mediation-brief.docx

1035-00004 · Client 1035 · Mediation

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CALDERWOOD & HARKNESS LLP 725 South Flower Street, Suite 4200 Los Angeles, California 90017 Telephone: (213) 555-7800 Facsimile: (213) 555-7801

Samuel Eklund (SBN 198742), Responsible Partner Jeffrey Park (SBN 301456), Lead Associate

Attorneys for Plaintiff Marguerite D. Fonseca

MEDIATION BRIEF

SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF LOS ANGELES

MARGUERITE D. FONSECA,

Plaintiff,

DESMOND R. RENNICK, an individual; RENNICK SLATE VENTURES LLC, a California limited liability company; and DOES 1 through 25, inclusive,

Defendants.

Case No. 23STCV01897

Submitted to: Hon. Patricia Villareal (Ret.) Apex Mediation Services 633 West 5th Street, Suite 2600 Los Angeles, California 90071

Mediation Date: May 19, 2023

Date of Brief: May 12, 2023

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I. INTRODUCTION

Plaintiff Marguerite D. Fonseca respectfully submits this Mediation Brief in advance of the mediation session scheduled for May 19, 2023, before the Honorable Patricia Villareal (Ret.), through Apex Mediation Services. Ms. Fonseca is represented in this matter by Calderwood & Harkness LLP, with Samuel Eklund serving as Responsible Partner and Jeffrey Park serving as Lead Associate.

The purpose of this brief is threefold. First, it presents the factual and legal basis for Ms. Fonseca's claims against Desmond R. Rennick and Rennick Slate Ventures LLC ("RSV"). Second, it summarizes the strength of Ms. Fonseca's evidence — including a detailed forensic accounting reconstruction prepared by Tillerman Forensic Advisory LLC — and explains why those claims are likely to succeed if the matter proceeds to trial. Third, and most importantly, it conveys Ms. Fonseca's genuine willingness to reach a fair and durable resolution through this mediation process.

Ms. Fonseca seeks both monetary compensation for the financial irregularities that occurred between 2018 and mid-2022 and prospective structural reforms to the Coastal Meridian Productions LLP ("CMP") partnership that will restore trust, transparency, and sound governance to the enterprise. CMP has been a profitable film-production partnership, and the four feature films in its library continue to generate meaningful revenues. Ms. Fonseca recognizes the value of that ongoing business, and she has no desire to destroy it through protracted and expensive litigation.

Accordingly, Ms. Fonseca enters this mediation with an express interest in preserving the partnership relationship, provided that a restructured economic arrangement can be negotiated — one that fairly compensates her for past losses and that implements the safeguards necessary to prevent a recurrence of the conduct at issue. She believes that a negotiated resolution is in the best interests of both partners, of CMP as an enterprise, and of CMP's lender, Ridgeline Commercial Bank.

Ms. Fonseca's settlement proposal, set forth in detail in Section VI below, reflects this constructive posture. It incorporates a meaningful discount from her full damages claim, forgoes the contractual attorney's-fee recovery to which she would be entitled under the Partnership Agreement, and proposes prospective reforms rather than dissolution.

II. BACKGROUND

A. Formation of Coastal Meridian Productions LLP

Coastal Meridian Productions LLP was formed on March 8, 2017, as a California limited liability partnership pursuant to the California Revised Uniform Partnership Act (Cal. Corp. Code §§ 16100, et seq.). A Statement of Partnership Authority was filed with the California Secretary of State on that date, and CMP has been in continuous good standing since its formation.

CMP's registered agent is Pacific Coast Registered Agents, Inc., located at 4200 Wilshire Boulevard, Suite 610, Los Angeles, California 90010. The partnership's Employer Identification Number is 83-2197644. Its principal office is located at 1140 North La Brea Avenue, Suite 300, Los Angeles, California 90038, where it maintains its primary books, records, and production offices.

The partnership was formed for the purpose of developing, producing, and exploiting feature-film properties. Since its formation, CMP has successfully produced four feature films that have generated aggregate gross receipts in excess of $23 million, underscoring the partnership's commercial viability and the ongoing economic value of its film library.

B. The Partners and Their Contributions

CMP has two partners: Marguerite D. Fonseca and Desmond R. Rennick. Their respective interests, capital contributions, and roles within the partnership are as follows.

Marguerite D. Fonseca holds a fifty-five percent (55%) equity interest in CMP. At the time of formation, Ms. Fonseca contributed $2,850,000 in initial capital to the partnership. In addition to her capital contribution, Ms. Fonseca personally guaranteed CMP's $1,400,000 revolving credit facility with Ridgeline Commercial Bank. This personal guaranty exposed Ms. Fonseca to significant individual financial risk for the benefit of the partnership and reflects the depth of her commitment to CMP's success.

Desmond R. Rennick holds a forty-five percent (45%) equity interest in CMP. Mr. Rennick contributed $2,331,818 in initial capital to the partnership, bringing the total partnership capitalization at inception to $5,181,818. Under the terms of the Partnership Agreement, Mr. Rennick has served as CMP's day-to-day Managing Partner since the partnership's formation. In that capacity, Mr. Rennick was vested with sole signing authority over CMP's operating bank accounts — a grant of authority that, as explained below, Mr. Rennick exploited to the detriment of Ms. Fonseca and the partnership.

C. The Partnership Agreement

The partners executed a comprehensive Partnership Agreement dated March 8, 2017 (the "Agreement"), which governs the economic terms, management authority, and dispute-resolution mechanisms of CMP. The Agreement was amended once, pursuant to a First Amendment dated January 15, 2019 (the "First Amendment"). The First Amendment addressed certain administrative matters related to CMP's banking arrangements and was silent on the subject of management fees, the management-fee cap, or the revenue-waterfall methodology — all of which are central to this dispute.

The key economic terms of the Agreement include the following:

Profit Distribution. Section 5.1 of the Agreement provides that distributable profits shall be allocated 55% to Ms. Fonseca and 45% to Mr. Rennick, after recoupment of initial capital contributions and permissible expenses incurred by the partnership. The Agreement sets forth a detailed waterfall methodology by which gross receipts from each film property are reduced by specified categories of expenses — including production costs, distribution fees, marketing and publicity costs, and permissible management fees — before the residual profits are distributed to the partners in accordance with their equity percentages.

Management-Fee Cap. Section 6.2 of the Agreement authorizes the payment of management fees to the Managing Partner's designee in connection with the supervision and administration of CMP's film properties. Critically, Section 6.2 caps such fees at five percent (5%) of gross receipts per film property. This provision was the subject of significant negotiation between the partners at the time of formation, and its inclusion reflects the parties' shared understanding that management fees should be reasonable and proportionate to the revenues generated by the partnership's films.

Fee-Shifting. Section 12.3 of the Agreement provides that in the event of a material breach of the Agreement by either partner, the breaching party shall be responsible for the reasonable attorney's fees and costs incurred by the non-breaching party in enforcing the Agreement. This provision is relevant both to the magnitude of Ms. Fonseca's potential recovery at trial and to the reasonableness of her settlement position, which forgoes this contractual entitlement in the interest of reaching an amicable resolution.

D. The Film Properties

Since its formation, CMP has produced and commercially exploited four feature films. Each of these films has generated meaningful revenues through a combination of domestic and international theatrical distribution, home-entertainment sales, streaming/SVOD licensing, and ancillary exploitation. The aggregate gross receipts for each film, through the second quarter of 2022 (the most recent period for which complete data is available), are as follows:

These figures are derived from CMP's quarterly financial statements prepared by Clearfield & Moss CPAs and have been independently verified by Tillerman Forensic Advisory LLC in connection with its forensic analysis. Salt Wind has been the partnership's most commercially successful property, generating $8,740,000 in aggregate gross receipts — nearly 38% of the partnership's total revenues. As detailed below, Salt Wind was also the property most significantly affected by Mr. Rennick's improper conduct.

The continued revenue-generating potential of this four-film library is an important consideration in this mediation. These films remain in active exploitation through streaming platforms, international licensing, and ancillary channels, and they are expected to continue generating meaningful revenues for years to come. A negotiated resolution that preserves the partnership and its library is therefore in the economic interest of both partners.

E. Rennick Slate Ventures LLC

Rennick Slate Ventures LLC ("RSV") is a California limited liability company organized on June 22, 2018, by Desmond R. Rennick as its sole member. RSV's Employer Identification Number is 84-3056178, and its principal address is 1925 Ocean Park Boulevard, Suite 200, Santa Monica, California 90405.

Beginning shortly after its formation, RSV invoiced CMP for a range of services purportedly rendered in connection with CMP's film properties, including production-management services, post-production supervision, and festival and distribution services. Over the period from 2018 through mid-2022, RSV submitted 142 invoices to CMP totaling $2,694,500. Every one of these invoices bore only Mr. Rennick's approval signature. Not a single invoice was countersigned by Ms. Fonseca, nor was Ms. Fonseca ever consulted about, informed of, or asked to approve any RSV invoice prior to payment.

The existence and operations of RSV are central to this dispute. RSV is, in substance, Mr. Rennick's alter ego — a single-member LLC through which Mr. Rennick channeled partnership funds to himself in excess of the amounts permitted under the Partnership Agreement. As Managing Partner with sole signing authority over CMP's operating accounts, Mr. Rennick was in a position to approve RSV's invoices, authorize their payment from CMP's bank accounts, and record them in CMP's books — all without Ms. Fonseca's knowledge or consent.

F. CMP's Lender

Ridgeline Commercial Bank ("Ridgeline") has provided CMP with a $1,400,000 revolving credit facility, secured by a first-priority lien on CMP's distribution proceeds. This facility has been instrumental in providing CMP with the working capital necessary to fund the development and production of its film properties.

As noted above, Ms. Fonseca personally guaranteed this credit facility. She remains liable under that guaranty as of the date of this brief. The Ridgeline relationship is relevant to this mediation in several respects. First, any disruption to CMP's operations — whether through dissolution, protracted litigation, or loss of confidence by the lender — could trigger a default under the credit facility and expose Ms. Fonseca to liability on her personal guaranty. Second, the lender's continued confidence in the partnership is dependent upon orderly financial management and transparent reporting, precisely the safeguards that Ms. Fonseca's settlement proposal is designed to restore. Third, an amicable resolution of this dispute will reassure Ridgeline that the partnership is being managed in a financially responsible manner, thereby preserving the credit facility for the benefit of both partners.

