FILMLINE (CROSS-COUNTRY) PROD. v. United Artists

• Decision Date: 22 June 1987
• Docket Number: No. 83 Civ. 744 (JES).,83 Civ. 744 (JES).
• Parties: FILMLINE (CROSS-COUNTRY) PRODUCTIONS, INC. and Yellowbill Finance Limited, Plaintiffs, v. UNITED ARTISTS CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of New York

662 F. Supp. 798

FILMLINE (CROSS-COUNTRY) PRODUCTIONS, INC. and Yellowbill Finance Limited, Plaintiffs, v. UNITED ARTISTS CORPORATION, Defendant.

No. 83 Civ. 744 (JES).

United States District Court, S.D. New York.

June 12, 1987.

As Amended June 22, 1987.

COPYRIGHT MATERIAL OMITTED

Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for plaintiffs; Robert S. Smith, Anne Louise Oates, Pamela M. Parker, of counsel.

Shea & Gould, New York City, for defendant; Martin I. Shelton, Fran M. Jacobs, of counsel.

OPINION & ORDER

SPRIZZO, District Judge:

Plaintiffs, Filmline Productions, Inc. ("Filmline") and Yellowbill Finance Limited ("Yellowbill"), bring this action against the defendant, United Artists Corporation ("UA"), for breach of contract. Specifically, plaintiffs allege that UA wrongfully repudiated its contractual obligation to purchase and distribute a motion picture produced by Filmline. Plaintiffs seek $2,504,508 in damages plus pre-judgment interest. See Joint Pre-Trial Order ("PTO") at ¶¶ 4, 6(n).

In April of 1984 the Court held a five-day bench trial in this action. Subsequently, the parties submitted post-trial briefs to the Court and the Court heard argument with respect to the liability issues raised at trial. On June 22, 1984 the Court orally stated its findings of facts and conclusions of law with respect to the defendant's liability in accordance with Fed.R.Civ.P. 52. See June 22, 1984 Transcript ("Opinion Tr.") at 70-78. In its oral Opinion, the Court found that the defendant was liable to the plaintiffs for breach of contract.

When the Court thereafter focused on the issue of damages, the defendant raised arguments with respect to plaintiffs' damages which the parties had not previously briefed or otherwise raised with the Court. To allow both parties the opportunity to present all evidence relevant to these new arguments, the Court reopened the trial. The Court also entertained supplemental briefs and heard further oral argument.

In total, the plaintiffs filed five supplemental briefs addressing solely the issues relating to damages. The defendant, in turn, filed four supplemental briefs with respect to plaintiffs' damages. Moreover, the parties submitted numerous letter briefs to the Court.

Set forth below are the Court's findings of fact and conclusions of law with respect to all issues raised by plaintiffs' complaint.

I. Findings of Fact and Conclusions of Law With Respect to Defendant's Liability

A. Background

Filmline, UA, and Yellowbill entered into a letter agreement, dated February 11, 1982 ("February agreement" or "contract"), which provided for the production, financing, and distribution of a feature length theatrical motion picture entitled "Cross Country" ("the Picture"). See PTO at ¶¶ 5(d), 5(e); Plaintiffs' Exhibit ("PX") 1. This agreement provided that Filmline would produce the picture, Yellowbill would finance that production, and, if certain conditions were satisfied, UA would purchase and distribute the Picture. See PX 1 at 1.¹

The February agreement set forth a specific mechanism for the development of the screenplay to be used for the Picture. According to the agreement, prior to the start of filming, UA had the right to demand changes in the draft screenplays. See PX 1 at ¶ 2. Filmline, in turn, was obliged to rewrite each draft "in accordance with UA's suggested changes." See id. The contract provided that this revision process would be "repeated until such time as UA and Filmline are satisfied with the final screenplay to be utilized for the production of the Picture." See id.

The February agreement further provided that Filmline was to produce the Picture "in strict conformity with the approved screenplay ... (except only for such minor changes as may be required by the exigencies of production)." See id. at ¶ 15. If Filmline fulfilled its obligations in that regard, UA was then required to purchase the Picture for a sum equal to the "final certified negative cost of the Picture ... up to the sum of Two Million Five Hundred Thousand Dollars." See id.

Pursuant to the February agreement, UA had the right to terminate the agreement in the event of a material breach by Filmline. See PX 1 at § 4.01. However, UA could not terminate unless (a) UA first served written notice to Filmline specifying the breach and (b) UA allowed Filmline thirty days to cure the breach. See id.²

Following the execution of this agreement, Filmline and UA began revising the screenplay. Charles Lippincott, who was then the Vice President of acquisitions at UA, supervised the revisions for UA. See PTO at ¶ 5(p). When Lippincott first reviewed the early drafts of the screenplay, he felt the Picture had the potential to become a successful "thriller" and a "hot searing romance." See Deposition of Charles Lippincott ("Lippincott Dep.") at 64-65. However, Lippincott was primarily concerned that the drafts did not sufficiently develop the romantic relationship between the two lead characters, Bley and Lois.

