08-6053-cv Streit V Twentieth Century Fox Appellants' Brf 2-9-09 (2)

08-6053-CV IN THE

United States Court of Appeals FOR THE SECOND CIRCUIT

>> >> CINDY STREIT, BEN K MCKINNON, MICHAEL M JARED, LYNN S JARED, SARAH MOSELEY, Plaintiffs-Appellants, v.

TWENTIETH CENTURY FOX FILM CORPORATION, ONE AMERICA PRODUCTIONS, INC., SPRINGLAND FILMS, TODD LEWIS SCHULMAN, MONICA LEVENSON, JULIE LYNN CHOUNARD, SACHA BARON COHEN, EVERYMAN PICTURES, GOLD/MILLER PRODUCTIONS, DUNE ENTERTAINMENT, LLC, FOUR BY TWO PRODUCTIONS COMPANY, PETER BAYNHAM, JAN MAZER, ANTHONY HINES, Defendants-Appellees,

MAJOR STUDIO PARTNERS, INC., Defendant.

On Appeal from the United States District Court for the Southern District of New York

BRIEF FOR PLAINTIFFS-APPELLANTS

ADAM RICHARDS LLC Attorneys for Plaintiffs-Appellants Of Counsel:

Adam Richards

40 Fulton Street New York, New York 10038 212-233-4400

TABLE OF CONTENTS Page TABLE OF AUTHORITIES ................................................................................... iii JURISDICTIONAL STATEMENT ..........................................................................1 ISSUES PRESENTED FOR REVIEW .....................................................................2 STATEMENT OF THE CASE..................................................................................3 STATEMENT OF FACTS AND PROCEDURAL HISTORY ................................8 ARGUMENT .......................................................................................................... 16 I.

STANDARD OF REVIEW .................................................................. 17

II. THE DISTRICT COURT’S FINDING THAT THE RELEASES EXECUTED BY THE APPELLANTS WERE NOT AMBIGUOUS WAS CLEAR ERROR AND SHOULD BE REVERSED .................................................................. 18 A.

The Release Is Deliberately Misleading, Is Unenforceable And Does Not Contradict The Claims of Fraud In The Complaint............................................................18

B.

The Phrase “Documentary Style” is an Ambiguity Which Cannot be Resolved as a Matter of Law............................23

III. THE DISTRICT COURT ERRED BY DISMISSING APPELLANTS’ CLAIMS BASED ON THE RELEASES BECAUSE APPELLANTS ALLEGED THAT THE RELEASES WERE PROCURED BY FRAUD....................................27 A.

The Appellants Adequately Pleaded Fraudulent Inducement Which Is Sufficient To Defeat A Motion To Dismiss.....................................................................................27

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B.

The District Court’s Reliance on Danann Realty Corp. v. Harris Is Misplaced.........................................................32

IV. APPELLEES WERE UNDER A DUTY TO DISLCOSE THEIR TRUE IDENTITIES AS WELL AS THE TRUE NATURE OF THE FILM......................................................................37 CONCLUSION....................................................................................................... 40

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TABLE OF AUTHORITIES FEDERAL CASES Banque Arabe et International D’Investissement v. Maryland Nat. Bank, 57 F.3d 146, 153 (2d Cir. 1995) .........................................................................37 Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1966 (2007) ..............................................................................18 Brass v. American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir. 1993) .......................................................................37 Davis v. Scherer, 468 U.S. 183 (1984)............................................................................................17 DeMuria v. Hawkes, 328 F.3d 704, 706 (2d Cir. 2003). ................................................................17, 27 Golden Pacific Bancorp. V. Fed. Deposit Ins. Corp., 273 F.3d 509 (2d Cir. 1993) .........................................................................23, 24 Hofheinz v. Discovery Communications, Inc., No. 00 Civ. 3802 (HB), 2001 WL 1111970, *4 (S.D.N.Y. Sept. 20, 2001) ......26 Information Superhighway, Inc. v. Talk America, Inc. 274 F. Supp. 2d 466 (S.D.N.Y. 2003) ...............................................................23 Lifson v. INA Life Ins. Co. of New York, 333 F.3d 349, 353 (2d Cir. 2003) .......................................................................24 Patane v. Clark, 508 F.3d 106 (2d Cir. 2007) ..............................................................................18 Psenicska v. Twentieth Century Fox Film Corp., et al, Case No. 07 Civ. 10972 ...............................................................................19, 20 Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)....................................................................................17 iii

UBS AG, Stamford Branch v. Healthsouth Corp., No. 07 Civ. 8490 (LAP), 2008 WL 2337846, at *5 (S.D.N.Y. June 6, 2008) ...............................................................................................................32 Walk-in Medical Centers, Inc. v. Breuer Capital Corp., 818 F.2d 260, 263-64 (2d Cir. 1987) ..................................................................18 STATE CASES Alexander & Alexander of New York, Inc. v Fritzen, 68 N.Y.2d 968, 969 (1986) .................................................................................29 Anger v. Ford Motor Co. Dealer Development, 80 A.D.2d 736; 437 N.Y.S.2d 165 (4th Dep’t 1981) .........................................28 Bloss v. Va’ad Harabonim of Riverdale, 203 A.D.2d 36; 610 N.Y.S.2d 197 (1st Dep’t 1994)..........................................28 Cahill v. Regan, 5 N.Y.2d 292; 184 N.Y.S.2d 348 (1959)............................................................19 Cirillo v. Slomin’s Inc., 196 Misc. 2d 922, 768 N.Y.S.2d 759 (N.Y. Sup.Ct., Nassau Co. 2003)...........................................................34, 36, 37 Danann Realty Corp. v. Harris, 5 N.Y.2d 317 (1959) ............................................................................... 17, 32-37 Demaria v. Brenhouse, 277 A.D.2d 344; 716 N.Y.S.2d 99 (2d Dep’t 2000) ..........................................19 Doldan v. Fenner, 309 A.D.2d 1274; 765 N.Y.S.2d 401 (4th Dep’t 2003).......................................23 Farber v. Breslin, 47 A.D.3d 873; 850 N.Y.2d 604 (2d Dep’t 2008)..............................................28 Gibli v. Kadoshi, 279 A.D.2d. 35; 717 N.Y.S.2d 553 (1st Dep’t 2000).........................................28 iv

Integrated Book Technology, Inc. v. T/R Systems, Inc., 2 A.D.3d 1193; 770 N.Y.S.2d 186 (3rd Dep’t 2003) ..........................................23 Jackson v. State of New York, 205 N.Y.S. 658, 661 (N.Y. App. Div. 1924)........................................................3 Newin Corp. v. Hartford Acc. & Indem. Co., 37 N.Y.2d 211, 371 N.Y.S.2d 884 (1975)....................................................27, 30 Newin Corp. See, e.g., Ladenburg Thalman & Co., Inc. v. Imaging Diagnositc Systems, Inc., 176 F. Supp. 2d 199 (S.D.N.Y. 2001) ...............................................................27 Starr v. Johnson, 143 A.D.2d 130; 531 N.Y.S.2d 589 (2d Dep’t 1988) ........................................39 Steen v. Bump, 233 A.D.2d 583; 649 N.Y.S.2d 731 (3d Dep’t 1996) ........................................28