III. THE DISPUTE

The dispute between the parties centers on two categories of financial irregularities perpetrated by Mr. Rennick during his tenure as Managing Partner: (1) the payment of excessive management fees to RSV in violation of the contractual cap in Section 6.2 of the Partnership Agreement; and (2) the improper reclassification of distributable revenue as advance recoupments, which reduced the distributable profit pool and depressed Ms. Fonseca's partnership distributions.

A. Excess Management Fees Paid to RSV

Between 2018 and mid-2022, Mr. Rennick caused CMP to pay management fees and service invoices to RSV totaling $2,694,500. This figure encompasses all 142 invoices submitted by RSV to CMP during that period, as identified and cataloged by Tillerman Forensic Advisory LLC in the course of its forensic analysis.

Under Section 6.2 of the Partnership Agreement, the maximum permissible management fees payable to the Managing Partner's designee are capped at five percent (5%) of gross receipts per film property. Based on the aggregate gross receipts of $23,220,000 generated by CMP's four films through Q2 2022, the maximum total management fees that could properly have been paid to RSV under the 5% cap were $1,161,000, calculated as follows:

The total excess fees paid to RSV thus amount to $1,533,500 — more than 132% above the permissible amount.

The forensic analysis conducted by Tillerman Forensic Advisory LLC, under the direction of Greta Sørensen, CPA, CFF, provides a detailed breakdown of the excess fees by category:

Post-Production Supervision (37 invoices; $814,600). RSV submitted 37 invoices totaling $814,600 for purported "post-production supervision" services rendered in connection with CMP's four film properties. However, CMP's own records reflect that each of these films was post-produced by established third-party post-production houses engaged directly by CMP under separate service agreements. The work performed by these third-party vendors — including editorial, color correction, sound design, and visual effects — fully encompassed the services described in RSV's invoices. RSV's post-production supervision invoices were therefore duplicative of services already being provided to CMP by its vendors and for which CMP had already paid.

Festival and Distribution Services (18 invoices; $412,900). RSV submitted 18 invoices totaling $412,900 for purported "festival and distribution services." A significant number of these invoices were dated and rendered after the applicable film's theatrical release had already concluded. Moreover, CMP's files contain no deliverables, attendance records, travel receipts, or other documentation to substantiate the provision of any festival or distribution services by RSV in connection with these invoices. The invoices are, in effect, unsupported by any evidence that the claimed services were actually performed.

Miscellaneous Charges ($306,000). The remaining $306,000 in excess fees is spread across range miscellaneous charges — including consulting fees, talent-liaison services, and administrative-support fees — that, according to Tillerman's analysis, exceed comparable industry rates by 40% to 65%. These charges, even if they reflected actual services, were billed at rates substantially above market and contributed to the aggregate overpayment to RSV.

It bears emphasis that every one of the 142 RSV invoices was approved solely by Mr. Rennick, in his capacity as Managing Partner with sole signing authority over CMP's operating accounts. Ms. Fonseca did not approve, countersign, or authorize any of these invoices. Nor was she informed of their existence or given an opportunity to review them prior to payment. This unilateral conduct, by a fiduciary who stood on both sides of every transaction — as the Managing Partner authorizing CMP's payments and as the sole member of RSV receiving those payments — lies at the heart of Ms. Fonseca's claims.

B. Improper Revenue Reclassifications

In addition to the excess management fees, Mr. Rennick engaged in a separate course of conduct designed to reduce the distributable profit pool available for allocation to the partners. Specifically, Mr. Rennick reclassified a total of $847,200 in domestic distribution revenues as recoupable producer-advance repayments on the partnership's waterfall schedules, notwithstanding that the underlying advances had already been fully recouped.

The reclassifications affected two of CMP's four film properties:

*Salt Wind* — $538,200. In the third quarter of 2020, CMP received $538,200 in domestic home-entertainment revenue attributable to Salt Wind. On the Q3 2020 waterfall schedule, Mr. Rennick reclassified this revenue from "distributable revenue" to "advance recoupment — Tranche B." This reclassification had the effect of diverting $538,200 from the distributable profit pool — revenues that should have been allocated 55/45 between the partners — and treating them instead as repayments of a production advance that had already been fully recouped.

*Iron Lullaby* — $309,000. In the first quarter of 2021, CMP received $309,000 in domestic subscription video-on-demand (SVOD) revenue attributable to Iron Lullaby. On the Q1 2021 waterfall schedule, Mr. Rennick reclassified this revenue from "distributable revenue" to "advance recoupment — Tranche B" in a manner identical to the Salt Wind reclassification.

The forensic analysis conducted by Tillerman Forensic Advisory LLC conclusively establishes that the Tranche B advances for both Salt Wind and Iron Lullaby were fully recouped by the fourth quarter of 2019. This finding is not based solely on Tillerman's independent reconstruction; it is corroborated by CMP's own internal financial records. Specifically, CMP's partnership accountant, Clearfield & Moss CPAs (Howard Moss, CPA), confirmed in its Q4 2019 quarterly report to the partners that full recoupment of Tranche B advances for both films had been achieved as of December 31, 2019.

The reclassifications at issue occurred in Q3 2020 and Q1 2021 — nine to fifteen months after the Tranche B advances had been fully recouped according to CMP's own accountant. There is no legitimate accounting basis for reclassifying distributable revenue as advance recoupments after the underlying advances have already been repaid. The reclassifications were, in substance, a mechanism by which Mr. Rennick artificially reduced the distributable profit pool, thereby depressing Ms. Fonseca's partnership distributions for his own benefit.

C. Total Damages

Based on the foregoing, Ms. Fonseca's total damages are calculated as follows:

Excess Management Fees. Ms. Fonseca's 55% share of the $1,533,500 in excess management fees paid to RSV is $843,425 ($1,533,500 × 55%).

Improperly Reclassified Revenues. Ms. Fonseca's 55% share of the $847,200 in improperly reclassified revenues is $465,960 ($847,200 × 55%).

Subtotal. Ms. Fonseca's aggregate claimed damages are $1,309,385 ($843,425 + $465,960).

Pre-Judgment Interest. Pre-judgment interest at the statutory rate of ten percent (10%) per annum, calculated from the date of Ms. Fonseca's formal demand (October 2022) through the anticipated mediation date — a period of approximately nine months — yields estimated pre-judgment interest of approximately $98,204 ($1,309,385 × 10% × 9/12), rounded to the nearest dollar.

Total Claim. Ms. Fonseca's total claim, including pre-judgment interest, is approximately $1,407,589 ($1,309,385 + $98,204).

This damages calculation is fully consistent with the independent forensic reconstruction performed by Tillerman Forensic Advisory LLC. Tillerman's reconstructed waterfall analysis demonstrates that Ms. Fonseca's cumulative distributions through Q2 2022 should have been $7,418,692, based on the partnership's actual gross receipts and properly calculated expenses and fees. Instead, Ms. Fonseca received cumulative distributions of only $6,109,307 — a shortfall of $1,309,385, which is identical to the damages figure derived from the component-by-component analysis set forth above. The consistency of these two independent calculations — one bottom-up and one top-down — provides powerful corroboration of the accuracy and reliability of Ms. Fonseca's damages claim.

In addition to the foregoing monetary damages, Ms. Fonseca would be entitled, in the event of a trial, to recover her reasonable attorney's fees and costs under Section 12.3 of the Partnership Agreement, which provides for fee-shifting in the event of a material breach. As discussed in Section VI below, Ms. Fonseca's settlement proposal forgoes this contractual entitlement as a concession in furtherance of resolution.

IV. STRENGTH OF FONSECA'S CLAIMS

Ms. Fonseca's Complaint asserts five causes of action against Mr. Rennick and RSV. Each is well-supported by the factual record and applicable California law. The following discussion summarizes the legal basis for each claim and explains why Ms. Fonseca is likely to prevail if the matter proceeds to trial.

A. Breach of Fiduciary Duty

As a partner in CMP, Mr. Rennick owed fiduciary duties to Ms. Fonseca and to the partnership under California's Revised Uniform Partnership Act. Specifically, California Corporations Code Section 16403 imposes a general obligation on partners to discharge their duties consistently with the obligation of good faith and fair dealing. Section 16404 further delineates the specific fiduciary duties owed by each partner, including the duty of loyalty, which encompasses the obligation to "account to the partnership and hold as trustee for it any property, profit, or benefit derived by the partner in the conduct . . . of the partnership business or derived from a use by the partner of partnership property" (Cal. Corp. Code § 16404(b)(1)), and the duty to "refrain from dealing with the partnership in the conduct . . . of the partnership business as or on behalf of a party having an interest adverse to the partnership" (Cal. Corp. Code § 16404(b)(2)).

Mr. Rennick's conduct violated each of these duties. By channeling excess partnership funds to RSV — his own single-member LLC — Mr. Rennick engaged in classic self-dealing. He stood on both sides of every transaction, approving invoices as CMP's Managing Partner and receiving the resulting payments as RSV's sole member. Under California law, the burden falls on Mr. Rennick to establish that he had proper authority for each of these related-party transactions. Given the unambiguous 5% management-fee cap in Section 6.2 of the Partnership Agreement and the complete absence of any written consent from Ms. Fonseca, Mr. Rennick cannot meet that burden.

The manipulation of the revenue waterfall — reclassifying $847,200 in distributable revenues as advance recoupments months after the advances had been fully repaid — constitutes a separate and independent breach of fiduciary duty. This was not a good-faith accounting judgment; it was a deliberate alteration of the partnership's financial records by a fiduciary with exclusive control over those records, designed to reduce Ms. Fonseca's share of partnership profits.

B. Breach of Partnership Agreement

Section 6.2 of the Partnership Agreement is unambiguous: management fees payable to the Managing Partner's designee are capped at five percent (5%) of gross receipts per film property. Mr. Rennick caused CMP to pay RSV $2,694,500 — more than $1.5 million in excess of the permissible cap. This constitutes a clear and material breach of the Partnership Agreement.

