CALDERWOOD & HARKNESS LLP 725 South Flower Street, Suite 4200 Los Angeles, California 90017 Telephone: (213) 555-8200 Facsimile: (213) 555-8201
July 14, 2023
VIA EMAIL
Ms. Marguerite D. Fonseca 2817 Cheremoya Avenue Los Angeles, CA 90068
Re: Closing of Matter — *Fonseca v. Rennick et al. LASC Case No. 23STCV01897 Calderwood & Harkness Matter No. 1035-00004*
Dear Ms. Fonseca:
We are pleased to confirm that the Settlement Agreement and Mutual Release, together with the Restated Distribution Waterfall attached thereto as Exhibit A (collectively, the "Settlement Agreement"), were fully executed today, July 14, 2023, by all parties: Marguerite D. Fonseca, individually; Desmond R. Rennick, individually; and Rennick Slate Ventures LLC, a California limited liability company (collectively with Mr. Rennick, the "Rennick Parties"). All signature pages have been exchanged, and a fully conformed copy of the executed Settlement Agreement has been circulated to counsel for each party.
The purpose of this letter is threefold: first, to summarize the key outcomes of the settlement for your records; second, to identify the next steps and action items that will require your attention in the coming weeks and months; and third, to formally close Calderwood & Harkness LLP's representation of you in this matter. We congratulate you on a favorable resolution — one that not only provides meaningful monetary recovery but also preserves the value of your 55% partnership interest in Coastal Meridian Productions LLP ("CMP") and establishes robust governance protections for the partnership going forward.
Each of the principal terms of the settlement is summarized below.
1. Settlement Payment
Under the Settlement Agreement, Desmond R. Rennick is personally obligated to pay you a total settlement amount of Nine Hundred Seventy-Five Thousand Dollars ($975,000.00) (the "Settlement Amount"), payable in two installments, as follows:
First Installment. Six Hundred Thousand Dollars ($600,000.00), due and payable within fifteen (15) business days following the date of full execution of the Settlement Agreement — that is, on or before August 4, 2023.
Second Installment. Three Hundred Seventy-Five Thousand Dollars ($375,000.00), due and payable on or before October 15, 2023.
Both installments are to be made by wire transfer of immediately available funds to the bank account you designated in writing pursuant to Section 3.2 of the Settlement Agreement. It is important to note that the Settlement Amount is Mr. Rennick's personal obligation; no portion of the Settlement Amount will be paid from CMP partnership funds, and the Settlement Agreement expressly prohibits any such payment or reimbursement from the partnership.
The Settlement Amount of $975,000.00 represents approximately 69% of our total claim, which we valued at approximately $1,407,589 inclusive of estimated pre-judgment interest calculated at the 10% statutory rate under California law. This is a strong recovery by any measure, particularly given the inherent risks and expense of proceeding to trial.
The Settlement Agreement includes a late-payment provision for your protection: any installment not received by its applicable due date shall bear interest at the rate of ten percent (10%) per annum, accruing from the due date until the date of actual receipt. Should either payment not arrive by its due date, please contact our office immediately. The Settlement Agreement further provides that the Court shall retain jurisdiction to enforce the settlement terms pursuant to California Code of Civil Procedure Section 664.6. In the event of a payment default, we can promptly move to enforce the settlement in the Los Angeles Superior Court without the need to initiate a new action.
2. Restated Distribution Waterfall — Key Terms
The Restated Distribution Waterfall is effective as of January 1, 2023, and expressly supersedes all prior waterfall schedules, distribution provisions, and related amendments under the Partnership Agreement for Coastal Meridian Productions LLP dated March 8, 2017, as amended January 15, 2019. The following is a summary of the principal structural reforms we negotiated on your behalf.
2.1 Management-Fee Cap Reduction
The management-fee cap payable to Rennick Slate Ventures LLC ("RSV") has been reduced from five percent (5%) to three percent (3%) of gross receipts for all current and future CMP-produced film properties. RSV may continue to provide management and production-services to CMP in the ordinary course; however, all RSV invoices submitted to CMP are now subject to the new 3% cap. Additionally, each RSV invoice must receive dual-signature approval from both partners before payment may be processed. This reform directly addresses the core misconduct identified in our forensic accounting analysis — namely, the systematic inflation of management fees beyond contractually authorized levels.