FEDERAL STATUTES 28 U.S.C. § 1291........................................................................................................1 28 U.S.C. § 1331........................................................................................................1 28 U.S.C. § 1338........................................................................................................1 Fed. R. Civ. P. 9(b) ..................................................................................................29 Fed. R. Civ. P. 12(b)(6)..............................................................................................1 Fed. R. Civ. P. 41(a)...................................................................................................1 Fed. R. Civ. P. 54(b) ..................................................................................................1

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MISCELLANEOUS Gritten: Halliwell’s Film Video & DVD Guide 2008 at p. 151 (Harper Collins 2007) .........................................................................22 http://www.goldenglobes.org/nominations/year/2006 ............................................21 http://www.oscar.com/nominees/index?pn=index#10_BestDocumentaryFeat ureNominationCategory......................................................................................22

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Jurisdictional Statement The District Court had original jurisdiction under 28 U.S.C. §§ 1331 and 1338. Appellate jurisdiction exists under 28 U.S.C. § 1291. This appeal is from an Order (Preska, J.) dismissing the case below pursuant to Fed. R. Civ. P. 12(b)(6) and entered in the United States District Court for the Southern District of New York on September 3, 2008. The Order appealed from disposed of all claims. Appellants Cindy Streit, et al. timely filed a Notice of Appeal from the Order on September 29, 2008. Subsequently, Staff Counsel to this Court raised the issue of whether Appellants’ appeal was premature. Specifically, Staff Counsel noted that Appellants’ claims against Defendant Major Studio Partners, Inc. were dismissed pursuant to Rule 41(a)(1)(i) of the Federal Rules of Civil Procedure "without prejudice" and no certification pursuant to Fed. R. Civ. P. 54(b) had been granted. Accordingly, an issue arose as to whether the Court’s September 3 Order was final for the purposes of the appeal filed on September 3, 2008. Upon further discussion with Staff Counsel, counsel for the parties executed a Stipulation Withdrawing Apparently Premature Appeal With Conditional Right of Reinstatement (R. A197-98). That stipulation was filed in the Second Circuit on December 2, 2008 and the mandate of the Second Circuit withdrawing the appeal was filed on December 4, 2008 (R. A197-98).

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Thereafter, on or about December 5, 2008, Appellants filed in the District Court a Stipulation Dismissing Defendant Major Studio Partners, Inc. With Prejudice (R. A199-200). On December 9, 2008, the District Court entered an Order approving the dismissal of Defendant Major Studio Partners, Inc. with prejudice (R. A199-200). On December 11, 2008, Appellants timely reinstated their initial appeal by filing a second Notice of Appeal from the District Court’s December 9, 2008 Order (R. A201-02).

Issues Presented for Review (1)

Whether the District Court erred by finding that the Releases executed

by the Appellants were not ambiguous. (2)

Whether the District Court’s finding that the Releases barred

Appellants’ claims despite the Appellants’ extensive allegations (and evidence) of fraudulent inducement and well-settled New York law that the mere allegations of fraud in the inducement of a release warrant denial of a motion to dismiss that is grounded on that release.

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Statement of the Case “A party to a contract cannot, by misrepresentation of a material fact, induce the other party to the contract to enter into it to his damage and then protect himself from the legal effect of such misrepresentation by inserting in the contract a clause to the effect that he is not to be held liable for the misrepresentation which induced the other party to enter into the contract. The effect of misrepresentation and fraud cannot be thus easily avoided.” -- Long Standing Precept of New York law as enunciated in Jackson v. State of New York, 205 N.Y.S. 658, 661 (N.Y. App. Div. 1924) This appeal arises from the Appellants’ unwitting performance in the now infamous “dinner party scene” in the even more infamous movie: “Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan” (the “Borat movie”). The District Court’s ruling, if permitted to stand, raises many questions: should the law enable sophisticated business people to hire experienced, highpriced lawyers to defraud unsuspecting and trusting individuals through their superior knowledge of legal technicalities in order to reap huge profits at the individuals’ humiliation and expense? Is it fair or reasonable to permit deceptive con-artists to insulate themselves from liability for their fraud and other misconduct by using exculpatory clauses in non-negotiable contracts of adhesion? Should this Court allow a well-financed Hollywood production company to dupe unsuspecting individuals into filming sessions that, unbeknownst to the victims, will be included in a pornography-filled, profanity-laden motion picture shown 3

world-wide to millions of viewers? Does the law provide no recourse for these victims? How can the answer to any of the above questions be “yes?” In dismissing Appellants’ Amended Complaint, the District court found (1) that the “Standard Consent Agreements” releasing all of Appellants’ claims (the “Releases”) were not ambiguous and (2) that the Appellants waived their fraudulent inducement claims based upon a merger/disclaimer clause contained in the Releases. Appellants urge this Court to reconsider the pleadings in this case and the Releases themselves. The Releases are ambiguous at best and, in reality, are

intentionally

misleading,

particularly

in

light

of

the

pre-signing

misrepresentations. Additionally, there is well-settled New York law that provides a roadmap for this Court to set aside the Releases based on the fact that the Appellees fraudulently induced the Appellants to sign them. Despite the Court’s finding that the Releases were valid and thus acted as a bar to all of Appellants’ claims, this case presents a clear example of fraud. The Appellees, under the ruse of making an educational documentary, concocted a well-laid plan to defraud the Appellants, fraudulently induced Appellants into signing agreements releasing all of Appellants’ claims and ultimately made hundreds of millions of dollars at Appellants’ expense. This Court now has the

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opportunity to undo the injustice that was perpetrated by the Appellees. The Appellants implore the Court to reverse the District Court’s decision. The story of this case began when Appellant Cindy Streit (“Streit”) agreed to provide dining etiquette training to, and, along with the other Appellants, have dinner with a “foreign dignitary” from the country of Belarus to be filmed for a purported “educational documentary” that would be shown only on Belarus Television.

Streit memorialized this understanding, which was based on the

Appellees’ oral representations, in a written agreement executed by the parties (the “ETS Agreement”). On the night that the training and dinner were to occur, the Appellees served some of the Appellants wine while they waited for almost two hours for the dignitary to arrive. At no time during that long wait did the Appellees present the Appellants with the Release which the District court has found absolves them of their fraudulent conduct. Instead, the Appellees waited to present the Releases to the Appellants until just moments before the “dignitary” arrived. They then rushed the Appellants to sign the Releases.

Prior to the execution, Appellee Todd

Schulman (acting under the alias “Todd Lewis”), an employee of Springland Films (a d/b/a of One America Productions, Inc.), assured Streit and the other Appellants that the Releases did not change any of the terms of the ETS Agreement and would

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not harm the guests in any way. Unbeknownst to the Appellants, the Appellees were scamming them in an effort to shoot a scene for the Borat movie. Appellees are asking this Court to ignore Appellants’ well-plead allegations that the Appellees repeatedly lied to and systematically defrauded the Appellants into appearing in the Borat movie and signing the Releases. Under long-standing New York law, however, well-plead allegations of fraud defeat a motion to dismiss premised on a release. The District Court, however, chose to ignore completely this well-established law in its September 3 Decision and Order. For that reason alone, the Order should be reversed. Although Appellees argue that the wording of the Release contradicts any claim of fraud, they are wrong. The Appellees contend that the Borat movie is exactly the “documentary-style film” described in the Release. This argument is not only belied by Appellee Sacha Baron-Cohen (“Cohen”) himself but also by film journalists, authors and the awards bestowed upon the Borat movie, none of which, were in the documentary category. The Borat movie is not a documentary, nor can it correctly be categorized as “documentary-style.” Instead, the entire movie is premised on fooling multiple innocent and unwitting participants like the Appellants. At the very least, the phrase “documentary-style film” renders the Releases ambiguous. As a result, the District Court erred in granting the Motion to Dismiss. 6

Appellees also claim that the disclaimers in the merger clause of the Release preclude Appellants’ reliance on Appellees’ misrepresentations. That is not so. First, as mentioned above, a party cannot fraudulently induce another party to enter into a contract to his/her detriment and then shield itself from liability through the use of a disclaimer in the contract of the very fraud used to induce the signing of the contract in the first place.

