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1PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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STEPHEN R. MICK (SBN 131569)smick@btlaw.comDAVID W. NELSON (SBN 240040)dnelson@btlaw.comBARNES & THORNBURG LLP2029 Century Park East, Suite 300Los Angeles, California 90067Telephone: 310.284.3880Facsimile: 310.284.3894
Attorneys for Plaintiff and Counter-DefendantsLMNO CABLE GROUP, INC. andLMNO ENTERTAINMENT GROUP, LLC
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
LMNO CABLE GROUP, INC., aCalifornia corporation,
Plaintiff,
v.
DISCOVERY COMMUNICATIONS,LLC, a Delaware limited liabilitycompany,
Defendants.
Case No. 2:16-cv-4543-JAK-SK
[The Honorable John A. Kronstadt]
PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP,INC. AND LMNO ENTERTAINMENTGROUP, LLC’S ANSWER TODISCOVERY’S COUNTERCLAIM
DISCOVERY COMMUNICATIONS,LLC, a Delaware limited liabilitycompany,
Counterclaimant,
v.
LMNO CABLE GROUP, INC., aCalifornia corporation, and LMNOENTERTAINMENT GROUP, LLC, aCalifornia limited liability company,
Counter-Defendants.
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2PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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Plaintiff and Counter-Defendant LMNO Cable Group, Inc. (“LMNO Cable”) and
Counter-Defendant LMNO Entertainment Group, LLC (“LEG” and, together with
LMNO Cable, “LMNO”) hereby answer to Defendant and Counterclaimant Discovery
Communications, LLC’s Counterclaim:
INTRODUCTION
1. LMNO admits that it had a long-standing relationship with Discovery.
Since approximately 1999, LMNO has produced more than two dozen series and
innumerable specials that have been broadcast on Discovery’s networks. As a
sophisticated media and entertainment company that worked with numerous producers,
Discovery kept working with LMNO because it recognized that LMNO provided high
production quality, hit programs at costs to Discovery well below comparable shows.
Given this long-standing relationship, LMNO believed that there was a mutual
atmosphere of trust between the parties. Yet, when Discovery learned that LMNO had
been victimized by its former accountant, who stole money from LMNO, extorted
LMNO, and effectively destroyed LMNO’s books and records, Discovery sought to
prey on LMNO’s vulnerability by working with the extortionist, making unreasonable
audit demands, and concocting pretexts to terminate LMNO’s contracts.
After 17 years of working together based on the practice and understanding that
LMNO would produce shows on a flat-fee, no cost reports, and non-auditable basis,
Discovery demanded that LMNO immediately produce books and records dating back
over 8 years. Even through this far exceeded any contractual audit right, LMNO’s
finance staff and accountants worked full time to collect the documents requested by
Discovery. It is now clear, however, that Discovery never had any interest in working
with LMNO or conducting a real audit. By the time Discovery’s auditors began
reviewing LMNO’s books and records, Discovery had already started shooting new
episodes of The Little Couple – a program owned by LMNO and only licensed to
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3PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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Discovery – behind LMNO’s back in violation of LMNO’s contractual and intellectual
property rights. And, after spending five days at LMNO’s offices, Discovery’s auditors
simply left without completing their work, even as LMNO continued to provide
additional documents.
It did not matter to Discovery what would be found in an audit; it was intent on
terminating LMNO’s contracts in an effort to seize control over LMNO’s intellectual
property – particularly the hit show The Little Couple – no matter what. If Discovery
had worked with LMNO, it would have found what is known throughout the industry
and will become clear in this litigation: that LMNO is one of the most honest companies
in the business, which made significant contributions and sacrifices to make the shows
produced for Discovery great. LMNO was then victimized by its extortionist
accountant, and victimized again by its trusted “partner” Discovery.
Except as expressly admitted, LMNO denies the allegations in Paragraph 1.
2. On information and belief, in late-2015 Discovery was contacted by Paul
Ikegami, LMNO’s former accountant. In November 2015, as LMNO was moving its
business to a new accountant, Ikegami made an extortion demand on LMNO,
threatening that if he was not paid over $800,000 and given a full release for all prior
acts, he would attempt to ruin LMNO’s business relationships. LMNO later learned that
the prior acts included embezzling over $1.5 million of LMNO’s funds, falsifying
LMNO’s accounting books and records to cover up his embezzlement, and even lying
for years about being a certified public accountant.
Discovery did not inform LMNO about their contact with Ikegami until a surprise
meeting on February 10, 2016. At that meeting, LMNO explained to Discovery how it
had been victimized and threatened by Ikegami, and asked Discovery to cooperate with
LMNO’s efforts to pursue Ikegami with law enforcement. In part, LMNO asked
Discovery to provide copies of any documents that Ikegami had given to them, as they
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4PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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would have been either stolen from LMNO or created by Ikegami. Discovery refused to
cooperate or to provide LMNO with copies of any documents.
Except as expressly admitted, LMNO denies the allegations in Paragraph 2.
3. In early February 2016, Discovery’s counsel requested a meeting with
LMNO. LMNO was not told the purpose of the meeting, or who was attending, and
LMNO was not requested to prepare anything for that meeting. When the parties met at
LMNO’s office on February 10, 2016, Discovery demanded an immediate audit of
records dating back over eight years (even though many of the shows were non-
auditable and the longest audit period in any contract was two years). Discovery knew
that what they were requesting was impossible, particularly because many of the records
that they were requesting were held by third parties and would take weeks, if not
months, to obtain. LMNO also fully explained the situation with Ikegami, and that his
essential destruction of LMNO documents would require LMNO and its new accountant
to spend significant time and effort attempting to locate and reassemble relevant
records. LMNO, nonetheless, made clear that it would cooperate with the audit requests,
and would produce documents as soon as they could be obtained. But, instead of
working with LMNO, Discovery immediately served default notices for six shows prior
to leaving the meeting.
Even after receiving the default notices, LMNO continued to reach out to
Discovery in an effort to cooperate on the audit requests. LMNO’s outside accountants
and finance staff worked full time at gathering the documents requested by Discovery,
many of which needed to be identified and reassembled after being destroyed by
Ikegami. And, LMNO requested all relevant third-party records.
After this extensive effort by LMNO, Discovery’s auditors were provided the
documents that had been requested at LMNO’s offices, and told to request any
additional records that they would like to review. The auditors never requested any
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5PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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additional records. And, after reviewing documents at LMNO’s offices for one week,
Discovery’s auditors stopped showing up without notice or explanation, even as LMNO
continued to provide additional records for them to review. After several days and
without any further explanation, Discovery served notice that it was purportedly
terminating the contracts associated with the shows.
Except as expressly admitted, LMNO denies the allegations in Paragraph 3.
4. LMNO lacks knowledge or information sufficient to form a belief as to the
truth of the allegations in Paragraph 4, and on that basis denies the allegation in
Paragraph 4.
5. The parties understood that LMNO would primarily contribute to co-
production programs by bringing to bear its own employees, production equipment, and
infrastructure. As Discovery knows, this is a standard industry practice, it was how
Discovery and LMNO worked throughout their 17-year relationship, and it benefitted
both LMNO and Discovery because the efficiencies of LMNO using its own staff and
equipment resulted in costs savings that were passed on to Discovery through lower
“contributions” and “fees.” This understanding is further reflected in the language of the
parties’ agreements. While each relevant agreement specifically set forth the cash
payment that Discovery was required to make and an applicable payment schedule,
Discovery does not and cannot cite to any similar provision requiring LMNO to make
any monetary contribution to any production.
As discussed in response to Paragraph 3, LMNO fully cooperated with
Discovery’s unreasonable audit demands, including requests concerning records for
shows that were non-auditable, and records dating back well beyond two years, the
longest audit period in any contract. LMNO’s outside accountants and in-house finance
staff worked full time to gather these records, and they were provided to Discovery as
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6PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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quickly as possible. Discovery, however, chose to end its audit and terminate its
contracts with LMNO before the audit was complete, even while LMNO continued to
provide Discovery with additional records to review.
Except as expressly admitted, LMNO denies the allegations in Paragraph 5.
6. LMNO admits that it received notices of termination related to The Little
Couple, Speaking for the Dead, Unusual Suspects, 7 Little Johnstons, Hollywood &
Crime, and Killer Confessions on or about June 17, 2016. LMNO further admits that it
filed this lawsuit against Discovery on June 24, 2016. Except as expressly admitted,
LMNO denies the allegation in Paragraph 6.
7. LMNO admits that on or about June 30, 2016, the FBI executed a search
warrant at LMNO’s offices in connection with an ongoing investigation. Except as
expressly admitted, LMNO denies the allegations in Paragraph 7.
