Locke v. Warner Bros., Inc.

57 Cal App. 4^th 354 (Cal. Ct. App. 1997), review den. 1997 Cal. LEXIS 7949 (cal. S. Ct.)

NATURE OF CASE: Determination of whether agreement between parties contained an implied covenant of good faith and fair dealing.

FACT SUMMARY: No-talent hack actress with delusions of grandeur (Locke) had agreement to pitch development deals to cynical mainstream producer of unadulterated pap (Warner Brothers), which could accept or reject such deals. Warner Brothers was in the pocket of actor with marginal talent but undeniable box-office appeal (Clint Eastwood), and thus entered agreement to consider projects pitched by Locke in order to facilitate divorce settlement between Locke and Eastwood.

ISSUE: Did Warner Brothers breach an implied covenant of good faith by not seriously considering any deals with Locke, or was it simply making subjective creative decisions allowed by the terms of the deal?

FACTS:

1. In 1975 Locke and Eastwood began a relationship and as a result Locke appeared in several of Eastwood’s films. In 1986 Locke’s meteoric rise continued as she staked her claim as a director of some note with her work on the classic film Ratboy (Warner Bros. 1986).

2. Sadly, in 1988 the fairytale romance deteriorated and by 1989 Eastwood decided he would make his own day (sorry, I’d been holding that one back for so long) by terminating the relationship. Locke sued and ended up with cash and real property. Allegedly the deal she struck with Eastwood was facilitated by Warner Brothers, as discussed below.

3. In 1990 Locke signed a deal with Warner Brothers that she claimed was secured for her by Eastwood (in consideration of the deal with WB Locke dropped her suit against Eastwood). The key terms of the Locke/WB deal were these:

- Locke received $250,000/year for 3 years to submit any picture to WB she was interested in developing before she pitched the deals to competing studios (WB never picked up any of the films…oddly enough neither did anyone else).

- Locke also received $750,000 in a “pay or play” deal, that is, she was paid $750,000 to direct whether or not she ever directed anything.

- Locke also got an office on the studio lot and a much-needed assistant

4. WB ultimately compensated Locke the full $1.5 million, but the studio secretly charged the cost to Eastwood. WB never developed any of Locke’s projects.

5. The cause of action dealt with here is Locke’s claim that WB breached by refusing to consider her projects. Although she was compensated, she claimed she was deprived of the full benefit of the agreement.

DISCUSSION: WB was under no obligation to develop projects submitted by Locke if it felt they were not worthy. WB maintained creative judgment and no court can determine which, if any projects WB should have pursued. A covenant of good faith cannot change what the parties bargained for, and here the bargain was only that WB would consider Locke’s projects. However the issue is whether WB ever had any intention of working with Locke. Although she was paid handsomely, the real benefit of the agreement to Locke was the exposure and career-enhancement she would receive if she were able to develop or direct a major motion picture.

While it is not known if Locke ever came to WB with a latter-day Citizen Kane and they tossed it on the scrap heap, it must be pointed out that this is a studio that with Eastwood produced Any Which Way but Loose. Notwithstanding the dubious nature of this creative decision, Locke relied on two other pieces of evidence to make her case. Via statements made by WB executives, Locke showed that WB never intended to produce anything she submitted, and that the whole agreement was a fiction created only to help the settlement between her and Eastwood.

RATIONALE: “Warner was entitled to reject Locke’s work based on its subjective judgment…[h]owever…the evidence raises a triable issue as to whether Warner breached its agreement with Locke by not considering her proposals on their merits.” Locke at 364 (439 in Casebook).

“The Locke/Warner agreement did not give Warner the express right to refrain from working with Locke. Rather, the agreement gave Warner discretion with respect to developing Locke’s projects. The implied covenant of good faith and fair dealing obligated Warner to exercise that discretion honestly and in good faith.” Locke at 367 (441 in Casebook).

HOLDING: Agreements can be said to have an implied covenant of good faith and fair dealing. Neither party to the agreement may frustrate the other’s right to receive the benefits of the contract. Locke at 367 (441 in Casebook).

AFTERMATH: Locke and WB settled, and she went back to work with “a new lease on her career,” according to her attorney. Always quick with a pithy turn of phrase, Locke said of the settlement: “This is my best day in a long, long time.” Locke also reported she felt vindicated as a professional. Amen!

(I should admit that Locke did receive an Oscar nomination for The Heart is a Lonely Hunter, her first film.)