Second, Appellees, who were all Hollywood

insiders, had peculiar knowledge of the material facts, had a duty in equity and good conscience to disclose the true nature of their business, and, in failing to do so, effectively made it impossible for the Appellants to conduct any meaningful investigation into the ramifications of the Release or the veracity of the Appellees’ representations. The Appellants must now live with the fact that they will forever be linked to a vulgar and offensive film in which they are portrayed as backward and racially intolerant.

Tellingly, in its Decision and Order, the District Court lumps in

Appellants with the other unwitting participants in the film and fails to distinguish their appearance from any of the others in the film. See September 3 Decision and Order at 3 (R. 168) (“[t]he movie challenges its viewers to confront, not only the bizarre and offensive Borat character himself, but the equally bizarre and offensive reactions he elicits from “average” Americans). This is how the Appellants will always be remembered by the movie-going public. 7

The Appellees, on the other hand, through their defrauding of Appellants, reaped hundreds of millions of dollars without paying Appellants for their contribution or humiliation. The Appellants are entitled to the day in court that was erroneously denied to them by the District Court. Statement of Facts and Procedural History Appellant Streit is the owner of ETS, an etiquette training business (R. A91).1 On or about October 21, 2005, Appellee Schulman, operating under the alias “Todd Lewis” of Springland Films, contacted Streit to request the services of Streit and ETS (R. A91). Schulman represented that he was assisting Springland in filming an educational documentary for Belarus Television about a foreign dignitary’s tour of the United States (R. A91). Schulman stated that the dignitary needed etiquette and dining skills training and inquired whether Streit and ETS could provide such services (R. A91). Schulman also explained that this portion of the documentary was designed to portray a Southern, in-home style dining experience and requested that Streit arrange for such a dinner (R. A91). During all times relevant hereto, Schulman was acting as an agent for and in conspiracy with the other Appellees (R. A91). Streit agreed to perform the requested etiquette and dining skills training and to arrange a catered dinner complete with appropriate guests (R. A91). 1

All references beginning with the prefix “R” are to the Revised Record on appeal. 8

On the evening of October 21st, Schulman requested to meet with Streit in order to finalize the arrangements and for Schulman to examine a potential training location (R. A92). Schulman also requested to meet one of the guests that would be present at the dinner party (R. A92). The following day, October 22nd, Schulman and Appellants Streit and McKinnon met at a Birmingham, Alabama, restaurant to discuss the arrangements for the training and dinner (R. A92). During that meeting, Schulman provided further details about the “foreign dignitary,” discussing the dignitary’s home country of The Republic of Belarus, which he described as a small country in the former Soviet Union (R. A92). Schulman also stated that the dignitary worked with Belarus Television and this “educational documentary” was for the cultural enrichment of that country (R. A92).

Schulman further represented that the

documentary was to be in the nature of those shown by National Geographic and was being made to help build relations between the United States and Belarus (R. A92). Streit asked Schulman whether Belarus Television was similar to Alabama Public Television, and he replied that it was very similar (R. A92). Schulman represented that Appellants’ role in the documentary was mainly for school children to learn cultural diversity and to learn about Southern traditional values and Southern-style living (R. A92).

Appellant McKinnon asked whether

Schulman knew the dignitary’s name (R. A92). Schulman responded that he did, 9

but was unsure how to pronounce it (R. A92). Schulman further stated that the dignitary spoke English so there would not be problems with communication (R. A92).

Schulman repeatedly referred to the visiting guest (now known to be

Appellee Cohen) as a “dignitary” (R. A92). That evening, Schulman notified Streit that Springland had authorized Streit to perform the requested training and dinner services (R. A92). At that time, Schulman stated that the restaurant at which they met would not be appropriate for filming and, as such, requested that the dinner and training take place in a Southern home “with columns” (R. A92-93). Schulman stated that he would pay $600 extra for an in-home setting. Both the training and dinner were to take place on October 24, 2005 (R. A93). On the evening of October 22nd and on October 23rd, Streit arranged for the attendance of dinner guests, including Appellants Moseley, McKinnon, Michael Jared and Lynn Jared, among others (R. A93). Streit also arranged for catering services and reserved a dining facility – a home with columns (R. A93). In the hours prior to the training and dinner on October 24, 2005, Streit and Springland Films, by way of Springland Films representatives, Julie Lynn Chounard and Monica Levenson, negotiated a written contract for Streit’s services (R. A93). At all times relevant hereto, Chounard and Levenson were acting as agents for and in conspiracy with the other Appellees (R. A93). Consistent with 10

the representations of Appellees Schulman, Levenson, Chounard and Springland, the contract contains the following provisions: ETS will customize its “Business Etiquette and Leadership Programs” and Dining Tutorial Program and present a two-hour training session for an international guest from Belarus Television for Springland Films. Additionally, ETS will plan, design, facilitate, coordinate and implement an inhome style atmosphere dining experience for the dignitary. *** These sessions will be filmed as part of a documentary for Belarus Television and for those purposes only. *** The purpose of this film session is to enable the dignitary to interact in a home-like setting of southern hospitality and comfort to learn about southern traditional values and southern-style living as part of the entire cultural experience in his travels throughout America. The portrayal of participants will be filmed and used for purposes only of the utmost dignity and class. There will not be any embarrassment to the participants or ETS. (R. A93-94, R. A143). During the dinner later that evening, Appellee Cohen performed numerous offensive and outrageous acts, several of which, identified below, became part of the final, edited version of the Borat movie, its trailers and other promotional material (R. A94).2 The scenes in the Borat movie leading up to the dinner include Cohen driving to the house where the dinner is scheduled to take place (R. A94). At this Appellants have included one originally purchased version of the Borat Movie in the Appendix. Should the Court require further copies, Appellants will provide them at such time. 2

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point, the Borat movie flashes to the following road name: “Secession, Private Drive” (R. A94). The road on which the dinner facility was located does not bear this name, nor do any of the Appellants live on or know of such a road (R. A94). Upon information belief, Appellees scripted the “Secession Drive” scene to set the stage for Cohen’s portrayal of Appellants as being racially intolerant (R. A94). During the dinner, Cohen referred to Appellant Michael Jared as “retarded” and then complimented the other guests on their willingness to let “retarded” persons dine with them (R. A94). He asked the dinner guests whether they owned slaves (R. A94). He made several derogatory and sexists comments to the women who were present (R. A94). At one point, Cohen excused himself to the bathroom only to come back to the dinner table holding a plastic bag purportedly containing his own feces (R. A94). Upon information and belief, a member of Springland films had defecated in the plastic bag prior to filming the dinner scenes (R. A94). Appellant Streit was shocked at the sight of the plastic bag, but assisted Cohen to the restroom, only to have Cohen falsely describe his own culture’s bathroom etiquette (R. A94). During this scene in the film, Cohen tells Streit that his understanding is that the host of the dinner is responsible for “wiping” him (R. A94). Believing that Cohen was, as represented, a foreign dignitary unaccustomed to American ideals, Appellants acted with benevolence toward Cohen and made all attempts to be tolerant of his conduct (R. A95). 12