NATURE OF THE COUNTERCLAIMS
8. Discovery is one of the largest, most sophisticated media and entertainment
companies in the world, controlling a family of at least 13 domestic and over 50 global
television networks, which reach in excess of three billion viewers worldwide. It
contracts with producers for hundreds of shows each year. Discovery knows exactly
what is required and what it costs to produce a successful reality television show. The
notion that LMNO consistently bamboozled Discovery by convincing it to overpay for
shows by 30% or more is absurd; and it is simply untrue.
Prior to each season (or for additional show orders within a season), Discovery
and LMNO would negotiate a production budget. This “budget” was generally
understood by the parties to be a negotiated constraint on what Discovery was willing to
pay for the shows (based on its projections of the revenue that it would generate).
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7PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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Indeed, the parties would often negotiate the fee that Discovery was willing to pay for
the shows before negotiating a production budget, and the production budget would be
crafted around Discovery’s agreed payment. At best, given that this agreed production
budget was generally negotiated before substantial details regarding story lines,
shooting locations, and other essential elements were determined, Discovery could
allege that it was a rough estimate of what the parties agreed would be a reasonable cost
to produce the shows.
LMNO denies that it ever manipulated any books and records, and it had no
reason to. LMNO and Discovery understood – and most of the contractual agreements
reflect – that LMNO was being paid a “flat-fee,” that no costs reports were required, and
that the shows were not auditable. In other words, it did not matter to Discovery what
the shows cost to produce as long as LMNO delivered a quality product. Throughout
their 17-year relationship, LMNO never reported to Discovery on the actual costs of any
production – and Discovery never asked. And, LMNO never paid Discovery for any
“underages” – and Discovery never asked. After 17 years, Discovery cannot now claim
that it had a different understanding of the parties’ agreement. LMNO could not have
wrongfully withheld payments that the parties agreed were never owed, and would not
have “doctored” books that it never had to provide.
Far from overstating production costs, like much of the industry, LMNO was
under intense pressure from Discovery and other networks to provide more for less. In
the last season, Discovery paid LMNO just $127,560 per episode for the hit show The
Little Couple. This is a shockingly low number to anyone in the industry, with
comparable quality shows generally costing $250,000 to $350,000 per episode or more.
LMNO was able to produce the show for Discovery for such a low fee only because of
its significant “in-kind” contributions, using a unique team approach that centered
around using its own employees, own equipment, and own infrastructure for many
aspects of a production.
Finally, Discovery’s contention that LMNO maintained “separate books and
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8PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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records that documented the actual costs of production” is simply false. Discovery is
grossly mischaracterizing LMNO’s internal documents – which LMNO believes it was
provided by Ikegami – that were used for the sole purpose of tracking the use of
Discovery’s contribution and certain out-of-pocket, third party expenses. The
documents that Discovery references do not show, and are not intended to show,
LMNO’s internal costs or the value that LMNO was contributing to the production
through its own employees, equipment, and infrastructure. In essence, the documents
that Discovery references were not separate budgets, they were merely internal tracking
documents that were never intended to account for all the costs of a production.
Except as expressly admitted, LMNO denies the allegations in Paragraph 8.
9. LMNO denies that the production budget were representations made by
LMNO. The production budgets were negotiated between LMNO and Discovery, both
sophisticated entities with extensive knowledge regarding what it costs to produce a
reality television program. As one example, attached as Exhibit A is an email
evidencing a portion of the negotiation of the production budget for Meteorite Men,
showing Discovery making extensive comments on the budget and demanding
numerous reductions in the production budget. As noted in the initial email, this was the
second round of a negotiation based on a budget that that had already been reduced.
Moreover, in many cases, LMNO and Discovery negotiated the “fee” or
“contribution” that Discovery would pay before working together to create a budget
around that agreed fee amount. In every case, while LMNO generally prepared the
initial draft of a production budget, the final production budget was the product of a
good-faith negotiation between the parties.
Except as expressly admitted, Discovery denies the allegations in Paragraph 9.
10. LMNO admits that LMNO produced programs for Discovery pursuant to
both “co-production” agreements and “commission” agreements. The specific language
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9PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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of those agreements, in particular concerning the “fee” or “budget contribution” that
would be made by Discovery, varied among the agreements for different show, and
even among different seasons of the same show.
In general, the “co-production” agreements contemplated that both Discovery and
LMNO would contribute value toward the production of the shows. While the specific
language varies, the agreements all required Discovery to make monetary payments to
LMNO, which would be used toward the production of the shows. The agreements do
not include a similar requirement that LMNO make a specific monetary contribution to
the production of the shows. Instead, it was understood that LMNO would primarily
contribute the services of its production employees and contractors, and the use of its
production equipment and infrastructure. With respect to the “co-production” shows,
LMNO maintained ownership of the intellectual property, including the copyright and
trademark rights, and Discovery was granted a license to use some of the intellectual
property.
In general, the “commission” agreements contemplated that Discovery would
make a monetary payment to LMNO sufficient to compensate LMNO for the entire cost
of the production, including for the use LMNO’s employees, equipment, and
infrastructure. With respect to the “commission” shows, Discovery maintained
ownership in the intellection property.
Except as expressly admitted, LMNO denies the allegations in Paragraph 10.
11. LMNO denies that it “presented” Discovery with intentionally inflated
budgets, and further denies that the “fee” or “budget contribution” paid by Discovery
for the “co-production” shows was sufficient to cover the costs of production. The
production budgets for each season, or for additional show orders, were the results of
good faith negotiation between LMNO and Discovery. And, LMNO made significant
“in-kind” contributions to the “co-production” programs, including the services of its
production employees and use of its equipment and infrastructure, for which it was not
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10PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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compensated by Discovery’s “fee” or “budget contribution.” When, for instance,
LMNO’s employee performs the services of the line producer, or LMNO shoots with its
own cameras, it is contributing value to the production even if there is not a direct
monetary payment being made to a third party. This is common industry practice and
was always understood by Discovery.
Except as expressly admitted, LMNO denies the allegations in Paragraph 11.
12. LMNO denies that it “prepared and submitted” intentionally inflated
budgets to Discovery regarding the commission programs. Two “commission”
programs were produced for Discovery, 7 Little Johnstons and The Coroner: I Speak for
the Dead. The Coroner is in just its first season, and 7 Little Johnstons is in its second.
The production budgets for both were negotiated between the parties, based on what
Discovery was willing to pay and the parties’ own assumptions regarding the reasonable
cost of producing these programs.
Except as expressly admitted, LMNO denies the allegation in Paragraph 12.
13. LMNO denies that it has withheld any licensing royalties that are due to
Discovery. Discovery’s allegation that royalties should have been due is based on its
false assertion that LMNO contributed no value to the production of the shows. As
discussed above, LNMO made significant “in kind” contributions, and properly
calculated the total costs of production by including both its out-of-pocket third party
costs and the value of its “in-kind” contributions, above and beyond the “contribution”
or “fee” paid by Discovery. It generally requires many years of licensing to cover a
production deficit, and the shows on which Discovery is entitled to a royalty share are
still operating on a production deficit. LMNO and Discovery agreed and understood that
royalty reports would not be provided to Discovery as long as a program was still in a
deficit, and Discovery has never requested that LMNO provide royalty reports for any
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11PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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of the shows.
Except as expressly admitted, LMNO denies the allegations in Paragraph 13.
14. LMNO denies that it breached any contractual obligations or made any
fraudulent representations, and further denies that Discovery has incurred any damages
arising from its relationship with LMNO. On information and belief, Discover has made
tens-of-millions of dollars in profits off the high quality programs produced for its
networks by LMNO, and now seeks to squeeze out more windfall profits by stealing
LMNO’s original shows, particularly The Little Couple.
Except as expressly admitted, LMNO denies the allegations in Paragraph 14.
THE PARTIES
15. LMNO lacks knowledge or information sufficient to form a belief as to the
truth of the allegations in Paragraph 15, and on that basis denies the allegation in
Paragraph 15.
16. LMNO admits that it is a California corporation with its principal place
of business in Los Angeles County, California. LMNO further admits that it is a
production company and that it has produced television shows for Discovery,
including The Little Couple and 7 Little Johnstons. Except as expressly admitted,
LMNO denies the allegations in Paragraph 16.
17. LMNO admits that LEG is a California limited liability company with its
principal place of business on Los Angeles County, California. LMNO further admits
that LEG is a production company that has produced the show The Coroner: I Speak for
the Dead for Discovery. Except as expressly admitted, LMNO denies the allegations in
Paragraph 17.
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12PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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JURISDICTION AND VENUE
18. LMNO admits that the Court has proper subject matter jurisdiction over
this action.
19. LMNO admits that venue is proper in this judicial district.
20. LMNO admits that the Court may properly assert personal jurisdiction over
LMNO in this matter.
BACKGROUND FACTS
I. Discovery and LMNO Had a Longstanding Business Relationship
21. LMNO admits that LMNO and Discovery had a long-standing business
relationship, and that the relationship is governed by numerous contractual agreements.
