784 F.2d 674 (5th Cir. 1986), 84-1693, Presidio Enterprises, Inc. v. Warner Bros. Distributing Corp.

Docket Nº:84-1693.
Citation:784 F.2d 674
Party Name:PRESIDIO ENTERPRISES, INC., Investors Un Ltd. d/b/a Village Cinema Four, & Lakehills Cinema, Ltd., Plaintiffs-Appellees, Cross-Appellants, v. WARNER BROS. DISTRIBUTING CORP., Defendant-Appellant, Cross-Appellee.
Case Date:March 12, 1986
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 674

784 F.2d 674 (5th Cir. 1986)

PRESIDIO ENTERPRISES, INC., Investors Un Ltd. d/b/a Village

Cinema Four, & Lakehills Cinema, Ltd.,

Plaintiffs-Appellees, Cross-Appellants,

v.

WARNER BROS. DISTRIBUTING CORP., Defendant-Appellant, Cross-Appellee.

No. 84-1693.

United States Court of Appeals, Fifth Circuit

March 12, 1986

Page 675

Stuart Robinowitz, Lewis R. Clayton, Alan Pfeffer, New York City, Strasburger & Price, R. Chris Harvey, Gary W. Davis, Jr., Dallas, Tex., Jack D. Maroney, Austin, Tex., for defendant-appellant, cross-appellee.

Philip K. Maxwell, Longley & Maxwell, Mark L. Kincaid, John E. Athey, Austin, Tex., for plaintiffs-appellees, cross-appellants.

Appeals from the United States District Court for the Western District of Texas.

Before GOLDBERG, JOLLY and HIGGINBOTHAM, Circuit Judges.

GOLDBERG, Circuit Judge:

The distinctly unsettling thought of angry "killer bees" terrorizing an unsuspecting Texas town lies at the heart of this case. Appellant Warner Bros. thought it could turn this idea into a "chilling, riveting, harrowing, cinematic experience," and spent $10 million trying to do so. Appellee Presidio Enterprises was apparently similarly affected, for it agreed to pay Warner $65,000 for the right to show the film, sight unseen, at two of its theatres in Austin, Texas. To make a long story short, the film was a flop. Stung by this turn of events, Presidio flew enraged into federal court, where it somehow managed to persuade a judge and jury that it had been tricked into purchasing a defective product and could collect damages under Texas consumer protection law. Through the vagaries of statutory provisions, Presidio was

Page 676

able to turn its damages of $56,000 into a judgment of more than $500,000. We reverse.

In Part I the essential factual and procedural background to the case is set out. In Part II we analyze Warner's representations concerning its film as expressions of opinion that are not actionable at common law. In Part III we conclude that the so-called "special knowledge" exception to the opinion rule is inapplicable, because Warner's expressions of opinion are merely dealers' talk or "puffery." As explained in Part IV, our common law analysis is not altered by the statutory provisions of the Texas consumer protection act under which Warner was found liable. Thus we conclude in Part V that Warner's representations are not actionable as a matter of law.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs-appellees Presidio Enterprises et al. ("Presidio") are experienced film exhibitors who own and successfully operate five movie theatres (with a total of 18 screens); their operations in Austin, Texas, date back to 1973. Transcript of Proceedings ("Tr.") at 133, 308-14. Defendant-appellant Warner Bros. Distributing Corporation ("Warner") is a major motion picture distributor; it licenses exhibitors to show films under copyright. Tr. at 317. 1

In late 1977 Warner was completing filming of a movie entitled The Swarm, which concerned an invasion of Texas by "killer bees" from South America. The Swarm was based on a best-selling novel by Arthur Herzog and was directed by Irwin Allen, who had an Oscar award to his credit and had recently produced two enormously successful "disaster" films, The Poseidon Adventure and The Towering Inferno. Tr. at 437-38, 440, 499. The cast of The Swarm included such well known stars as Michael Caine, Richard Chamberlain, Olivia de Havilland, Patty Duke Astin, Henry Fonda, Ben Johnson, Slim Pickens, Katharine Ross, and Richard Widmark. Tr. at 439. The production budget for The Swarm was about $10,000,000. Tr. at 1847, 1851-52.

The Swarm was scheduled for release in July, 1978. As is the practice with such productions, Warner began advertising the film to potential exhibitors far in advance of the release date. In August, 1977, Warner sent Presidio and other exhibitors a brochure that read as follows:

August 22, 1977

Dear Mr. Exhibitor:

"THE SWARM" IS COMING!

Today, shooting started at Warner Bros. on your blockbuster for the summer of '78.

"THE SWARM" IS COMING!

From the man who brought you the stunning successes of "THE POSEIDON ADVENTURE" and "THE TOWERING INFERNO" now comes what we hope to be the greatest adventure-survival movie of all time.

"THE SWARM" IS COMING!

After more than two years of preparation, that master showman, Irwin Allen, combines terror, suspense and startling performances in an eleven million dollar spectacular intended for audiences of all ages.

"THE SWARM" IS COMING!

