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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: 40 Fulton Street
New York, New York 10038
Adam Richards 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

ii
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

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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

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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

v
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, high-

priced 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

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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.

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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.

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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,

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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 in-
home 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

2
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.
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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).

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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,

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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 movie-

related 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

3
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).
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 “documentary-

style 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).

4
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”).
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. 183-

184). 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 end-

run 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 plaintiff-

purchaser 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. Appellants in this case, like the

36
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. A192-

93). 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)

1. 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).

2. 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)
ANTI-VIRUS CERTIFICATION FORM

See Second Circuit Interim Local Rule 25(a)6.

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


CASE NAME:________________________________________________________________

08-6053-cv
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02/09/2009
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