963 F.2d 1269 (9th Cir. 1992), 91-55471, In re De Laurentiis Entertainment Group Inc.

Docket Nº:91-55471, 91-55473.
Citation:963 F.2d 1269
Party Name:In re DE LAURENTIIS ENTERTAINMENT GROUP INC., a Delaware corporation, Debtor. CAROLCO TELEVISION INC., Appellant, v. NATIONAL BROADCASTING CO., Appellee.
Case Date:May 07, 1992
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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963 F.2d 1269 (9th Cir. 1992)

In re DE LAURENTIIS ENTERTAINMENT GROUP INC., a Delaware

corporation, Debtor.

CAROLCO TELEVISION INC., Appellant,

v.

NATIONAL BROADCASTING CO., Appellee.

Nos. 91-55471, 91-55473.

United States Court of Appeals, Ninth Circuit

May 7, 1992

        Argued and Submitted April 6, 1992.

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        Daphne M. Stegman, Teresa A. Blasberg, White & Case, Los Angeles, Cal., for appellant.

        Jeremy V. Richards, Pachulski, Stang & Ziehl, Los Angeles, Cal., for appellee.

        Appeal from the United States District Court for the Central District of California.

        Before: PREGERSON, D.W. NELSON, and THOMPSON, Circuit Judges.

        D.W. NELSON, Circuit Judge:

        OVERVIEW

        De Laurentiis Entertainment Group ("DEG") contracted through an intermediary to purchase advertising from National Broadcasting Co. ("NBC"). DEG filed for

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bankruptcy under Chapter 11 without having paid for this advertising. DEG was reorganized through a series of steps into Carolco Television, Inc. ("CTI"), which emerged from bankruptcy. When CTI sued NBC on a pre-bankruptcy debt, NBC asserted the advertising debt as a setoff against CTI's claim. The bankruptcy court granted summary judgment for NBC, concluding that it was entitled to recover the advertising debt from DEG on a quantum meruit theory. It also permitted NBC to set off this debt against CTI. The district court affirmed. We affirm as well.

FACTUAL AND PROCEDURAL BACKGROUND

        DEG made movies. It contracted with an advertising agency ("BBDO") to place advertising for various movies in different media markets. BBDO purchased $1.6 million in television advertising from NBC on DEG's behalf. DEG knew and approved of this purchase, but was not directly a party to the purchase contract. NBC billed BBDO, which in turn billed DEG for all its advertising accounts on a separate invoice. Neither DEG nor BBDO had paid the $1.6 million owed to NBC at the time DEG filed for bankruptcy.

        DEG had other dealings with NBC as well. DEG granted to NBC the right to televise one of its movies, called "Manhunter," at a price of $1.25 million. When DEG filed for bankruptcy protection, NBC still owed this money to DEG.

        In August 1988, DEG filed for bankruptcy protection under Chapter 11. In March 1989, NBC filed a "proof of claim" asserting its $1.6 million interest and claiming a right of setoff against its $1.25 million debt to DEG. NBC also filed a motion for relief from the automatic stay 1 so that it could pursue its setoff claim. NBC's claim was converted into an adversary proceeding by the bankruptcy court. NBC filed a complaint, and the parties proceeded with discovery. NBC has pursued its claim diligently before the bankruptcy court at all times.

        Meanwhile, DEG filed a reorganization plan which was confirmed by the bankruptcy court in May 1990. Under this plan, the lion's share of DEG's assets were purchased by Carolco, merged with a Carolco subsidiary, and renamed CTI. Under the plan, CTI acquired the rights to the $1.25 million claim against NBC. According to the plan, this right was transferred "free and clear" of all pre-bankruptcy claims or interests not listed in the plan. NBC's $1.6 million claim was not listed in the plan. NBC did not object to this plan or contest the order confirming the plan.

        In July 1990, CTI intervened in the NBC-DEG proceeding and asserted its right to the $1.25 million. NBC in turn asserted its right to a setoff of the entire $1.25 million from the $1.6 million it was owed. 2 Both parties filed motions for summary judgment. The bankruptcy court concluded that disputed issues of fact concerning whether DEG was a party to the BBDO-NBC contract precluded summary judgment on NBC's contract claims. However, it granted NBC summary judgment on its quantum meruit claim against DEG. Finally, the bankruptcy court concluded that NBC was entitled to assert its quantum meruit claim as a setoff against CTI, in spite of CTI's claim that this debt was discharged under the bankruptcy laws when the plan was confirmed. CTI appealed to the district court, which affirmed.