Starring Michael Caine, Katharine Ross, Richard Widmark, Olivia de Havilland, Ben Johnson, Lee Grant, Patty Duke Astin, Slim Pickens, Bradford Dillman, and Henry Fonda as Dr. Krim, this will be the most "want-to-see" movie of the year.

"THE SWARM" IS COMING AND AVAILABLE July 14, 1978!

Sincerely,

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/s/Terry Semel

Plaintiff's Exhibit 2. Warner also ran similar advertisements in the trade press at this time. See Plaintiff's Exhibit 1.

In December, 1977, Warner sent Presidio and other exhibitors a second brochure, which read as follows:

December 1, 1977

Dear Exhibitor:

"THE SWARM" IS COMING!

Today, shooting was completed on your summer of '78 blockbuster.

"THE SWARM" IS COMING!

From Irwin Allen, the man who brought you astronomical grosses with "The Poseidon Adventure" and "The Towering Inferno" now comes one of the greatest adventure-survival movies of all time.

"THE SWARM" IS COMING!

And with it one of the greatest casts ever assembled for a motion picture; Michael Caine, Katharine Ross, Richard Widmark, Olivia de Havilland, Henry Fonda, Fred MacMurray, Richard Chamberlain, Jose Ferrer, Patty Duke Astin, Lee Grant, Bradford Dillman, Ben Johnson, and Slim Pickens.

"THE SWARM" IS COMING!

It is a chilling, riveting, harrowing, cinematic experience.

It promises to be Irwin Allen's biggest and best to date.

Sincerely,

/s/ Terry Semel

TERRY SEMEL

Executive Vice President

General Sales Manager

Plaintiff's Exhibit 4. This brochure also stated:

Bigger than

"The Towering Inferno"

More Exciting than

"The Poseidon Adventure"

From the man

who brought you both.

Id. Warner also ran similar advertisements in the trade press at this time. See Plaintiff's Exhibit 3.

On or about December 16, 1977, Warner sent a letter to Presidio and other exhibitors soliciting bids for The Swarm. The bid letter was typed on Warner Bros. Distributing stationery and began as follows:

December 16, 1977

Dear Exhibitor:

Irwin Allen, whose last two pictures--"TOWERING INFERNO" and "POSEIDON ADVENTURE"--generated over $100 million at the domestic boxoffice, brings you yet another giant spectacular--"SWARM."

The film, based on the Arthur Herzog best-seller, is produced and directed by Irwin Allen from a screenplay by Sterling Silliphant.

"SWARM", the story of an invasion of the United States by billions of South American killer bees, reunites six Oscar winners in their first film venture together since the top-grossing "TOWERING INFERNO" and "POSEIDON ADVENTURE". They include Irwin Allen, Sterling Silliphant; special-effects expert, Bill Abbott; cinematographer, Fred Koenekamp; editor, Harold Kress; and composer-conductor, John Williams.

It stars Michael Caine, Katherine Ross, Richard Widmark, Henry Fonda, Olivia deHavilland, Lee Grant, Patty Duke Astin, Ben Johnson, Slim Pickens, and Bradford Dillman.

"SWARM" will be available in the Austin area on or about July 14, 1978, on an exclusive or non-exclusive basis for a maximum of two (2) runs.

Since the film is not yet complete, we will not be able to screen it at this time. This letter is being sent to you as a solicitation for a bid. If a bid is submitted by you and accepted by Warner Bros. such offer will be noncancellable.

Plaintiff's Exhibit 5, at 1.

In effect, Presidio was being invited to bid for the exhibition rights to the film

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sight unseen. This practice, known as "blind bidding," is relatively common in the film industry. 2 It apparently makes economic sense for both distributors and exhibitors to reserve theatres and films far in advance of the important Christmas and summer viewing seasons. Distributors want to be sure their films are solidly booked before they set in motion their expensive advertising campaigns (in this case, Warner spent over $4,000,000 advertising The Swarm, Tr. at 1381-82), and exhibitors want to be sure they have promising films to show during periods of peak attendance. At any rate, The Swarm was blind bid, and Presidio knew that it was being invited to bid on a film that would not be complete or available for viewing until months later. 3

In its bid letter Warner suggested a minimum "guarantee" of $35,000 for The Swarm. Plaintiff's Exhibit 5, at 2. 4 The "guarantee" is a fixed minimum amount to be paid in advance to the distributor, whatever the film grosses; if it grosses more than the guarantee, the exhibitor may also (depending on the contractual terms that have been worked out) have to pay a percentage of receipts over and above the guarantee. Presidio responded with bids of $35,000 and $30,000 as the guarantees for eight-week runs at two of its theatres; 5 its remaining terms closely mirrored those suggested by Warner. Compare Plaintiff's Exhibit 5 (Warner's bid letter) with Plaintiff's Exhibit 6 (Presidio's bids). Warner accepted Presidio's bids on January 30, 1978, and returned signed and completed copies of its standard form contracts to Presidio. Plaintiff's Exhibits 8-9.

The Swarm opened as scheduled on July 14, 1978. It was not a big success. The film ran for only five weeks at one of Presidio's theatres, and four weeks at the other. Presidio calculated that, after subtracting the guarantees and operating expenses from box office revenues, it had sustained a loss of $56,056.69. Tr...

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