After returning from the restroom, there was a knock at the door and Cohen presented an African-American female to the dinner guests as a prostitute he had asked to dine with them (R. A95). Appellants have since learned that this was professional actress Luenell Campbell (a.k.a. Jane Sanguinetti Luenell) (R. A95). The Borat movie depicts that, at this point in the dinner, certain of the guests chose to leave (R. A95). Appellees purposely edited the scenes in which Ms. Campbell appeared in order to give the impression that Appellants and others present at the dinner were intolerant of dining with members of another race and left as a result of her presence (R. A95). What was filmed, but not shown in the Borat movie, however, was that Streit apologized to Ms. Campbell for what Streit believed was Campbell’s involuntary participation in the Appellees’ scheme (R. A95). Appellants at all times acted in goodwill towards Ms. Campbell. The scripting, filming and showing of the “Secession Drive” scene leading up to the dinner was designed to set the stage for this false portrayal (R. A95). At the end of the dinner scenes, the film shows Cohen leaving and asking whether the cause of the commotion was that the “retard had gotten out of his cage” (R. A95). The scenes of the Borat movie following those in which Appellants appeared show Cohen at an “antique” store that sells various civil war and Confederate items, including signage associating the Confederate, or “Rebel” flag, 13

with “Secession” (R. A95). Upon information and belief, Appellees’ scripting, filming and showing of this portion of the Borat movie was made for the purpose of linking the scenes of the dinner with “Secession,” its association with the Confederate flag and racial intolerance (R. A95-96). Indeed, this is exactly how it has been interpreted by the viewing public (R. A96). One movie review describes the “dinner scenes” as follows: “You hear about people so racist they can’t stand to be in the same room as one of ‘them’” (R. A96). Another says it this way: “The other guests try to excuse it all away up until Borat’s dinner guest arrives, an overweight black prostitute. Not something that someone living on Secession Drive … can handle” (R. A96) Without Appellants’ consent, the Appellees revised, edited, formatted and distributed scenes from the Appellants’ dinner with Cohen into a segment for the Borat movie and have used these scenes in advertising and promotion for the movie in multiple media, including print, television and the Internet (R. A96). The dinner scenes are frequently depicted in trailers for the Borat movie and are among the most critical components to the popularity and financial success of the movie (R. A96). The Borat movie was released in the United States on or about November 3, 2006 (R. A96). The movie carries an R-rating “for pervasive strong crude and sexual content including graphic nudity, and language” according to the Motion 14

Pictures Association of America and the National Association of Theatre Owners (R. A96). In its first ten days in the box office, the Borat movie grossed approximately $68,000,000.00 (R. A96). Upon information and belief, as of December 21, 2006, ticket sales for the Borat movie had grossed more than $227,613,553.00 worldwide (R. A96). Upon information and belief, DVD sales and the sale of other movierelated items have dramatically increased the amount of total revenue generated by the film (R. A96). Upon information and belief, the total production cost for the Borat movie was only $18 million (R. A97). Appellees were able to keep such costs to a minimum by defrauding Appellants and others into playing the roles that would otherwise be occupied by paid actors and actresses (R. A97). Appellants have been made the subjects of numerous newspaper and magazine articles, internet postings and television programs as a result of their involvement with the movie and their names, likenesses and images have been repeatedly associated with the acts performed by Appellee Cohen at the October 24, 2005, dinner (R. A97). Contrary to Appellees’ oral and written representations to the Appellants, Appellees were not filming an educational documentary for a foreign dignitary to be shown on Belarus Television (R. A97). There was no “foreign dignitary,” but 15

only Cohen, a paid actor who carried out this previously-scripted, outrageous conduct (R. A97). There was no “educational documentary,” but only a film memorializing the mockery, humiliation and degradation of unsuspecting participants (R. A97). Not everyone involved in the filming of the Borat movie were victims of fraud (R. A97). Appellees selectively disclosed the purpose and intent of the Borat movie to professional actors and actresses, including Appellee Cohen, Pamela Anderson and Luenell Campbell (aka Jane Sanguinetti Luenell) (R. A97). These individuals were given an opportunity to review and agree to the movie script and knowingly participate in the Borat movie (R. A97). Unlike the Appellants, they had the option to decide whether or not to have their names, likenesses and images associated with a movie containing racism, child pornography, sexism, nudity, anti-Semitism and vulgarity (R. A97). And, unlike the Appellants, they had the option to determine how their participation in the Borat movie would affect their personal, social and business lives (R. A97-98). Argument As set forth below, for several reasons, the District Court’s Decision and Order should be reversed. First, The District Court erroneously found the term “documentary-style” in the Release to be unambiguous in the context of the Borat Movie, a film that, as reflected by the awards it won and the criticism it received, is 16

virtually impossible to classify. The term is not only ambiguous, but was integral to Appellees overall scheme to deceive Mrs. Martin into executing the Release. Second, in enforcing the terms of the Release, the District Court misplaced its reliance on Danann Realty Corp. v. Harris, 5 N.Y.2d 317 (1959), a case involving sophisticated business parties involved in an arms-length business transaction. The facts and circumstances of Danann are light years away from those here. Finally, the District Court failed to properly address clear New York law holding one party to a transaction liable for misrepresentation where, like here, that party misrepresents facts and where, like here, that party possesses superior information sufficient to undo the misrepresentation and fails to disclose it. I.

STANDARD OF REVIEW The standards for reviewing the District Court’s dismissal are well-settled in

the Second Circuit. The Second Circuit applies “a de novo standard of review to the grant of a motion to dismiss on the pleadings, accepting as true the complaint’s factual allegations and drawing all inferences in Appellant’s favor.” DeMuria v. Hawkes, 328 F.3d 704, 706 (2d Cir. 2003). “On a motion to dismiss, the issue is ‘whether the claimant is entitled to offer evidence to support the claims. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984). In order to withstand a motion to dismiss, a complaint must plead enough facts to state a claim for relief that is plausible on its 17

face. Bell Atlantic Corp. v. Twombly 127 S.Ct. 1955, 1966 (2007).” See also Patane v. Clark, 508 F.3d 106 (2d Cir. 2007). Further, whether a contractual term is ambiguous is a threshold question of law that should also be reviewed de novo. Walk-in Medical Centers, Inc. v. Breuer Capital Corp., 818 F.2d 260, 263-64 (2d Cir. 1987). II.