Mr. Rennick is anticipated to assert, in defense, that a "course of dealing" between the partners modified the contractual cap or that Ms. Fonseca's silence constituted implied consent to the excess payments. This defense is without merit. First, there is no documentary evidence of any kind — no written amendment, no email exchange, no text message, no memorandum, no board resolution — reflecting that Ms. Fonseca was ever informed of, let alone consented to, RSV's invoices or the excess fees being paid. Second, the First Amendment, which was negotiated and executed on January 15, 2019 — well after RSV had begun invoicing CMP — was entirely silent on the subject of management fees, the management-fee cap, or RSV. If the parties had intended to modify the 5% cap, the First Amendment was the natural vehicle for doing so, and the absence of any such modification is powerful evidence that no such agreement existed. Third, Ms. Fonseca's silence cannot constitute consent to transactions of which she had no knowledge. Mr. Rennick's sole signing authority and exclusive control over CMP's operating accounts meant that Ms. Fonseca was simply not in a position to know what was being paid, to whom, or in what amounts.

C. Accounting

Ms. Fonseca's third cause of action seeks a full and complete accounting of CMP's finances. Throughout the relevant period, Mr. Rennick failed to provide Ms. Fonseca with a transparent and accurate accounting of the partnership's income, expenses, and distributions. The excess fees paid to RSV were not identified or disclosed in CMP's financial statements in a manner that would have alerted Ms. Fonseca to their existence, and the revenue reclassifications were embedded in waterfall schedules that Ms. Fonseca was given no opportunity to review or challenge prior to their implementation.

Under California law, Ms. Fonseca is entitled to a court-ordered accounting of the partnership's financial affairs. California Corporations Code Section 16405(b) provides that a partner may maintain an action against the partnership or another partner for an accounting, and the right to an accounting accrues whenever circumstances render it just and reasonable. Here, the documented financial irregularities amply justify an accounting, and Ms. Fonseca's forensic expert is prepared to assist the Court in that process if mediation is unsuccessful.

D. Constructive Fraud

Ms. Fonseca's fourth cause of action alleges constructive fraud. Under California law, constructive fraud arises where a person in a fiduciary or confidential relationship with another takes unconscionable advantage of that relationship. (See Cal. Civ. Code § 1573.) Mr. Rennick, as a partner and fiduciary, exploited his exclusive control over CMP's financial records and bank accounts to reclassify distributable revenue for his own benefit. This conduct constitutes constructive fraud, entitling Ms. Fonseca to actual damages and, potentially, disgorgement of any profits Mr. Rennick derived from the improper reclassifications.

The constructive-fraud claim is particularly strong because the revenue reclassifications occurred nine to fifteen months after CMP's own accountant had confirmed that the underlying Tranche B advances had been fully recouped. There was no ambiguity, no good-faith misunderstanding, and no legitimate accounting basis for the reclassifications. They were deliberate acts by a fiduciary who knew — or, at a minimum, should have known — that the advances had been repaid.

E. Unjust Enrichment (Against RSV)

Ms. Fonseca's fifth cause of action asserts unjust enrichment against RSV. RSV received $1,533,500 in excess management fees — payments to which it was not contractually entitled and which were made without Ms. Fonseca's knowledge or consent. Under these circumstances, equity requires that RSV make restitution to CMP (and, by extension, to Ms. Fonseca in proportion to her 55% equity interest) for the amounts improperly received. The unjust-enrichment claim provides an alternative basis for recovery and ensures that Mr. Rennick cannot shield improperly obtained partnership funds behind the corporate form of RSV.

F. Forensic Evidence

The factual basis for Ms. Fonseca's claims is not based on speculation or conjecture. It is grounded in a rigorous, independent forensic accounting analysis conducted by Tillerman Forensic Advisory LLC, a well-regarded forensic accounting firm, under the direction of Greta Sørensen, CPA, CFF.

Ms. Sørensen prepared a preliminary forensic memorandum dated December 19, 2022, which set forth the results of her analysis. In the course of her work, Ms. Sørensen reviewed and analyzed all 142 RSV invoices submitted to CMP between 2018 and mid-2022, CMP's quarterly financial statements and waterfall schedules for the same period as prepared by Clearfield & Moss CPAs, CMP's bank records and check registers, the Partnership Agreement and First Amendment, and all available supporting documentation in CMP's files relating to the services purportedly rendered by RSV.

Ms. Sørensen's findings, summarized in Sections III.A through III.C above, are comprehensive, well-documented, and internally consistent. The reconstructed waterfall analysis independently confirms the damages calculation derived from the component-level analysis. Ms. Sørensen is prepared to serve as an expert witness if the matter proceeds to trial, and her testimony will provide the fact-finder with a clear, credible, and persuasive account of the financial irregularities at issue.

G. Rennick's Counterclaim Is Meritless

On March 6, 2023, Mr. Rennick filed an answer and counterclaim asserting that Ms. Fonseca breached her obligations of good faith by retaining Tillerman Forensic Advisory LLC to investigate CMP's financial records without obtaining Mr. Rennick's prior consent. This counterclaim is entirely without merit.

Nothing in the Partnership Agreement requires that a partner obtain the consent of the other partner before retaining personal advisors — whether attorneys, accountants, or forensic consultants — to review the partnership's books and records. To the contrary, California partnership law expressly recognizes each partner's right to inspect and copy the partnership's books and records (Cal. Corp. Code § 16403(b)) and to maintain an action for an accounting (Cal. Corp. Code § 16405(b)). The retention of a forensic accountant to assist a partner in understanding the partnership's financial affairs is a natural and lawful exercise of these rights.

Mr. Rennick's counterclaim appears to be a transparent attempt to chill Ms. Fonseca's legitimate inquiry into the partnership's finances and to create a negotiating chip for settlement discussions. It has no factual or legal merit, and Ms. Fonseca is confident that it would not survive a demurrer or, at most, a motion for summary judgment.

V. LITIGATION STATUS

The following summary of the procedural status of this case is provided for the mediator's reference.

Ms. Fonseca filed her Complaint on January 24, 2023, in the Superior Court of California, County of Los Angeles, and the matter was assigned Case No. 23STCV01897. The Complaint asserts five causes of action: (1) breach of fiduciary duty; (2) breach of the Partnership Agreement; (3) accounting; (4) constructive fraud; and (5) unjust enrichment.

Mr. Rennick filed his answer and counterclaim on March 6, 2023. Mr. Rennick is represented by Hargrove, Pettit & Sun LLP, with Elaine Chow serving as Lead Partner and Marcus Webb serving as Associate. Hargrove Pettit's offices are located at 800 South Figueroa Street, Suite 3100, Los Angeles, California 90017.

On April 11, 2023, the parties entered into a stipulation to participate in mediation, and the Court ordered a stay of all proceedings pending the completion of the mediation process. As a result, no formal discovery has been taken to date. There have been no depositions, no interrogatories, no document demands, and no expert disclosures.

If this mediation is unsuccessful and the litigation resumes, both sides will face significant additional costs. Based on Calderwood & Harkness's experience in comparable partnership disputes, each party can reasonably anticipate incurring litigation costs of $350,000 or more through trial, including attorney's fees, expert fees (forensic accountants and potentially industry experts), deposition costs, and trial preparation expenses. These costs will be borne out of partnership funds or by the individual partners, further diminishing the value available for distribution and undermining the financial stability of CMP.

VI. SETTLEMENT POSITION

Ms. Fonseca is prepared to settle this matter on the terms set forth below. These terms are designed to be fair to both parties, to compensate Ms. Fonseca for the documented financial irregularities, and to establish a prospective governance framework that will restore trust and transparency to the partnership while preserving CMP as a going concern.

A. Monetary Recovery

Ms. Fonseca requests a lump-sum payment of $1,150,000, to be paid by Mr. Rennick and/or RSV within thirty (30) days of the execution of definitive settlement documents. This figure reflects a modest discount of approximately $257,589 from Ms. Fonseca's full claim of approximately $1,407,589 (inclusive of estimated pre-judgment interest). In addition, this settlement figure entirely forgoes Ms. Fonseca's contractual right to recover attorney's fees under Section 12.3 of the Partnership Agreement — a fee-shifting provision that, given the strength of Ms. Fonseca's breach-of-contract claims, would likely yield a substantial additional recovery at trial. The $1,150,000 figure is intended to reflect a good-faith compromise that accounts for the inherent uncertainties and costs of continued litigation while still fairly compensating Ms. Fonseca for the losses she has sustained.

B. Restated Revenue Waterfall

Ms. Fonseca proposes that the partnership's revenue waterfall be restated, effective prospectively, to incorporate the following structural changes:

1. Reduction of Management-Fee Cap. The management-fee cap in Section 6.2 of the Partnership Agreement shall be reduced from five percent (5%) to three percent (3%) of gross receipts for all current and future CMP-produced film properties. This reduction reflects the fact that Mr. Rennick, through RSV, has demonstrated a willingness to exploit the fee mechanism to the detriment of Ms. Fonseca, and a lower cap is necessary to minimize future risk. A 3% cap remains within the range of industry-standard management fees for comparable film-production partnerships and will provide reasonable compensation for any legitimate management services rendered by RSV going forward.

2. Restoration of Reclassified Revenues. The $847,200 in domestic distribution revenues that were improperly reclassified as advance recoupments shall be restored to the distributable profit pool, retroactive to the quarters in which they were originally received (Q3 2020 for the $538,200 in Salt Wind home-entertainment revenue and Q1 2021 for the $309,000 in Iron Lullaby SVOD revenue). The waterfall for each of these quarters shall be recalculated to reflect the proper classification, and any resulting distributions owed to Ms. Fonseca shall be included in the lump-sum payment described in Section VI.A above.

3. Reclassification Consent Requirement. Going forward, any reclassification of revenue from "distributable revenue" to any other category on the partnership's waterfall schedules — including, without limitation, reclassification to advance recoupments, reserves, or any other non-distributable category — shall require the prior written consent of both partners before such reclassification is reflected in the waterfall.

4. Independent Accountant Administration. All waterfall calculations shall be administered on a quarterly basis by an independent accountant mutually selected by the partners. Clearfield & Moss CPAs shall continue to serve as the partnership's accountant, but Clearfield & Moss's waterfall calculations shall be subject to oversight and review by Tillerman Forensic Advisory LLC for the first two annual audit cycles following the effective date of the settlement. This transitional oversight mechanism is intended to ensure the accuracy and integrity of the waterfall during the period immediately following the restructuring, after which the independent accountant's review alone will provide adequate protection.