2.2 Restoration of Reclassified Revenues
A total of Eight Hundred Forty-Seven Thousand Two Hundred Dollars ($847,200.00) in domestic distribution revenues that had been improperly reclassified by RSV as "recoupable advance repayments" has been restored to CMP's distributable profit pool. The reclassified amounts break down as follows:
•  Salt Wind (Q3 2020): $538,200.00
•  Iron Lullaby (Q1 2021): $309,000.00
CMP's partnership accountant, Clearfield & Moss CPAs, will restate the applicable quarterly waterfall schedules within thirty (30) days of the Effective Date of the Settlement Agreement. To the extent that the restatement results in an adjustment to your cumulative partnership distributions (i.e., an amount owing to you from the partnership itself), that adjustment will be netted against the Settlement Amount so as to avoid any double recovery.
2.3 Excess Management Fees — Deemed Satisfied
The Settlement Agreement provides that all management fees previously paid by CMP to RSV in excess of the original 5% cap — totaling One Million Five Hundred Thirty-Three Thousand Five Hundred Dollars ($1,533,500.00) — are deemed fully satisfied by the Settlement Amount. For reference, this figure represents the difference between the $2,694,500 actually paid to RSV and the $1,161,000 that would have been permissible under the 5% cap. No further clawback, restitution, or accounting with respect to these excess fees will be required from the Rennick Parties, and neither party will assert any claim related thereto following the effective date of the mutual release.
2.4 Reclassification Consent Requirement
Going forward, no revenue that has been categorized as "distributable revenue" under the waterfall may be reclassified to any other category — including, without limitation, recoupable advances, reserve holdbacks, or deferred income — without the prior written consent of both partners. This provision is designed to prevent the type of unilateral revenue reclassification that gave rise to a substantial portion of your claims in this litigation.
2.5 Dual-Signature Requirement for Expenditures
Any single CMP expenditure exceeding Twenty-Five Thousand Dollars ($25,000.00) now requires the prior written approval of both you and Mr. Rennick before the partnership may disburse funds. This threshold applies to all categories of partnership expenditure, including production costs, distribution expenses, marketing outlays, and any payments to related parties such as RSV.
2.6 Quarterly Financial Reporting
CMP's independent accountant shall prepare and distribute to both partners a quarterly financial-reporting package within forty-five (45) days of the end of each calendar quarter. The quarterly package will include, at minimum, a statement of partnership income and expenses, a balance sheet, a detailed waterfall computation for the quarter, and a schedule of all payments to RSV or any other related party. This reporting obligation commences with the quarter ending September 30, 2023, and the first package should therefore be in your hands by mid-November 2023.
2.7 Annual Audit
CMP's books and records are now subject to a mandatory annual audit, with the audit report to be issued within ninety (90) days of the end of each fiscal year. This requirement applies beginning with the fiscal year ending December 31, 2023. The annual audit will be conducted in accordance with generally accepted auditing standards and will encompass all partnership accounts, revenue streams, and related-party transactions.
2.8 Independent Accountant Administration
Clearfield & Moss CPAs, under the direction of Howard Moss, CPA, Partner-in-Charge, will continue to serve as CMP's partnership accountant and will be responsible for the preparation of the quarterly financial-reporting packages and annual financial statements described above.
In addition, Tillerman Forensic Advisory LLC, under the direction of Greta Sørensen, CPA, CFF, will provide independent oversight for the annual audits of calendar years 2023 and 2024. Tillerman's oversight fees are classified as a CMP partnership expense, subject to a cap of Forty Thousand Dollars ($40,000.00) per audit cycle, for an aggregate cap of Eighty Thousand Dollars ($80,000.00) for both cycles. This oversight arrangement ensures that an experienced forensic accountant — one already familiar with CMP's historical financial practices — will be reviewing the partnership's books during the critical transition period.
Beginning with the calendar year 2025 audit, you and Mr. Rennick will mutually select a successor accountant or, if both partners agree, reappoint Clearfield & Moss to continue serving in that capacity. The Tillerman oversight requirement will not apply to the 2025 audit or subsequent audits unless either partner requests it, in which case the requesting partner shall bear the cost of Tillerman's engagement.
3. Mutual Release
Both parties have executed a mutual general release of all claims, demands, causes of action, obligations, damages, and liabilities of any kind or nature, whether known or unknown, arising from or related to CMP's financial affairs for the period from the inception of the partnership through December 31, 2022. Both parties have expressly waived the protections of California Civil Code Section 1542, which provides:
"A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party."
There is an important distinction in the timing of the releases. Your release of the Rennick Parties becomes effective only upon your confirmed receipt of the First Installment ($600,000.00). The Rennick Parties' release of you became effective upon execution of the Settlement Agreement. This structure protects you: if Mr. Rennick fails to make the First Installment payment, your claims are not released, and we retain the ability to enforce or, if necessary, to litigate those claims.