THE DISTRICT COURT’S FINDING THAT THE RELEASES EXECUTED BY THE APPELLANTS WERE NOT AMBIGUOUS WAS CLEAR ERROR AND SHOULD BE REVERSED The Court’s Order of September 3, 2008 dismissing Appellants’ claims for

failure to state a claim upon which relief can be granted should be reversed since the Court erred in finding that the Releases executed by the Appellants were not ambiguous. A. The Release Is Deliberately Misleading, Is Unenforceable And Does Not Contradict The Claims of Fraud In The Complaint In its order dated September 3, 2008, the District Court grounded its decision to dismiss Appellants’ Complaint on the fact that each of the Appellants had signed a Release prior to the filming of the dinner scene. In reaching its decision, the District Court expressly found that the Releases were not ambiguous and, thus, were enforceable. In relevant part, each Release provides that: “[t]he Participant agrees to be filmed and/or taped by the Producer for a documentary-style film (the “Film”). It is understood that the Producer hopes to reach a young adult audience by using entertaining contents and formats.” 18

(R. A23). The Release provides that the producer of the Borat movie was Springland Films. In fact, it was One America Productions. The Release provides that the production would be a “documentary-style” film. To the contrary, the film is a fictional account of a staged journey across the United States by a fictional character, from a fictional country, who intentionally provokes base reactions from the unwitting. As such, the Release is unenforceable. See Cahill v. Regan, 5 N.Y.2d 292; 184 N.Y.S.2d 348 (1959); Demaria v. Brenhouse, 277 A.D.2d 344, 345; 716 N.Y.S.2d 99, 100 (2d Dep’t 2000) (each standing for the proposition that a release may not be read to cover matters which the parties did not intend it to cover). In Psenicska v. Twentieth Century Fox Film Corp., et al; Case No. 07 Civ. 10972, Appellant Michael Psenicska, another victim of Appellees’ fraud, develops a line of argument demonstrating how the words in paragraph 1 of his identically worded release do not come close to describing the true nature of the Borat movie (R. A146-51). See Appellant’s Memorandum of Law in Opposition to Appellee’s Motion to Dismiss the Complaint, dated April 8, 2008; pp. 4-9; Psenicska v. Twentieth Century Fox Film Corp., et al; Case No. 07 Civ. 10972 (“Psenicska Brief in Opp.”).

He further argues that, in seeking to enforce the Release,

19

Appellees attempt to conjure a whole new meaning for the words Appellees chose (R. A146-51). More specifically, using the dictionary definitions of

the

word

“documentary” and “style” together with an appraisal of what, typically, has constituted a “documentary” in modern cinema, Psenicska argues convincingly that the term “documentary-style” is misleading when viewed in the context of the Borat movie (R. A146-51).

Further, Psenicska argues that the Appellees’

expression in the Release that they “hope to reach a young adult audience with entertaining content” creates neither a contrary conclusion nor a contrary impression with respect to the substance of the film (R. A146-51). Citing to a number of documentary movies aimed at young adults, Psenicska argues that young people are more than capable of finding serious treatment of a topical issue to be entertaining. Appellant adopts and incorporates the arguments articulated by Psenicska as if set forth fully herein.

Perhaps more importantly, the prior

representations by Schulman that the documentary would be viewed by “school children” made the reference to “young adults” in the Release all the more plausible (R. A92). As further evidence that the movie was not in the style of a documentary, Appellee Cohen was nominated for, and won, the 2007 Golden Globe Award for Best Actor: Musical or Comedy. Cohen’s fellow nominees were Johnny Depp, for 20

“Pirates of the Caribbean: Dead Man’s Chest,” Aaron Eckhart for “Thank You for Smoking,” Chiwetel Ejiofor for “Kinky Boots” and Will Ferrell for “Stranger than Fiction.” http://www.goldenglobes.org/nominations/year/2006 (last viewed June 4, 2008). The Borat Movie was also nominated for Best Motion Picture in the same category. Its fellow nominees were “The Devil Wears Prada,” “Dreamgirls,” “Little Miss Sunshine” and “Thank You for Smoking.” Id. None of these movies could even remotely be described as a “documentary” or “documentary-style.” By contrast, the 2008 Academy Award Nominees for “Documentary Feature” included the following films: (1) “Taxi to the Darkside” – The case of an Afghan taxi driver beaten to death in 2002 while in U.S. military custody forms the heart of this examination of the abuses committed during the detainment and interrogation of political prisoners; (2) “No End in Sight” – Analyst and scholar Charles Ferguson examines the process behind the Bush Administration’s decision to invade Iraq in 2003; (3) “Operation Homecoming: Writing the Wartime Experience” – The experiences of Iraq War veterans are seen through their writings, accompanied by news footage and photographs; (4) “Sicko” –Michael Moore’s look at American health care explores the reasons behind the adoption of a for-profit system and profiles individuals whose lack of proper care and battles with insurance companies have drastically affected their lives; (5) “War/Dance” – Chief among the victims of the ongoing warfare in northern Ugandan are the 21

country’s children. Three students in the Patongo refugee camp, all victims of terrible violence and losses, nevertheless prepare to enter a music competition that offers

them

a

lifeline

of

hope.

http://www.oscar.com/nominees/index?pn=index#10_BestDocumentaryFeatureNo minationCategory (last viewed June 7, 2008). It goes without saying that the Borat movie bears no similarities to any of these bona fide documentaries.3 Furthermore, and more importantly, these are the type movies that come to mind when the terms “documentary” or documentary-style” are used. Certainly, the Appellants, based on their own understanding of the term documentary and the representations made to them by Appellees prior to executing the Releases, pictured the movie in which they agreed to appear as being similar to these movies – i.e. a documentary. And, upon reading the Releases, the mere use of the phrase “documentary-style” did not cause the Appellants to pause and think “this says ‘documentary-style’ not ‘documentary,’ is this movie really a filmed set-up designed to embarrass us by catching us off-guard in an offensive situation?” And, of course, it is not surprising that the Appellants did not consider that possibility. The reason is because in light of the earlier representations made by Appellees, the

For further evidence that the Borat movie is more deserving of a comedic or satirical definition, the Court need look no further than the UK’s definitive film guide. Halliwell’s, which, describes the movie as “a spoof.” See Gritten: Halliwell’s Film Video & DVD Guide 2008 at p. 151 (Harper Collins 2007) (R. A153-154). 3

22

description in the Release gave the Appellants no reason to think that the movie was other than what the Appellants had described. In sum, the Releases were, just as the Appellees intended, deliberately misleading and as such the District Court’s decision is due to be reversed. B. The Phrase “Documentary-Style” Is An Ambiguity Which Cannot Be Resolved As A Matter Of Law Because “[t]he ‘law looks with disfavor upon agreements intended to absolve [a party] from the consequences of his [wrongdoing],’ a release which purports to excuse a party from responsibility for misconduct is subject to the ‘closest of judicial scrutiny’” Golden Pacific Bancorp. V. Fed. Deposit Ins. Corp., 273 F.3d 509 (2d Cir. 1993) (citations omitted) (release is a species of contract governed by principles of contract law). Due to the heightened level of judicial scrutiny of releases, “an ambiguous release may not form the basis for a motion to dismiss.” Information Superhighway, Inc. v. Talk America, Inc. 274 F. Supp. 2d 466, 470 (S.D.N.Y. 2003) (denying motion to dismiss where release was ambiguous as to the acts to be released); see also Integrated Book Technology, Inc. v. T/R Systems, Inc., 2 A.D.3d 1193, 1195; 770 N.Y.S.2d 186, 187 (3rd Dep’t 2003) (affirming trial court’s denial of motion to dismiss where release was ambiguous as to what was being released); Doldan v. Fenner, 309 A.D.2d 1274; 765 N.Y.S.2d 401 (4th Dep’t 2003) (finding that the term “no fault” in a release could be ambiguous to a lay-person entering 23

into a release waiving certain personal injury claims). Moreover any ambiguities must be construed against Appellees as the drafters. Lifson v. INA Life Ins. Co. of New York, 333 F.3d 349, 353 (2d Cir. 2003); See also Golden Bancorp., 273 F.3d at 515-16 (“’[w]here contract language is ambiguous, the differing interpretations of the contract present a trial issue of fact … [t]he language of a contract is ambiguous if it is capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement.’” (internal citations omitted). The District Court expressly found that the phrase “documentary-style film” contained in the Release was not ambiguous. In its Order, the court points out that the “Plaintiffs seem unwilling to recognize that the operative word in the phrase “documentary-style film” is “style” and not “documentary.”

