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IP/Entertainment Case Law Updates

Celador Int’l Inc. v. American Broadcasting Companies, Inc.

Ninth Circuit upholds $269 million jury award against ABC and other Disney affiliates in a breach of contract case regarding the North American rights to the game show Who Wants to be a Millionaire?

Plaintiff Celador International Inc. (Celador) brought suit against American Broadcasting Companies, Inc., Buena Vista Television, and Valleycrest Productions (the Disney affiliates) asserting breach of the express provisions of a contract through which Celador sold the North American rights to the game show Who Wants to be a Millionaire? and breach of the implied covenant of good faith and fair dealing for defendants’ alleged failure to include half of ABC’s profits in Celador’s compensation and improperly deducting merchandising distribution expenses from the compensation. Following a jury award of $269 million in damages for Celador, the Disney affiliates moved for judgment as a matter of law or a new trial. The district court denied both motions, and the Disney affiliates appealed, arguing that the district court erred in submitting the interpretation of disputed contract questions to the jury, that the implied covenant theory was legally insufficient and tainted by the erroneous submission of the contract questions, that the jury award was unsupported by the record, and that they are entitled to a new trial because the district court committed evidentiary, instructional, and other errors. The Ninth Circuit, in a de novo review, found that the district court did not err in denying the motion for judgment as a matter of law and upheld the jury award.

The Ninth Circuit found that the district court did not err by submitting disputed contract questions to the jury because interpretations of contract provisions and the determination of whether contract language is ambiguous are questions of law. Under California law, the court determines whether a contract provision is ambiguous by determining whether any material conflict exists in the extrinsic evidence proffered by the parties to show whether the contract is susceptible to a particular meaning. If a material conflict exists, then the jury must weigh the credibility of the conflicting evidence. The Ninth Circuit found that a material conflict did exist with provisions of the contract related to network licensing and that the extrinsic evidence offered by the parties was materially conflicted as to that provision. The court found that the contract was also ambiguous as to the merchandising claim, because the contract did not expressly provide for the deduction of the merchandising distribution expenses, and divergent conclusions could result from the proffered extrinsic evidence.

The court of appeals concluded that the district court’s evidentiary rulings were not prejudicial and not reversible, and that even if the evidentiary rulings were erroneous, they did not entitle the Disney affiliates to a new trial, as an appellate court generally will not reverse the lower court’s denial of a motion for a new trial if some reasonable basis exists for the jury’s verdict. The court also found that the district court did not abuse its discretion in refusing to include the Disney affiliates’ suggested jury instructions. The court upheld the jury award because the assumptions that Celador’s experts relied upon to project damages provided a reasonable basis for the jury award and because the jury award is afforded substantial deference and was not grossly excessive clearly not supported by the evidence or based only on speculation or guesswork.

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