Cbs, Inc., Plaintiff/counterdefendant Appellee/cross-Appellant v. David Merrick, Defendant/counterclaimant Appellant/cross-Appellee

CBS, Inc., appellee, filed an action against David Merrick in the Los Angeles County Superior Court for rescission seeking restitution and consequential damages. Merrick removed the action on the grounds of diversity of citizenship to the federal court where he filed an answer and also a counterclaim for damages for breach of contract. Thereafter, CBS filed an amended complaint containing a separate cause of action for damages for breach of contract. After a court trial, the district court found that Merrick had breached his contract with CBS and awarded CBS the amount it had paid Merrick and his agent but denied CBS recovery for the amount paid out to Fried-kin, the director, and Green, the screenwriter, after execution of and in reliance on the contract. The court denied Merrick any relief. Both parties appeal.

*1294 CBS contends that the district court erred in refusing to award reliance damages in addition to the award for restitution.

Facts

David Merrick is a well known producer of entertainment programs for stage and screen. CBS is a major television network.

In early 1977, Merrick acquired the motion picture and television rights to the novel Blood and Money. CBS…

concurring:

I concur in the majority opinion but believe that the applicable law in section II requires further clarification.

The proper measure of damages in this case depends on an interpretation of an unclear area of New York law. Although CBS denominated its complaint below as one for rescission, I believe CBS’s lawsuit was effectively a breach of contract action. The complaint sought restitution instead of lost profits because of the speculative nature of the breached contract. The question presented to us, then, is whether an award of restitution when used as a substitute for speculative lost profits in a breach of contract action should preclude the recovery of additional measures of damages.

In seeking to answer this question of New York law, I have found neither a New York statute that is directly controlling nor a decision by the New York Court of Appeals that is directly on point. I would therefore have this court turn to other relevant sources of New York law and sit, in effect, as a New York state court. Commissioner v. Estate of Bosch, 387 U.S. 456, 465 , 87 S.Ct. 1776, 1782 , 18 L.Ed.2d 886 (1967).

The phrase “rescission and restitution” has two meanings in New…

716 F.2d 1292 CBS, INC., Plaintiff/Counterdefendant Appellee/Cross-Appellant, v. David MERRICK, Defendant/Counterclaimant Appellant/Cross-Appellee. CA Nos. 82-5520, 82-5557. United States Court of Appeals, Ninth Circuit. Argued and Submitted April 6, 1983. Decided Sept. 27, 1983. 1 William W. Vaughn, O'Melveny & Myers, Los Angeles, Cal., for plaintiff/counterdefendant appellee/cross-appellant. 2 Dennis E. Kinnaird, Munger, Tolles & Rickershauser, Los Angeles, Cal., for defendant/counterclaimant appellant/cross-appellee. 3 Appeal from the United States District Court for the Central District of California. 4 Before ANDERSON and NELSON, Circuit Judges, and SOLOMON, * District Judge. SOLOMON, Senior District Judge: 5 CBS, Inc., appellee, filed an action against David Merrick in the Los Angeles County Superior Court for rescission seeking restitution and consequential damages. Merrick removed the action on the grounds of diversity of citizenship to the federal court where he filed an answer and also a counterclaim for damages for breach of contract. Thereafter, CBS filed an amended complaint containing a separate cause of action for damages for breach of contract. After a…