Ilshin Investment Co. v. Buena Vista Home Entertainment, Inc.

I concur in the majority opinion except as to part I.A. and B. of the Discussion, from which I respectfully dissent. In my view, the implied covenant of good faith and fair dealing prohibited Last Patriot Productions, Inc. (Last Patriot), from unreasonably withholding consent to distribution costs in excess of $900,000, and there is no reason why a court cannot determine whether it would have been unreasonable for Last Patriot to withhold consent to Buena Vista’s distribution costs if Buena Vista had asked. Moreover, on this record it is undisputed that withholding consent would have been unreasonable—Buena Vista introduced evidence that its distribution costs were reasonable, Ilshin introduced no evidence to the contrary, and all parties agree that the ongoing distribution of the film was profitable. I further conclude that the implied covenant of *632 good faith and fair dealing prohibited Last Patriot from requiring Buena Vista to continue to distribute the film if Last Patriot refused to consent to additional distribution costs, so the lost profits award should be reversed as well.

On June 1, 2011, and on June 13, 2011, the opinion was modified to read as printed above.…

*615 Opinion

Ilshin Investment Co., Ltd. (Ilshin), a Korean company, loaned funds to Last Patriot Productions, Inc. (Last Patriot), to enable production of The Patriot, a film starring Steven Seagal. Last Patriot obtained the necessary bank financing and completed the film, but was unable to repay its obligations to Ilshin and others.

When the completed film failed to obtain theatrical distribution, Last Patriot entered into an exclusive agreement (the Agreement) for its home video distribution by Buena Vista Home Entertainment, Inc. (Buena Vista), for an eight-year term ending in approximately June 2007. The Agreement provided that Buena Vista’s fee would be a percentage of the distribution proceeds, and permitted Buena Vista to recoup its expenses before paying the balance of the proceeds to Last Patriot. But the Agreement expressly required Buena Vista to obtain Last Patriot’s consent before incurring recoupable distribution expenses in excess of $900,000.

Buena Vista distributed The Patriot from mid-1999 until October 2005, with sales far exceeding the parties’ expectations. 3 Between May 1, 1998, and September 30, 2006, United States distribution receipts were almost…