USDC C.D. Cal., January 31, 2014
District court dismisses French television company’s breach of contract claim against U.S. distribution company, finding that no contract was formed because parties intended to be bound only by agreement signed by both parties.
French television production company Atlantique Productions, S.A. sued ION Media Networks, Inc. for breach of contract, and related claims, based on negotiations regarding U.S. television distribution of the internationally produced police drama series “Jo.” The primary issue was whether a “term sheet” signed by Atlantique, but not signed by ION, created a binding $4 million contract. Atlantique alleged that, although ION never signed the proposed term sheet, it was nevertheless bound to the contract because it negotiated the terms of the agreement through an email exchange and eventually sent a “final execution copy” to Atlantique. The district court ruled that, based on a review of all of the factual circumstances, no contract was formed because the parties intended to be bound by a signed agreement, and dismissed Atlantique’s contract claim.
The series was filmed in France, but in English, and Atlantique approached ION in early 2012 for U.S. distribution. Between May and July 2012, the parties negotiated the terms of a proposed distribution agreement, and their creative representatives concurrently exchanged comments on scripts, casting, etc. The business representatives settled on language for the written agreement, and on July 19, 2012, ION sent a “clean execution copy” (reserving ION’s rights of corporate approval) and also proposed a “protocol” for signatures, with Atlantique to sign first, and ION to then seek its internal approvals and, if given, countersign. On July 20, ION emailed a revised “final execution copy” to Atlantique. Later, on July 20, Atlantique replied by email stating “we’re closed!” and asked ION to vary the signature protocol by signing first, but ION declined. The parties made minor revisions to the term sheet and, on July 23, Atlantique then signed and emailed a “partially executed term sheet” back to ION, but ION – which had become increasingly concerned that this French production would not be suitable for a U.S. audience – did not countersign. Atlantique asked for a countersignature on July 24, and on July 25 ION told Atlantique that ION had not signed and that ION still had material creative concerns with the series that had to be addressed. Atlantique pressed for a counter-signature for some time, and then, in August, Atlantique (and its talent agent representatives at UTA) took the position that a binding agreement had been reached and invoiced ION for $1 million (for the first license fees that would have been due). The lawsuit was filed a few weeks later.
Atlantique argued that a binding, $4 million contract was formed in connection with a July 19-23 exchange because ION sent a “final execution copy” to Atlantique (without an express reservation of rights). Atlantique also argued (based in part on an alleged “custom and practice” in Hollywood of closing deals orally) that signatures were just a “formality,” and mere “paperwork.” The court rejected these arguments and ruled that the parties’ negotiations and all the surrounding circumstances showed that the parties intended to be bound only by a mutually signed term sheet and that the parties had agreed on a protocol for signatures. Atlantique asked to vary it, ION declined, and Atlantique did in fact follow the protocol by “signing first.” The court concluded: “Here, the uncontroverted facts demonstrate that the understanding between the parties in negotiating the agreement was that the term sheet had to be signed by both parties in order to be valid.” The district court also dismissed Atlantique’s other claims for promissory estoppel, unjust enrichment, and fraud.