Hollywood Fantasy Corp. v. Gabor, 151 F.3d 203

United States Court of Appeals, Fifth Circuit

1998

Chapter

20

Title

Contract Remedies

Page

811

Topic

Reliance Damages as an Alternative to Expectations Damages

Quick Notes

Although recovery of lost profits does not require that the loss be susceptible to exact calculation, lost profits must be proved with "reasonable certainty.

Book Name

Contracts Cases, Discussions, and Problems.  Blum Bushaw, Second Edition.  ISBN:  978-0-7355-7069-6.

Issue

o         Whether Hollywood Fantasy can recover compensatory damages based of speculation and uncertainty?  No.

Procedure

Trial

o         Trial Judge Findings found that Ms. Gabor and Hollywood Fantasy had reached a contract.  Jury found that Ms. Gabor had breached that contract.  $100,000 for the breach, as well as $100,000 for fraud.

District

o         Set aside the jury's fraud verdict for lack of evidence.  Affirmed $100,000 on the breach of contract, plus attorneys' fees and post-judgment interest.

Circuit

o         Affirm the district court's judgment as to liability; Reverse the district court's damages award (from $100K to $57,500 [out of pocket expenses]);  Render judgment for a lesser amount of damages.

Facts

Rules

Reason

Pl Hollywood Fantasy Corp (HF)

Df Gabor

What happened?

Make a movie with a celebrity

o         Hollywood Fantasy Corporation was briefly in the business of providing "fantasy vacation" packages that would allow participants to "make a movie" with a Hollywood personality and imagine themselves movie stars, for one week, for a fee.

Zsa Zsa

o         Hollywood Fantasy arranged to have Zsa Zsa Gabor as one of two celebrities at the event.

Zsa Zsa Cancelled

o         Two weeks before the fantasy vacation event, Ms. Gabor cancelled her appearance.

Hollywood Fantasy Cancelled

o         A short time later, Hollywood Fantasy cancelled the vacation event, to which it had sold only two tickets.

Hollywood Goes Out of business

o         A short time after that, Hollywood Fantasy went out of business.

Hollywood - Sued

o         Hollywood Fantasy sued Ms. Gabor for breach of contract and fraud.

Trial Judge Findings

o         Found that Ms. Gabor and Hollywood Fantasy had reached a contract,

Jury Findings

o         Found that Ms. Gabor had breached that contract.

o         $100,000 for the breach, as well as $100,000 for fraud.

District Court

o         Set aside the jury's fraud verdict for lack of evidence.

o         $100,000 on the breach of contract, plus attorneys' fees and post-judgment interest.

Zsa Zsa Appealed

o         Ms. Gabor appealed.

Fifth Circuit Court

o         Affirm the district court's judgment as to liability;

o         Reverse the district court's damages award;

o         Render judgment for a lesser amount of damages.

Contract between Hollywood Fantasy and Zsa Zsa

o         14 paragraph letter confirming agreement.

o         Zsa Zsa responded with three changes.

o         Contract contained an out clause.

Zsa Zsa Terminated Contract

o         She wrote she was involved with preproduction and promotional film work for a movie she was going to appear in.

Courts Response Zsa Zsas Termination

o         There was a contract.  The trial court was justified in finding Gabor breached the contract.

o         Concluded Gabor did not have a significant opportunity.

o         Only a 14-second cameo.

o         Did not preproduction work and the second movie was never made.

Reliance Damages

o         It is a general rule that the victim of a breach of contract should be restored to the position he would have been in had the contract been performed.

o         However, an injured party may, if he so chooses, ignore the element of profits and recover as damages his expenditures in reliance.

Saffir Testified That:

o         Hollywood Fantasy lost $ 250,000 in profits from future fantasy vacation events

o         $1,000,000 in future profits the bloopers/outtakes television series

Courts Response Lost Profit must be proved with Reasonable Certainty.

o         The $ 100,000 damages award cannot be supported as the recovery of lost profits.

o         Although recovery of lost profits does not require that the loss be susceptible to exact calculation, lost profits must be proved with "reasonable certainty."

Courts Response Future Profits amount to $250K

o         This was based on his estimate that HF would make a $ 25,000 profit from each of ten future events.

o         However, there was only one previous venture that lost money and the employees did not get paid.

o         Also, he had no future commitments.

o         No evidence that HF had been a successful enterprise or a prior enterprise.

Rule Speculative, Uncertain Conditions

o         Profits which are largely speculative, as from an activity dependent on uncertain or changing market conditions, or on chancy business opportunities, or on the success of a new and unproven enterprise, cannot be recovered.

o         The mere hope for success of an untried enterprise, even when that hope is realistic, is not enough for recovery of lost profits.

The Inquiry is about the Activity and not the Enterprise

o         The relevant "enterprise" in the lost profits inquiry is not the business entity, but the activity which is alleged to have been damaged.

Courts Response Loss of Television Revenue

o         There were no object facts, figures, or data to substantiate the estimate of lost profits.

Courts Response Lost $200K in Good Will

o         The lost of good will or business reputation is not recoverable in a breach of contract.

Courts Response - $200K Lost Investment in the Corporation

o         It is pure speculation but for Ms. Gabors breach that HF would not have gone out of business.

Rule - Foreseeable Damages

o         Actual damages may be recovered when loss is the natural, probable, and foreseeable consequence of the defendant's conduct.

o         The record must contain evidence that permits the jury to assess with reasonable certainty the degree of causation of the damage by the breach or interference relative to other factors. 

Courts Response Out Of Pocket Expenses

o         Did present sufficient evidence.

o         (1) $ 8,500 in printing costs; (2) $ 12,000 in marketing costs; (3) $ 22,000 in personnel and miscellaneous expenses, including air fares, staff accommodations, script-writing costs, telephone calls, and logo t-shirts; (4) $ 9,000 in travel expenses; and (5) $ 6,000 in expenses relating to preparations to film the San Antonio event for a possible television pilot. These expenses total $ 57,500.

Conclusion

o         Mr. Saffir's testimony as to HFs out-of-pocket expenses is sufficient to support an award of $ 57,500 for breach of contract, but not to support an award of $ 100,000.

o         The award of $ 100,000 is reversed in part on the basis that the evidence disclosed in the record does not support compensatory damages beyond $ 57,500.

Rules

Contracts Law > Formation >  Counteroffers

o         The general rule is that an acceptance must not change or qualify the terms of the offer. If it does, the offer is rejected. Under this "mirror image" rule, a modification of an offer qualifies as a rejection and counteroffer only if the modification is "material."

Contracts Law > Remedies >  Reliance Damages

o         It is a general rule that the victim of a breach of contract should be restored to the position he would have been in had the contract been performed. However, an injured party may, if he so chooses, ignore the element of profits and recover as damages his expenditures in reliance.

Contracts Law > Remedies >  Foreseeable Damages

o         Under Texas law, actual damages may be recovered when loss is the natural, probable, and foreseeable consequence of the defendant's conduct. The record must contain evidence that permits the jury to assess with reasonable certainty the degree of causation of the damage by the breach or interference relative to other factors. 

Class Notes

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