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Wyler Summit Partnership v. Turner Broadcasting System, Inc.

United States Court of Appeals for the Ninth Circuit
135 F.3d 658 (1998)


William Wyler was the director of the hit film Ben Hur. MGM was the production company for the film. In 1958, Wyler signed an agreement with MGM stating that, in addition to a one-time base payment, Wyler would be paid a percentage compensation based on the film’s receipts. The contract provided that this percentage compensation would be paid in annual installments, and each installment was not to exceed $50,000. This provision was inserted solely at Wyler’s request to avoid income tax liability. Because of the film’s success, Wyler and his heirs (plaintiffs) earned $3.3 million in total percentage compensation. Wyler and his heirs had been paid $1.8 million. Turner (defendant) was MGM’s successor. Turner retained the remaining $1.5 million as a result of the payment plan. Turner did not argue that Wyler’s heirs didn’t deserve the money. Turner claimed only that the money could be paid only in annual installments of $50,000, as per the agreement. Wyler’s heirs argued that they were being deprived of the economic benefit of the percentage compensation by the operation of the contract’s installment payment provision. The heirs argued that Turner was earning a significant amount of interest income on the deferred compensation. The heirs also argued that the original parties to the contract never contemplated that the installment provision would work to deprive Wyler or his heirs of that benefit. Finally, the heirs claimed that Turner unlawfully rejected the heirs’ proposal to waive the provision. The heirs thus brought suit against Turner, claiming unjust enrichment, breach of contract, and breach of the duty of good faith and fair dealing. Turner filed a motion to dismiss. The trial judge granted Turner’s motion, holding that (1) there must be an express provision in the contract allowing parties to waive their obligations and (2) there was nothing in the contract to suggest that the percentage compensation provision was included solely for the benefit of Wyler; in fact, the court held, the provision also benefits Turner by allowing Turner to limit Wyler’s annual payment. The heirs appealed.

Rule of Law


Holding and Reasoning (Stagg, C.J.)

Dissent (Tashima, J.)

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