4. Dismissal of Lawsuit
Upon our confirmation that you have received the First Installment of $600,000.00 on or before August 4, 2023, Calderwood & Harkness will file the Joint Stipulation for Dismissal of the entire action with prejudice in the Los Angeles Superior Court, Case No. 23STCV01897. Mr. Rennick's counterclaim will be dismissed with prejudice simultaneously. Pursuant to the Settlement Agreement, each side will bear its own attorney's fees and costs incurred in connection with the litigation; there is no fee-shifting provision.
Importantly, the parties have stipulated that the Court shall retain jurisdiction under California Code of Civil Procedure Section 664.6 to enforce the terms of the Settlement Agreement even after the dismissal is entered. This retained jurisdiction provides an efficient mechanism for enforcement should any dispute arise regarding compliance with the settlement terms, including the payment obligations and the governance reforms set forth in the Restated Distribution Waterfall.
5. Non-Disparagement and Confidentiality
We wish to remind you that the Settlement Agreement includes mutual non-disparagement provisions. Neither you nor any of the Rennick Parties shall make any disparaging, defamatory, or derogatory statements about the other party in connection with CMP, the lawsuit, the settlement, or the events giving rise to the dispute. This obligation is ongoing and survives the dismissal of the litigation.
In addition, the terms and conditions of the settlement — including the Settlement Amount, the installment schedule, and the specific governance reforms — are strictly confidential and may not be disclosed to any third party except in the following limited circumstances:
(a) to your legal and tax advisors, who are bound by their own professional obligations of confidentiality;
(b) as required by applicable law, regulation, or order of a court of competent jurisdiction; or
(c) to Ridgeline Commercial Bank, N.A., solely in connection with CMP's existing $1,400,000.00 revolving credit facility, to the extent such disclosure is required by the terms of that facility or reasonably requested by the lender.
We encourage you to exercise caution in any discussions about the resolution of this matter and to direct any inquiries from third parties to our office.
6. Document Retention
Calderwood & Harkness will retain your complete file for this matter in accordance with the firm's standard document-retention policy, which provides for the secure storage of closed-matter files for a period of ten (10) years following the date of the closing letter. At the expiration of that period, the file will be subject to destruction unless you instruct us otherwise in writing.
The executed originals of the Settlement Agreement and Mutual Release and the Restated Distribution Waterfall (Exhibit A) will be delivered to you under separate cover via certified mail to the address listed above. Please store these documents in a secure location; they are the controlling instruments governing both the settlement obligations and the ongoing financial operations of CMP.
For your reference, the principal documents in the client file for this matter include the following:
1.  Engagement Letter (dated October 10, 2022)
2.  Pre-Litigation Demand Letter (dated November 18, 2022)
3.  Internal Case Assessment Memorandum
4.  Forensic Accounting Analysis Summary (prepared by Tillerman Forensic Advisory LLC)
5.  Complaint (Fonseca v. Rennick et al., filed January 23, 2023)
6.  Mediation Brief (submitted to Apex Mediation Services, June 2023)
7.  Settlement Term Sheet (executed June 28, 2023)
8.  Settlement Agreement and Mutual Release (executed July 14, 2023)
9.  Restated Distribution Waterfall (Exhibit A to Settlement Agreement)
10.  Joint Stipulation for Dismissal (to be filed upon receipt of First Installment)
11.  This Closing Letter (dated July 14, 2023)
12.  Matter Closing Memorandum
7. Final Invoice and Fee Summary
The final invoice for Calderwood & Harkness Matter No. 1035-00004 will be rendered in the August 2023 billing cycle. For purposes of your planning, we provide the following summary of the fees and costs incurred in this matter:
The remaining balance of approximately $73,500.00, together with any outstanding disbursements not yet invoiced, will appear on the final invoice. Consistent with the terms of our Engagement Letter dated October 10, 2022, Tillerman Forensic Advisory LLC's fees of $92,400.00 were billed directly to you and are not included in Calderwood & Harkness's invoices. Similarly, your share of the Apex Mediation Services fees ($6,250.00) was invoiced to you separately by Apex.
Please do not hesitate to contact us if you have any questions regarding the final invoice when it is received.
8. Assessment of Outcome
We believe this settlement represents an excellent outcome for you, measured both in monetary terms and in the structural protections it secures for the future of your partnership interest.