C. Partnership Governance Reforms

In addition to the restated waterfall, Ms. Fonseca proposes the following governance reforms to CMP's ongoing operations:

Dual-Signature Requirement. Any single CMP expenditure exceeding $25,000 shall require the prior written approval of both Ms. Fonseca and Mr. Rennick before disbursement. This requirement is not intended to impede the day-to-day operations of the partnership but rather to ensure that material expenditures — including, in particular, payments to related parties such as RSV — receive appropriate scrutiny before they are made.

Quarterly Financial Reporting. CMP's accountant shall prepare and distribute to both partners a comprehensive quarterly financial-reporting package within forty-five (45) days of the end of each calendar quarter. The quarterly package shall include, at a minimum, a profit-and-loss statement, a balance sheet, a cash-flow statement, a detailed waterfall schedule for each film property, and a schedule of all payments made to related parties (including RSV) during the quarter.

Annual Audit. CMP's books and records shall be subject to an annual audit by the independent accountant. The scope of the audit shall encompass all partnership income, expenses, distributions, and related-party transactions. The audit report shall be delivered to both partners within ninety (90) days of the end of each fiscal year.

D. Mutual Release

Upon execution of definitive settlement documents and receipt of the lump-sum payment, each party shall execute a mutual general release of all claims arising from or relating to CMP's financial affairs for the period from the partnership's inception through December 31, 2022. The release shall be broadly drafted to encompass all known and unknown claims, subject to a carve-out for claims arising under the terms of the settlement agreement itself and for any claims arising from conduct occurring after December 31, 2022.

E. Dismissal

Upon execution of the definitive settlement documents and receipt of the lump-sum payment, the parties shall file a joint stipulation to dismiss LASC Case No. 23STCV01897, with prejudice, with each side bearing its own attorney's fees and costs. Mr. Rennick shall simultaneously dismiss his counterclaim with prejudice. The dismissal shall be filed within ten (10) business days of receipt of payment.

F. RSV Going Forward

Ms. Fonseca does not seek to prohibit RSV from continuing to provide services to CMP. She recognizes that Mr. Rennick's involvement in the day-to-day management of CMP's film properties has contributed to the partnership's commercial success, and she does not wish to disrupt that involvement. However, all future RSV invoices shall be subject to the reduced three percent (3%) management-fee cap and to the dual-signature approval requirement described above. This framework ensures that RSV can continue to be compensated for legitimate services while providing Ms. Fonseca with the transparency and oversight necessary to prevent a recurrence of the excess-fee problem.

G. Non-Disparagement and Confidentiality

Neither party shall make any disparaging or derogatory statements about the other in connection with CMP, the underlying lawsuit, or the settlement, whether publicly or privately, including to industry contacts, financing sources, talent representatives, or any other third parties. This non-disparagement obligation is mutual and is intended to preserve the professional reputations of both partners and the commercial standing of CMP.

The terms of the settlement shall be kept strictly confidential by both parties and their respective counsel, with limited exceptions for disclosures to (i) the parties' respective legal and tax advisors on a need-to-know basis, (ii) disclosures required by court order or subpoena, and (iii) disclosures to Ridgeline Commercial Bank in connection with CMP's revolving credit facility, to the extent reasonably necessary to assure the lender of the partnership's financial stability and orderly governance.

VII. WHY RENNICK SHOULD SETTLE

The mediator is respectfully invited to consider the following factors, each of which weighs heavily in favor of a negotiated resolution on the terms proposed by Ms. Fonseca:

The forensic evidence is strong and well-documented. Tillerman Forensic Advisory's analysis is based on CMP's own financial records, bank statements, and RSV invoices. The excess-fee calculation is a straightforward arithmetic exercise: RSV's invoices total $2,694,500; the 5% cap permits $1,161,000; the excess is $1,533,500. The reclassification analysis is equally clear: CMP's own accountant confirmed full recoupment of Tranche B advances in Q4 2019, yet Mr. Rennick reclassified $847,200 in distributable revenue as advance recoupments in Q3 2020 and Q1 2021. A jury presented with this evidence will find these facts easy to understand and difficult to excuse.

The 5% management-fee cap is unambiguous. Section 6.2 of the Partnership Agreement is clear on its face. There is no ambiguity to construe, no extrinsic evidence to consider, and no written authorization — by amendment, email, or otherwise — for the excess payments. Mr. Rennick's anticipated "course of dealing" defense is critically undermined by the absence of any documentary evidence of consent and by the fact that the First Amendment was silent on fees.

The revenue reclassifications occurred after full recoupment was confirmed. The Q4 2019 quarterly report from Clearfield & Moss CPAs — CMP's own accountant, not an adversarial expert — confirmed that Tranche B advances for both Salt Wind and Iron Lullaby had been fully recouped. The reclassifications that followed, nine to fifteen months later, cannot be defended as good-faith accounting judgments.

Rennick's counterclaim has no basis. The counterclaim alleges that Ms. Fonseca breached her good-faith obligations by retaining Tillerman Forensic Advisory without Mr. Rennick's consent. There is no provision in the Partnership Agreement requiring mutual consent to hire personal advisors, and California partnership law expressly protects each partner's right to inspect partnership records and to seek an accounting. This counterclaim will not survive a motion to dismiss and should not be a barrier to settlement.

Continued litigation will be costly. If mediation is unsuccessful, both parties face estimated litigation costs of $350,000 or more through trial — costs that will come on top of the fees already incurred. These costs include attorney's fees, forensic and industry expert fees, deposition expenses, and trial preparation costs. For Mr. Rennick, these costs will be compounded by the near-certainty of an adverse fee-shifting order under Section 12.3 of the Partnership Agreement if Ms. Fonseca prevails at trial.

Prolonged litigation will harm the partnership. CMP's four-film library continues to generate meaningful revenues, but the partnership's ability to exploit that library — and to develop new properties — will be severely impaired by protracted litigation. Distributors, financing sources, and talent representatives will be reluctant to engage with a partnership embroiled in an acrimonious legal dispute between its two principals. Perhaps most critically, the Ridgeline Commercial Bank revolving credit facility — which is secured by CMP's distribution proceeds and personally guaranteed by Ms. Fonseca — could be jeopardized if the lender loses confidence in the partnership's financial management and stability.

A restructured waterfall preserves value for both partners. Ms. Fonseca's settlement proposal is designed to preserve the partnership as a going concern. Rather than seeking dissolution, liquidation, or buyout, Ms. Fonseca proposes a set of prospective reforms — a reduced management-fee cap, dual-signature requirements, quarterly reporting, and annual audits — that will enable the partnership to continue operating on a transparent and equitable basis. These reforms are in the interest of both partners, as they protect the ongoing economic value of CMP's film library and create a foundation for future collaboration.

Ms. Fonseca's settlement position is reasonable. The $1,150,000 lump-sum payment represents an approximate 18% discount from Ms. Fonseca's full claim (including pre-judgment interest), and it entirely forgoes the Section 12.3 attorney's-fee recovery. The prospective reforms are designed to be practical and workable, not punitive. The settlement proposal reflects Ms. Fonseca's genuine desire to resolve this dispute fairly and to move forward with a partnership that works for both parties.

VIII. CONCLUSION

Ms. Fonseca respectfully requests that the mediator consider the strength of her claims, the clarity and reliability of the forensic evidence, and the substantial benefits to both parties of a negotiated resolution that preserves the Coastal Meridian Productions LLP partnership as a viable, revenue-generating enterprise.

The financial irregularities documented in this brief are not matters of interpretation or business judgment. They are quantifiable, well-documented departures from the express terms of the Partnership Agreement and from the fiduciary duties that Mr. Rennick owes to Ms. Fonseca and to CMP. The forensic evidence is supported by CMP's own internal records and by the work product of CMP's own accountant. Ms. Fonseca is confident in the merits of her claims and in her ability to prove them at trial if necessary.

At the same time, Ms. Fonseca recognizes that litigation is costly, time-consuming, and destructive to business relationships. She has no interest in pursuing a pyrrhic victory that enriches lawyers at the expense of the partnership. She enters this mediation in good faith, prepared to engage constructively with Mr. Rennick and his counsel, and hopeful that a fair resolution can be achieved on May 19, 2023.

Ms. Fonseca's settlement proposal — a $1,150,000 lump-sum payment, a restated revenue waterfall, and sensible governance reforms — represents a reasonable and balanced path forward. It compensates Ms. Fonseca for documented losses, establishes the transparency and oversight necessary to prevent future irregularities, and preserves the economic value of a partnership that has generated more than $23 million in gross receipts from a four-film library that continues to produce revenue. Ms. Fonseca urges the mediator to convey to Mr. Rennick and his counsel that this is an opportunity to resolve a difficult situation on terms that serve the long-term interests of both partners.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Jeffrey Park (SBN 301456) Attorneys for Plaintiff Marguerite D. Fonseca

Dated: May 12, 2023

CONFIDENTIAL — FOR MEDIATION PURPOSES ONLY Submitted pursuant to Cal. Evid. Code §§ 1115–1128. This document is inadmissible in any subsequent judicial, arbitral, or administrative proceeding.

