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Ninth Circuit Revives Screenwriter’s Lawsuit Against ‘Managers’ Over Budget Disclosures
Opinion Says Summary Judgment Improperly Granted in Breach of Contract, Fiduciary Duty Action Alleging That Defendants’ Failure to Tell Plaintiff of Increased Financing Undermined Payout
By a MetNews Staff Writer
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Depicted is a poster promoting the 2021 Movie “Copshop.” The Ninth U.S. Circuit Court of Appeals yesterday resurrected claims by the writer of the original script for the project, who alleges that his purported managers failed to ensure that he was fairly compensated. |
Summary judgment was improperly granted to a management company and two of its partners in a lawsuit alleging that they represented the plaintiff—the writer of the original script for the 2021 film “Copshop”—and breached contractual and fiduciary duties by failing to inform him or renegotiate his pay when the budget for the movie was substantially increased, the Ninth U.S. Circuit Court of Appeals held yesterday.
Alleging that the increase was of particular significance was Canadian screenwriter Kurt McLeod, who asserts that his pay was tied to the overall budget but capped at $125,000. He contends that the Los Angeles-based Zero Gravity Management (“ZGM”), and two of its partners Mark and Eric Williams, were operating under an oral agreement to represent him on the project at the time his pay was settled.
According to McLeod, he optioned his screenplay to Sculptor Media LLC, the production company responsible for making the film.
The plaintiff says he was told that the project’s budget would be somewhere between $3 million and $10 million but later learned that the threshold was raised to $45 million after actor Gerard Butler agreed to star in the film. McLeod says the Williams brothers and ZGM breached their contractual and fiduciary duties to help him renegotiate his pay after the significant change.
In the complaint, he asserts:
“ZGM advised Mr. McLeod to agree to a cap on his screenwriting fee even though they knew—and concealed from Mr. McLeod—that the budget for the film was much larger than anticipated and that this cap would mean that he would only earn a fraction of what he should. Specifically, in March 2020, Mr. McLeod’s managers negotiated an option agreement with Sculptor on behalf of Mr. McLeod. This option agreement, which ZGM advised Mr. McLeod to sign, directly linked Mr. McLeod’s potential screenwriting fee to the budget of any produced movie, i.e., he would be paid two and one-half percent (2.5%) of the budget. However, the agreement with Sculptor capped Mr. McLeod’s fee at $125,000.00. Six months later, and just days before production of Copshop was about to start, ZGM again negotiated the identical capped fee for Mr. McLeod, which was a fraction of what he should have earned on the movie if he were to be paid 2.5% of the budget.”
The film, a comedy/thriller, grossed $6.8 million worldwide.
Summary Judgment
District Court Judge Fred Slaughter of the Central District of California granted summary judgment in favor of the defendants , finding that the Williams brothers were not parties to the oral representation agreement as a matter of law.
Slaughter pointed out that the purported oral contract was to be a continuation of a prior written management agreement to which only ZGM and McLeod were parties and concluded that there was “insufficient indication that Eric and Mark Williams entered into the Written Agreement with McLeod in their personal capacities.”
As to ZGM, he opined that McLeod failed to adequately point to any provision of the oral agreement that the management company violated.
Turning to the breach of fiduciary duty claim, the judge said that the parties agree that a fiduciary relationship exists between a manager and client, but “McLeod’s undated testimony alone is insufficient to create a triable…issue of fact as to whether Mark Williams actually served as McLeod’s manager.”
As to the other defendants, he acknowledged expert testimony indicating that knowledge of the increase would have allowed McLeod to demand a higher screenplay price of somewhere between $500,000 and $750,000, but opined:
“The problem is that neither the evidence nor McLeod’s arguments to the contrary, explains or supports a finding that this budgetary increase necessarily means McLeod would have received additional compensation, as opposed to the directing of that funding to other expenses on the movie project….In the absence of more concrete evidence…McLeod’s claim he should have been paid more based solely on the fact the film’s budget expanded is simply too speculative to indicate they breached a fiduciary duty owed to McLeod and consequently caused him to incur damages.”
In yesterday’s memorandum opinion signed by Circuit Judges John B Owens, Mark J. Bennett, and Holly A. Thomas, the Ninth Circuit said that the court “erred by granting summary judgment on McLeod’s claims for breach of contract, breach of fiduciary duty, and breach of the implied covenant of good faith and fair dealing.” They affirmed the judgment as to fraud claims relating to Mark Williams obtaining shared “story by” credit for the screenplay.
Ninth Circuit’s View
The panel found that Slaughter erred by finding that the Williams brothers were not parties to the oral representation agreement as a matter of law, saying:
“McLeod presented evidence from which a reasonable jury could find that the Williamses were parties to the oral agreement and served as McLeod’s personal managers under the terms of that agreement. This evidence included McLeod’s testimony that Mark Williams told him that he was his manager, McLeod’s testimony that he and Mark Williams discussed Mark Williams’s dual role as manager and producer, Mark Williams’s listing as a manager on the Writers Guild of America website, and evidence that Mark Williams conducted himself as a manager. On this record, summary judgment was inappropriate.”
They rejected the defendants’ argument that the terms of the oral agreement were too indefinite to be enforced, saying the actions of the parties show that they intended to make a binding contract and “missing terms may be supplied by ‘entertainment industry custom and usage.’ ”
As to damages, they pointed out that McLeod’s expert testified that the defendants should have disclosed the increased budget, and, if necessary, tapped into their own producer fees to ensure that their client was fairly compensated, and that McLeod’s attorney on the sale, Matthew Sugarman of the Los Angeles office of Weintraub Tobin Chediak Coleman Grodin, said that McLeod’s compensation was below market.
Based on that evidence, the judges wrote:
“The district court also erred by concluding as a matter of law that McLeod could not prove the fact of damage….We recognize the possibility that McLeod would not have sought or obtained additional compensation even had he known of the increased budget, but when ruling on a motion for summary judgment ‘all justifiable inferences are to be drawn in [the non-moving party’s] favor.’ ”
Continuing, they said:
“McLeod’s evidence that he suffered damage was also sufficient as a matter of California law. Although ‘[a] plaintiff cannot recover damages based upon speculation or even a mere possibility that the wrongful conduct of the defendant caused the harm,’ the evidence is sufficient where, as here, it ‘rise[s] to the level of a reasonable probability based upon competent testimony.’ ”
The case is Kurt McLeod v. Zero Gravity Management, 24-3266.
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