Appellants do

recognize that “style” is the operative word, but, contrary to the District Court’s conclusion, Appellants contend that adding the word “style” as a suffix creates even more of an ambiguity. Appellees intentionally use the phrase “documentarystyle film” not to accurately describe the film, but rather to create ambiguity so that the Release could be read to encompass the true nature of the movie without belying the lies and false statements the Appellees made to the Appellants to persuade them to appear in the movie in the first place. To be sure, the Appellees laid their trap with the utmost skill. But, should the Appellees be permitted to 24

manipulate release agreements, which serve a valid and just purpose, for unjust means? Certainly not. As a technical matter, adding the word “style” to the end of another word immediately diminishes the precision of the word being modified. The word “documentary” is not ambiguous; there can be no doubt as to its meaning. The word “documentary-style,” however, is far less precise. In fact, the Appellees certainly chose this phrase for that exact reason. The Appellees intended the Release language to be ambiguous so that it would not alert the Appellants as to the true nature of the film. Despite the Appellants, the Appellees, and the court all offering definitions of the phrase “documentary-style,” the truth of the matter is that there is no definition for that term. Indeed, the confusion engendered by this deliberately ambiguous term is underscored by the District Court’s own analysis. Somewhat astoundingly, the District Court analogizes the use of humor in “An Inconvenient Truth,” Al Gore’s award winning documentary about global warming and the future of the planet and in “Bowling For Columbine,” Michael Moore’s acclaimed documentary concerning gun violence in America, to that used in the Borat Movie (R. A190).

As the District Court acknowledges, both “An

Inconvenient Truth,” and “Bowling For Columbine,” use humor to make a point and to underscore points of view about gravely serious issues. In Borat, the movie is devoid of any point of view. And its humor, unlike in An Inconvenient Truth,” 25

and in “Bowling For Columbine,” lies in the humiliation of its unwitting participants, not in commentary on weighty and political issues of life and death. Further, as at least one other court in this Circuit has recognized, it is debatable whether the District Court should have engaged in the type of film classification or categorization found in its Decision and Order in the first place. See Hofheinz v. Discovery Communications, Inc., No. 00 Civ. 3802 (HB), 2001 WL 1111970, *4 (S.D.N.Y. Sept. 20, 2001) (court refused to engage in “subjective line-drawing” as to whether a “documentary-style” program examining common themes and political contexts of alien visitation films was entertaining or serious, weighty or frivolous or plausible or implausible). This is especially true here, where the District Court was deciding questions of law at the motion to dismiss stage. The dictionary does not include an entry for “documentary-style.” It is an ambiguous, undefined term that perfectly served the Appellees purpose – to defraud the Appellants while passing judicial scrutiny. The Appellees knew that the Appellants, upon seeing that phrase in the Release, given the detailed description of the movie that the Appellants had previously provided, would not have any reason to think that the movie was other than what the Appellees had represented.

26

As a result, the Releases are clearly ambiguous and unenforceable and the District Court’s findings should be reversed. III.

THE DISTRICT COURT ERRED BY DISMISSING APPELLANT’S CLAIMS BASED ON THE RELEASES BECAUSE APPELLANTS ALLEGED THAT THE RELEASES WERE PROCURED BY FRAUD. A. The Appellants Adequately Pleaded Fraudulent Inducement Which Is Sufficient To Defeat A Motion To Dismiss At the motion to dismiss stage, Appellees face an extremely high burden,

and Appellants’ allegations must be accepted as fact. DeMuria, 328 F.3d at 706. Because the Appellants alleged, with specificity and particularity, that they executed the Releases because of fraud, duress, and undue influence, the District Court erred by granting the Appellees’ motion to dismiss. In 1975, the New York Court of Appeals held that where a complaint alleges that the execution of a release was “improperly obtained,” that allegation, in and of itself, is sufficient to support a denial of a motion to dismiss a complaint on the basis of such a release. Newin Corp. v. Hartford Acc. & Indem. Co., 37 N.Y.2d 211; 217, 371 N.Y.S.2d 884, 889 (1975). Since then, numerous New York Courts have followed the decision of the Court of Appeals in Newin Corp. See, e.g., Ladenburg Thalman & Co., Inc. v. Imaging Diagnostic Systems, Inc., 176 F.Supp.2d 199, 205 (S.D.N.Y. 2001) (“[u]nder relevant New York case law, mere allegations of fraud in the inducement of a release warrant denial of a motion to dismiss that is grounded on a release”); 27

Steen v. Bump, 233 A.D.2d 583, 584; 649 N.Y.S.2d 731, 732 (3d Dep’t 1996) (“[p]laintiff’s factual allegations of fraud in the procurement of the release were sufficient to defeat defendant’s … motion to dismiss the complaint”); Farber v. Breslin, 47 A.D.3d 873, 877; 850 N.Y.2d 604, 608 (2d Dep’t 2008) (finding that the trial court erred in granting a motion to dismiss on grounds of a release where “the allegations of fraud were sufficient to support a possible finding that the release signed by the plaintiff was obtained ‘under circumstances which indicate unfairness;’” and that “[d]ismissal … overlooks the fact that the plaintiff alleged that [plaintiff] procured the release by means of fraud.”) (citation omitted); Bloss v. Va’ad Harabonim of Riverdale, 203 A.D.2d 36, 37; 610 N.Y.S.2d 197, 198 (1st Dep’t 1994) (“[w]here fraud or duress in the procurement of a release is alleged, a motion to dismiss should be denied”); Anger v. Ford Motor Co. Dealer Development, 80 A.D.2d 736, 736; 437 N.Y.S.2d 165, 165 (4th Dep’t 1981) (ordering an evidentiary hearing on the validity of the release after finding that the trial court erred in dismissing complaint based on release where plaintiff had alleged fraud in its procurement); Gibli v. Kadoshi, 279 A.D.2d. 35, 40; 717 N.Y.S.2d 553 (1st Dep’t 2000) (“it is inequitable to allow a release to bar a claim where, as here, it is alleged that the releaser had little time for investigation or deliberation and that it was the result of overreaching or unfair circumstances”).

28

Here, of course, the Appellants go beyond the standards set by the Court of Appeals; they not only contend that the execution of the Releases was “improperly obtained” or obtained “under circumstances which indicate unfairness,” they allege outright fraud.

The Amended Complaint details the Appellees’ well-planned

scheme to defraud the Appellants. It alleges, among other things, that Appellees, acting in concert through Appellee Schulman,4 Springland, and One America, represented to Streit and Appellant McKinnon that Springland Films was filming an educational documentary for Belarus Television about a foreign dignitary’s tour of the United States (R. A92). Schulman stated that the documentary would be similar to those shown by National Geographic, was being made to build relations between the United States and Belarus, and that the Appellants’ role in the documentary was mainly for school children to learn about cultural diversity and traditional Southern values (R. A92). Schulman repeatedly referred to the visiting guest (now known to be the Appellee Cohen) as a “dignitary” (R. A92).