LMNO further admits that LMNO produced various television shows for Discovery,
which were then broadcast on Discovery’s cable networks.
Except as expressly admitted, LMNO denies the allegations of Paragraph 21.
22. LMNO admits that 7 Little Johnstons and The Coroner: I Speak for the
Dead were produced for Discovery pursuant to “commission” agreements. LMNO
further admits that LEG is the contracting party in relation to The Coroner: I Speak for
the Dead, and that LMNO Cable is the only party that has signed contractual
agreements with Discovery regarding any of the other shows.
LMNO denies that Discovery agreed to pay the “entire cost of production” for
these programs. For Coroner, Discovery agreed to pay LEG a “‘Flat Fee’ equal to . . .
(USD $3,040,000),” with no reference to either the production budget or the cost of
production. (See Exhibit B.) Discovery further agreed that “Producer is responsible for
all overages . . . and retains all underages,” and that “[t]he Production Budget is non-
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13PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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auditable and no cost reports will be required . . . .” The “Attachment” for 7 Little
Johnstons included similar language. (See Exhibit C.)
Except as expressly admitted, LMNO denied the allegation in Paragraph 22.
23. LMNO admits that each of the programs identified in Paragraph 23 were
produced by LMNO for Discovery under “co-production” agreements. The specific
language of those agreements, in particular concerning the “fee” or “budget
contribution” that would be made by Discovery, varied among the agreements for
different show, and even among different seasons of the same show.
In general, the “co-production” agreements contemplated that both Discovery and
LMNO would contribute value toward the production of the shows. While the specific
language varies, the agreements all required Discovery to make monetary payments to
LMNO, which would be used toward the production of the shows. The agreements do
not include a similar requirement that LMNO make a specific monetary contribution to
the production of the shows. Instead, it was understood that LMNO would primarily
contribute the services of its production employees and contractors, and the use of its
production equipment and infrastructure. With respect to the “co-production” shows,
LMNO maintained ownership of the intellectual property, including the copyright and
trademark rights, and Discovery was granted a license to use some of the intellectual
property.
Except as expressly admitted, LMNO denies the allegations in Paragraph 23.
24. Discovery does not, and cannot, cite to any contractual provision that
required LMNO to make a specific monetary contribution to the production of the
programs. And Discovery, as a highly-sophisticated media and entertainment company,
fully understands the economics and practices in the industry. All parties knew and
understood the LMNO’s contributions would primarily be “in-kind”: its production
staff; its cameras and production equipment; and its infrastructure. As discussed above,
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14PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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LMNO made significant “in-kind” contributions to productions above and beyond
anything compensated by Discovery’s “fee” or “contribution.” Discovery repeatedly
told LMNO that it loved the LMNO deals because its costs were relatively low and
LMNO always provided a quality production.
Except as expressly admitted, LMNO denies the allegations in Paragraph 24.
25. LMNO denies the any numbers in the production budget were intentionally
inflated. The production budgets were negotiated between LMNO and Discovery, both
of which are sophisticated parties with a thorough understanding of what it requires and
costs to produce a reality television show. Except as expressly admitted, LMNO denies
the allegations in Paragraph 25.
26. At peak, LMNO had a core staff of over 70 full-time employees and,
depending on need, between 100 and 200 freelance employees, including production,
post production, finance, legal, accounting, clearance, and human relations. It owns its
own cameras and production equipment. It has infrastructure in place to support a
production. LMNO was able to keep production costs down by using a team approach
that tapped its own employees, equipment, and infrastructure for its productions. That is
how it was able produce The Little Couple for a payment from Discovery of just
$127,560 per episode in Season 8. Necessarily, these “in kind” contributions provide
value to the production.
Except as expressly admitted, LMNO denies the allegations in Paragraph 26.
II. The Contractual Framework and Relevant Agreements
27. LMNO denies the allegations in Paragraph 27. Each “co-production”
program, and each new season of a “co-production” program, was governed by a
separate contractual agreement. In general, the parties would enter into a contract, which
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15PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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Discovery called an “Attachment,” that concerned the production of the initial show(s)
or season of the new program. For subsequent seasons or additional shows, the parties
would enter into a new contract, which Discovery called an “Amendment,” concerning
the additional season or shows. The “Amendments” would generally incorporate certain
terms of the “Attachment.” There were also certain standard terms, which Discovery
called a “Master Agreement,” which were generally incorporated into an “Attachment.”
In fact, Discovery’s allegation that the “Master Agreement” is itself a contract is false
and misleading. While the “Master Agreement” set forth standard terms and conditions,
it did not require or contemplate a performance by either party. The “Master
Agreement” is relevant only to the extent that these standard terms were incorporated
into the parties’ contracts.
Except as expressly admitted, LMNO denies the allegations in Paragraph 27.
28. LMNO denies the allegations in Paragraph 28. See Response to Paragraph
27. Except as expressly admitted, LMNO denies the allegations in Paragraph 28.
A. The Co-Production Agreements
29. LMNO admits that Discovery and LMNO Cable each signed a document,
dated January 8, 2002, that Discovery deceptively titled a “Master Agreement.” LMNO
further admits that LMNO Cable and Discovery entered into an “Amendment and
Restatement dated December 10, 2002 of Co-Production Master Agreement Dated
January 8, 2002.” LMNO further admits that LMNO Cable and Discovery entered into
“Amendment 2” concerning the “Co-production Master Agreement,” on or about
December 31, 2013. LMNO denies that these documents are contractual agreements
between the parties. At most, these documents set forth standard terms that may be
incorporated by the parties into other agreements.
Except as expressly admitted, LMNO denies the allegations in Paragraph 29.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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30. LMNO denies the “Co-Production Master Agreement” imposes any
obligations on LMNO. The document that Discovery deceptively called a “Master
Agreement” was, in fact, merely standard terms that were often incorporated, in part,
into agreements entered between the parties concerning different programs, and
different seasons for programs.
LMNO further denies that the cited language applied to the “Attachments” and
“Amendments” entered into by the parties. By its terms, and without considering
whether these terms are incorporated into the parties’ subsequent agreements, the
provision does not apply where a different intent is “otherwise set forth in the
Attachment.” This is often the case. For instance, “Amendment 20” for The Little
Couple, which concerned episodes for a portion of Season 7, provided that Discovery’s
“Budget Contribution shall be a Flat Fee of USD $127,035 per half-hour Episode.” (See
Exhibit D.) It is understood in the industry, and was understood by the parties, that a
“flat fee” means that there will be no later adjustment to the payment to account for
actual costs. Some of the agreements were even more explicit, such as the
“Coproduction Attachment” for Killer Confessions, which provided that “[t]he ‘Budget
Contribution’ for the Program shall be a per episode “Flat Fee” equal to . . . (USD
$266,000) per episode,” that “[p]roducer is responsible for all overages and retains all
underages (i.e., savings),” and that “[t]he Production Budget is non-auditable and no
cost reports will be required . . . .” (See Exhibit E.)
Moreover, without regard to the specific contractual language, the parties’
conduct evidences their mutual understanding that LMNO was always producing shows
for Discovery on a “flat fee” basis, that no cost reporting was required, and that LMNO
would be responsible for all overages and retain all underages. Indeed, throughout the
parties’ approximately 17-year relationship, LMNO never provided Discovery with any
documentation of the actual costs of production, never paid Discovery any underages,
and except in exceptional circumstances where the parties agreed to a creative change
that would increase the production cost, never was compensated for any overages.
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17PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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As one example, the language in the contract for Seasons 2 of Meteorite Men,
standing alone, indicates that it was not a “flat-fee” deal. Specifically, the agreement,
which is attached hereto as Exhibit F, provided that Discovery’s “budget contribution”
shall be “approximately . . . (77%) of the actual, documented final costs of the
production of the Program based upon Company approved Production Budget up to a
maximum Budget Contribution of . . . (USD $2,320,000)(. . . (USD $290,000) per
episode . . . .” But, even with this language in the contact, the email attached as Exhibit
G shows Discovery’s response when LMNO requested that Discovery contribute to an
overage. In part, Discovery wrote: “It’s our position that given LMNO have maintained
their position on working on a flat-fee, non-auditable basis, then we should not be asked
to cover production overages. It is essentially a quid pro quo, if you have underages we
don’t benefit from them.” Now, Discovery is trying to disregard this “quid pro quo” that
the parties understood and relied upon for 17 years, alleging that LMNO somehow
defrauded Discovery by not paying “underages.”After 17 years, Discovery cannot now
claim the “quid pro quo” agreement and understanding that it enforced and benefitted
from did not exist.
Except as expressly admitted, LMNO denies the allegations in Paragraph 30.
31. Discovery does not quote the language of the provision, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 31.
32. LMNO admits that this language is included in Section 5.7 of the cited
document. Except as expressly admitted, LMNO denies the allegation in Paragraph 32.
