Feel Films Limited v. AP Production Services, Inc.

Background

Feel Films Limited brought claims against AP Production Services, Inc. for breach of contract, conversion, and related declaratory relief. The claims arose from an agreement under which AP Production Services was to provide line-production services in Georgia for a commercial for Kia Motors of America.

The agreement required AP Production Services to take steps to maximize and obtain Georgia tax credits, provide Feel Films with information and communications concerning those credits, and pay or deliver the credits to Feel Films within seven days of receiving them. It also stated that the tax credits and certificates were held in trust for Feel Films and were Feel Films’ property, and that AP Production Services could not offset or reduce the amounts reflected in the certificates.

The production budget was $1,462,766. Feel Films paid AP Production Services $2,332,050.20, including approved additional expenses. AP Production Services obtained $427,731 in tax credits. After Feel Films demanded the credits and related information, AP Production Services refused to provide them, claiming it could retain them as an offset or form of self-help for expenses that Feel Films had not paid. AP Production Services sold the credits to third parties for $378,541.94 on April 28, 2021, and refused to transfer the proceeds to Feel Films.

Summary-judgment standard

The court explained that summary judgment is proper only when the evidence shows no genuine dispute about any material fact and the moving party is entitled to judgment as a matter of law. The court must view the evidence in the light most favorable to the party opposing the motion. A genuine dispute exists when a reasonable jury could decide for that opposing party.

Breach of contract

The court rejected AP Production Services’ argument that the agreement was invalid for lack of consideration. Feel Films undisputedly paid $2,332,050.20, which included the original budget and certain additional expenditures and was more than the producer fee specified in the contract. The court stated that AP Production Services’ argument that it used the money for production expenses concerned whether Feel Films materially breached the agreement, not whether the agreement lacked consideration.

The court nevertheless held that Feel Films had to show that it materially performed its own obligations before recovering for AP Production Services’ alleged breach of the tax-credit provisions. The court determined that the tax-credit provisions were not independent and divisible from the rest of the agreement. The amount of the credits was tied to production expenditures, and the agreement required the tax-credit consultant’s fees to be paid from Feel Films’ production budget.

AP Production Services presented evidence that Feel Films refused to approve more than $40,000 in COVID-19 testing costs. The parties disputed whether those costs were reasonable and whether AP Production Services paid them out of pocket. The court held that these disputes created factual questions for a jury, including whether Feel Films materially breached the agreement and whether such a breach would excuse AP Production Services’ performance. The court therefore denied Feel Films’ motion for summary judgment on the breach-of-contract claim.

Conversion

Under New York law, conversion occurs when someone intentionally and without authority exercises control over another person’s personal property in a way that interferes with that person’s possessory rights. A conversion claim involving money requires a specific, identifiable fund and an obligation to return or handle that fund in a particular way.

Feel Films argued that the tax credits and sale proceeds were an identifiable fund in which it had a possessory interest under the agreement’s trust provision. It also argued that AP Production Services wrongfully exercised control over the credits by selling them and retaining the proceeds. AP Production Services argued that the conversion claim merely duplicated the breach-of-contract claim.

The court assumed, without deciding, that the conversion claim was not duplicative. Even under that assumption, the court held that Feel Films was not entitled to summary judgment because factual disputes remained about whether Feel Films materially breached the agreement. If Feel Films materially breached the agreement, AP Production Services could be relieved of its obligations concerning the tax credits. The court therefore denied Feel Films’ motion for summary judgment on the conversion claim.

Disposition

The court denied Feel Films’ motion for summary judgment. The Clerk was directed to terminate the motion at ECF No. 44, and the opinion stated that trial was scheduled to begin on February 21, 2023.