In their motion to dismiss, the Appellees argued that the Appellants failed to meet the heightened pleading standard of Fed. R. Civ. P. 9(b) because the Apellants did not allege that Appellees Dune, Fox, or Everyman misrepresented anything to anyone and further that Appellants Moseley and Mr. and Mrs. Jared do not allege that any of the Appellees misrepresented anything to them. This argument is without merit. Appellants have alleged that at all times Appellees were acting in concert and conspiracy to defraud Appellants. Complaint at ¶¶33 and 103-106. Alexander & Alexander of New York, Inc. v Fritzen, 68 N.Y.2d 968, 969 (1986) (“[a]llegations of conspiracy are permitted only to connect the actions of separate Appellees with an otherwise actionable tort”). 4

29

Rather than address Newin Corp. and its progeny, the District Court simply ignored it altogether. In an analytical sleight of hand, the District Court found that Appellants were “restyling their allegations of misrepresentation as allegations of omission” in an attempt to “avoid the consequences of their waivers.” (R. 183184). To be sure, the record is replete with examples of Appellees’ material omissions. But the District Court’s analysis ignores completely the numerous material misrepresentations and outright lies made to Appellants by Appellees. The fact is that there was no “restyling” of any of Appellants allegations as the District Court erroneously found. Further, this analysis effectively allows an endrun around the New York Court of Appeals decision in Newin Corp. and the cases that followed it. Should the District Court’s September 3 Decision and Order be allowed to stand, it will effectively rubber-stamp well-financed con-schemes like the ones perpetrated here to proceed. Streit and Springland Films executed a written contract for Streit’s Etiquette Training Services business to arrange for a dinner and to provide etiquette training (R. A93).

The contract provides, among other things, that “[t]hese sessions will

be filmed as part of a documentary for Belarus Television and for those purposes only” (R. A143). It also states that “[t]he portrayal of the participants will be filmed and used for purposes only of the utmost dignity and class” and that “[t]here will not be any embarrassment to the participant or ETS” (R. A143). 30

At no time during the days leading up to the filming or during the negotiation of the ETS Agreement did the Appellees provide Streit with a copy of the Release so that she could review it, investigate, or consult an attorney. Instead, Appellee Schulman, acting for all the Appellees, waited until the last minute before filming commenced and after some of the Appellants had been drinking wine and then hurriedly thrust the Releases on the Appellants and rushed the Appellants to sign (R. A138).

Further, Streit specifically asked Lewis if the Release changed

any of the terms in the ETS Agreement (R. A139). Lewis assured Streit that the Release did not change the ETS Agreement and that there was nothing in it that would harm the guests (R. A139). The Appellees’ earlier representations, the ETS Agreement, and Schulman’s assurances in the face of the Release all made the Appellants feel comfortable with the Release. The systematic deception, which the Appellees’ carried out over several days leading up to the filming, made the last minute execution of the Releases possible. It was all part of a well-orchestrated scheme of fraudulent inducement. The Borat character was not a dignitary from Belarus; the Borat movie was not a documentary to be created for and shown only on Belarus Television; Appellee Springland was a shell company created to hide the true identity of Appellee One-America and 20th Century Fox; Appellee Springland was not 31

Schulman’s employer and was not the producer of the Borat Movie; the individual “Todd Lewis” was an illusion to hide Schulman’s true identity; the Borat movie is not a “documentary-style film;” and the Releases did change the ETS Agreement, or at least Appellant Streits’ rights thereunder. Indeed, nothing that the Appellees represented to the Appellants before they executed the Releases was true. It was all false. The Releases were the product of fraud. B. The District Court’s Reliance on Danann Realty Corp. v. Harris Is Misplaced

In its order the District Court relies heavily on the 1959 New York Court of Appeals decision in Danann Realty Corp. v. Harris, 5 N.Y.2d 317 (1959). Particularly, the District Court focused on the specificity of the disclaimer in Danann. The District Court, quoting UBS AG, Stamford Branch v. Healthsouth Corp., No. 07 Civ. 8490 (LAP), 2008 WL 2337846, at *5 (S.D.N.Y. June 6, 2008), asserted the following: Specificity was the touchstone of the disclaimer in Danann: the purchaser in that case could not claim to have relied on the allegedly fraudulent representations when, in the contract, the purchaser stated that the “Purchaser hereby expressly acknowledges that no such representations have been made.” Id. (quoting Danann). However, the District Court’s reasoning is flawed. The facts of Danann differ significantly from the facts of this case such that the District Court’s reliance 32

on Danann is misplaced and does not justify the inequitable result reached by the District court. The release in Danann was part of a merger clause in a complicated purchase agreement that was negotiated by sophisticated business people. In Danann, the plaintiff-purchaser complained that it was induced to enter into a contract of sale of a building lease because of oral misrepresentations by the seller regarding the operating expenses of the building and expected profits to be earned. The contract in that case contained the following release language: The Purchaser has examined the premises agreed to be sold and is familiar with the physical condition thereof. The Seller has not made and does not make any representations as to the physical condition thereof. The Seller has not made and does not make any representations as to the physical condition, rents, leases, expenses, operation or any other matter or thing affecting or related to the aforesaid premises, except as herein specifically set forth, and the Purchaser hereby expressly acknowledges that no such representations have been made, and the Purchaser further acknowledges that it has inspected the premises and agrees to take the premises as is…. It is understood and agreed that all understandings and agreements heretofore had between the parties hereto are merged in this contract, which alone fully and completely expresses their agreement, and that the same is entered into after full investigation, neither party relying upon any statement or representation, not embodied in this contract, made by the other. Danann at 320. The Court of Appeals held that the disclaimer provision in the parties’ agreement, in which the plaintiff-purchaser expressly acknowledged that the seller had made no extra contractual representations regarding the building’s 33

operating costs or potential profit and disclaimed any reliance on any such representations, precluded plaintiff-purchaser from later alleging that it had justifiably relied on alleged misrepresentations by the seller. Danann is easily distinguished from the Appellants’ case. Danann involved a transaction to purchase a leasehold on a piece of real estate. The plaintiffpurchaser had the opportunity to inspect the property and the books and records detailing the rents, leases, expenses and operations of the property. The contract in Danann was fully negotiated at an arms-length between sophisticated business people. In contrast, the Appellants in the present case did not have an opportunity to learn about the true nature of the film; in fact, the Appellees made certain that they did not know the true nature of the film. The Appellants did not receive the Releases until the very last second with little, if any, time to review. The Releases certainly were not negotiated, and there was a great disparity of knowledge and information between the Appellants and the defrauding movie producers. The systematic deception perpetrated by the Appellees could not be any less analogous to the arms-length business transaction in Danann. In Cirillo v. Slomin’s Inc., 196 Misc. 2d 922, 768 N.Y.S.2d 759 (N.Y. Sup.Ct., Nassau Co. 2003), the court discussed at length the decision in Danann: Nonetheless, the rule in Danann should not be rigidly or automatically applied with respect to any of the disclaimers cited above. Keeping in mind that “opinions must be read in the setting of the particular cases and as 34

