## Facts

- Producers Michael Uslan and Benjamin Melniker (through Batfilm Productions, Inc. and Franklin Enterprises, Ltd.) obtained motion-picture rights to the Batman comic-book characters and contracted in 1979 with Casablanca Productions to develop a Batman film with fixed and contingent compensation.
- Polygram (Casablanca’s successor) later assigned its rights and obligations to Warner Bros.
- In 1988, the parties executed an amended agreement with Warner Bros. providing: (1) fixed compensation for *Batman*; (2) a deferred payment upon reaching a receipts threshold; and (3) 13% of “Net Profits” as defined by a detailed schedule.
- Warner paid the fixed and deferred amounts and additional fixed fees for later Batman-related pictures, but plaintiffs received no “Net Profits” because the contractual definition allowed numerous deductions and accounting treatments.
- Plaintiffs sued in 1992, alleging they were denied profit participation and seeking, among other relief, to avoid or reform the net-profits provisions as unconscionable and to apply contract-of-adhesion/reasonable-expectations principles.
- The trial court bifurcated proceedings; Phase I was a bench trial addressing enforceability and interpretation of the net-profits terms, including specific challenged deductions (e.g., overhead-type charges, foreign taxes, sound-stage holdovers, limited crediting of videocassette revenue, and interest on production costs).

## Issues

1. Whether the net-profits definition and deductions were unconscionable, warranting invalidation or reformation of the profit-participation terms.
2. Whether the agreement should be treated as a contract of adhesion and construed against Warner Bros. to protect plaintiffs’ reasonable expectations regarding profit participation.
3. Whether unconscionability requires an extreme level of one-sidedness (often described as “shocking the conscience”), particularly where procedural unfairness is not strongly shown.

## Decision

- The court rejected plaintiffs’ unconscionability challenge and enforced the net-profits provisions as written.
- The court found plaintiffs failed to prove the agreement (or any specific challenged provision) was procedurally and substantively unconscionable.
- The court declined to invalidate particular deductions or accounting methods, finding plaintiffs did not carry their evidentiary burden to show the items were improper, outside industry practice, or yielded an extreme and legally unacceptable result.
- Although the agreement could have adhesive features, the court did not use adhesion doctrine to override the express net-profits definition.
- Phase I relief to avoid or rewrite the net-profits terms was denied; remaining claims proceeded (including accounting-related matters) under the contract’s definition.

## Legal Principles

- Under California law, unconscionability generally requires both procedural unconscionability (oppression, surprise, lack of meaningful choice) and substantive unconscionability (overly harsh or one-sided terms); the required showing varies on a sliding scale.
- Economic disadvantage or a lopsided bargain, without more, does not establish unconscionability; a contract need not be “fair” to be enforceable.
- Sophistication, experience, and bargaining context can defeat claims of procedural unconscionability, even when standardized studio terms are used.
- A party challenging specific cost deductions or accounting rules bears the burden to show, with evidence, that the challenged items are improper, nonstandard, or produce an extreme result sufficient to support unconscionability.
- Contract-of-adhesion principles may affect interpretation in close cases, but they do not permit rewriting clear profit-participation definitions absent a legally sufficient basis such as unconscionability.

## Conclusion

The court enforced the studio-drafted net-profits definition for the Batman films and refused to reform it, holding that plaintiffs—experienced industry participants—did not prove procedural abuse or substantively extreme terms sufficient to render the agreement unconscionable, even if the outcome left them with no net-profit participation.


Batfilm Prods., Inc. v. Warner Bros. Inc., 1994 Cal. App. LEXIS 1333 (Cal. Ct. App. 1994)