed to pay Retro
Television Network, Inc. royalty payments in the amount of ten percent of the net
revenue of Retro Television Network.
The terms of the IPA established additional covenants, including (1) that Retro
Television Network, Inc. and Equity would handle jointly the marketing of Retro
Television Network; (2) that Equity would pay for the development of Retro
1

The Honorable Susan Webber Wright, United States District Judge for the
Eastern District of Arkansas.
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Television Network; (3) that Retro Television Network, Inc. could audit Equity’s
accounts maintained pursuant to the IPA; (4) that Equity could assign the IPA to any
of its wholly owned subsidiaries provided that Equity guaranteed the performance of
the IPA in writing; and (5) that disputes between Equity and Retro Television
Network, Inc. would be settled by arbitration. Finally, paragraph 13 of the IPA
stated:
This agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors, and permitted
assigns. No person or entity that is not a party to this agreement may
claim any right or benefit hereunder.
In 2008, Luken Communications, LLC (Luken) purchased 100% of the stock
of Equity’s subsidiary, to which the IPA had transferred Retro Television Network’s
noncreative rights.2 Thereafter, Equity’s subsidiary merged with one of Luken’s
subsidiaries and became known as Retro Television, Inc.
In 2011, Retro Television Network, Inc. sued Luken and Retro Television, Inc.,
seeking royalty payments and an accounting under the IPA. Although neither Luken
nor Retro Television, Inc. was in existence at the time the IPA was executed, Retro
Television Network, Inc.’s amended complaint asserted that Retro Television, Inc.
was a third party beneficiary to the IPA and that Luken had acquired Retro
Television, Inc. “including its assets and liabilities.” Appellees filed a motion to
dismiss for failure to state a claim, arguing that they were not parties to the IPA and
therefore had no obligations under it. The district court granted Appellees’ motion
2

Prior to this stock purchase, Equity merged with Coconut Palm Acquisition
Corporation (Coconut) to form Equity Media Holdings Corporation and amended the
IPA to reflect a change in Equity’s subsidiary’s name. For sake of clarity and because
these facts do not bear upon the outcome of this case, we continue to refer to Equity
Media Holdings Corporation as “Equity” and Equity’s subsidiary as simply
“subsidiary.”
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to dismiss, holding that the language of the IPA made clear that neither Retro
Television, Inc. nor its predecessors were third party beneficiaries of the IPA. The
district court ruled further that Retro Television Network, Inc. had failed to allege any
facts that would make Luken liable under the IPA. In a subsequent order, the district
court awarded Appellees $46,795.00 in attorneys’ fees.
II.
We review de novo the district court’s grant of a motion to dismiss under Rule
12(b)(6), construing all reasonable inferences in favor of the nonmoving party. EShops Corp. v. U.S. Bank Nat’l Ass’n, 678 F.3d 659, 662 (8th Cir. 2012). To
withstand a motion to dismiss, a complaint must contain enough facts to “state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007). “[C]onclusory statements” and “naked assertion[s] devoid of further
factual enhancement” are insufficient. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(internal quotation marks and citation omitted). Courts must accept a plaintiff’s
factual allegations as true but need not accept a plaintiff’s legal conclusions. Id.
Additionally, “documents attached to or incorporated within a complaint are
considered part of the pleadings, and courts may look at such documents for all
purposes, including to determine whether a plaintiff has stated a plausible claim[.]”
Brown v. Medtronic, Inc., 628 F.3d 451, 459-60 (8th Cir. 2010) (internal quotation
marks and citations omitted).
It is undisputed that neither Retro Television, Inc. nor Luken is a party to the
IPA. As a general rule, a contract’s obligations do not extend to nonparties to the
contract. EEOC v. Waffle House, Inc., 534 U.S. 279, 294 (2002) (“It goes without
saying that a contract cannot bind a nonparty.”). Retro Television Network, Inc.,
however, alleges that Retro Television, Inc. is a third party beneficiary of the IPA.
The parties agree that Arkansas law governs interpretation of the IPA. In Arkansas,
“[a] contract is actionable by a third party when there is substantial evidence of a
clear intention to benefit that third party.” Simmons Foods, Inc. v. H. Mahmood J.
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Al-Bunnia & Sons Co., 634 F.3d 466, 469-70 (8th Cir. 2011) (quoting Perry v.
Baptist Health, 189 S.W.3d 54, 58 (Ark. 2004)). “[T]he presumption is that parties
contract only for themselves and a contract will not be construed as having been made
for the benefit of a third party unless it clearly appears that such was the intention of
the parties.” Id. at 470 (internal quotation marks and citation omitted). We agree
with the district court that the IPA between Retro Television Network, Inc. and
Equity did not express an intent to make Retro Television, Inc. or any of its
predecessors a third party beneficiary. Not only do the IPA’s recitals make clear that
the transfer of rights was for Equity’s benefit, but paragraph 13 of the IPA explicitly
denies an intention to create a third party beneficiary, stating that “[n]o person or
entity that is not a party to this agreement may claim any right or benefit hereunder.”
Even if Retro Television, Inc. or one of its predecessors were a third party
beneficiary of the IPA, the IPA does not impose any obligations on these parties.
Instead, the terms of the IPA make clear that Equity was to provide all of the
consideration for the transfer of rights and be the only obligor for such consideration.3
Because Retro Television Network, Inc. has provided no basis for concluding that
either Retro Television, Inc. or any of its predecessors are responsible for Equity’s
obligations under the IPA, the district court correctly held that Retro Television
Network, Inc. failed to plead sufficient facts to state a claim for relief against Retro
Television, Inc. that is plausible on its face.
Retro Television Network, Inc.’s argument that the district court erred in
dismissing its claim against Luken is likewise without merit. In its amended
3