33. Discovery does not quote the language of the provision, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 33.
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18PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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34. LMNO admits that the quoted language appears in Paragraph II of the cited
document. LMNO notes that the subsequent “Amendment 2” provides that “Paragraph
II of the [Amended and Restated Master] is hereby deleted and replaced in its entirety
with Paragraph 1 of Exhibit C to the Agreement.” Except as expressly admitted, LMNO
denies the allegations in Paragraph 34.
35. Discovery does not quote the language of the provision, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 36.
36. Discovery does not quote the language of the provision, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 36.
37. LMNO is unable to admit or deny the allegations in Paragraph 37 because
it cannot understand which agreements are being referenced by Discovery. Discovery
references 14 separate programs, each of which were governed by different contracts.
Except as expressly admitted, LMNO denies the allegations in Paragraph 37.
1. The Little Couple
38. LMNO admits that LMNO Cable and Discovery entered into a
“Coproduction Attachment for New Program,” dated November 5, 2008, concerning
The Little Couple program. LMNO further admits that LMNO Cable and Discovery
entered into a contract entitled “Amendment 1” on or about February 17, 2009. LMNO
further admits that LMNO Cable and Discovery subsequently entered into additional
contracts concerning the production of The Little Couple. Except as expressly admitted,
LMNO denies the allegations in Paragraph 38.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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39. Many of the “Amendments” concerned Discovery’s exercise of an option
to order an additional season or additional episodes of The Little Couple. Most of those
“Amendments” included a production budget that was negotiated between the parties.
The language concerning the “fee” or “budget contribution” required from Discovery
varies among the Amendments, and only sometimes references the production budget.
For instance, “Amendment 2,” which concerns two additional episodes, provides
that “Company agrees to pay Producer, and Producer agreed to accept a fee (the “Fee”)
which shall be One Hundred Sixteen Thousand United States Dollars (USD $116,000).”
Likewise, “Amendment 15,” which concerns “Season 6B,” provides “[t]he parties
acknowledge and agree that for Season 6B, Company’s Budget Contribution shall be a
Flat Fee of USD $126,162 per half-hour Episode for a total Flat Fee Budget
Contribution for Season 6B of USD $1,640,106.” These and other “Amendments” do
not connect the fee that Discovery is required to pay to the production budget.
Except as expressly admitted, LMNO denies the allegations in Paragraph 39.
40. LMNO admits that the quoted language appears in the cited portions of the
referenced agreement. Except as expressly admitted, LMNO denies the allegations in
Paragraph 40.
41. The separate “Amendments” concerning the production of additional
seasons or additional episodes of The Little Couple include various language concerning
the “fee” or “budget contribution” that Discover was required to pay to LMNO Cable.
As noted in response to Paragraph 39, some of the provisions connect Discovery’s
payment to a certain percentage of the production budget, while others do not.
LMNO admits that many of the “Amendments” contemplated that LMNO Cable
would contribute value to the production, but none the “Amendments” required LMNO
Cable to make any specific monetary contribution. The parties understood that LMNO
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20PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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Cable’s primary contributions to the production would be through the services of its
employees, and the use of its equipment and infrastructure.
Except as expressly admitted, LMNO denies the allegations in Paragraph 41.
42. LMNO admits that most of the relevant “Amendments” contemplated that
Discovery would pay a “fee” or “budget contribution” that was either expressly, or in
fact, equal to 70% of the negotiated production budget. LMNO further admits that the
relevant “Amendments” contemplated that LMNO Cable would provide the funding or
services necessary to produce the show within the negotiated production budget, or
would be generally be responsible for any costs exceeding the negotiated production
budget. LMNO denies that any of the “Amendments” required LMNO Cable to make
any specific monetary contribution toward the production of the shows.
Except as expressly admitted, LMNO denies the allegations in Paragraph 42.
43. Discovery does not quote to the relevant provision, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 43.
44. LMNO denies the allegations in Paragraph 44.
45. LMNO denies the allegations in Paragraph 45.
46. LMNO denies the allegations in Paragraph 46. LMNO further denies that
Discovery made any “overpayment” in connection with the production of any seasons
or episodes of The Little Couple or that LMNO Cable had any contractual obligation to
return “overpayments.”
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21PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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47. LMNO admits that the quoted language appears in the cited section of the
referenced agreement. Except as expressly admitted, LMNO denies the allegations in
Paragraph 47.
48. Discovery does not quote to the relevant provision, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 48.
2. Unusual Suspects
49. LMNO admits that LMNO Cable and Discovery entered into a
“Coproduction Attachment for New Program,” dated July 3, 2008, concerning the
Unusual Suspects program. LMNO further admits that LMNO Cable and Discovery
subsequently entered into “Amendments” to the Coproduction Attachment for Unusual
Suspects. Except as expressly admitted, LMNO denies the allegations in Paragraph 49.
50. Many of the “Amendments” concerned Discovery’s exercise of an option
to order an additional season or additional episodes of Unusual Suspects. Those
“Amendments” included a production budget that was negotiated between the parties.
Except as expressly admitted, LMNO denies the allegations in Paragraph 50.
51. LMNO admits that the quoted language appears in the cited portions of the
referenced agreement. Except as expressly admitted, LMNO denies the allegations in
Paragraph 51.
52. LMNO admits that many of the “Amendments” contemplated that LMNO
Cable would contribute value to the production, but none the “Amendments” required
LMNO Cable to make any specific monetary contribution. The parties understood that
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22PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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LMNO Cable’s primary contributions to the production would be through the services
of its employees, and the use of its equipment and infrastructure.
Except as expressly admitted, LMNO denies the allegations in Paragraph 52.
53. Discovery does not quote to the relevant provision, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 53.
54. LMNO denies the allegations in Paragraph 54.
55. LMNO denies the allegations in Paragraph 55.
56. LMNO denies the allegations in Paragraph 56. LMNO further denies that
Discovery made any “overpayment” in connection with the production of any seasons
or episodes of Unusual Suspects or that LMNO Cable had any contractual obligation to
return “overpayments.”
57. LMNO admits that the quoted language appears in the cited section of the
referenced agreement. Except as expressly admitted, LMNO denies the allegations in
Paragraph 57.
58. Discovery does not quote to the relevant provision, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 58.
3. Killer Confessions
59. LMNO admits that LMNO Cable and Discovery entered into a
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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“Coproduction Attachment for New Program,” dated August 20, 2014, concerning the
Killer Confessions program. LMNO further admits that LMNO Cable and Discovery
entered into an amendment to the Coproduction Attachment for Killer Confessions,
effective November 23, 2015. Except as expressly admitted, LMNO denies the
allegations in Paragraph 59.
60. The Attachment for Killer Confessions included a production budget that
was negotiated between the parties. Under the terms of the Attachment, Discovery’s
“Budget Contribution” was not directly linked to the production budget. With respect to
Discovery’s “contribution,” the Attachment provides that “[t]he ‘Budget Contribution’
for the Program shall be a per episode “Flat Fee’ equal to . . . (USD $266,000) per
episode (for an aggregate payment of . . . (USD $1,064,000).” Except as expressly
admitted, LMNO denies the allegations in Paragraph 60.
61. LMNO admits that the quoted language appears in the cited portions of the
referenced agreement. Except as expressly admitted, LMNO denies the allegations in
Paragraph 61.
62. LMNO denies the allegations in Paragraph 62. The flat fee paid by
Discovery was 74.5% of the agreed production budget. Discovery understood the
LMNO would primarily make “in-kind” contributions to the production of the shows,
including through the use of its own employees, equipment and infrastructure. Except as
expressly admitted, LMNO denies the allegations in Paragraph 62.
63. LMNO admits that the quoted language appears in the cited portions of the
referenced agreement. Except as expressly admitted, LMNO denies the allegations in
Paragraph 63.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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64. LMNO admits that LMNO Cable and Discovery entered into an
amendment to the Killer Confessions Attachment, effective November 30, 2015,
concerning the production of episodes for “Season 2” of the program. Discovery further
admits that the Killer Confessions Attachment provides that “[f]or subsequent
Production Years (if ordered), the Flat Fee shall be seventy-four and one- half percent
(74.5%) of the Company-approved production budget for such Production Year, subject
to the applicable production budget limits set forth hereunder.” Except as expressly
admitted, LMNO denies the allegations in Paragraph 64.
65. Discovery does not quote to the relevant provision, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 65.
4. Hollywood & Crime
66. LMNO admits that LMNO Cable and Discovery entered into a
“Coproduction Attachment for New Program,” dated March 16, 2012, concerning the
Hollywood & Crime program. Except as expressly admitted, LMNO denies the
allegations in Paragraph 66.
67. The Hollywood & Crime Attachment included a production budget that
was negotiated between the parties. Pursuant to the Attachment, Discovery agreed to
pay LMNO a fee equal to 74% of the production budget. Except as expressly admitted,
LMNO denies the allegations in Paragraph 67.
