FremantleMedia, the producer of the reality show American Inventor, has asked the Central District of California to dismiss a counterclaim accusing it of fraud and negligent misrepresentation during mediation. Fremantle, which also produced the shows American Idol and America's Got Talent, filed a motion to dismiss AXA Insurance Company's counterclaim on the grounds that the counterclaim fails to meet the requisite pleading standards, fails to state a claim, arises out of constitutionally protected speech, and is untimely.

The current litigation stems from an infringement action filed in August 2005 against Fremantle and ABC, Inc., by Roaring Entertainment, Inc., a production company. Roaring Entertainment alleged in the suit that American Inventor infringed upon the trademarks and copyrights it held for Million Dollar Idea, another television show about inventions. AXA, which issued an insurance policy to Fremantle, agreed to defend Fremantle and ABC under Fremantle's insurance policies and pursuant to Fremantle's indemnification agreement with ABC. The infringement action was aggressively litigated, but Fremantle and ABC ultimately agreed to settle the case with Roaring Entertainment for $750,000, with ABC and AXA both contributing to the settlement. In exchange for ABC's contribution to the settlement, AXA agreed to reimburse ABC's defense fees and to contribute $300,000 towards the settlement. AXA thereafter notified ABC and Fremantle that it would not reimburse ABC for its defense costs and demanded reimbursement for the sum it paid toward the settlement.

Based on this purported breach, Fremantle brought suit against AXA in March 2010, asserting claims of breach of duty, breach of indemnification, declaratory relief, and breach of the duty of good faith and fair dealing. AXA thereafter filed a counterclaim against Fremantle, alleging that Fremantle induced it to settle the infringement action through false and fraudulent statements during mediation about the nature of the written indemnity agreement between Fremantle and ABC, which caused AXA to pay $175,000 more towards the settlement than it otherwise would have been required to pay.

In its motion to dismiss AXA's counterclaim, Fremantle argues that any statements made during mediation are protected by the federal mediation privilege and California's litigation privilege, and therefore cannot serve as a basis for AXA's claims of fraud. Fremantle further claims that the purportedly false statements cannot serve as a basis for liability under California's anti-SLAPP statute, which provides a procedure for striking a complaint when the complaint arises from conduct that falls within the rights of petition and free speech, because such statements were made during court-ordered mediation and thus are entitled to protection.

In responding to the motion to dismiss, AXA argues that the purportedly fraudulent statements were made in violation of the "cooperation clause” contained in the Fremantle's insurance policy with AXA. AXA also contends that the federal mediation privilege and California's litigation privileges do not go so far as to protect fraudulent statements made during mediation. AXA further asserts that California's anti-SLAPP statute is inapplicable to the case because the statute does not protect fraudulent behavior.

Fremantle's motion to dismiss the counterclaim is pending before the court and will be ruled upon without a hearing.

Arent Fox is monitoring this issue and working with its clients to ensure their patents are managed and protected in accordance with the laws. Please contact Anthony V. Lupo or Leah C. Montesano if you have any questions.

Anthony V. Lupo
lupo.anthony@arentfox.com
202.857.6353

Leah C. Montesano
montesano.leah@arentfox.com
202.715.8586