the product of preoccupation with their special facts” (Danann Realty Corp. v. Harris, supra at 322, quoting Freeman v. Hewit, 329 US 249, 252 (1946)), this court finds that the Danann holding is not controlling in the instant circumstances. Both Danann Realty Corp. v. Harris and Citibank, N.A. v. Plapinger addressed transactions between sophisticated business people, negotiated at arm’s length. The Court in Danann emphasized that the facts allegedly misrepresented were matters not peculiarly within the Appellee’s knowledge, and that the other party had the means available to him of knowing, “by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation. (Id. at 322). **** The instant situation, however, contemplates a consumer sales transaction, in which the merchant provides to the consumer a boiler plate contract form on a nonnegotiable basis. In such context, the consumer must be afforded more protection, and the reality of his contractual statements must be examined more closely. **** With respect to the issue of justifiable reliance, the Danann dissent admonishes: “In the realm of fact it is entirely possible for a party knowingly to agree that no representations have been made to him, while at the same time believing and relying upon representations which in fact have been made and in fact are false but for which he would not have made the agreement. To deny this possibility is to ignore the frequent instances in everyday experience where parties accept … and act upon agreements containing … exculpatory clauses in one form or another, but where they do so, nevertheless, in reliance upon the honesty of supposed friends, the plausible and disarming statements of salesmen, or the customary course of business. To refuse relief would result in opening the 35

door to a multitude of frauds and in thwarting the general policy of the law. **** This argument is more compelling here, in the context of a consumer sales transaction, than in the context of the business transaction that took place in Danann. A consumer’s reliance upon the representations of the seller’s sales agent may be justifiable, especially with respect to technical matters (such as the capabilities of an alarm system), presumably within the agent’s expertise, which are incapable of independent verification by the consumer. **** This case provokes the following questions: Is the consumer’s claim, innately, any less reliable than the purported disclaimer of reliance? The consumer must sign the contract if he wants to obtain the product or service, and ordinarily must adopt it wholesale, without opportunity to negotiate as to particular provisions. Can the consumer really be said to “represent” a state of facts (i.e., that no oral representations were made to him), by virtue of his acquiescent signature? What if such state of facts is rendered untrue by the acts of the merchant’s sales agent? In such circumstances, the consumer’s claim that he relied upon the sales agent’s oral representations is no more inherently unreliable than the compulsory boiler plate disclaimer. To reflexively disallow parol evidence on the basis of such a disclaimer is to reward the ingenuity of draftsman at the expense of sound public policy, and to invite sales agents, armed with impenetrable contracts, to lie to their customers. Here, the danger of fraudulent claims is outweighed by the danger of unrestrained fraud against the consumer. Appellants are more similarly situated to the consumer in Cirillo than to the sophisticated plaintiff-purchaser in Danann. 36

Appellants in this case, like the

consumer in Cirillo, signed a boiler plate contract, under duress, and without opportunity to negotiate the contract or to learn the true nature of the underlying film. As a result, the District Court’s reliance on Danann is misplaced. In fact, as discussed in Cirillo, the Danann court even acknowledged that the particular facts of each case should be considered when determining whether to review parol evidence where fraudulent inducement of a contract is alleged. Danann at 322. As discussed in Cirillo, the facts of Appellants’ case and public policy considerations require that the Court’s decision be reversed. IV.

APPELLEES WERE UNDER A DUTY TO DISLCOSE THEIR TRUE IDENTITIES AS WELL AS THE TRUE NATURE OF THE FILM. If a party has a duty to disclose, that party’s failure to disclose a material fact

may be as actionable as an affirmative misrepresentation by the party. See Banque Arabe et International D’Investissement v. Maryland Nat. Bank, 57 F.3d 146, 153 (2d Cir. 1995). Under New York law, the following circumstances, among others, give rise to a duty to disclose facts: “ where the party has made a partial or ambiguous statement, on the theory that once a party has undertaken to mention a relevant fact to the other party, it cannot give only half of the truth; … and … where one party possesses superior knowledge, not readily available to the other, and knows that the other is acting on the basis of mistaken knowledge.” Brass v. American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir. 1993) (quotations and citations omitted). 37

These two circumstances are present in this case. The Appellees represented to the Appellants both orally and in writing that they were producing an educational documentary that was to be shown on Belarus Television, when in reality the Appellees knew the true nature of the film – an R rated major motion picture containing graphic nudity, masturbation, shocking vulgarity, pornography, racist stereotyping, and anti-Semitism which would ultimately be shown throughout the United States and the world. Yet, the District Court found in its Decision and Order that Appellants were somehow “restyling their allegations of misrepresentation as allegations of omission” in an attempt to “avoid the consequences of their waivers” (R. A19293). This just is not the case. The fact is that under the circumstances (which the Appellees went to great pains to manipulate), the Appellants could not have uncovered the truth about the Borat movie, facts within the exclusive knowledge of the Appellees.

The

Appellants never had the opportunity to review the script. They were not informed that the film included professional actors, which included celebrities such as Pamela Anderson and Cohen. Even the producer, Appellee Schulman, misrepresented his true identity to the Appellants. Everything appeared to be as represented until filming began. Appellees carefully and strategically concealed all of the material facts regarding the film until after the Releases were signed. And, 38

just to make sure that the Appellants had no opportunity to fully appreciate the gravity and legal significance of the Releases, the Appellees waited until the last possible moment to present the Releases and only after encouraging the Appellants to drink wine for at least an hour and a half; they assured the Appellants that there was nothing in the Releases that would harm them in any way or that changed the ETS Agreement; and, once the Releases had finally been distributed, they repeatedly stated that the Appellants needed to “hurry up” and sign them so that filming could commence. Moreover, Schulman’s failure to disclose his true identity and his execution of the Release with a false name, by itself, constitutes grounds to reverse the District Court. See Starr v. Johnson, 143 A.D.2d 130, 132; 531 N.Y.S.2d 589, 591 (2d Dep’t 1988) (holding that the defendant was under a duty at the time of the accident to disclose his true identity in order for a release to be validly asserted). “Todd Lewis” was under a duty to reveal to the Appellants not only that he was, in fact, Todd Schulman, but also that his employer was not Springland, but One America, and the true intent of the filming (i.e., to embarrass the Appellants). Full disclosure would have at least given the Appellants the opportunity to conduct some sort of investigation before signing what Appellees now claim to be a binding agreement. By violating these duties, the Appellees rendered the Releases unenforceable. 39

Conclusion For all the foregoing reasons, Appellants respectfully request that this Court issue an Order reversing the District Court, remanding the case back to the District Court, restoring each of the causes of action in the Appellants’ Amended Complaint and granting such other and further relief as it deems just and proper. Dated: New York, New York February 9, 2009

Respectfully submitted, ADAM RICHARDS LLC 40 Fulton Street, 7th Floor New York, New York 10038 (212) 233-4400 Attorneys for Appellants By: __________________________ Adam Richards (AR-2489)

40

CERTIFICATE OF COMPLIANCE WITH FRAP 32(a)

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This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because this brief contains 9,250 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii).

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This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using Microsoft Word in Times New Roman, 14 point font.

Respectfully submitted, ADAM RICHARDS LLC 40 Fulton Street, 7th Floor New York, New York 10038 (212) 233-4400 Attorneys for Appellants By: __________________________ Adam Richards (AR-2489)

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Streit et al v. Twentieth Century Fox Film Corporation et al.

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and that no viruses were detected. Please print the name and the version of the anti-virus detector that you used______________________

Symantec AntiVirus, Version 10.0.0.359

____________________________________________________________________________________ If you know, please print the version of revision and/or the anti-virus signature files ________________ ____________________________________________________________________________________

(Your Signature)______________________________________________

02/09/2009

Date: _________________