Retro Television Network, Inc. acknowledged as much before the district
court, arguing that when Equity merged with Coconut, the surviving corporation
“became the party responsible for any and all obligations under the IPA, including but
not limited to, the royalty payment of ten percent (10%) of the net revenue to [Retro
Television Network, Inc.] for the transfer of its rights, other than creative rights, in
and to Retro Television Network to [Equity’s subsidiary].”
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complaint, Retro Television Network, Inc. alleges that Luken “acquired [Equity’s
subsidiary], including its assets and liabilities,” but does not plead any additional
facts to support this conclusory statement. In its brief and at oral argument, Retro
Television Network, Inc. asserted that by virtue of purchasing the stock of Equity’s
subsidiary, Luken became a “successor” as that term is used in paragraph 13 of the
IPA and is therefore liable for Equity’s subsidiary’s obligations under the IPA. As
explained above, however, neither Retro Television, Inc. nor any of its predecessors
are liable for Equity’s obligations under the IPA. Further, even if one of Equity’s
subsidiaries were liable, Luken does not automatically inherit the subsidiary’s
obligations solely by virtue of purchasing the subsidiary’s stock.4 In Arkansas, a
shareholder is generally not liable for the obligations of a corporation in which the
shareholder owns stock, see Ark. Code Ann. § 4-27-622(b) (“Unless otherwise
provided in the articles of incorporation, a shareholder of a corporation is not
personally liable for the acts or debts of the corporation except that he may become
personally liable by reason of his own acts or conduct.”); Scott v. Cent. Ark. Nursing
Ctrs., Inc., 278 S.W.3d 587, 595 (Ark. Ct. App. 2008) (“Shareholders are not
ordinarily liable for the acts of their corporation or LLC.” (citing Ark. Code Ann. § 427-622(b)), and Retro Television Network, Inc. has not explained why this rule
should not apply here. Because Retro Television Network, Inc. failed to allege any
facts that would make Luken liable for Equity’s obligations under the IPA, the district
court properly dismissed Retro Television Network, Inc.’s claim against Luken.
III.
Retro Television Network, Inc. asserts that the district court’s award of
attorneys’ fees was excessive given the “early stage of the litigation.” “We will
4

The district court correctly did not consider whether Luken accepted the
subsidiary’s obligations through the terms of the stock purchase agreement because
Retro Television Network, Inc. neither attached the stock purchase agreement to, nor
incorporated the agreement within, its amended complaint.
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disturb a district court’s decision to award attorneys’ fees only if we find an abuse of
discretion.” Henderson v. Simmons Foods, Inc., 217 F.3d 612, 619 (8th Cir. 2000).
In Arkansas, a prevailing party in a contract suit “may be allowed a reasonable
attorney’s fee to be assessed by the court[.]” Ark. Code Ann. § 16-22-308. Relying
on the appropriate factors under Arkansas law, see Chrisco v. Sun Indus., Inc., 800
S.W.2d 717, 718-19 (Ark. 1990), the district court concluded that Appellees were
entitled to $46,795.00 in attorneys’ fees. In reaching this conclusion, the district
court found that a proper defense of Retro Television Network, Inc.’s claims required
a significant time commitment and that defense counsels’ hourly billing rates were
reasonable. The district court then used the lodestar method to arrive at the amount
of the fee.
The district court’s calculation of this amount is supported by the detailed
affidavits and time sheets attached to Appellees’ motion for attorneys’ fees. Although
Retro Television Network, Inc. contends that defense counsels’ expenditure of time
on this case was unjustified, the record indicates otherwise. As the district court
correctly noted, this case involved a complicated factual background, the potential for
millions of dollars in liability, and a ten-count initial complaint that included 555
pages of exhibits. Under these circumstances, the district court did not abuse its
discretion in awarding attorneys’ fees.5

5

Retro Television Network, Inc. argues also that it should have been permitted
to conduct discovery on the attorneys’ fees issue. As the Supreme Court has
explained, however, “[a] request for attorney’s fees should not result in a second
major litigation.” Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). Here, the district
court properly relied on defense counsels’ affidavits and time records to calculate the
attorneys’ fees, and thus discovery on this issue was unnecessary.
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IV.
The judgment is affirmed.
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