Sandy Veith and Vuelta International, Inc. v. MCA, Inc.
1997 Cal. App. Unpub. LEXIS 1 (1997)
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Rule of Law:
A party to a contract breaches the implied covenant of good faith and fair dealing by engaging in conscious and deliberate conduct that prevents the other party from fulfilling a condition precedent to performance. When a party's bad faith conduct makes a condition impossible to satisfy, that condition is excused, and the breaching party remains liable under the contract.
Facts:
- In late 1980 or early 1981, Sandy Veith and William Sackheim developed an idea for a television series titled 'Coletta.'
- In March 1981, Veith signed an exclusive contract with Universal City Studios, Inc. ('Universal') to develop television programming.
- The contract stipulated that Veith would receive a substantial bonus if a primetime television series was licensed as a direct result of a pilot for which he received sole or partial teleplay credit and separation of rights.
- Under his Universal contract, Veith wrote a pilot script for 'Coletta,' which Universal pitched to networks like NBC and ABC over several years, with various writers working on rewrites, but the project was never produced as a series.
- After Veith's contract expired, he signed extension agreements giving Universal continued rights to develop 'Coletta.'
- In July 1990, a new Universal-produced television series, 'Northern Exposure,' premiered on CBS, crediting Joshua Brand and John Falsey as creators.
- Veith and others recognized that 'Northern Exposure' had significant similarities in plot, characterization, and detail to his 'Coletta' project.
- Evidence at trial indicated that Universal executives had a financial incentive to use Brand and Falsey and had intentionally provided them with material from 'Coletta' during the development of 'Northern Exposure' without disclosing the source.
Procedural Posture:
- Sandy Veith filed a lawsuit against Universal in a state trial court for breach of contract.
- After a five-week trial, a jury returned a special verdict in favor of Veith, awarding him $7.29 million in damages.
- The trial court entered a judgment on the verdict.
- Universal, as the defendant, filed a motion for judgment notwithstanding the verdict and a motion for a new trial.
- The trial court denied both of Universal's post-trial motions.
- Universal, as appellant, appealed the judgment to the California Court of Appeal, with Veith as the appellee.
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Issue:
Does a production company breach the implied covenant of good faith and fair dealing when it secretly uses a writer's original television series concept and script to develop another hit series, thereby preventing the original writer from fulfilling the contractual condition precedent of receiving screen credit and, consequently, from receiving bonus compensation?
Opinions:
Majority - Aldrich, J.
Yes, a production company breaches the implied covenant of good faith and fair dealing through such conduct. Every contract imposes a duty of good faith, requiring parties not to do anything that deprives the other of the contract's benefits. Universal's bonus payment was conditioned on Veith receiving screen credit. The court found substantial evidence that Universal engaged in 'conscious and deliberate' conduct by secretly feeding Veith's 'Coletta' material to the writers of 'Northern Exposure,' which frustrated Veith's justifiable contractual expectations. This act made it impossible for Veith to be listed as a participating writer and compete for screen credit under the Writers Guild of America (WGA) process. Because Universal's bad faith conduct prevented the condition precedent (receiving credit) from occurring, the condition was excused. Therefore, Universal's failure to pay the bonus constituted a breach of contract.
Analysis:
This case is a significant application of the implied covenant of good faith and fair dealing within the entertainment industry, particularly concerning creative rights and conditional compensation. The decision establishes that a studio cannot strategically circumvent a writer's contractual rights by secretly repurposing their creative work for a different project and assigning credit elsewhere. It affirms that actions not explicitly forbidden by a contract can still constitute a breach if they are done in bad faith to frustrate the contract's purpose. This precedent empowers creators by providing a legal remedy when industry arbitration mechanisms are rendered inaccessible due to a party's deceptive conduct.
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