        STANDARD OF REVIEW

        A grant of summary judgment is reviewed de novo. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989), cert. denied, 496 U.S. 937, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990). We must determine whether, viewing the evidence in the light most favorable to CTI,

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there are any genuine issues of material fact and whether the district court correctly applied the law. Tzung v. State Farm Fire & Cas. Co., 873 F.2d 1338, 1339-40 (9th Cir.1989).

        DISCUSSION

       I. Quantum Meruit

        The district court denied NBC's motion for summary judgment on its contract theories, concluding that issues of material fact existed as to whether BBDO had acted as DEG's agent in buying advertising from NBC. However, it granted summary judgment for NBC on its quantum meruit claim. 3 CTI appeals the grant of summary judgment on the quantum meruit claim (case no. 91-55471).

        Quantum meruit (or quasi-contract) is an equitable remedy implied by the law under which a plaintiff who has rendered services benefiting the defendant may recover the reasonable value of those services when necessary to prevent unjust enrichment of the defendant. B. Witkin, Summary of California Law: Contracts § 91 (1987); 55 Cal. Jur.3d Restitution 360-61 (1980). Quantum meruit is not the same as a contract implied in fact. Quantum meruit is based not on the intention of the parties, but rather on the provision and receipt of benefits and the injustice that would result to the party providing those benefits absent compensation. B. Witkin, supra, at § 12.

        NBC sought to recover in quantum meruit the reasonable value of the advertising it had provided for DEG's benefit and for which it had not been paid. The bankruptcy court found that, based on the undisputed factual evidence, NBC had established its claim to recovery. The district court affirmed on the basis of the bankruptcy court's finding that "DEG benefited from the Network Time rendered to it by NBC at DEG's special instance and request." (emphasis added). 4 While CTI disputes whether DEG was ever contractually obligated to NBC directly, it does not dispute that it in fact requested that BBDO purchase advertising time for its benefit from NBC. Nor does CTI dispute that DEG received a benefit from NBC for which it has not paid anyone. 5

        CTI contends, however, that quantum meruit recovery by NBC would be improper because NBC did not expect to be paid by DEG, but rather by BBDO. NBC contends that an expectation of payment by the benefited party is not an element of quantum meruit recovery. California law on this subject is not entirely clear.

        Two cases relied upon by CTI do suggest such a requirement. In Fontaine v. Home Box Office, 654 F.Supp. 298, 303 (C.D.Cal.1986), the court asserted in dictum that an element of quantum meruit recovery was that the circumstances "would reasonably inform the person sought to be charged that plaintiff, in performing such services, was expecting to be paid by the person

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sought to be charged." (emphasis added). A more closely analogous case is Shepherd v. Perea, 98 Cal.App.2d 518, 220 P.2d 776, 777 (1950). In Shepherd, the plaintiff fixed the defendant's tractor at the request of a third party, who had originally sold the defendant the tractor. The plaintiff sought recovery from the defendant, rather than from the third party with whom he had contracted. The court held that "[u]nder the facts of this case, the rule of unjust enrichment does not apply. Ordinarily, of course, the law will imply a promise on the part of the recipient of services to pay for them. But the implied promise is a question of fact, and a determination by the trier of fact that there was no such promise will be supported on appeal." 6

        However, the vast majority of California cases do not require that a plaintiff expect compensation from the defendant himself in order to prove a quantum meruit claim. Compensation must be "expected" only in the sense that the services rendered must not have been intended to be gratuitous. See, e.g., Haggerty v. Warner, 115 Cal.App.2d 468, 252 P.2d 373, 377 (1953) (no requirement of intent to compensate); Carey v. Cusack, 245 Cal.App.2d 57, 54 Cal.Rptr. 244, 252 (1966) (same); Wescoatt v. Meeker, 63 Cal.App.2d 618, 626, 147 P.2d 41 (1944) (presumption of recovery sustained if "it can reasonably be inferred that pecuniary compensation was in the view of the parties," but not if "the services were intended to be gratuitous."). Nor do the treatises suggest that an expectation of payment by the defendant himself is required. See B. Witkin, supra, at § 113 (expectation of compensation requirement limited to determining whether services were intended to be gratuitous); 55 Cal. Jur.3d, supra, at § 49. Kossian v. American Nat'l Ins. Co., 254 Cal.App.2d 647, 62 Cal.Rptr. 225, 227 (1967) provides substantial support for this view. There, the owner of a building damaged by fire contracted with the plaintiff to repair the building. The plaintiff did so. The plaintiff then sought recovery in quantum meruit from the defendant, who had not contracted with the plaintiff but who held a deed of trust on the building and who had received the proceeds of the fire insurance. The court held that the plaintiff was entitled to recover from the defendant on a quantum meruit theory, even though he had no express or implied contractual relationship with the defendant and did not expect payment from the defendant, but rather from the owner.

        We do not believe California law requires an expectation of payment...

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