MERRY GENTLEMAN, LLC, Plaintiff-Appellant, v. GEORGE AND LEONA PRODUCTIONS, INC. and Michael Keaton, Defendants-Appellees.
No. 15-1195.
United States Court of Appeals, Seventh Circuit.
Argued June 4, 2015. Decided Aug. 25, 2015.
800 F.3d 827
AFFIRMED.
Chris Hagale, Attorney, Sidney N. Herman, Attorney, Hamilton Hill, Attorney, Bartlit, Beck, Herman, Palenchar & Scott LLP, Chicago, IL, Michael Joseph Kump, Attorney, Jeremiah T. Reynolds, Attorney, Kinsella, Weiztman, Iser, Kump & Aldisert LLP, Santa Monica, CA, for Defendant-Appellee.
Before BAUER, ROVNER, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge.
Merry Gentleman, LLC produced the motion picture The Merry Gentleman, which was released in 2009. Despite some critical acclaim, the film was a commercial flop. Merry Gentleman blames Michael Keaton, the film‘s lead actor and director, for the bust. It brought this breach of contract action against Keaton and George and Leona Productions, Inc., Keaton‘s “loan-out company” that he uses for professional contracting, alleging that Keaton violated his directing contract by (1) failing to prepare the first cut of the film in a timely fashion, (2) submitting a first cut that was incomplete, (3) submitting a revised cut that was not ready for the producers to watch, (4) communicating directly with officials at the Sundance Film Festival and threatening to boycott the festival if they did not accept his director‘s cut instead of the producers’ preferred cut, (5) failing to cooperate with the producers during the post-production process, and (6) failing to promote the film adequately.
If the case were to go to trial, one might expect Keaton to dispute that any of these alleged breaches actually violated the directing contract. After all, Keaton completed the movie. It was accepted at the prestigious Sundance Film Festival. It received critical praise—Roger Ebert, for example, gave it 3.5 stars out of 4 and called it “original, absorbing and curiously moving.” And the film‘s executive producer, Paul Duggan, admitted during his deposition that he was unaware of any director who did more publicity than Keaton did for a movie with a comparable budget.
Keaton moved for summary judgment, however, on the narrow ground that Merry Gentleman had failed to produce sufficient evidence that his alleged breaches of the directing contract caused it damages. For purposes of deciding this appeal, we must therefore assume as the district court did that Keaton in fact breached the contract.
Illinois law governs the directing contract. Under Illinois law, a “party injured by another‘s breach or repudiation of a contract usually seeks recovery in the form of damages based on his ‘expectation interest,’ which involves obtaining the ‘benefit of the bargain,’ or his ‘reliance interest,’ which involves reimbursement for loss caused by reliance on a contract.” MC Baldwin Financial Co. v. DiMaggio, Rosario & Veraja, LLC, 364 Ill.App.3d 6, 300
First, the district court held that Merry Gentleman forfeited the expectation damages theory by not addressing it sufficiently in its response to summary judgment. Merry Gentleman, LLC v. George & Leona Productions, Inc., 76 F.Supp.3d 756, 761 (N.D.Ill.2014). Merry Gentleman does not dispute this conclusion on appeal, so expectation damages are out.
Second, the district court held that Merry Gentleman failed to produce evidence from which a reasonable trier of fact could find that Keaton‘s alleged breaches caused the damages Merry Gentleman seeks: all $5.5 million it spent producing the movie. Id. at 761-66. This holding is the focus of Merry Gentleman‘s appeal.
We review the grant of summary judgment de novo, reviewing the record in the light most favorable to Merry Gentleman, as the non-moving party, and drawing all reasonable inferences in its favor. E.g., Bentrud v. Bowman, Heintz, Boscia & Vician, P.C., 794 F.3d 871, 873-74 (7th Cir.2015). Summary judgment is appropriate only where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.
Illinois follows the approach of
Merry Gentleman argues that the district court required too much when it held that Merry Gentleman failed to establish a causal connection between its expenditures on the film and Keaton‘s alleged breaches. The causation standard is minimal when the injured party seeks reliance damages under
We agree with Merry Gentleman that a party seeking reliance damages under
It is often very hard to learn what the value of the performance would have been; and it is a common expedient, and a just one, in such situations to put the peril of the answer upon that party who by his wrong has made the issue relevant to the rights of the other. On principle therefore the proper solution would seem to be that the promisee may recover his outlay in preparation for the performance, subject to the privilege of the promisor to reduce it by as much as he can show that the promisee would have lost, if the contract had been performed.
