Hollywood Fantasy Corp. v. Gabor

• Decision Date: 12 August 1998
• Docket Number: No. 93-8199,93-8199
• Citation: 1998 WL 469672,151 F.3d 203
• Parties: HOLLYWOOD FANTASY CORPORATION, Plaintiff-Appellee, v. Zsa Zsa GABOR, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 203

151 F.3d 203

HOLLYWOOD FANTASY CORPORATION, Plaintiff-Appellee, v. Zsa Zsa GABOR, Defendant-Appellant.

No. 93-8199.

United States Court of Appeals, Fifth Circuit.

Aug. 12, 1998.

R. Laurence Macon, Mary Claire Fisher, Akin, Gump, Strauss, Hauer & Feld, San Antonio, TX, for Plaintiff-Appellee.

Hal Monk, Hal Monk & Associates, Bedford, TX, Kevin R. McLean, Belli, Belli & Brown, San Francisco, CA, for Defendant-Appellant.

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

Before KING and WIENER, Circuit Judges, and ROSENTHAL ^*, District Judge.

ROSENTHAL, District Judge:

Appellee Hollywood Fantasy Corporation was briefly in the business of providing "fantasy vacation" packages that would allow participants to "make a movie" with a Hollywood personality and imagine themselves movie stars, for one week, for a fee. In May 1991, Hollywood Fantasy planned to offer its second fantasy vacation package, in San Antonio, Texas. Hollywood Fantasy arranged to have Zsa Zsa Gabor as one of two celebrities at the event. Two weeks before the fantasy vacation event, Ms. Gabor cancelled her appearance. A short time later, Hollywood Fantasy cancelled the vacation event, to which it had sold only two tickets. A short time after that, Hollywood Fantasy went out of business.

Hollywood Fantasy sued Ms. Gabor for breach of contract and fraud. After the trial judge found that Ms. Gabor and Hollywood Fantasy had reached a contract, the jury found that Ms. Gabor had breached that contract. The jury awarded Hollywood Fantasy $100,000 for the breach, as well as $100,000 for fraud. The district court set aside the jury's fraud verdict for lack of evidence and entered judgment in favor of Hollywood Fantasy for $100,000 on the breach of contract claim, plus attorneys' fees and post-judgment interest. Ms. Gabor appealed. ¹ We affirm the district court's judgment as to liability; reverse the district court's damages award; and render judgment for a lesser amount of damages.

I. The Facts as to Hollywood Fantasy

Leonard Saffir created Hollywood Fantasy and served as its chief executive officer. The company Mr. Saffir created charged each vacation "client" $7,500 for a week of "pampering," instruction on making movies, rehearsals, and a "starring" role in a short videotaped film with a "nationally known" television or movie star. Mr. Saffir hoped that "bloopers" and "outtakes" from the videotapes would ultimately become the basis for a television series. A new venture, Hollywood Fantasy had conducted only one vacation event before the package scheduled to take place in San Antonio in May 1991. The first event, held in Palm Springs, California, had received some media coverage, but had lost money.

This case began with a letter Hollywood Fantasy sent Zsa Zsa Gabor dated March 4, 1991. The letter opened with the following language:

This will confirm our agreement whereby Hollywood Fantasy Corporation (HFC) will employ you under the following terms and conditions: ...

The letter set out the terms and conditions of Ms. Gabor's appearance in fourteen numbered paragraphs. The terms and conditions specified the dates of employment; the hours of work; the duties required; the payment; and certain perquisites to be provided. The letter stated that Ms. Gabor was to be employed from May 2-4, 1991, in San Antonio, Texas; was to be "on call" from after breakfast until before dinner each day; was to act in videotaped "movie" scenes with the clients, using scripts and direction provided by Hollywood Fantasy, and was to join the clients for lunch and dinner; was to allow Hollywood Fantasy to use her name and photograph for publicity; and was to provide media interviews "as appropriate" during her stay in San Antonio. Hollywood Fantasy was to pay Ms. Gabor a $10,000 appearance fee and $1,000 for miscellaneous expenses. Hollywood Fantasy would also provide Ms. Gabor two first-class round-trip plane fares from Los Angeles; transportation to the Los Angeles airport and in San Antonio; hair and makeup services; meals; hotel expenses, excluding long distance telephone calls; and a hotel suite with "two bath rooms if available."

Ms. Gabor made three handwritten changes to this letter before signing and returning it to Mr. Saffir. She inserted the word "one" into the sentence stating that she would make herself available for media interviews; inserted the words "two bedroom" above the sentence describing the hotel suite that was to be provided in San Antonio; and added the words "wardrobe to be supplied by Neiman Marcus" to the paragraph outlining the perquisites.

The last paragraph of the terms and conditions provided an "out clause":

[Hollywood Fantasy] agrees that if a significant acting opportunity in a film comes up [Gabor] will have the right to cancel [her] appearance in San Antonio by advising [Hollywood Fantasy] in writing by April 15, 1991.