On the monetary side, the $975,000.00 recovery represents approximately 69.3% of the total claim, which we valued at approximately $1,407,589 inclusive of estimated pre-judgment interest at the 10% statutory rate. This recovery rate compares favorably with outcomes in similar partnership-accounting disputes, where settlement ranges typically fall between 40% and 65% of claimed damages. Your recovery exceeded the upper end of that range.
Beyond the monetary recovery, the structural governance reforms embedded in the Restated Distribution Waterfall provide meaningful and lasting prospective protections for your 55% partnership interest in CMP. The reduced management-fee cap, the dual-signature controls on RSV invoices and expenditures above $25,000, the mandatory independent accountant oversight, the quarterly financial-reporting obligation, and the annual audit requirement collectively establish a governance framework that is materially more protective of your interests than the one that existed under the original Partnership Agreement. These reforms address the root causes of the financial misconduct at issue and substantially reduce the risk of similar conduct recurring.
The resolution was also achieved with considerable efficiency. The matter was opened on October 10, 2022, and closed with a fully executed settlement on July 14, 2023 — a period of approximately nine months. This timeline is well within the pre-trial phase of the litigation and represents a significant savings over the estimated cost and duration of proceeding through trial. At the outset of the engagement, we estimated that total legal fees through trial would approximate $630,000; the actual fees incurred were approximately $148,500, representing a savings of roughly $481,500 in legal fees alone, not including the additional forensic accounting fees, expert witness costs, and other expenses that would have been necessary to support a trial.
Finally, and importantly, the partnership with Mr. Rennick has been preserved. CMP's four film properties — Iron Lullaby, The Perdition Room, Salt Wind, and Nightjars — with aggregate gross receipts of approximately $23,220,000 through the second quarter of 2022, can continue to be exploited under transparent, independently audited accounting. The ongoing revenue streams from these properties represent significant long-term value for you, and the preservation of the partnership ensures that you will continue to benefit from that value without the disruption and uncertainty of a dissolution or buyout.
9. Next Steps and Action Items
To ensure a smooth transition following the closing of this matter, we ask that you attend to the following items:
1.  First Installment — August 4, 2023. Monitor your designated bank account for receipt of the First Installment of $600,000.00, which is due on or before August 4, 2023. If you have not received the wire transfer by the close of business on that date, please notify our office immediately.
2.  Second Installment — October 15, 2023. Monitor for receipt of the Second Installment of $375,000.00, which is due on or before October 15, 2023. Again, please notify us immediately if payment is not received by that date.
3.  Waterfall Restatement. Cooperate with Howard Moss and the team at Clearfield & Moss CPAs as they work to restate the applicable quarterly waterfall schedules within thirty (30) days of the Effective Date. They may need access to certain records in your possession, and prompt cooperation will help ensure the restatement is completed on schedule.
4.  First Quarterly Report. Expect to receive the first quarterly financial-reporting package under the new regime for the third quarter of 2023 (the quarter ending September 30, 2023). That package is due within 45 days of the quarter-end — that is, by approximately mid-November 2023.
5.  Ongoing Questions. Should any questions arise regarding the enforcement of any settlement term, the restated waterfall, the annual audit process, or any other matter related to CMP or the partnership, please do not hesitate to contact Calderwood & Harkness.
It has been a genuine privilege to represent you in this matter, Ms. Fonseca. We are proud of the result we achieved together, and we are confident that the settlement outcome — both the monetary recovery and the governance reforms — positions Coastal Meridian Productions LLP for transparent and equitable operations going forward. We believe you will see the benefits of these structural changes reflected in the partnership's financial reporting in the quarters and years ahead.
Should you have any questions about the settlement terms, the upcoming payment deadlines, the final invoice, or any other matter, please do not hesitate to contact me directly or reach out to any member of the engagement team: Jeffrey Park, Linda Osei, or Yuki Nakamura. We are here to assist you.
With best regards,
CALDERWOOD & HARKNESS LLP
By: ________
Samuel Eklund Partner
cc: Jeffrey Park
Linda Osei Yuki Nakamura
Item | Amount
Total Calderwood & Harkness professional fees | $148,500.00 (approx.)
Initial retainer received and applied | ($75,000.00)
Remaining balance (fees) | $73,500.00 (approx.)
Outstanding disbursements (copying, filing fees, court reporters, etc.) | To be reflected on final invoice
Tillerman Forensic Advisory LLC — forensic accounting fees (billed directly to client) | $92,400.00
Apex Mediation Services — Ms. Fonseca's share of mediation fees | $6,250.00