Filmline (Cross-Country) Productions, Inc. v. United Artists Corp.

Filmline (Cross-Country) Productions, Inc. (Filmline) (plaintiff); Yellowbill Finance Limited (Yellowbill) (plaintiff); and United Artists Corporation (UA) (defendant) entered an agreement that called for Filmline to produce a motion picture, Yellowbill to provide interim financing, and UA to purchase the finished product. UA’s final purchase was conditional upon Filmline’s satisfaction of its obligations under the agreement. However, in the event of a breach by Filmline, UA was obligated to provide Filmline with 30 days in which to correct the breach. An amendment to the contract stated that UA reserved the right to request changes to the screenplay prior to the start of filming. UA’s agent requested changes to the version of the screenplay that he reviewed in April 1982. Some (but not all) of UA’s requested revisions were incorporated into the final version of the screenplay, which UA’s agent reviewed on May 11. Filming also began on May 11. UA’s agent actively participated in the production. This participation included further requests for revisions but also assurances to Filmline that the production was proceeding in a satisfactory manner. In June, when the film was near completion, UA acted to repudiate the agreement due to variation from the approved screenplay. UA’s notice of termination did not include a provision for Filmline to correct its alleged breach. Filmline and Yellowbill secured another distributor, but the film was a commercial failure upon release. Filmline and Yellowbill brought suit. The district court found in favor of Filmline and Yellowbill, holding that UA waived its right to terminate the contract by actively participating in the production. Damages were assessed against UA. UA appealed. The United States Court of Appeals for the Second Circuit granted certiorari.