68. LMNO admits that the quoted language appears in the cited portions of the
referenced agreement. Except as expressly admitted, LMNO denies the allegations in
Paragraph 68.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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69. LMNO denies the allegations in Paragraph 69.
70. LMNO denies the allegation in Paragraph 70.
71. LMNO denies the allegations in Paragraph 71. LMNO further denies that
Discovery made any “overpayment” in connection with the production of Hollywood &
Crime or that LMNO Cable had any contractual obligation to return “overpayments.”
72. LMNO admits that the quoted language appears in the cited section of the
referenced agreement. Except as expressly admitted, LMNO denies the allegations in
Paragraph 72.
73. Discovery does not quote to the relevant provision, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 73.
74. Discovery does not quote to the relevant provision, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 74.
5. Murder Book
75. LMNO admits that LMNO Cable and Discovery entered into a
“Coproduction Attachment for New Program,” dated December 31, 2013, concerning
the Murder Book program. LMNO further admits that LMNO Cable and Discovery
subsequently entered into additional contracts entitled “Amendments” concerning
Murder Book. Except as expressly admitted, LMNO denies the allegations in Paragraph
75.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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76. The Attachment for Killer Confessions included a production budget that
was negotiated between the parties. Under the terms of the Attachment, Discovery’s
“Budget Contribution” was not directly linked to the production budget. With respect to
Discovery’s “contribution,” the Attachment provides that “[t]he ‘Budget Contribution’
for the Program shall be a per episode ‘Flat Fee’ equal to . . . (USD $238,632.20) per
episode (for an aggregate payment of . . . (USD $2,386,322)).” Except as expressly
admitted, LMNO denies the allegations in Paragraph 76.
77. LMNO admits that the quoted language appears in the cited portions of the
referenced agreement. Except as expressly admitted, LMNO denies the allegations in
Paragraph 77.
78. LMNO denies the allegations in Paragraph 78. The flat fee paid by
Discovery was 70% of the agreed production budget. Discovery understood the LMNO
would primarily make “in-kind” contributions to the production of the shows, including
through the use of its own employees, equipment and infrastructure. Except as expressly
admitted, LMNO denies the allegations in Paragraph 78.
79. LMNO admits that the quoted language appears in the cited portions of the
referenced agreement. Except as expressly admitted, LMNO denies the allegations in
Paragraph 79.
80. LMNO admits that LMNO Cable and Discovery entered into an
amendment to the Murder Book Attachment, effective February 20, 2015, concerning
the production of episodes for “Season 2” of the program. Discovery further admits that
the Murder Book Attachment provides that “[f]or subsequent Production Years (if
ordered), the Flat Fee shall be seventy percent (70%) of the Company-approved
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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production budget for such Production Year, subject to the applicable production budget
limits set forth hereunder.” Except as expressly admitted, LMNO denies the allegations
in Paragraph 80.
81. Discovery does not quote to the relevant provision, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 81.
6. Other Co-Produced Programs
82. LMNO admits that it produced the identified programs for Discovery
pursuant to co-production agreements. Each program was governed by a separate set of
agreements, and the language regarding Discovery’s “fee” or “contribution” to the
production varied between programs, and often between seasons of a single program.
While none of the agreements required LMNO to make a monetary contribution to the
production of the shows, LMNO did make “in-kind” contributions through the services
of its employees and use of its production equipment and infrastructure. LMNO denies
that it breached any of these agreements or engaged in any fraudulent conduct. Except
as expressly admitted, LMNO denies the allegations in Paragraph 82.
83. Discovery does not quote to the relevant provisions, and LMNO denies
Discovery’s characterization of the provision. Except as expressly admitted, LMNO
denies the allegations in Paragraph 83.
B. The Commission Agreements
84. LMNO admits that the programs 7 Little Johnstons and The Coroner: I
Speak for the Dead were produced for Discovery as commission programs. LMNO
denies that the production of the shows was governed by any “Master Commission
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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Agreement.” Except as expressly admitted, LMNO denies the allegations in Paragraph
84.
1. 7 Little Johnstons
85. LMNO admits that the quoted language appears in the cited portions of
the referenced document. Except as expressly admitted, LMNO denies the allegations
in Paragraph 85.
86. LMNO admits that LMNO Cable and Discovery entered into a document
titled “Commission Attachment for New Program,” dated November 10, 2014,
concerning 7 Little Johnstons program. LMNO further admits that LMNO Cable and
Discovery subsequently entered into contracts entitled “Amendments” concerning the
production of 7 Little Johnstons. Except as expressly admitted, LMNO denies the
allegations in Paragraph 86.
87. LMNO denies the allegations in Paragraph 87.
88. LMNO denies the allegations in Paragraph 88. LMNO further denies that
Discovery made any “overpayment” in connection with the production of any seasons
or episodes of the 7 Little Johnstons or that LMNO Cable had any contractual
obligation to return “overpayments.”
89. LMNO admits that the quoted language appears in the cited portions of the
referenced document. Except as expressly admitted, LMNO denies the allegations in
Paragraph 89.
90. LMNO admits that the quoted language appears in the cited portions of the
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29PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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referenced document. Except as expressly admitted, LMNO denies the allegations in
Paragraph 90.
91. LMNO denies the allegations in Paragraph 91.
2. The Coroner: I Speak for the Dead
92. LMNO admits that the quoted language appears in the cited portions of the
referenced document. Except as expressly admitted, LMNO denies the allegations in
Paragraph 92.
93. LMNO admits that LEG and Discovery entered into a document entitled
“Commission Attachment for New Program,” dated November 16, 2015, concerning
The Coroner: I Speak for the Dead program. Except as expressly admitted, LMNO
denies the allegations in Paragraph 93.
94. LMNO admits that the quoted language appears in the cited portions of the
referenced document. Except as expressly admitted, LMNO denies the allegations in
Paragraph 94.
95. LMNO admits that the quoted language appears in the cited portions of the
referenced document. Except as expressly admitted, LMNO denies the allegations in
Paragraph 95.
III. Discovery Receives Whistleblower Tip
96. LMNO denies the allegations in Paragraph 96, and specifically denies that
it engaged in any fraudulent behavior or breached any of the parties’ agreements. The
documents that Discovery deceptively calls “separate, secret internal budgets” were, in
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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fact, internal documents maintained by LMNO solely to track the use of Discovery’s
“fee” or “contribution” to the production, and to show out-of-pocket, third party costs –
that is why they reflected only the amount of Discovery’s “fee” or “contribution.” These
reports were meant solely for internal purposes, and were not intended to represent the
entire budget or cost for the production. In particular, they did not include the cost or
value of LMNO’s “in-kind” contributions to the production, including production staff,
equipment, and infrastructure.
IV. Discovery’s Response After Learning of the LMNO Defendants’
Wrongful Conduct
97. In early February 2016, Discovery’s counsel requested a meeting with
LMNO. LMNO was not told the purpose of the meeting, or who was attending, and
LMNO was not requested to prepare anything for that meeting. When the parties met at
LMNO’s office on February 10, 2016, Discovery demanded an immediate audit of
records dating back over eight years (even though many of the shows were non-
auditable and the longest audit period in any contract was two years). LMNO explained
that it was impossible for it to immediately provide the extensive documents sought by
Discovery, in part because many of its books and records had been effectively destroyed
by Ikegami, and it would take time to obtain documents from third parties such as banks
and vendors. LMNO, nonetheless, made clear that it would cooperate with the audit
requests. Instead of working with LMNO, Discovery served default notices for six
shows prior to leaving the meeting. Except as expressly admitted, LMNO denies the
allegations in Paragraph 97.
98. LMNO admits that default notices for these programs were delivered at the
meeting on February 10, 2016. Except as expressly admitted, LMNO denies the
allegations in Paragraph 98.
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31PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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99. LMNO admits that it met with Discovery on or about February 25, 2015.
LMNO further admits that it provided Discovery with a photograph evidencing the
manner in which Ikegami had effectively destroyed LMNO’s accounting books and
records, and explained the extent of work that was being done and would further be
required to identify and reassemble certain documents that Discovery sought through its
audit requests. Despite the work that would be required, and Discovery requesting
audits regarding shows and timeframes for which it had no contractual audit rights,
LMNO again made clear that it would cooperate with Discovery’s audit requests. To
that end, LMNO requested relevant third-party records from banks and vendors, and its
outside accountants and in-house finance staff began working full time to collect, and
where necessary reassemble, the requested documents.
As soon as LMNO was able to obtain the relevant third party document and
collect its own records, all the requested records were made available for review by
Discovery, and LMNO told Discovery’s auditors that they should request and would be
provided with any additional documents that they wished to review. Discovery’s
auditors spent one week at LMNO’s offices reviewing documents, but never requested
any additional documents or information. After one week, they never showed up again,
even though they had not yet reviewed all of the documents collected by LMNO, or any
documents for several of the requested shows.
