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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)[email protected] W. NELSON (SBN 240040)[email protected] & 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.

Case 2:16-cv-04543-JAK-SK Document 37 Filed 09/08/16 of 58 Page ID #:904

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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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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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would have been either stolen from LMNO or created by Ikegami. Discovery refused to

cooperate or to provide LMNO with copies of any documents.


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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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.


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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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.


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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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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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.


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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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.


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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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.


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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of the shows.


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.


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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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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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.


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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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.


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.


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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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.


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.



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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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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.


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.





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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








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.


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,



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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.


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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Cable’s primary contributions to the production would be through the services of its

employees, and the use of its equipment and infrastructure.


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.


43. Discovery does not quote to the relevant provision, and LMNO denies



44. LMNO denies the allegations in Paragraph 44.


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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47. LMNO admits that the quoted language appears in the cited section of the


Paragraph 47.




2. Unusual Suspects


“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.




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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LMNO Cable’s primary contributions to the production would be through the services

of its employees, and the use of its equipment and infrastructure.









or episodes of Unusual Suspects or that LMNO Cable had any contractual obligation to

return “overpayments.”



Paragraph 57.




3. Killer Confessions



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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.



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




Paragraph 63.


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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





4. Hollywood & Crime


“Coproduction Attachment for New Program,” dated March 16, 2012, concerning the

Hollywood & Crime program. Except as expressly admitted, LMNO denies the


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,




Paragraph 68.


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70. LMNO denies the allegation in Paragraph 70.


Discovery made any “overpayment” in connection with the production of Hollywood &

Crime or that LMNO Cable had any contractual obligation to return “overpayments.”



Paragraph 72.







5. Murder Book


“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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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




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




Paragraph 79.


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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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.




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



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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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





or episodes of the 7 Little Johnstons or that LMNO Cable had any contractual

obligation to return “overpayments.”


referenced document. Except as expressly admitted, LMNO denies the allegations in

Paragraph 89.



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Paragraph 90.


2. The Coroner: I Speak for the Dead



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




Paragraph 94.



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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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


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



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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.



99.


99.


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99.


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.


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


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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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.
















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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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.”


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.



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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.


“Attachment” for the program Unusual Suspects, which Discovery does not attach to its



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.


“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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Discovery is referencing, LMNO denies the allegations in Paragraph 121.


“Attachment” for the program Murder Book, which Discovery does not attach to its









SECOND CLAIM FOR RELIEF


(LMNO’s Failure to Return Overpayments to Discovery

for Certain Co-Produced Programs)


through 128 above.

130. LMNO denies the allegations in Paragraph 130. LMNO further specifically


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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,
















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THIRD CLAIM FOR RELIEF


(LMNO’s Failure to Keep Fair and Accurate Books, Accounts, and Records for

Certain Co-Produced Programs)


through 139 above.


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.






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“Attachment” for the program Killer Confessions, which Discovery does not attach to












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FOURTH CLAIM FOR RELIEF


(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


(LMNO’s Failure to Pay Discovery Its Share of LMNO’s Adjusted Gross

Revenue for Certain Co-Produced Programs)


through 161 above.







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“Attachment” for the program Killer Confessions, which Discovery does not attach to
















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SIXTH CLAIM FOR RELIEF


(LMNO’s Failure to Pay Discovery Its Share of Additional Funding

for The Little Couple)


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



178. Discovery does not attach the referenced contract to its Counterclaim.

Because LMNO does not know which specific agreement Discovery is referencing,





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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)


through 180 above.


183. Discovery does not attach the reference contract to its Counterclaim.





EIGHTH CLAIM FOR RELIEF


(LMNO’s Failure to Keep Fair and Accurate Books, Accounts,

and Records for 7 Little Johnstons)


through 185 above.


188. Discovery does not attach the reference contract to its Counterclaim.


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NINTH CLAIM FOR RELIEF


(LMNO’s Failure to Pay Discovery All Additional Funding for

7 Little Johnstons)


through 190 above.




“Attachment” for the program 7 Little Johnstons, which Discovery does not attach to its






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TENTH CLAIM FOR RELIEF


(LMNO’s Failure to Return Any Overpayments to Discovery for 7 Little

Johnstons)


through 196 above.








ELEVENTH CLAIM FOR RELIEF


(LMNO’s Failure to Deposit Budget Contribution into a Segregated Bank

Account for 7 Little Johnstons)


through 201 above.



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TWELFTH CLAIM FOR RELIEF

Breach of Implied Covenant of Good Faith and Fair Dealing

for The Coroner: I Speak for the Dead against LEG



THIRTEENTH CLAIM FOR RELIEF

Fraud against LMNO Defendants



FOURTEENTH CLAIM FOR RELIEF

Recovery of Personal Property/Claim and Delivery for Killer Confessions

against LMNO


through 269 above.

271. LMNO admits that the quoted language appears in the cited portion of the


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alleged agreement. Except as expressly admitted, LMNO denies the allegations in

Paragraph 271.


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


275. LMNO admits that Paragraph 275 correctly paraphrases items requested in

Discovery’s June 23, 2016 letter. Except as expressly admitted, LMNO denies the








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FIFTEENTH CLAIM FOR RELIEF

Recovery of Personal Property/Claim and Delivery for 7 Little Johnstons

against LMNO Defendants


through 281 above.


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.


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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demanded the delivery of certain material concerning 7 Little Johnstons. Except as


289. LMNO admits that Paragraph 289 correctly paraphrases items requested in

Discovery’s June 23, 2016 letter. Except as expressly admitted, LMNO denies the








SIXTEENTH CLAIM FOR RELIEF

Unfair Competition in Violation of Cal. Bus. & Prof. Code § 17200 et seq.

against LMNO


through 295 above.



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SEVENTEENTH CLAIM FOR RELIEF

Accounting for Certain Programs against LMNO


through 300 above.






EIGHTEENTH CLAIM FOR RELIEF

Declaratory Judgment of Ownership of the Co-Produced Programs




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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


through 310 above.
















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.



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LMNO owns all rights and interest in the mark “The Little Couple,” including the right

to sell apparel bearing the mark.




Consumers associate the name and mark “The Little Couple” with The Little Couple

program produced and owned by LMNO.




Consumers associate the name and mark “The Little Couple” with The Little Couple

program produced and owned by LMNO.






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



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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

















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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


through 326 above.















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.




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TWENTY-FIRST CLAIM FOR RELIEF

Trademark Dilution Under California Business and Professions Code § 14247

against LMNO


through 336 above.



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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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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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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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Case 2:16-cv-04543-JAK-SK Document 37-1 Filed 09/08/16 Page 1 of 4 Page ID #:962

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