Film Property	Release Year	Aggregate Gross Receipts (Through Q2 2022)
Iron Lullaby	2018	$6,420,000
The Perdition Room	2019	$4,110,000
Salt Wind	2020	$8,740,000
Nightjars	2021	$3,950,000
Total	$23,220,000
Film Property	Gross Receipts	5% Cap	RSV Fees Invoiced	Excess
Iron Lullaby	$6,420,000	$321,000	$612,300	$291,300
The Perdition Room	$4,110,000	$205,500	$473,200	$267,700
Salt Wind	$8,740,000	$437,000	$1,034,800	$597,800
Nightjars	$3,950,000	$197,500	$574,200	$376,700
Total	$23,220,000	$1,161,000	$2,694,500	$1,533,500

CONFIDENTIAL — FOR MEDIATION PURPOSES ONLY This document is submitted solely for use in connection with mediation proceedings before Hon. Patricia Villareal (Ret.) and is protected from disclosure under California Evidence Code §§ 1115–1128. This brief and its contents are inadmissible in any subsequent judicial, arbitral, or administrative proceeding.
CALDERWOOD & HARKNESS LLP 725 South Flower Street, Suite 4200 Los Angeles, California 90017 Telephone: (213) 555-7800 Facsimile: (213) 555-7801
Samuel Eklund (SBN 198742), Responsible Partner Jeffrey Park (SBN 301456), Lead Associate
Attorneys for Plaintiff Marguerite D. Fonseca
MEDIATION BRIEF
SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF LOS ANGELES
MARGUERITE D. FONSECA,
Plaintiff,
v.
DESMOND R. RENNICK, an individual; RENNICK SLATE VENTURES LLC, a California limited liability company; and DOES 1 through 25, inclusive,
Defendants.
Case No. 23STCV01897
Submitted to: Hon. Patricia Villareal (Ret.) Apex Mediation Services 633 West 5th Street, Suite 2600 Los Angeles, California 90071
Mediation Date: May 19, 2023
Date of Brief: May 12, 2023
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I. INTRODUCTION
Plaintiff Marguerite D. Fonseca respectfully submits this Mediation Brief in advance of the mediation session scheduled for May 19, 2023, before the Honorable Patricia Villareal (Ret.), through Apex Mediation Services. Ms. Fonseca is represented in this matter by Calderwood & Harkness LLP, with Samuel Eklund serving as Responsible Partner and Jeffrey Park serving as Lead Associate.
The purpose of this brief is threefold. First, it presents the factual and legal basis for Ms. Fonseca's claims against Desmond R. Rennick and Rennick Slate Ventures LLC ("RSV"). Second, it summarizes the strength of Ms. Fonseca's evidence — including a detailed forensic accounting reconstruction prepared by Tillerman Forensic Advisory LLC — and explains why those claims are likely to succeed if the matter proceeds to trial. Third, and most importantly, it conveys Ms. Fonseca's genuine willingness to reach a fair and durable resolution through this mediation process.
Ms. Fonseca seeks both monetary compensation for the financial irregularities that occurred between 2018 and mid-2022 and prospective structural reforms to the Coastal Meridian Productions LLP ("CMP") partnership that will restore trust, transparency, and sound governance to the enterprise. CMP has been a profitable film-production partnership, and the four feature films in its library continue to generate meaningful revenues. Ms. Fonseca recognizes the value of that ongoing business, and she has no desire to destroy it through protracted and expensive litigation.
Accordingly, Ms. Fonseca enters this mediation with an express interest in preserving the partnership relationship, provided that a restructured economic arrangement can be negotiated — one that fairly compensates her for past losses and that implements the safeguards necessary to prevent a recurrence of the conduct at issue. She believes that a negotiated resolution is in the best interests of both partners, of CMP as an enterprise, and of CMP's lender, Ridgeline Commercial Bank.
Ms. Fonseca's settlement proposal, set forth in detail in Section VI below, reflects this constructive posture. It incorporates a meaningful discount from her full damages claim, forgoes the contractual attorney's-fee recovery to which she would be entitled under the Partnership Agreement, and proposes prospective reforms rather than dissolution.
II. BACKGROUND
A. Formation of Coastal Meridian Productions LLP
Coastal Meridian Productions LLP was formed on March 8, 2017, as a California limited liability partnership pursuant to the California Revised Uniform Partnership Act (Cal. Corp. Code §§ 16100, et seq.). A Statement of Partnership Authority was filed with the California Secretary of State on that date, and CMP has been in continuous good standing since its formation.
CMP's registered agent is Pacific Coast Registered Agents, Inc., located at 4200 Wilshire Boulevard, Suite 610, Los Angeles, California 90010. The partnership's Employer Identification Number is 83-2197644. Its principal office is located at 1140 North La Brea Avenue, Suite 300, Los Angeles, California 90038, where it maintains its primary books, records, and production offices.
The partnership was formed for the purpose of developing, producing, and exploiting feature-film properties. Since its formation, CMP has successfully produced four feature films that have generated aggregate gross receipts in excess of $23 million, underscoring the partnership's commercial viability and the ongoing economic value of its film library.
B. The Partners and Their Contributions
CMP has two partners: Marguerite D. Fonseca and Desmond R. Rennick. Their respective interests, capital contributions, and roles within the partnership are as follows.
Marguerite D. Fonseca holds a fifty-five percent (55%) equity interest in CMP. At the time of formation, Ms. Fonseca contributed $2,850,000 in initial capital to the partnership. In addition to her capital contribution, Ms. Fonseca personally guaranteed CMP's $1,400,000 revolving credit facility with Ridgeline Commercial Bank. This personal guaranty exposed Ms. Fonseca to significant individual financial risk for the benefit of the partnership and reflects the depth of her commitment to CMP's success.
Desmond R. Rennick holds a forty-five percent (45%) equity interest in CMP. Mr. Rennick contributed $2,331,818 in initial capital to the partnership, bringing the total partnership capitalization at inception to $5,181,818. Under the terms of the Partnership Agreement, Mr. Rennick has served as CMP's day-to-day Managing Partner since the partnership's formation. In that capacity, Mr. Rennick was vested with sole signing authority over CMP's operating bank accounts — a grant of authority that, as explained below, Mr. Rennick exploited to the detriment of Ms. Fonseca and the partnership.
C. The Partnership Agreement
The partners executed a comprehensive Partnership Agreement dated March 8, 2017 (the "Agreement"), which governs the economic terms, management authority, and dispute-resolution mechanisms of CMP. The Agreement was amended once, pursuant to a First Amendment dated January 15, 2019 (the "First Amendment"). The First Amendment addressed certain administrative matters related to CMP's banking arrangements and was silent on the subject of management fees, the management-fee cap, or the revenue-waterfall methodology — all of which are central to this dispute.
The key economic terms of the Agreement include the following:
Profit Distribution. Section 5.1 of the Agreement provides that distributable profits shall be allocated 55% to Ms. Fonseca and 45% to Mr. Rennick, after recoupment of initial capital contributions and permissible expenses incurred by the partnership. The Agreement sets forth a detailed waterfall methodology by which gross receipts from each film property are reduced by specified categories of expenses — including production costs, distribution fees, marketing and publicity costs, and permissible management fees — before the residual profits are distributed to the partners in accordance with their equity percentages.
Management-Fee Cap. Section 6.2 of the Agreement authorizes the payment of management fees to the Managing Partner's designee in connection with the supervision and administration of CMP's film properties. Critically, Section 6.2 caps such fees at five percent (5%) of gross receipts per film property. This provision was the subject of significant negotiation between the partners at the time of formation, and its inclusion reflects the parties' shared understanding that management fees should be reasonable and proportionate to the revenues generated by the partnership's films.
Fee-Shifting. Section 12.3 of the Agreement provides that in the event of a material breach of the Agreement by either partner, the breaching party shall be responsible for the reasonable attorney's fees and costs incurred by the non-breaching party in enforcing the Agreement. This provision is relevant both to the magnitude of Ms. Fonseca's potential recovery at trial and to the reasonableness of her settlement position, which forgoes this contractual entitlement in the interest of reaching an amicable resolution.
D. The Film Properties
Since its formation, CMP has produced and commercially exploited four feature films. Each of these films has generated meaningful revenues through a combination of domestic and international theatrical distribution, home-entertainment sales, streaming/SVOD licensing, and ancillary exploitation. The aggregate gross receipts for each film, through the second quarter of 2022 (the most recent period for which complete data is available), are as follows:
These figures are derived from CMP's quarterly financial statements prepared by Clearfield & Moss CPAs and have been independently verified by Tillerman Forensic Advisory LLC in connection with its forensic analysis. Salt Wind has been the partnership's most commercially successful property, generating $8,740,000 in aggregate gross receipts — nearly 38% of the partnership's total revenues. As detailed below, Salt Wind was also the property most significantly affected by Mr. Rennick's improper conduct.
The continued revenue-generating potential of this four-film library is an important consideration in this mediation. These films remain in active exploitation through streaming platforms, international licensing, and ancillary channels, and they are expected to continue generating meaningful revenues for years to come. A negotiated resolution that preserves the partnership and its library is therefore in the economic interest of both partners.
E. Rennick Slate Ventures LLC
Rennick Slate Ventures LLC ("RSV") is a California limited liability company organized on June 22, 2018, by Desmond R. Rennick as its sole member. RSV's Employer Identification Number is 84-3056178, and its principal address is 1925 Ocean Park Boulevard, Suite 200, Santa Monica, California 90405.
Beginning shortly after its formation, RSV invoiced CMP for a range of services purportedly rendered in connection with CMP's film properties, including production-management services, post-production supervision, and festival and distribution services. Over the period from 2018 through mid-2022, RSV submitted 142 invoices to CMP totaling $2,694,500. Every one of these invoices bore only Mr. Rennick's approval signature. Not a single invoice was countersigned by Ms. Fonseca, nor was Ms. Fonseca ever consulted about, informed of, or asked to approve any RSV invoice prior to payment.
The existence and operations of RSV are central to this dispute. RSV is, in substance, Mr. Rennick's alter ego — a single-member LLC through which Mr. Rennick channeled partnership funds to himself in excess of the amounts permitted under the Partnership Agreement. As Managing Partner with sole signing authority over CMP's operating accounts, Mr. Rennick was in a position to approve RSV's invoices, authorize their payment from CMP's bank accounts, and record them in CMP's books — all without Ms. Fonseca's knowledge or consent.
F. CMP's Lender
Ridgeline Commercial Bank ("Ridgeline") has provided CMP with a $1,400,000 revolving credit facility, secured by a first-priority lien on CMP's distribution proceeds. This facility has been instrumental in providing CMP with the working capital necessary to fund the development and production of its film properties.