Except as expressly admitted, LMNO denies the allegations in Paragraph 99.
100. LMNO denies the allegations in Paragraph 100. See Response to Paragraph
99.
101. LMNO denies the allegations in Paragraph 101. See Response to Paragraph
99.
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32PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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102. LMNO denies the allegations in Paragraph 102. See Response to Paragraph
99.
103. LMNO denies the allegations in Paragraph 103.
104. LMNO admits that, on or around June 17, 2016, Discovery sent Notices of
Termination relating to The Little Couple, Unusual Suspects, Killer Confessions,
Hollywood & Crime, The Coroner: I Speak for the Dead, and 7 Little Johnstons.
Except as expressly admitted, LMNO denies the allegations in Paragraph 104.
V. LMNO’s Wrongful Use of Discovery’s Trademarks
105. LMNO admits that Discovery has improperly registered a trademark for
THE LITTLE COUPLE in the Principal Register of the United States Patent &
Trademark Office. LMNO denies that Discovery is the owner of, or has any rights with
respect to, the name or mark “The Little Couple” except as had been provided to
Discovery through a license from LMNO. As Discovery admits, LMNO maintained
ownership of the intellectual property rights in the “co-production” shows. Except as
expressly admitted, LMNO denies the allegations in Paragraph 105.
106. LMNO admits that The Little Couple began airing on TLC on or about
May 26, 2009, that subsequent seasons have since aired on TLC, and that the show had
not aired on any other television network in the United States. LMNO has sold the show
and licensed its intellectual property in the show, including the applicable copyrights
and trademarks, to air on other networks in international markets. LMNO further admits
that Discovery has marketed, advertised, and promoted The Little Couple show using
trademarks licensed to it from LMNO. LMNO further admits that The Little Couple is a
successful show. Except as expressly admitted, LMNO denies the allegations in
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33PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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Paragraph 106.
107. LMNO admits that Discovery has promoted The Little Couple, including
the name and mark “The Little Couple,” pursuant to a license from LMNO. As a result
of the success of The Little Couple, the general public has come to associate “The Little
Couple” name and mark with The Little Couple show produced and owned by LMNO.
Except as expressly admitted, LMNO denies the allegations in Paragraph 107.
108. LMNO admits that Discovery has improperly registered a trademark for
THE LITTLE COUPLE in the Principal Register of the United States Patent &
Trademark Office. LMNO denies that Discovery is the owner of, or has any rights with
respect to, the name or mark “The Little Couple” except as had been provided to
Discovery through a license from LMNO. As Discovery admits, LMNO maintained
ownership of the intellectual property rights in the “co-production” shows. Except as
expressly admitted, LMNO denies the allegations in Paragraph 108.
109. LMNO admits that Discovery has improperly registered a trademark for
THE LITTLE COUPLE in the Principal Register of the United States Patent &
Trademark Office. LMNO denies that Discovery is the owner of, or has any rights with
respect to, the name or mark “The Little Couple” except as had been provided to
Discovery through a license from LMNO. As Discovery admits, LMNO maintained
ownership of the intellectual property rights in the “co-production” shows. Except as
expressly admitted, LMNO denies the allegations in Paragraph 109.
110. LMNO denies the allegations in Paragraph 110. As Discovery admits,
LMNO maintained ownership of the intellectual property rights in the “co-production”
shows, including the name and mark “The Little Couple.”
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34PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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111. LMNO denies the allegations in Paragraph 111. As Discovery admits,
LMNO maintained ownership of the intellectual property rights in the “co-production”
shows, including the name and mark “The Little Couple.”
112. LMNO denies the allegations in Paragraph 112.
FIRST CLAIM FOR RELIEF
Breach of Written Contract against LMNO
(LMNO’s Failure to Contribute Its Share of the Production Costs for Certain
Co-Produced Programs)
113. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 112 above.
114. LMNO denies the allegations in Paragraph 114. Discovery does not, and
cannot, cite to any contractual provision in any of the applicable agreements that
requires LMNO to make a specific monetary contribution to the production of the
shows. That is because the parties understood that LMNO would primarily contribute to
the productions through the services of its own employees and the use of its production
equipment and infrastructure.
115. The Little Couple, Unusual Suspects, Hollywood & Crime, Killer
Confessions, and Murder Book are each governed by separate agreements, none of
which Discovery attaches to its Counterclaim. Because LMNO does not know which
specific agreement(s) Discovery is referencing, and the shows cannot be lumped
together under any single agreement, LMNO denies the allegations in Paragraph 115.
116. LMNO admits that LMNO Cable and Discovery entered into an
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35PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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“Attachment” for the program The Little Couple, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 116.
117. LMNO admits that LMNO Cable and Discovery entered into various
contracts entitled “Amendments” for the program The Little Couple, which Discovery
does not attach to its Counterclaim. Because LMNO does not know which specific
agreements Discovery is referencing, LMNO denies the allegations in Paragraph 117.
118. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Unusual Suspects, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 118.
119. LMNO admits that LMNO Cable and Discovery entered into various
contracts entitled “Amendments” for the program Unusual Suspects, which Discovery
does not attach to its Counterclaim. Because LMNO does not know which specific
agreements Discovery is referencing, LMNO denies the allegations in Paragraph 119.
120. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Hollywood & Crime, which Discovery does not attach to
its Counterclaim. Because LMNO does not know which specific agreement Discovery
is referencing, LMNO denies the allegations in Paragraph 120.
121. LMNO admits that LMNO Cable and Discovery entered into a contract
entitled an “Attachment” for the program Killer Confessions, which Discovery does not
attach to its Counterclaim. Because LMNO does not know which specific agreement
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36PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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Discovery is referencing, LMNO denies the allegations in Paragraph 121.
122. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Murder Book, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 122.
123. LMNO denies the allegations in Paragraph 123.
124. LMNO denies the allegations in Paragraph 124.
125. LMNO denies the allegations in Paragraph 125.
126. LMNO denies the allegations in Paragraph 126.
127. LMNO denies the allegations in Paragraph 127.
128. LMNO denies the allegations in Paragraph 128.
SECOND CLAIM FOR RELIEF
Breach of Written Contract against LMNO
(LMNO’s Failure to Return Overpayments to Discovery
for Certain Co-Produced Programs)
129. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 128 above.
130. LMNO denies the allegations in Paragraph 130. LMNO further specifically
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37PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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denies that Discovery made any payments in excess of those required under the
applicable agreements. While the specific language varied, all of the agreements
required Discovery to make certain payments to LMNO based on a set payment
schedule. Discovery never paid more than those agreed contractual payments.
131. The Little Couple, Unusual Suspects, and Hollywood & Crime are each
governed by a separate series of agreements, none of which Discovery attaches to its
Counterclaim. Because LMNO does not know which specific agreement(s) Discovery is
referencing, and the shows cannot be lumped together under any single agreement,
LMNO denies the allegations in Paragraph 131.
132. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program The Little Couple, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 132.
133. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Unusual Suspects, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 133.
134. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Hollywood & Crime, which Discovery does not attach to
its Counterclaim. Because LMNO does not know which specific agreement Discovery
is referencing, LMNO denies the allegations in Paragraph 134.
135. LMNO denies the allegations in Paragraph 135.
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38PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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136. LMNO denies the allegations in Paragraph 136.
137. LMNO denies the allegations in Paragraph 137.
138. LMNO denies the allegations in Paragraph 138.
THIRD CLAIM FOR RELIEF
Breach of Written Contract against LMNO
(LMNO’s Failure to Keep Fair and Accurate Books, Accounts, and Records for
Certain Co-Produced Programs)
139. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 139 above.
140. LMNO denies the allegations in Paragraph 140.
141. The Little Couple, Unusual Suspects, Hollywood & Crime, Killer
Confessions, and Murder Book are each governed by a separate series of agreements,
none of which Discovery attaches to its Counterclaim. Because LMNO does not know
which specific agreement(s) Discovery is referencing, and the shows cannot be lumped
together under any single agreement, LMNO denies the allegations in Paragraph 141.
142. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program The Little Couple, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 142.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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143. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Unusual Suspects, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 143.
144. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Hollywood & Crime, which Discovery does not attach to
its Counterclaim. Because LMNO does not know which specific agreement Discovery
is referencing, LMNO denies the allegations in Paragraph 144.
145. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Killer Confessions, which Discovery does not attach to
its Counterclaim. Because LMNO does not know which specific agreement Discovery
is referencing, LMNO denies the allegations in Paragraph 145.
146. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Murder Book, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 146.
147. LMNO denies the allegation in Paragraph 147.
148. LMNO denies the allegation in Paragraph 148.
149. LMNO denies the allegation in Paragraph 149.
150. LMNO denies the allegation in Paragraph 150.
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40PLAINTIFF AND COUNTER-DEFENDANTS LMNO CABLE GROUP, INC. AND LMNO
ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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151. LMNO denies the allegation in Paragraph 151.
