Batfilm Prods. v. Warner Bros. - 1994 Cal. App. LEXIS 1333

Rule:

A contract is not unconscionable simply because it is not fair. 

Facts:

The plaintiffs are two individuals, Benjamin Melniker and Michael Uslan, and the two corporations that furnish their services, Batfilm Productions, Inc., and Franklin Enterprises, Ltd. The defendants are Warner Bros. and Polygram Pictures, Inc. In 1979, Mr. Melniker and Mr. Uslan obtained an option on the motion picture rights to the Batman comic book characters. In November 1979, they made a deal with Casablanca Productions (Polygram's predecessor) for the development and production of a motion picture to be based on those characters (the “Casablanca Agreement”). Under the Casablanca Agreement, Mr. Melniker and Mr. Uslan were entitled to receive certain fixed and contingent compensation if a Batman motion picture were produced. In 1981, Polygram assigned to Warner Bros. its rights and obligations under the Casablanca Agreement. In 1988, Mr. Melniker and Mr. Uslan and Warner Bros. signed a written amendment to the Casablanca Agreement (the “Warner Agreement”). Under the Warner Agreement, Mr. Melniker and Mr. Uslan were entitled to receive $ 300,000 in fixed compensation for Batman, plus a $ 100,000 “deferment” once the film generated a certain level of receipts, plus 13% of the so-called “Net Profits,” as defined in an attachment to the Warner Agreement. Warner Bros. has paid Messrs. Melniker and Uslan the $ 300,000 fixed fee and $ 100,000 deferment. Under the Warner Agreement, Warner Bros. has also paid Melniker and Uslan an additional $ 700,000 in fixed fees on two additional motion pictures (Batman Returns and Batman: Mask of the Phantasm). Warner Bros. will have similar financial obligations to plaintiffs on each additional Batman motion picture. Although Batman has generated more revenue than any other Warner Bros. film, it has not generated any “Net Profits” under plaintiffs' contract. Melniker and Uslan filed suit in 1992 claiming, inter alia, they were denied their fair “Net Profits” compensation.

Issue:

Was the Warner Agreement unconscionable? 

Answer:

No.

Conclusion:

The Court found that the plaintiffs have failed to prove that the Warner Agreement, taken as a whole, is unconscionable. The Court also found that Warner Bros. met its burden of showing that the method of calculating interest provided in their contract is not unconscionable. Warner Bros. showed that the interest provision in the Warner Agreement is really the same provision found in the 1979 Casablanca Agreement that Warner Bros. did not have anything to do with. Plaintiffs were bound by that contract before they ever dealt with Warner Bros. The Court rejected plaintiffs' argument because there was no evidence that plaintiffs ever interpreted the language of the interest provisions in the manner claimed at trial. Mr. Melniker was an old hand at motion picture agreements of this type and had negotiated other “Net Profits” contracts like this himself. He had experience with similar provisions yet he never mentioned the interest issue with anyone at Warner Bros. Plaintiffs offered no evidence that they expected Warner Bros. to compute interest in any other manner. They have thus failed to prove that the contract defeated their reasonable expectations.