As noted above, Ms. Fonseca personally guaranteed this credit facility. She remains liable under that guaranty as of the date of this brief. The Ridgeline relationship is relevant to this mediation in several respects. First, any disruption to CMP's operations — whether through dissolution, protracted litigation, or loss of confidence by the lender — could trigger a default under the credit facility and expose Ms. Fonseca to liability on her personal guaranty. Second, the lender's continued confidence in the partnership is dependent upon orderly financial management and transparent reporting, precisely the safeguards that Ms. Fonseca's settlement proposal is designed to restore. Third, an amicable resolution of this dispute will reassure Ridgeline that the partnership is being managed in a financially responsible manner, thereby preserving the credit facility for the benefit of both partners.
III. THE DISPUTE
The dispute between the parties centers on two categories of financial irregularities perpetrated by Mr. Rennick during his tenure as Managing Partner: (1) the payment of excessive management fees to RSV in violation of the contractual cap in Section 6.2 of the Partnership Agreement; and (2) the improper reclassification of distributable revenue as advance recoupments, which reduced the distributable profit pool and depressed Ms. Fonseca's partnership distributions.
A. Excess Management Fees Paid to RSV
Between 2018 and mid-2022, Mr. Rennick caused CMP to pay management fees and service invoices to RSV totaling $2,694,500. This figure encompasses all 142 invoices submitted by RSV to CMP during that period, as identified and cataloged by Tillerman Forensic Advisory LLC in the course of its forensic analysis.
Under Section 6.2 of the Partnership Agreement, the maximum permissible management fees payable to the Managing Partner's designee are capped at five percent (5%) of gross receipts per film property. Based on the aggregate gross receipts of $23,220,000 generated by CMP's four films through Q2 2022, the maximum total management fees that could properly have been paid to RSV under the 5% cap were $1,161,000, calculated as follows:
The total excess fees paid to RSV thus amount to $1,533,500 — more than 132% above the permissible amount.
The forensic analysis conducted by Tillerman Forensic Advisory LLC, under the direction of Greta Sørensen, CPA, CFF, provides a detailed breakdown of the excess fees by category:
Post-Production Supervision (37 invoices; $814,600). RSV submitted 37 invoices totaling $814,600 for purported "post-production supervision" services rendered in connection with CMP's four film properties. However, CMP's own records reflect that each of these films was post-produced by established third-party post-production houses engaged directly by CMP under separate service agreements. The work performed by these third-party vendors — including editorial, color correction, sound design, and visual effects — fully encompassed the services described in RSV's invoices. RSV's post-production supervision invoices were therefore duplicative of services already being provided to CMP by its vendors and for which CMP had already paid.
Festival and Distribution Services (18 invoices; $412,900). RSV submitted 18 invoices totaling $412,900 for purported "festival and distribution services." A significant number of these invoices were dated and rendered after the applicable film's theatrical release had already concluded. Moreover, CMP's files contain no deliverables, attendance records, travel receipts, or other documentation to substantiate the provision of any festival or distribution services by RSV in connection with these invoices. The invoices are, in effect, unsupported by any evidence that the claimed services were actually performed.
Miscellaneous Charges ($306,000). The remaining $306,000 in excess fees is spread across range miscellaneous charges — including consulting fees, talent-liaison services, and administrative-support fees — that, according to Tillerman's analysis, exceed comparable industry rates by 40% to 65%. These charges, even if they reflected actual services, were billed at rates substantially above market and contributed to the aggregate overpayment to RSV.
It bears emphasis that every one of the 142 RSV invoices was approved solely by Mr. Rennick, in his capacity as Managing Partner with sole signing authority over CMP's operating accounts. Ms. Fonseca did not approve, countersign, or authorize any of these invoices. Nor was she informed of their existence or given an opportunity to review them prior to payment. This unilateral conduct, by a fiduciary who stood on both sides of every transaction — as the Managing Partner authorizing CMP's payments and as the sole member of RSV receiving those payments — lies at the heart of Ms. Fonseca's claims.
B. Improper Revenue Reclassifications
In addition to the excess management fees, Mr. Rennick engaged in a separate course of conduct designed to reduce the distributable profit pool available for allocation to the partners. Specifically, Mr. Rennick reclassified a total of $847,200 in domestic distribution revenues as recoupable producer-advance repayments on the partnership's waterfall schedules, notwithstanding that the underlying advances had already been fully recouped.
The reclassifications affected two of CMP's four film properties:
*Salt Wind* — $538,200. In the third quarter of 2020, CMP received $538,200 in domestic home-entertainment revenue attributable to Salt Wind. On the Q3 2020 waterfall schedule, Mr. Rennick reclassified this revenue from "distributable revenue" to "advance recoupment — Tranche B." This reclassification had the effect of diverting $538,200 from the distributable profit pool — revenues that should have been allocated 55/45 between the partners — and treating them instead as repayments of a production advance that had already been fully recouped.
*Iron Lullaby* — $309,000. In the first quarter of 2021, CMP received $309,000 in domestic subscription video-on-demand (SVOD) revenue attributable to Iron Lullaby. On the Q1 2021 waterfall schedule, Mr. Rennick reclassified this revenue from "distributable revenue" to "advance recoupment — Tranche B" in a manner identical to the Salt Wind reclassification.
The forensic analysis conducted by Tillerman Forensic Advisory LLC conclusively establishes that the Tranche B advances for both Salt Wind and Iron Lullaby were fully recouped by the fourth quarter of 2019. This finding is not based solely on Tillerman's independent reconstruction; it is corroborated by CMP's own internal financial records. Specifically, CMP's partnership accountant, Clearfield & Moss CPAs (Howard Moss, CPA), confirmed in its Q4 2019 quarterly report to the partners that full recoupment of Tranche B advances for both films had been achieved as of December 31, 2019.
The reclassifications at issue occurred in Q3 2020 and Q1 2021 — nine to fifteen months after the Tranche B advances had been fully recouped according to CMP's own accountant. There is no legitimate accounting basis for reclassifying distributable revenue as advance recoupments after the underlying advances have already been repaid. The reclassifications were, in substance, a mechanism by which Mr. Rennick artificially reduced the distributable profit pool, thereby depressing Ms. Fonseca's partnership distributions for his own benefit.
C. Total Damages
Based on the foregoing, Ms. Fonseca's total damages are calculated as follows:
Excess Management Fees. Ms. Fonseca's 55% share of the $1,533,500 in excess management fees paid to RSV is $843,425 ($1,533,500 × 55%).
Improperly Reclassified Revenues. Ms. Fonseca's 55% share of the $847,200 in improperly reclassified revenues is $465,960 ($847,200 × 55%).
Subtotal. Ms. Fonseca's aggregate claimed damages are $1,309,385 ($843,425 + $465,960).
Pre-Judgment Interest. Pre-judgment interest at the statutory rate of ten percent (10%) per annum, calculated from the date of Ms. Fonseca's formal demand (October 2022) through the anticipated mediation date — a period of approximately nine months — yields estimated pre-judgment interest of approximately $98,204 ($1,309,385 × 10% × 9/12), rounded to the nearest dollar.
Total Claim. Ms. Fonseca's total claim, including pre-judgment interest, is approximately $1,407,589 ($1,309,385 + $98,204).
This damages calculation is fully consistent with the independent forensic reconstruction performed by Tillerman Forensic Advisory LLC. Tillerman's reconstructed waterfall analysis demonstrates that Ms. Fonseca's cumulative distributions through Q2 2022 should have been $7,418,692, based on the partnership's actual gross receipts and properly calculated expenses and fees. Instead, Ms. Fonseca received cumulative distributions of only $6,109,307 — a shortfall of $1,309,385, which is identical to the damages figure derived from the component-by-component analysis set forth above. The consistency of these two independent calculations — one bottom-up and one top-down — provides powerful corroboration of the accuracy and reliability of Ms. Fonseca's damages claim.
In addition to the foregoing monetary damages, Ms. Fonseca would be entitled, in the event of a trial, to recover her reasonable attorney's fees and costs under Section 12.3 of the Partnership Agreement, which provides for fee-shifting in the event of a material breach. As discussed in Section VI below, Ms. Fonseca's settlement proposal forgoes this contractual entitlement as a concession in furtherance of resolution.
IV. STRENGTH OF FONSECA'S CLAIMS
Ms. Fonseca's Complaint asserts five causes of action against Mr. Rennick and RSV. Each is well-supported by the factual record and applicable California law. The following discussion summarizes the legal basis for each claim and explains why Ms. Fonseca is likely to prevail if the matter proceeds to trial.
A. Breach of Fiduciary Duty
As a partner in CMP, Mr. Rennick owed fiduciary duties to Ms. Fonseca and to the partnership under California's Revised Uniform Partnership Act. Specifically, California Corporations Code Section 16403 imposes a general obligation on partners to discharge their duties consistently with the obligation of good faith and fair dealing. Section 16404 further delineates the specific fiduciary duties owed by each partner, including the duty of loyalty, which encompasses the obligation to "account to the partnership and hold as trustee for it any property, profit, or benefit derived by the partner in the conduct . . . of the partnership business or derived from a use by the partner of partnership property" (Cal. Corp. Code § 16404(b)(1)), and the duty to "refrain from dealing with the partnership in the conduct . . . of the partnership business as or on behalf of a party having an interest adverse to the partnership" (Cal. Corp. Code § 16404(b)(2)).
Mr. Rennick's conduct violated each of these duties. By channeling excess partnership funds to RSV — his own single-member LLC — Mr. Rennick engaged in classic self-dealing. He stood on both sides of every transaction, approving invoices as CMP's Managing Partner and receiving the resulting payments as RSV's sole member. Under California law, the burden falls on Mr. Rennick to establish that he had proper authority for each of these related-party transactions. Given the unambiguous 5% management-fee cap in Section 6.2 of the Partnership Agreement and the complete absence of any written consent from Ms. Fonseca, Mr. Rennick cannot meet that burden.
The manipulation of the revenue waterfall — reclassifying $847,200 in distributable revenues as advance recoupments months after the advances had been fully repaid — constitutes a separate and independent breach of fiduciary duty. This was not a good-faith accounting judgment; it was a deliberate alteration of the partnership's financial records by a fiduciary with exclusive control over those records, designed to reduce Ms. Fonseca's share of partnership profits.
B. Breach of Partnership Agreement
Section 6.2 of the Partnership Agreement is unambiguous: management fees payable to the Managing Partner's designee are capped at five percent (5%) of gross receipts per film property. Mr. Rennick caused CMP to pay RSV $2,694,500 — more than $1.5 million in excess of the permissible cap. This constitutes a clear and material breach of the Partnership Agreement.