The final paragraph of the letter stated: "Please sign a copy of this agreement and fax it to me ... as soon as possible so we can proceed." Ms. Gabor signed the letter in a signature blank above the words "Agreed and accepted," and sent it back to Leonard Saffir, who had already signed as the chief executive officer for Hollywood Fantasy.

On April 10, Ms. Gabor and Mr. Saffir talked by telephone. The parties differ as to the substance of that conversation. Mr. Saffir asserts that they discussed the changes Ms. Gabor had made and "everything was agreed." Ms. Gabor asserts that Mr. Saffir acted as if the original offer had been accepted. The parties agree that Ms. Gabor sent Mr. Saffir a telegram dated April 15, 1991, stating:

In accordance with the contract that exists between us the purpose of this telegram is to inform you that I must terminate it because I am due to be involved in preproduction and a promotion film for a motion picture I am contracted to do. The name of the film is Queen of Justice produced by Metro Films of Los Angeles.... I am very sorry to cause you any discomfort but will be happy to try to help in supplying you with a replacement and hopefully we'll be able to do something together in the very near future.

Hollywood Fantasy unsuccessfully attempted to replace Ms. Gabor for the San Antonio event. The San Antonio event was cancelled; the two ticket purchasers received their money back; Hollywood Fantasy went out of business; and this litigation began.

Ms. Gabor did not appear at the docket call scheduled for November 9, 1992. Following a default judgment on liability and a jury trial on damages, the jury awarded Hollywood Fantasy $3,000,000. The district court entered final judgment in that amount. Ms. Gabor moved to set aside the judgment on the ground that she did not receive notice of the docket call. The district court granted Ms. Gabor's motion to vacate the judgment and ordered a new trial. After a second trial, the jury awarded Hollywood Fantasy $100,000 on its breach of contract claim and $100,000 on its fraud claim. In a post-trial order entered February 8, 1993, the district court set aside the jury's fraud verdict on the ground that Hollywood Fantasy had failed to show any fraudulent inducement or material misrepresentation. In the order, the district court found that a contract did exist between Ms. Gabor and Hollywood Fantasy, rejecting Ms. Gabor's argument that her handwritten changes to the March 4, 1991 letter materially modified and rejected Hollywood Fantasy's offer. The district court also upheld the jury's finding that Ms. Gabor's cancellation was not based on "a significant acting opportunity in a film," as the contract permitted. The district court entered judgment in favor of Hollywood Fantasy for $100,000, plus attorneys' fees and post-judgment interest. Ms. Gabor timely appealed.

Ms. Gabor asserts four grounds for appeal: (1) the parties did not reach a contract; (2) the jury's finding that Ms. Gabor did not effectively exercise the cancellation clause was against the weight of the evidence; (3) the jury's award of damages for breach of contract was not supported by competent evidence and was speculative; and (4) the district judge erred in failing to recuse himself before the second trial.

II. The Contract Formation Issue

Under Texas law, ² "[w]hen reviewing written negotiations, the question of whether an offer was accepted and a contract was formed is primarily a question of law for the court to decide." Scaife v. Associated Air Ctr. Inc., 100 F.3d 406, 410 (5th Cir.1996) (citing S & A Marinas, Inc. v. Leonard Marine Corp., 875 S.W.2d 766, 769 (Tex.App.--Austin 1994, writ denied)); see also Gilbert v. Pettiette, 838 S.W.2d 890, 893 (Tex.App.--Houston [1st Dist.] 1992, no writ). We review questions of law de novo. Lubbock County Hosp. Dist. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 143 F.3d 239, 241-42 (5th Cir.1998); Williamson v. Elf Aquitaine, Inc., 138 F.3d 546, 549 (5th Cir.1998). ³

The general rule is that "an acceptance must not change or qualify the terms of the offer. If it does, the offer is rejected." United Concrete Pipe Corp. v. Spin-Line Co., 430 S.W.2d 360, 364 (Tex.1968); see generally E. ALLAN FARNSWORTH, 1 FARNSWORTH ON CONTRACTS § 3.21, at 259 (1990). Under this "mirror image" rule, a modification of an offer qualifies as a rejection and counteroffer only if the modification is "material." Hoyt R. Matise Co. v. Zurn, 754 F.2d 560, 566 (5th Cir.1985); Gilbert, 838 S.W.2d at 893; MTrust Corp. N.A. v. LJH Corp., 837 S.W.2d 250, 254 (Tex.App.--Fort Worth 1992, writ denied). Ms. Gabor asserts that by making the three handwritten changes to the March 4, 1991 letter, she rejected Hollywood Fantasy's offer and made a counteroffer, which Mr. Saffir did not accept before Ms. Gabor revoked it. Hollywood Fantasy asserts that the changes were not material and that Ms. Gabor accepted the offer and entered into a contract, which she breached.

The cases in which courts find modifications to be material...