'Purchaser' Didn't Include Disney Subsidiaries

The court then noted that the clause in the rights-purchase agreement that addressed Wolf's royalties from character exploitations and licenses specifically gave him payment from three different sources, one of which was from Disney subsidiaries. The court explained: 'When the parties intended to identify 'subsidiaries,' they knew how to do so. Moreover, if 'Walt Disney Productions' includes subsidiaries, ' it would include a subsidiary 'licensing' itself to utilize the Roger Rabbit characters, a meaningless concept. ' On remand the trial court must reassess the damages awarded to Cry Wolf to the extent they were dependent on the erroneous interpretation of that contract term.'

Among the other appellate findings in the case, the court upheld a directed verdict for Disney on Wolf's cause of action of breach of implied covenant of good faith and fair dealing. A clause in the rights-purchase agreement stated: 'Purchaser shall not be under any obligation to exercise any of the rights granted to Purchaser hereunder; and any and all said rights may be assigned by Purchaser, and/or licenses may be granted by Purchaser with respect thereto, as Purchaser may see fit.'

The court of appeal emphasized: 'At trial, Cry Wolf [Gary Wolf's company] argued that, if the term 'gross receipts' [in the rights-purchase agreement] was intended to mean only monetized benefits received by Disney in exchange for licensing the Roger Rabbit franchise, then Disney breached the implied covenant of good faith and fair dealing by purposefully orchestrating promotional agreements for which it received no monetary consideration. ' Contrary to Cry Wolf's contention, there were no disputed factual issues for the jury to decide. The question was not what Disney did, but whether it was authorized by the parties' agreements to do it. In light of Disney's unfettered discretion under the 1983 Agreement to license or not license the Roger Rabbit franchise as it 'saw fit,' Cry Wolf's attempt to limit that discretion by use of an implied covenant, a pure legal question of contract interpretation, is improper.'

The California Court of Appeal, Second District, decided that the term 'Purchaser' in an agreement for 'Walt Disney Productions' to purchase rights in the novel 'Who Censored Roger Rabbit?' and its characters didn't apply to Disney's subsidiaries. Wolf v. Walt Disney Pictures and Television, BC251199.

Book author Gary Wolf sued Disney, claiming underpayment of royalties from merchandising uses of characters from the movie 'Who Framed Roger Rabbit,' which was based on Wolf's novel. A jury determined in part that Disney owed Wolf monies earned from merchandising sales by Disney subsidiaries.

But the Court of Appeal found that the trial court erred in allowing the jury to interpret the meaning of 'purchaser.' 'Absent a conflict in the evidence, the interpretation of the contract remains a matter of law,' the court noted. 'Here, the meaning of the term 'Purchaser' was not dependent on the credibility of conflicting extrinsic evidence.'

The court then noted that the clause in the rights-purchase agreement that addressed Wolf's royalties from character exploitations and licenses specifically gave him payment from three different sources, one of which was from Disney subsidiaries. The court explained: 'When the parties intended to identify 'subsidiaries,' they knew how to do so. Moreover, if 'Walt Disney Productions' includes subsidiaries, ' it would include a subsidiary 'licensing' itself to utilize the Roger Rabbit characters, a meaningless concept. ' On remand the trial court must reassess the damages awarded to Cry Wolf to the extent they were dependent on the erroneous interpretation of that contract term.'

Among the other appellate findings in the case, the court upheld a directed verdict for Disney on Wolf's cause of action of breach of implied covenant of good faith and fair dealing. A clause in the rights-purchase agreement stated: 'Purchaser shall not be under any obligation to exercise any of the rights granted to Purchaser hereunder; and any and all said rights may be assigned by Purchaser, and/or licenses may be granted by Purchaser with respect thereto, as Purchaser may see fit.'

The court of appeal emphasized: 'At trial, Cry Wolf [Gary Wolf's company] argued that, if the term 'gross receipts' [in the rights-purchase agreement] was intended to mean only monetized benefits received by Disney in exchange for licensing the Roger Rabbit franchise, then Disney breached the implied covenant of good faith and fair dealing by purposefully orchestrating promotional agreements for which it received no monetary consideration. ' Contrary to Cry Wolf's contention, there were no disputed factual issues for the jury to decide. The question was not what Disney did, but whether it was authorized by the parties' agreements to do it. In light of Disney's unfettered discretion under the 1983 Agreement to license or not license the Roger Rabbit franchise as it 'saw fit,' Cry Wolf's attempt to limit that discretion by use of an implied covenant, a pure legal question of contract interpretation, is improper.'