Cbs, Inc. v. Merrick

716 F.2d 1292 (9th Cir. 1983)

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Nature of the Case

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Facts

Merrick (D) acquired the motion picture and television rights to a novel called Blood and Money. CBS(P) negotiated with D for the right to do a mini-series based on the novel. They reached an agreement on August 1, 1977, and signed two documents, a rights agreement, and a production agreement. Under the rights agreement, P agreed to pay D $1,250,000 for the right to do a TV series. P paid D $833,333.34 when the agreement was executed and the balance in various stages of production. If photography did not commence by August 1, 1979, the agreement would terminate, and D would pay the balance owed under the contract and the rights would revert back to D. The agreement required all modifications to be in writing. In the production agreement, P paid D another $250,000 to produce the show. D would negotiate terms and conditions of the writer, director, and principal actors, and P would then enter into contract with these persons with the terms negotiated by D. When the final screenplay was delivered, the parties would then prepare an operating budget and P had 90 days from the delivery of the final screenplay to notify D whether it wanted to proceed. If D had not breached at that time, P would have to pay $250,000 to D or the entire rights would revert back to D. D selected a director and a screenwriter. The fee for the director was $500,000 regardless of whether the show was produced or not and the screenwriter was to get $250,000. When D hired both, he knew they were working on other projects and that they could not immediately start work on Blood and Money. D failed to tell them about the deadline and ignored other suggestions to hire a second writer. The first segment of the screenplay was not delivered until September 1978 and was not completed until June 1979. It was apparent that by April 1979 that the August deadline had not been completed and at least six months’ pre-production work was required before photography could start. D orally agreed to extend the deadline. P then sent D a proposed draft of a written amendment. D objected to the form and complexity of the contract amendments and even after P delivered a simple draft he never signed it. On May 17, 1979, D’s attorney sent a telex to P stating that D would not agree to the changes in the original agreement. D still continued to act as though the agreement had been extended. Five days before the August 1 deadline, P told D it wanted to proceed with the production of the show. Enthusiasm abounded, and meetings were held, but by September 1979, D notified P that the rights had reverted back to him. No further work was done on the project. P sued D, and the court awarded P the $833,333.34 and also $83,333.33 it has paid William Morris, D’s agent. The court denied P the $750,000 which P was contractually liable to pay the director and screenwriter. P appealed.