DeVito Artworks, which prepared a narrative framework for a prequel and sequel to King Kong, filed suit against Legendary Pictures and Warner Bros. Entertainment for breach of contract and interference with contractual relations claims.
On July 23, 2014, agents for DeVito Artworks pitched the development of a King Kong prequel and sequel for a television series or film to Warner Bros. Entertainment. After the meeting, DeVito and Warner entered into a written option purchase agreement for the production of the project as a television series and giving Warner the exclusive rights to market the series to networks. After ABC, CBS and Fox passed on the series, DeVito learned that Warner was no longer interested in pursuing the project. On December 16, 2014, DeVito and Warner entered a termination agreement in which the parties agreed to terminate the option agreement for a fee and Warner returned the rights to DeVito.
Legendary Pictures LLC then announced that it was going to produce and release a film exploring the origins of King Kong called “Kong: Skull Island.” In 2015 Warner and Legendary announced they were going to produce the film together.
DeVito sued Warner and Legendary for breach of contract and interference with contractual relations. DeVito argued that an implied contract was created when Warner accepted disclosure of the project, and Warner would not be able to use DeVito’s ideas without compensating DeVito. The plaintiff also alleged that Warner breached that contract by using ideas presented at the pitch meeting without providing compensation for their use.
Warner demurred to DeVito’s breach of implied contract claim. The court rejected Warner’s argument that the termination agreement was an integrated agreement confirming that no obligations existed between the parties. Instead, it held that the termination agreement was limited to the obligations under the option agreement. The termination “does not on its face negate obligations created by any agreement other than the express option agreement,” the court pointed out. In order for an implied contract to be disregarded, the state court concluded, it must exist at the same time as the express contract and it held that the only contract in existence at the time of the breach was the implied agreement.