152. LMNO denies the allegation in Paragraph 152.
FOURTH CLAIM FOR RELIEF
Breach of Written Contract against LMNO
(LMNO’s Failure to Tender Accurate Co-Production Budgets
Reflecting Actual and Direct Costs of Production )
153-161. LMNO has filed a motion to dismiss regarding these causes of action,
and therefore does not respond to these allegations herein.
FIFTH CLATM FOR RELIEF
Breach of Written Contract against LMNO
(LMNO’s Failure to Pay Discovery Its Share of LMNO’s Adjusted Gross
Revenue for Certain Co-Produced Programs)
162. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 161 above.
163. LMNO denies the allegation in Paragraph 163.
164. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program The Little Couple, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 164.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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165. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Unusual Suspects, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 165.
166. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Killer Confessions, which Discovery does not attach to
its Counterclaim. Because LMNO does not know which specific agreement Discovery
is referencing, LMNO denies the allegations in Paragraph 166.
167. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Hollywood & Crime, which Discovery does not attach to
its Counterclaim. Because LMNO does not know which specific agreement Discovery
is referencing, LMNO denies the allegations in Paragraph 167.
168. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program Murder Book, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 168.
169. LMNO denies the allegations in Paragraph 169.
170. LMNO denies the allegations in Paragraph 170.
171. LMNO denies the allegations in Paragraph 171.
172. LMNO denies the allegations in Paragraph 172.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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173. LMNO denies the allegations in Paragraph 173.
174. LMNO denies the allegations in Paragraph 174.
SIXTH CLAIM FOR RELIEF
Breach of Written Contract against LMNO
(LMNO’s Failure to Pay Discovery Its Share of Additional Funding
for The Little Couple)
175. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 174 above.
176. LMNO admits that it has received tax credits in connection with certain
production of The Little Couple. Except as expressly admitted, LMNO denies the
allegations in Paragraph 176.
177. LMNO denies the allegations in Paragraph 177.
178. Discovery does not attach the referenced contract to its Counterclaim.
Because LMNO does not know which specific agreement Discovery is referencing,
LMNO denies the allegations in Paragraph 178.
179. LMNO denies the allegations in Paragraph 179.
180. LMNO denies the allegations in Paragraph 180.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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SEVENTH CLAIM FOR RELIEF
Breach of Written Contract against LEG
(LEG’s Failure to Keep Fair and Accurate Books, Accounts,
and Records for The Coroner: I Speak for the Dead)
181. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 180 above.
182. LMNO denies the allegations in Paragraph 182.
183. Discovery does not attach the reference contract to its Counterclaim.
Because LMNO does not know which specific agreement Discovery is referencing,
LMNO denies the allegations in Paragraph 183.
184. LMNO denies the allegations in Paragraph 184.
185. LMNO denies the allegations in Paragraph 185.
EIGHTH CLAIM FOR RELIEF
Breach of Written Contract against LMNO
(LMNO’s Failure to Keep Fair and Accurate Books, Accounts,
and Records for 7 Little Johnstons)
186. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 185 above.
187. LMNO denies the allegations in Paragraph 187.
188. Discovery does not attach the reference contract to its Counterclaim.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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Because LMNO does not know which specific agreement Discovery is referencing,
LMNO denies the allegations in Paragraph 188.
189. LMNO denies the allegations in Paragraph 189.
190. LMNO denies the allegations in Paragraph 190.
NINTH CLAIM FOR RELIEF
Breach of Written Contract against LMNO
(LMNO’s Failure to Pay Discovery All Additional Funding for
7 Little Johnstons)
191. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 190 above.
192. LMNO denies the allegations in Paragraph 192.
193. LMNO denies the allegations in Paragraph 193.
194. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program 7 Little Johnstons, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 194.
195. LMNO denies the allegations in Paragraph 195.
196. LMNO denies the allegations in Paragraph 196.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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TENTH CLAIM FOR RELIEF
Breach of Written Contract against LMNO
(LMNO’s Failure to Return Any Overpayments to Discovery for 7 Little
Johnstons)
197. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 196 above.
198. LMNO denies the allegations in Paragraph 198.
199. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program 7 Little Johnstons, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 199.
200. LMNO denies the allegations in Paragraph 200.
201. LMNO denies the allegations in Paragraph 201.
ELEVENTH CLAIM FOR RELIEF
Breach of Written Contract against LMNO
(LMNO’s Failure to Deposit Budget Contribution into a Segregated Bank
Account for 7 Little Johnstons)
202. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 201 above.
203. LMNO denies the allegations in Paragraph 203.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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204. LMNO admits that LMNO Cable and Discovery entered into an
“Attachment” for the program 7 Little Johnstons, which Discovery does not attach to its
Counterclaim. Because LMNO does not know which specific agreement Discovery is
referencing, LMNO denies the allegations in Paragraph 204.
205. LMNO denies the allegations in Paragraph 205.
206. LMNO denies the allegations in Paragraph 206.
TWELFTH CLAIM FOR RELIEF
Breach of Implied Covenant of Good Faith and Fair Dealing
for The Coroner: I Speak for the Dead against LEG
207-213. LMNO has filed a motion to dismiss regarding these causes of action,
and therefore does not respond to these allegations herein.
THIRTEENTH CLAIM FOR RELIEF
Fraud against LMNO Defendants
214-269. LMNO has filed a motion to dismiss regarding these causes of action,
and therefore does not respond to these allegations herein.
FOURTEENTH CLAIM FOR RELIEF
Recovery of Personal Property/Claim and Delivery for Killer Confessions
against LMNO
270. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 269 above.
271. LMNO admits that the quoted language appears in the cited portion of the
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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alleged agreement. Except as expressly admitted, LMNO denies the allegations in
Paragraph 271.
272. LMNO denies the allegations in Paragraph 272.
273. LMNO admits that Discovery sent a letter dated June 17, 2016 in which it
demanded that LMNO deliver to Discovery “Program Deliverables” within two
business days. Except as expressly admitted, LMNO denies the allegations in Paragraph
273.
274. LMNO admits that Discovery sent a letter dated June 23, 2016 in which is
demanded the delivery of certain material concerning Killer Confessions. Except as
expressly admitted, LMNO denies the allegations in Paragraph 274.
275. LMNO admits that Paragraph 275 correctly paraphrases items requested in
Discovery’s June 23, 2016 letter. Except as expressly admitted, LMNO denies the
allegations in Paragraph 275.
276. LMNO denies the allegation in Paragraph 276.
277. LMNO denies the allegations in Paragraph 277.
278. LMNO denies the allegations in Paragraph 278.
279. LMNO denies the allegations in Paragraph 279.
280. LMNO denies the allegations in Paragraph 280.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
1
2
3
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281. LMNO denies the allegations in Paragraph 281.
FIFTEENTH CLAIM FOR RELIEF
Recovery of Personal Property/Claim and Delivery for 7 Little Johnstons
against LMNO Defendants
282. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 281 above.
283. LMNO denies the allegations in Paragraph 283.
284. LMNO admits that the quoted language appears in the cited portion of the
alleged document. Except as expressly admitted, LMNO denies the allegations in
Paragraph 284.
285. LMNO denies the allegations in Paragraph 285.
286. Discovery does not attach the purported agreement that it references to its
Counterclaim. Because LMNO does not know what agreement Discovery is
referencing, it denies the allegations in Paragraph 286.
287. LMNO admits that Discovery sent a letter dated June 17, 2016 in which it
demanded that LMNO deliver to Discovery “Program Deliverables” within two
business days. Except as expressly admitted, LMNO denies the allegations in Paragraph
287.
288. LMNO admits that Discovery sent a letter dated June 23, 2016 in which is
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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2
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demanded the delivery of certain material concerning 7 Little Johnstons. Except as
expressly admitted, LMNO denies the allegations in Paragraph 288.
289. LMNO admits that Paragraph 289 correctly paraphrases items requested in
Discovery’s June 23, 2016 letter. Except as expressly admitted, LMNO denies the
allegations in Paragraph 289.
290. LMNO denies the allegations in Paragraph 290.
291. LMNO denies the allegations in Paragraph 291.
292. LMNO denies the allegations in Paragraph 292.
293. LMNO denies the allegations in Paragraph 293.
294. LMNO denies the allegations in Paragraph 294.
295. LMNO denies the allegations in Paragraph 295.
SIXTEENTH CLAIM FOR RELIEF
Unfair Competition in Violation of Cal. Bus. & Prof. Code § 17200 et seq.
against LMNO
296. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 295 above.
297. LMNO denies the allegations in Paragraph 297.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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2
3
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298. LMNO denies the allegations in Paragraph 298.
299. LMNO denies the allegations in Paragraph 299.
SEVENTEENTH CLAIM FOR RELIEF
Accounting for Certain Programs against LMNO
300. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 300 above.