Mr. Rennick is anticipated to assert, in defense, that a "course of dealing" between the partners modified the contractual cap or that Ms. Fonseca's silence constituted implied consent to the excess payments. This defense is without merit. First, there is no documentary evidence of any kind — no written amendment, no email exchange, no text message, no memorandum, no board resolution — reflecting that Ms. Fonseca was ever informed of, let alone consented to, RSV's invoices or the excess fees being paid. Second, the First Amendment, which was negotiated and executed on January 15, 2019 — well after RSV had begun invoicing CMP — was entirely silent on the subject of management fees, the management-fee cap, or RSV. If the parties had intended to modify the 5% cap, the First Amendment was the natural vehicle for doing so, and the absence of any such modification is powerful evidence that no such agreement existed. Third, Ms. Fonseca's silence cannot constitute consent to transactions of which she had no knowledge. Mr. Rennick's sole signing authority and exclusive control over CMP's operating accounts meant that Ms. Fonseca was simply not in a position to know what was being paid, to whom, or in what amounts.
C. Accounting
Ms. Fonseca's third cause of action seeks a full and complete accounting of CMP's finances. Throughout the relevant period, Mr. Rennick failed to provide Ms. Fonseca with a transparent and accurate accounting of the partnership's income, expenses, and distributions. The excess fees paid to RSV were not identified or disclosed in CMP's financial statements in a manner that would have alerted Ms. Fonseca to their existence, and the revenue reclassifications were embedded in waterfall schedules that Ms. Fonseca was given no opportunity to review or challenge prior to their implementation.
Under California law, Ms. Fonseca is entitled to a court-ordered accounting of the partnership's financial affairs. California Corporations Code Section 16405(b) provides that a partner may maintain an action against the partnership or another partner for an accounting, and the right to an accounting accrues whenever circumstances render it just and reasonable. Here, the documented financial irregularities amply justify an accounting, and Ms. Fonseca's forensic expert is prepared to assist the Court in that process if mediation is unsuccessful.
D. Constructive Fraud
Ms. Fonseca's fourth cause of action alleges constructive fraud. Under California law, constructive fraud arises where a person in a fiduciary or confidential relationship with another takes unconscionable advantage of that relationship. (See Cal. Civ. Code § 1573.) Mr. Rennick, as a partner and fiduciary, exploited his exclusive control over CMP's financial records and bank accounts to reclassify distributable revenue for his own benefit. This conduct constitutes constructive fraud, entitling Ms. Fonseca to actual damages and, potentially, disgorgement of any profits Mr. Rennick derived from the improper reclassifications.
The constructive-fraud claim is particularly strong because the revenue reclassifications occurred nine to fifteen months after CMP's own accountant had confirmed that the underlying Tranche B advances had been fully recouped. There was no ambiguity, no good-faith misunderstanding, and no legitimate accounting basis for the reclassifications. They were deliberate acts by a fiduciary who knew — or, at a minimum, should have known — that the advances had been repaid.
E. Unjust Enrichment (Against RSV)
Ms. Fonseca's fifth cause of action asserts unjust enrichment against RSV. RSV received $1,533,500 in excess management fees — payments to which it was not contractually entitled and which were made without Ms. Fonseca's knowledge or consent. Under these circumstances, equity requires that RSV make restitution to CMP (and, by extension, to Ms. Fonseca in proportion to her 55% equity interest) for the amounts improperly received. The unjust-enrichment claim provides an alternative basis for recovery and ensures that Mr. Rennick cannot shield improperly obtained partnership funds behind the corporate form of RSV.
F. Forensic Evidence
The factual basis for Ms. Fonseca's claims is not based on speculation or conjecture. It is grounded in a rigorous, independent forensic accounting analysis conducted by Tillerman Forensic Advisory LLC, a well-regarded forensic accounting firm, under the direction of Greta Sørensen, CPA, CFF.
Ms. Sørensen prepared a preliminary forensic memorandum dated December 19, 2022, which set forth the results of her analysis. In the course of her work, Ms. Sørensen reviewed and analyzed all 142 RSV invoices submitted to CMP between 2018 and mid-2022, CMP's quarterly financial statements and waterfall schedules for the same period as prepared by Clearfield & Moss CPAs, CMP's bank records and check registers, the Partnership Agreement and First Amendment, and all available supporting documentation in CMP's files relating to the services purportedly rendered by RSV.
Ms. Sørensen's findings, summarized in Sections III.A through III.C above, are comprehensive, well-documented, and internally consistent. The reconstructed waterfall analysis independently confirms the damages calculation derived from the component-level analysis. Ms. Sørensen is prepared to serve as an expert witness if the matter proceeds to trial, and her testimony will provide the fact-finder with a clear, credible, and persuasive account of the financial irregularities at issue.
G. Rennick's Counterclaim Is Meritless
On March 6, 2023, Mr. Rennick filed an answer and counterclaim asserting that Ms. Fonseca breached her obligations of good faith by retaining Tillerman Forensic Advisory LLC to investigate CMP's financial records without obtaining Mr. Rennick's prior consent. This counterclaim is entirely without merit.
Nothing in the Partnership Agreement requires that a partner obtain the consent of the other partner before retaining personal advisors — whether attorneys, accountants, or forensic consultants — to review the partnership's books and records. To the contrary, California partnership law expressly recognizes each partner's right to inspect and copy the partnership's books and records (Cal. Corp. Code § 16403(b)) and to maintain an action for an accounting (Cal. Corp. Code § 16405(b)). The retention of a forensic accountant to assist a partner in understanding the partnership's financial affairs is a natural and lawful exercise of these rights.
Mr. Rennick's counterclaim appears to be a transparent attempt to chill Ms. Fonseca's legitimate inquiry into the partnership's finances and to create a negotiating chip for settlement discussions. It has no factual or legal merit, and Ms. Fonseca is confident that it would not survive a demurrer or, at most, a motion for summary judgment.
V. LITIGATION STATUS
The following summary of the procedural status of this case is provided for the mediator's reference.
Ms. Fonseca filed her Complaint on January 24, 2023, in the Superior Court of California, County of Los Angeles, and the matter was assigned Case No. 23STCV01897. The Complaint asserts five causes of action: (1) breach of fiduciary duty; (2) breach of the Partnership Agreement; (3) accounting; (4) constructive fraud; and (5) unjust enrichment.
Mr. Rennick filed his answer and counterclaim on March 6, 2023. Mr. Rennick is represented by Hargrove, Pettit & Sun LLP, with Elaine Chow serving as Lead Partner and Marcus Webb serving as Associate. Hargrove Pettit's offices are located at 800 South Figueroa Street, Suite 3100, Los Angeles, California 90017.
On April 11, 2023, the parties entered into a stipulation to participate in mediation, and the Court ordered a stay of all proceedings pending the completion of the mediation process. As a result, no formal discovery has been taken to date. There have been no depositions, no interrogatories, no document demands, and no expert disclosures.
If this mediation is unsuccessful and the litigation resumes, both sides will face significant additional costs. Based on Calderwood & Harkness's experience in comparable partnership disputes, each party can reasonably anticipate incurring litigation costs of $350,000 or more through trial, including attorney's fees, expert fees (forensic accountants and potentially industry experts), deposition costs, and trial preparation expenses. These costs will be borne out of partnership funds or by the individual partners, further diminishing the value available for distribution and undermining the financial stability of CMP.
VI. SETTLEMENT POSITION
Ms. Fonseca is prepared to settle this matter on the terms set forth below. These terms are designed to be fair to both parties, to compensate Ms. Fonseca for the documented financial irregularities, and to establish a prospective governance framework that will restore trust and transparency to the partnership while preserving CMP as a going concern.
A. Monetary Recovery
Ms. Fonseca requests a lump-sum payment of $1,150,000, to be paid by Mr. Rennick and/or RSV within thirty (30) days of the execution of definitive settlement documents. This figure reflects a modest discount of approximately $257,589 from Ms. Fonseca's full claim of approximately $1,407,589 (inclusive of estimated pre-judgment interest). In addition, this settlement figure entirely forgoes Ms. Fonseca's contractual right to recover attorney's fees under Section 12.3 of the Partnership Agreement — a fee-shifting provision that, given the strength of Ms. Fonseca's breach-of-contract claims, would likely yield a substantial additional recovery at trial. The $1,150,000 figure is intended to reflect a good-faith compromise that accounts for the inherent uncertainties and costs of continued litigation while still fairly compensating Ms. Fonseca for the losses she has sustained.
B. Restated Revenue Waterfall
Ms. Fonseca proposes that the partnership's revenue waterfall be restated, effective prospectively, to incorporate the following structural changes:
1. Reduction of Management-Fee Cap. The management-fee cap in Section 6.2 of the Partnership Agreement shall be reduced from five percent (5%) to three percent (3%) of gross receipts for all current and future CMP-produced film properties. This reduction reflects the fact that Mr. Rennick, through RSV, has demonstrated a willingness to exploit the fee mechanism to the detriment of Ms. Fonseca, and a lower cap is necessary to minimize future risk. A 3% cap remains within the range of industry-standard management fees for comparable film-production partnerships and will provide reasonable compensation for any legitimate management services rendered by RSV going forward.
2. Restoration of Reclassified Revenues. The $847,200 in domestic distribution revenues that were improperly reclassified as advance recoupments shall be restored to the distributable profit pool, retroactive to the quarters in which they were originally received (Q3 2020 for the $538,200 in Salt Wind home-entertainment revenue and Q1 2021 for the $309,000 in Iron Lullaby SVOD revenue). The waterfall for each of these quarters shall be recalculated to reflect the proper classification, and any resulting distributions owed to Ms. Fonseca shall be included in the lump-sum payment described in Section VI.A above.
3. Reclassification Consent Requirement. Going forward, any reclassification of revenue from "distributable revenue" to any other category on the partnership's waterfall schedules — including, without limitation, reclassification to advance recoupments, reserves, or any other non-distributable category — shall require the prior written consent of both partners before such reclassification is reflected in the waterfall.
4. Independent Accountant Administration. All waterfall calculations shall be administered on a quarterly basis by an independent accountant mutually selected by the partners. Clearfield & Moss CPAs shall continue to serve as the partnership's accountant, but Clearfield & Moss's waterfall calculations shall be subject to oversight and review by Tillerman Forensic Advisory LLC for the first two annual audit cycles following the effective date of the settlement. This transitional oversight mechanism is intended to ensure the accuracy and integrity of the waterfall during the period immediately following the restructuring, after which the independent accountant's review alone will provide adequate protection.
