Full Disclosure Agreements Coming to California

In Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424 (2d. Cir. 2012) (Walker, J.), the Second Circuit vacated a decision pre-empting an implied-in-fact contract claim against Universal Television regarding the development of the USA Network television show “Royal Pains.” The case arose because in 2005, Hayden Christensen along with his brother Tove and their company Forest Park Pictures developed an extensive treatment and character bible for a show they called “Housecall” about a concierge doctor working in the rich Malibu suburb. After an unsuccessful pitch of the show to USA Network, the project was dropped. But later, Royal Pains aired as a conceptually similar concierge doctor series working in the Hamptons. (Clearly, the move from West Coast to East Coast obviated any substantial similarity.)

The district court reviewed only the copyright action and found that no copyrightable material was copied and dismissed on summary judgment. The Second Circuit reversed, holding that the implied-in-fact contract was not pre-empted by copyright law and that under California law, there remains an implied duty to pay.

California has long recognized that an implied-in-fact contract may be created where the plaintiff submits an idea (the offer) that the defendant subsequently uses (the acceptance) without compensating the plaintiff (the breach). … Forest Park alleges that it agreed with USA Network to be paid the industry standard for its idea, which is enough under California law to survive a motion to dismiss. At trial, Forest Park will have to prove that such an industry standard price exists and that both parties implicitly agreed to it.

The Second Circuit has added pricing to the establishment of an understanding, but given union minimum pay scales for at least some components in the sale of a show, the existence of some common practice may be possible.

The effect will likely be greater clarity regarding invitations for pitch meetings. Any studio hosting a meeting would be well served to use a disclaimer stating that while the company will respect the copyright ownership of any material submitted, it does not pay for ideas and does not pay for development services unless those services are specified in a written and fully executed agreement.

Fortunately for plaintiffs, old-Hollywood loves the myth of the deal on the napkin and the handshake agreement. So long as executives continue to work (as well as live) in a fantasy world, there will be room for claims of implied-in-fact contract breaches.