301. LMNO denies the allegations in Paragraph 301.
302. LMNO denies the allegations in Paragraph 302.
303. LMNO denies the allegations in Paragraph 303.
304. LMNO denies the allegations in Paragraph 304.
305. LMNO denies the allegations in Paragraph 305.
EIGHTEENTH CLAIM FOR RELIEF
Declaratory Judgment of Ownership of the Co-Produced Programs
306-310. LMNO has filed a motion to dismiss regarding these causes of action,
and therefore does not respond to these allegations herein.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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2
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NINETEENTH CLAIM FOR RELIEF
Trademark Infringement and Unfair Competition Under Sections 32 and 43(a)
of the Lanham Act, 15 U.S.C. §§ 1114,1125(a) against LMNO
311. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 310 above.
312. LMNO admits that Discovery has improperly registered a trademark for
THE LITTLE COUPLE in the Principal Register of the United States Patent &
Trademark Office. LMNO denies that Discovery is the owner of, or has any rights with
respect to, the name or mark “The Little Couple” except as had been provided to
Discovery through a license from LMNO. As Discovery admits, LMNO maintained
ownership of the intellectual property rights in the “co-production” shows. Except as
expressly admitted, LMNO denies the allegations in Paragraph 312.
313. LMNO admits that Discovery has improperly registered a trademark for
THE LITTLE COUPLE in the Principal Register of the United States Patent &
Trademark Office. LMNO denies that Discovery is the owner of, or has any rights with
respect to, the name or mark “The Little Couple” except as had been provided to
Discovery through a license from LMNO. As Discovery admits, LMNO maintained
ownership of the intellectual property rights in the “co-production” shows. Except as
expressly admitted, LMNO denies the allegations in Paragraph 313.
314. LMNO denies the allegations in Paragraph 314, and specifically denies that
Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
315. LMNO denies the allegations in Paragraph 315, and specifically denies that
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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3
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8
9
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Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
LMNO owns all rights and interest in the mark “The Little Couple,” including the right
to sell apparel bearing the mark.
316. LMNO denies the allegations in Paragraph 316, and specifically denies that
Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
Consumers associate the name and mark “The Little Couple” with The Little Couple
program produced and owned by LMNO.
317. LMNO denies the allegations in Paragraph 317, and specifically denies that
Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
Consumers associate the name and mark “The Little Couple” with The Little Couple
program produced and owned by LMNO.
318. LMNO denies the allegations in Paragraph 318, and specifically denies that
Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
LMNO owns all rights and interest in the mark “The Little Couple,” including the right
to sell apparel bearing the mark.
319. LMNO admits that it has registered a stylized logo version of THE
LITTLE COUPLE mark for “clothing, namely, T-shirts and sweatshirts; Hats,” as U.S.
Patent & Trademark Office Reg. No. 4,774,145. Except as expressly admitted, LMNO
denies the allegations in Paragraph 319.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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320. LMNO admits that its use the its logo version of THE LITTLE COUPLE
mark is designed to create consumer association between the products and The Little
Couple show produced and owned by LMNO. Except as expressly admitted, LMNO
denies the allegations in Paragraph 320.
321. LMNO denies the allegations in Paragraph 321, and specifically denies that
Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
LMNO owns all rights and interest in the mark “The Little Couple,” including the right
to sell apparel bearing the mark.
322. LMNO denies the allegations in Paragraph 322.
323. LMNO denies the allegations in Paragraph 323.
324. LMNO denies the allegations in Paragraph 324.
325. LMNO denies the allegations in Paragraph 325.
326. LMNO denies the allegations in Paragraph 326, and specifically denies that
Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
LMNO owns all rights and interest in the mark “The Little Couple,” including the right
to sell apparel bearing the mark.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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2
3
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5
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7
8
9
10
11
12
13
14
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TWENTIETH CLAIM FOR RELIEF
Trademark Dilution Under Section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c)
against LMNO
327. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 326 above.
328. LMNO denies the allegations in Paragraph 328, and specifically denies that
Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
LMNO owns all rights and interest in the mark “The Little Couple,” including the right
to sell apparel bearing the mark.
329. LMNO denies the allegations in Paragraph 329, and specifically denies that
Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
LMNO owns all rights and interest in the mark “The Little Couple,” including the right
to sell apparel bearing the mark.
330. LMNO denies the allegations in Paragraph 330, and specifically denies that
Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
LMNO owns all rights and interest in the mark “The Little Couple,” including the right
to sell apparel bearing the mark. Discovery promoted The Little Couple using the name
and trademark “The Little Couple” pursuant to a license from LMNO.
331. LMNO denies the allegations in Paragraph 331, and specifically denies that
Discovery has any ownership, rights, or interest in the name and trademark “The Little
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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Couple” except as had been provided to Discovery through a license from LMNO.
LMNO owns all rights and interest in the mark “The Little Couple,” including the right
to sell apparel bearing the mark.
332. LMNO denies the allegations in Paragraph 332, and specifically denies that
Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
LMNO owns all rights and interest in the mark “The Little Couple,” including the right
to sell apparel bearing the mark.
333. LMNO denies the allegations in Paragraph 333, and specifically denies that
Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
LMNO owns all rights and interest in the mark “The Little Couple,” including the right
to sell apparel bearing the mark.
334. LMNO denies the allegations in Paragraph 334.
335. LMNO denies the allegations in Paragraph 335.
TWENTY-FIRST CLAIM FOR RELIEF
Trademark Dilution Under California Business and Professions Code § 14247
against LMNO
336. LMNO repeats and incorporates herein its responses to Paragraphs 1
through 336 above.
337. LMNO denies the allegations in Paragraph 337, and specifically denies that
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
1
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Discovery has any ownership, rights, or interest in the name and trademark “The Little
Couple” except as had been provided to Discovery through a license from LMNO.
LMNO owns all rights and interest in the mark “The Little Couple,” including the right
to sell apparel bearing the mark.
AFFIRMATIVE DEFENSES
Subject to discovery, and without assuming the burden of proof on any element or
issue for which Discovery bears the burden of proof, pursuant to Fed. R. Civ Proc. 8,
LMNO asserts the following affirmative defenses:
FIRST AFFIRMATIVE DEFENSE
(Failure to State a Claim)
Discovery’s claims, and each of them, fail to state a claim upon which relief can
be granted as a matter of law.
SECOND AFFIRMATIVE DEFENSE
(Prior Material Breach)
Discovery’s claims for breach of contract are barred by Discovery’s prior material
breach of the contracts, which excuse and discharge any obligation of LMNO to
perform under the contract.
THIRD AFFIRMATIVE DEFENSE
(Statute of Limitations)
Discovery’s claims are barred, in whole or in party, by the applicable statute of
limitations, including but not limited to California Code of Civil Procedure sections
337(1) and 338(d).
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
1
2
3
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5
6
7
8
9
10
11
12
13
14
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17
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25
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28
FOURTH AFFIRMATIVE DEFENSE
(Failure to Mitigate)
If Discovery has sustained any damages, which LMNO denies, any recovery by
Discovery must be diminished or barred because Discovery has failed to mitigate or
attempt to mitigate its alleged damages.
FIFTH AFFIRMATIVE DEFENSE
(Setoff and Recoupment)
If Discovery is entitled to any recovery against LMNO, which LMNO denies,
LMNO is entitled to offset and recoup against such recovery all obligations that
Discovery owes to LMNO, including but not limited to the obligations set forth in the
Complaint.
SIXTH AFFIRMATIVE DEFENSE
(Estoppel)
Discovery’s claims are barred, in whole or in part, by the doctrine of estoppel.
SEVENTH AFFIRMATIVE DEFENSE
(Waiver)
Discovery’s claims are barred, in whole or in part, by the doctrine of waiver.
EIGHTH AFFIRMATIVE DEFENSE
(Unclean Hands)
Discovery’s claims are barred, in whole or in part, by the doctrine of unclean
hands.
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ENTERTAINMENT GROUP, LLC’S ANSWER TO DISCOVERY’S COUNTERCLAIM
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NINTH AFFIRMATIVE DEFENSE
(Ratification)
Discovery’s claims are barred, in whole or in part, because Discovery ratified
some or all of the things it complains of in the Counterclaim.
TENTH AFFIRMATIVE DEFENSE
(Consent)
Discovery’s claims are barred, in whole or in part, because Discovery consented
to and approved of the acts and omissions about which it now complains of in the
Counterclaim.
WHEREFORE, LMNO prays for judgment as follows:
1. That Discovery take nothing by its Counterclaim and that judgment be
entered in favor of LMNO;
2. That LMNO be awarded fees and costs of suit herein, as allowed by
contract and/or applicable law; and
3. For such other and further relief as the Court deems proper.
Dated: September 8, 2016 BARNES & THORNBURG LLP
By /s/ Stephen R. Mick___ _Stephen R. Mick
Attorneys for PlaintiffLMNO CABLE GROUP, INC.
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