C. Partnership Governance Reforms
In addition to the restated waterfall, Ms. Fonseca proposes the following governance reforms to CMP's ongoing operations:
Dual-Signature Requirement. Any single CMP expenditure exceeding $25,000 shall require the prior written approval of both Ms. Fonseca and Mr. Rennick before disbursement. This requirement is not intended to impede the day-to-day operations of the partnership but rather to ensure that material expenditures — including, in particular, payments to related parties such as RSV — receive appropriate scrutiny before they are made.
Quarterly Financial Reporting. CMP's accountant shall prepare and distribute to both partners a comprehensive quarterly financial-reporting package within forty-five (45) days of the end of each calendar quarter. The quarterly package shall include, at a minimum, a profit-and-loss statement, a balance sheet, a cash-flow statement, a detailed waterfall schedule for each film property, and a schedule of all payments made to related parties (including RSV) during the quarter.
Annual Audit. CMP's books and records shall be subject to an annual audit by the independent accountant. The scope of the audit shall encompass all partnership income, expenses, distributions, and related-party transactions. The audit report shall be delivered to both partners within ninety (90) days of the end of each fiscal year.
D. Mutual Release
Upon execution of definitive settlement documents and receipt of the lump-sum payment, each party shall execute a mutual general release of all claims arising from or relating to CMP's financial affairs for the period from the partnership's inception through December 31, 2022. The release shall be broadly drafted to encompass all known and unknown claims, subject to a carve-out for claims arising under the terms of the settlement agreement itself and for any claims arising from conduct occurring after December 31, 2022.
E. Dismissal
Upon execution of the definitive settlement documents and receipt of the lump-sum payment, the parties shall file a joint stipulation to dismiss LASC Case No. 23STCV01897, with prejudice, with each side bearing its own attorney's fees and costs. Mr. Rennick shall simultaneously dismiss his counterclaim with prejudice. The dismissal shall be filed within ten (10) business days of receipt of payment.
F. RSV Going Forward
Ms. Fonseca does not seek to prohibit RSV from continuing to provide services to CMP. She recognizes that Mr. Rennick's involvement in the day-to-day management of CMP's film properties has contributed to the partnership's commercial success, and she does not wish to disrupt that involvement. However, all future RSV invoices shall be subject to the reduced three percent (3%) management-fee cap and to the dual-signature approval requirement described above. This framework ensures that RSV can continue to be compensated for legitimate services while providing Ms. Fonseca with the transparency and oversight necessary to prevent a recurrence of the excess-fee problem.
G. Non-Disparagement and Confidentiality
Neither party shall make any disparaging or derogatory statements about the other in connection with CMP, the underlying lawsuit, or the settlement, whether publicly or privately, including to industry contacts, financing sources, talent representatives, or any other third parties. This non-disparagement obligation is mutual and is intended to preserve the professional reputations of both partners and the commercial standing of CMP.
The terms of the settlement shall be kept strictly confidential by both parties and their respective counsel, with limited exceptions for disclosures to (i) the parties' respective legal and tax advisors on a need-to-know basis, (ii) disclosures required by court order or subpoena, and (iii) disclosures to Ridgeline Commercial Bank in connection with CMP's revolving credit facility, to the extent reasonably necessary to assure the lender of the partnership's financial stability and orderly governance.
VII. WHY RENNICK SHOULD SETTLE
The mediator is respectfully invited to consider the following factors, each of which weighs heavily in favor of a negotiated resolution on the terms proposed by Ms. Fonseca:
The forensic evidence is strong and well-documented. Tillerman Forensic Advisory's analysis is based on CMP's own financial records, bank statements, and RSV invoices. The excess-fee calculation is a straightforward arithmetic exercise: RSV's invoices total $2,694,500; the 5% cap permits $1,161,000; the excess is $1,533,500. The reclassification analysis is equally clear: CMP's own accountant confirmed full recoupment of Tranche B advances in Q4 2019, yet Mr. Rennick reclassified $847,200 in distributable revenue as advance recoupments in Q3 2020 and Q1 2021. A jury presented with this evidence will find these facts easy to understand and difficult to excuse.
The 5% management-fee cap is unambiguous. Section 6.2 of the Partnership Agreement is clear on its face. There is no ambiguity to construe, no extrinsic evidence to consider, and no written authorization — by amendment, email, or otherwise — for the excess payments. Mr. Rennick's anticipated "course of dealing" defense is critically undermined by the absence of any documentary evidence of consent and by the fact that the First Amendment was silent on fees.
The revenue reclassifications occurred after full recoupment was confirmed. The Q4 2019 quarterly report from Clearfield & Moss CPAs — CMP's own accountant, not an adversarial expert — confirmed that Tranche B advances for both Salt Wind and Iron Lullaby had been fully recouped. The reclassifications that followed, nine to fifteen months later, cannot be defended as good-faith accounting judgments.
Rennick's counterclaim has no basis. The counterclaim alleges that Ms. Fonseca breached her good-faith obligations by retaining Tillerman Forensic Advisory without Mr. Rennick's consent. There is no provision in the Partnership Agreement requiring mutual consent to hire personal advisors, and California partnership law expressly protects each partner's right to inspect partnership records and to seek an accounting. This counterclaim will not survive a motion to dismiss and should not be a barrier to settlement.
Continued litigation will be costly. If mediation is unsuccessful, both parties face estimated litigation costs of $350,000 or more through trial — costs that will come on top of the fees already incurred. These costs include attorney's fees, forensic and industry expert fees, deposition expenses, and trial preparation costs. For Mr. Rennick, these costs will be compounded by the near-certainty of an adverse fee-shifting order under Section 12.3 of the Partnership Agreement if Ms. Fonseca prevails at trial.
Prolonged litigation will harm the partnership. CMP's four-film library continues to generate meaningful revenues, but the partnership's ability to exploit that library — and to develop new properties — will be severely impaired by protracted litigation. Distributors, financing sources, and talent representatives will be reluctant to engage with a partnership embroiled in an acrimonious legal dispute between its two principals. Perhaps most critically, the Ridgeline Commercial Bank revolving credit facility — which is secured by CMP's distribution proceeds and personally guaranteed by Ms. Fonseca — could be jeopardized if the lender loses confidence in the partnership's financial management and stability.
A restructured waterfall preserves value for both partners. Ms. Fonseca's settlement proposal is designed to preserve the partnership as a going concern. Rather than seeking dissolution, liquidation, or buyout, Ms. Fonseca proposes a set of prospective reforms — a reduced management-fee cap, dual-signature requirements, quarterly reporting, and annual audits — that will enable the partnership to continue operating on a transparent and equitable basis. These reforms are in the interest of both partners, as they protect the ongoing economic value of CMP's film library and create a foundation for future collaboration.
Ms. Fonseca's settlement position is reasonable. The $1,150,000 lump-sum payment represents an approximate 18% discount from Ms. Fonseca's full claim (including pre-judgment interest), and it entirely forgoes the Section 12.3 attorney's-fee recovery. The prospective reforms are designed to be practical and workable, not punitive. The settlement proposal reflects Ms. Fonseca's genuine desire to resolve this dispute fairly and to move forward with a partnership that works for both parties.
VIII. CONCLUSION
Ms. Fonseca respectfully requests that the mediator consider the strength of her claims, the clarity and reliability of the forensic evidence, and the substantial benefits to both parties of a negotiated resolution that preserves the Coastal Meridian Productions LLP partnership as a viable, revenue-generating enterprise.
The financial irregularities documented in this brief are not matters of interpretation or business judgment. They are quantifiable, well-documented departures from the express terms of the Partnership Agreement and from the fiduciary duties that Mr. Rennick owes to Ms. Fonseca and to CMP. The forensic evidence is supported by CMP's own internal records and by the work product of CMP's own accountant. Ms. Fonseca is confident in the merits of her claims and in her ability to prove them at trial if necessary.
At the same time, Ms. Fonseca recognizes that litigation is costly, time-consuming, and destructive to business relationships. She has no interest in pursuing a pyrrhic victory that enriches lawyers at the expense of the partnership. She enters this mediation in good faith, prepared to engage constructively with Mr. Rennick and his counsel, and hopeful that a fair resolution can be achieved on May 19, 2023.
Ms. Fonseca's settlement proposal — a $1,150,000 lump-sum payment, a restated revenue waterfall, and sensible governance reforms — represents a reasonable and balanced path forward. It compensates Ms. Fonseca for documented losses, establishes the transparency and oversight necessary to prevent future irregularities, and preserves the economic value of a partnership that has generated more than $23 million in gross receipts from a four-film library that continues to produce revenue. Ms. Fonseca urges the mediator to convey to Mr. Rennick and his counsel that this is an opportunity to resolve a difficult situation on terms that serve the long-term interests of both partners.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
CALDERWOOD & HARKNESS LLP
By: ________
Jeffrey Park (SBN 301456) Attorneys for Plaintiff Marguerite D. Fonseca
Dated: May 12, 2023
CONFIDENTIAL — FOR MEDIATION PURPOSES ONLY Submitted pursuant to Cal. Evid. Code §§ 1115–1128. This document is inadmissible in any subsequent judicial, arbitral, or administrative proceeding.
Film Property | Release Year | Aggregate Gross Receipts (Through Q2 2022)
Iron Lullaby | 2018 | $6,420,000
The Perdition Room | 2019 | $4,110,000
Salt Wind | 2020 | $8,740,000
Nightjars | 2021 | $3,950,000
Total | $23,220,000
Film Property | Gross Receipts | 5% Cap | RSV Fees Invoiced | Excess
Iron Lullaby | $6,420,000 | $321,000 | $612,300 | $291,300
The Perdition Room | $4,110,000 | $205,500 | $473,200 | $267,700
Salt Wind | $8,740,000 | $437,000 | $1,034,800 | $597,800
Nightjars | $3,950,000 | $197,500 | $574,200 | $376,700
Total | $23,220,000 | $1,161,000 | $2,694,500 | $1,533,500

MEDIATION BRIEF

SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF LOS ANGELES

MARGUERITE D. FONSECA,

I. INTRODUCTION

II. BACKGROUND

III. THE DISPUTE

IV. STRENGTH OF FONSECA'S CLAIMS

V. LITIGATION STATUS

VI. SETTLEMENT POSITION

VII. WHY RENNICK SHOULD SETTLE

VIII. CONCLUSION

CALDERWOOD & HARKNESS LLP

CALDERWOOD & HARKNESS LLP

Record

Parties

Dates

Amounts