L. Albert & Son v. Armstrong Rubber Co., 178 F.2d 182, 189 (2d Cir.1949) (footnote omitted).
The burden does not shift to the breaching party until the injured party first satisfies this threshold showing of causation, however. And just because the causation threshold under
In the typical case where reliance damages are sought, the defendant has simply repudiated the contract and walked away from the deal. This causal link will be straightforward in those cases. As the district court explained, in such cases the non-breaching plaintiff is left “holding the bag after having made its expenditures.” Merry Gentleman, 76 F.Supp.3d at 763. In those cases, it is appropriate for the injured party to claim as damages all expenditures it made in preparation for performance because the other side failed to perform at all. In such cases, the complete loss of investment will often be the proximate result of the breach.
Take this case, for example. Who can say why a critically praised movie did not make money? Merry Gentleman claims as damages all $5.5 million it spent to produce the movie. If Keaton had somehow prevented completion of the movie, Merry Gentleman might well have been entitled to all expenditures made in preparation for his performance (subject, of course, to the “losing contract” limitation in
The fundamental problem we have been describing is that Merry Gentleman‘s damages theory is completely insensitive to the importance and severity of Keaton‘s alleged breaches. This is how Merry Gentleman explained its damages theory in opposing summary judgment:
Keaton‘s actions were in breach of his contract, and caused damage to MG LLC in that it was unable to screen and market the film of its choosing (as was its contractual right); in that it endured substantial additional costs; and in that in reliance on its expectation that Keaton would satisfy his contractual obligations, it spent millions of dollars to finance Keaton‘s temper tantrum, money it never would have expended if it had been aware of Keaton‘s unwillingness to conform his behavior to his contractual obligations.
That‘s it. Merry Gentleman did not explain how Keaton‘s cut differed from “the film of its choosing.” Nor did it explain how that difference caused it damage. It did not identify what it meant by “substantial additional costs.” And the last claim—that it never would have signed the contract if it had known that Keaton would breach—is something almost any plaintiff can say in a breach-of-contract dispute.
The only evidence Merry Gentleman cited in support of these conclusory assertions were the following facts:
MG LLC spent over $5 million to produce the film, the vast majority of which was spent after Keaton entered into his directorial contract.
Had MG LLC known that Keaton would fail to meet his contractual obligations as
Dkt. No. 79 at 24, ¶¶ 121-22 (internal record citations omitted). Again, Merry Gentleman made no effort to establish any causal connection between the particular breaches asserted—the failure to submit a first cut on time, submitting a revised cut that was incomplete, failing to publicize the film better, etc.—and the $5.5 million that Merry Gentleman spent on the production process as a whole.1
We agree with the district court that Merry Gentleman, in seeking $5.5 million in reliance damages, “effectively wants to shift the entire cost—and risk—of producing The Merry Gentleman to Keaton for his alleged breaches, giving it a windfall and placing it in a better position than it would have been in had the contract never been signed.” Merry Gentleman, 76 F.Supp.3d at 766. Reliance damages are not insurance. Courts “will not ‘knowingly put the plaintiff [receiving a reliance recovery] in a better position than he would have occupied had the contract been fully performed.‘” Bausch & Lomb Inc. v. Bressler, 977 F.2d 720, 729 (2d Cir.1992), quoting L.L. Fuller & William R. Perdue, Jr., The Reliance Interest in Contract Damages: 1, 46 Yale L.J. 52, 79 (1936); see also, e.g., V.S. Int‘l, S.A. v. Boyden World Corp., 862 F.Supp. 1188, 1198 (S.D.N.Y. 1994) (assuming for sake of argument that defendant breached contract but declining to award reliance damages: “Based on plaintiffs’ continued running of a successful business, any compensation for these initial expenses would not place plaintiffs in the same position as they were prior to the execution of the contract, as reliance damages are intended to do, but would instead constitute a windfall for plaintiffs.“).
As noted, we must assume here that Keaton breached the $100,000 contract as alleged, but these alleged breaches did not render his performance completely worthless. He directed the movie, it was accepted by Sundance, and it was released to the public. Reimbursing Merry Gentleman for all $5.5 million it spent, even though it received from Keaton a finished film praised by critics, would put it in a better position than if the contract had not been made. Perhaps Merry Gentleman might have been able to present a genuine issue for trial on a more modest damages theory, but it decided to shoot for the moon and missed. A reasonable trier of fact could not find that Keaton‘s alleged breaches caused Merry Gentleman to sustain $5.5 million in damages.2