I laughed, I cried, I was denied reliance damages

Merry Gentleman, LLC v. George & Leona Prods., Inc., No. 15-1195 (7th Cir. Aug. 25, 2015).

Seventh Circuit appeal Merry Gentleman Michael Keaton

The Merry Gentleman (2008), starring and directed by Michael Keaton, cost $5.5 million to produce, but grossed a disappointing $350,000 at the box office. It also received some critical praise.

In 2013, however, the company that was formed to produce the movie sued Keaton for breaching his $100,000 directing contract. The company asserts that Keaton failed to submit a first cut on time; that he submitted a revised cut that was incomplete; that he refused to cooperate with the producers; and that he even threatened to boycott the Sundance Film Festival, where the movie was showing, if the Festival didn’t accept his director’s cut instead of the producers’ preferred cut. While there’s evidence that Keaton didn’t actually breach the agreement, Keaton (or rather his attorneys) decided to move for summary judgment merely on the ground that the production company hadn’t produced evidence of damages, even if he did breach the agreement. The district court agreed with him and so dismissed the case on summary judgment.

The Seventh Circuit affirms. The production company seeks reliance damages in the form of the $5.5 million it spent to produce the film—i.e., the money it spent in reliance on Keaton’s promise to obey his contractual promises. Usually a party seeks reliance damages when the other party has totally refused to perform. Here, though, Keaton made a movie, albeit a commercially unsuccessful one. And the problem with the production company’s demand for $5.5 million in damages, as the Seventh Circuit sees it, is that the company doesn’t tie the particular breaches it complains of—the untimely first cut, the incomplete revised cut, etc.—to particular expenditures of money during the production process. It just asks for the entire $5.5 million on the ground that it wouldn’t have entered into a contract with Keaton if it had known what he was going to do (or fail to do). But that’s an assertion that any plaintiff in a breach-of-contract action can make—which means it can’t be enough by itself to justify recovery.