## Facts

- Art Buchwald wrote a screen treatment in 1982 (later titled *King for a Day*) about an African ruler who visits the United States, is deposed, becomes destitute, and ultimately marries a woman who helps him.
- Buchwald and producer Alain Bernheim presented the concept to Paramount Pictures, which optioned the treatment in 1983 and commissioned development.
- The parties’ agreement provided for specified compensation if the picture was produced and for contingent compensation tied to Paramount’s standard “net profits” definition if a film was made based on Buchwald’s material.
- Paramount released *Coming to America* in 1988, starring Eddie Murphy and directed by John Landis, without paying Buchwald or Bernheim contingent compensation.
- The film earned substantial revenues, but Paramount’s accounting under its contractual “net profits” definition reported no net profits and therefore no contingent payments.
- In an earlier liability phase, the court found the film was “based on” Buchwald’s treatment within the meaning of the agreement and that Paramount breached.
- The case proceeded to a separate damages phase focused on enforceability of the “net profits” provision and the proper measure of damages if that provision could not be enforced.

## Issues

1. Whether the contract’s “net profits” definition and accounting provisions were unconscionable and unenforceable under California law.
2. If the “net profits” provision was unenforceable, what alternative measure should be used to calculate damages for Paramount’s breach.
3. Whether plaintiffs were entitled to contingent compensation despite Paramount’s accounting showing zero net profits.

## Decision

- The court held Paramount’s “net profits” definition and related accounting provisions unconscionable and refused to enforce them to deny any contingent compensation.
- The court rejected Paramount’s “no net profits” accounting as the basis for damages.
- The court awarded damages using alternative measures informed by evidence of industry practice and the film’s financial performance to approximate a reasonable participation.
- The litigation later ended by settlement before an appellate ruling.

## Legal Principles

- Under California unconscionability doctrine, a contract term may be unenforceable when procedural unconscionability (e.g., standardized, drafter-controlled terms and bargaining inequality) combines with substantive unconscionability (grossly one-sided economic effect).
- A profit-participation clause may be substantively unconscionable where its cost allocations and deductions are structured so that even a highly successful film predictably yields “no net profits” to participants promised net-profit compensation.
- When a contractual damages measure is unenforceable due to unconscionability, a court may use other competent evidence (including industry custom and expert testimony) to determine a reasonable monetary award that reflects the parties’ expected benefit from the bargain.
- A drafting party cannot rely on an unconscionable accounting scheme to eliminate contingent compensation where the project’s commercial success would otherwise support a meaningful participation.

## Conclusion

The court invalidated Paramount’s “net profits” participation formula as unconscionable and calculated damages using alternative, industry-based measures rather than the studio’s accounting that reported no net profits from a commercially successful film.


Buchwald v. Paramount Pictures Corp., 1992 WL 1462910 (Cal. Super. Ct. 1992)