In accordance with their contractual right to demand changes in the screenplay, UA prepared several story reports outlining the problems in the screenplay which Lippincott wanted Filmline to address. The first of these story reports is sufficiently illustrative of the types of sweeping conceptual changes Lippincott desired. This report states:

Bley's transformation from a cold, technical lover with kinky tastes and an aversion to women, into the warm, trusting man who falls in love with Lois could well serve as the basis on which to propel the story. It would greatly improve the story if a character study of Bley could more strongly be incorporated into the narrative by way of emphasizing this interesting psychological breakthrough (or character transformation).

See Defendant's Exhibit ("DX") F at 2.

On April 17, 1982, Lippincott met with Pieter Kroonenberg, one of the principals in Filmline, to discuss the most recent draft screenplay, which was dated April 13, 1982. See Trial Transcript ("Tr.") at 219. At this meeting, Lippincott stated that he remained dissatisfied with the screenplay and he repeated his requests for conceptual revisions in the screenplay with respect to the development of the romantic relationship between Lois and Bley. These revisions were designed to create the "sensual thriller" Lippincott envisioned the Picture could become. See Tr. at 155-56, 187, 224, 281-83, 287; Lippincott Dep. at 21, 24, 29-30. Kroonenberg agreed to make those revisions.

Despite Lippincott's dissatisfaction with the April 13 screenplay, it is undisputed that UA conditionally approved that screenplay by an amendment to the February agreement dated April 19, 1982 ("April amendment"). See PTO at ¶ 5(e); PX 2 at ¶ 3(a). Specifically, the April amendment provided that UA approved

The April 13, 1982 revised screenplay, as further revised in accordance with the changes agreed to by UA and Filmline on April 17, 1982, provided that it is acknowledged that UA reserves the right to request minor changes to said screenplay prior to the confirmed May 11, 1982 start date of principal photography.

See PX 2 at ¶ 3(a). The April amendment also provided that, "other than as modified hereby, the February Agreement shall remain in full force and effect." See id. at 2.³

The Court notes that both the February agreement and the April amendment required Filmline to make the conceptual changes in the screenplay prior to the start of filming, which was scheduled to begin on May 11. Moreover, it is also clear that after filming began on May 11, UA would have no right to demand and, therefore, Filmline would have had no obligation to make any further revisions in the screenplay. Indeed, it would be totally inconsistent with the entire structure of the parties' agreement, which provided for screenplay revisions up until the start of filming and then a Picture shot in strict conformity with that screenplay, to conclude that UA had a contractual right to demand changes in the screenplay once filming began. In short, as the defendant concedes, the parties agreed that there would be an approved screenplay before Filmline began to film the Picture. See Defendant's Trial Memo at 24.

The next and final screenplay developed by Filmline prior to the start of filming was dated May 7, 1982. Lippincott reviewed the May 7 screenplay on May 11, the day filming was scheduled to begin. This May 7 screenplay did not incorporate the conceptual changes which Lippincott requested and Filmline agreed it would make. See Opinion Tr. at 72. Therefore, the conditions for UA's approval of the screenplay set forth in the April amendment were not met. Moreover, Filmline was in material breach of its contractual obligation "to cause each draft of the screenplay to be rewritten in accordance with UA's suggested changes." See PX 1 at ¶ 2; see also PX 2 at ¶ 3(a). It follows that at this time UA could have terminated the contract, provided that UA first gave Filmline written notice that it was in breach and thirty days to cure that breach, and provided Filmline did not in fact cure that breach. See PX 1 at § 4.01.

Following Lippincott's review of the May 7 screenplay, however, Lippincott chose neither to assert that breach nor to terminate the contract. Although Lippincott again expressed dissatisfaction with the screenplay and repeated his requests for conceptual changes in the screenplay,⁴ Lippincott nonetheless chose to go forward with filming, with the hope, shared by Filmline, that the remaining problems in the screenplay could be worked out at a later time during production.

Thus, with Lippincott present on the scene, filming began as scheduled on May 11, 1982 and Lippincott remained on the set until May 16. See Tr. at 102; Lippincott Dep. at 140-41. Even after Lippincott left the set, he continued to have frequent telephone conversations with Filmline regarding the progress of the Picture. Then, on June 1 Lippincott...