Facts
- Art Buchwald wrote a story treatment titled It’s a Crude, Crude World, later retitled King for a Day (the work), about a rich, educated, arrogant, despotic African leader who comes to the United States and ultimately marries an American woman.
- Buchwald and Paramount Pictures, Corp. entered into a contract under which Buchwald transferred rights in the work to Paramount.
- The agreement provided that Buchwald would be paid only if Paramount produced a feature-length motion picture “based upon” the work; the contract did not define “based upon.”
- Paramount later produced and released Coming to America (1988), starring Eddie Murphy as a pampered but kind African prince who travels to America and, while there, experiences life without the usual trappings of wealth and status and falls in love with an American woman.
- Both stories were comedies involving an African royal figure in America, the character ending up in an urban American ghetto, a change in attitude away from royal entitlement, and a romance with an American woman.
- Both works also included a similar comic beat in which the prince uses a mop to foil an attempted robbery.
- It was undisputed that Paramount executives involved in the development and production of Coming to America, including director John Landis, knew about Buchwald’s work.
- Buchwald sued Paramount for breach of contract, alleging that Coming to America was “based upon” his work and that Paramount therefore owed him compensation.
- After the court found liability, the case proceeded to a damages/accounting phase addressing Paramount’s “net profits” definition and whether that provision could be used to reduce Buchwald’s recovery to zero.
Issues
- Whether Coming to America was “based upon” Buchwald’s work within the meaning of the parties’ contract, even though the agreement did not define that term.
- Whether Paramount breached the contract by producing Coming to America without paying Buchwald under the “based upon” compensation provision.
- Whether Paramount’s contractual definition and calculation of “net profits,” applied so that a highly successful film could yield no payable profits to the participant, was unconscionable and unenforceable in determining Buchwald’s recovery.
Decision
- The court concluded that Coming to America was “based upon” Buchwald’s work for purposes of the parties’ agreement, triggering Paramount’s payment obligation.
- The court found Paramount liable for breach of contract for failing to compensate Buchwald after producing the film.
- In the damages/accounting phase reported at 13 U.S.P.Q.2d (BNA) 1497, the court held Paramount’s “net profits” definition and accounting approach unconscionable and refused to enforce the clause to deny Buchwald compensation.
- With the net-profits clause not enforced as written, the court moved toward a reasonable measure of compensation rather than Paramount’s claimed zero “net profits.”
- The matter later resolved by settlement before an appellate ruling on the unconscionability determination.
Legal Principles
- When a contract uses an undefined term such as “based upon,” the court may construe it in light of the agreement’s language and context; the absence of a settled industry meaning can support treating the term as ambiguous and construing it by ordinary understanding and the parties’ deal structure.
- Proof that the defendant had access to the plaintiff’s work, combined with meaningful similarities in story elements and sequencing, can support a finding that a later film was “based upon” the earlier work under a compensation-triggering contract clause.
- Under California unconscionability doctrine (including California Civil Code § 1670.5), a court may refuse to enforce a contract clause, or limit its application, when the clause and the circumstances of contracting and performance produce an overly one-sided result.
- A “net profits” participation provision may be found unconscionable where the definition and accounting methodology operate so that even a commercially successful film can be reported as generating no payable profits to the participant, defeating reasonable payment expectations tied to success.
Conclusion
Buchwald v. Paramount Pictures, Corp. held Paramount liable for making Coming to America based upon Buchwald’s King for a Day and, in the published damages ruling, refused to enforce Paramount’s net-profits definition as unconscionable, allowing Buchwald to pursue compensation outside the studio’s claimed zero-profit accounting.