The opinion of the court was delivered by: LASKER
The plaintiffs move for judgment on the pleadings or, in the alternative, summary judgment, dismissing the defendants' sixth and seventh
affirmative defenses and second and third counterclaims.
This action arises out of efforts by the actor George C. Scott, an additional defendant to the counterclaims, to utilize a novel plan to distribute "The Savage Is Loose," a movie he starred in and directed. The plaintiffs are The Savage Is Loose Company ("Company") and Campbell Devon Productions, Inc. ("Campbell"). Scott is the sole shareholder in Campbell which, in turn, is the general partner of Company, the producer and owner of the movie. The defendant is United Artists Theatre Circuit, Inc. ("UATC"), an exhibitor of motion pictures in theatres operated by it throughout the United States. The plaintiffs claim damages of $30,000,000. for UATC's alleged breach of an agreement under which Company licensed UATC to exhibit "The Savage Is Loose" at some of its theatres.
The agreement between UATC and Company, entered into on June 27, 1974, was unusual in several respects. It called for the payment of a "flat" license fee by the exhibitor, a departure from the usual movie industry practice requiring payment of a percentage of gross receipts. The agreement, moreover, eliminated the "middlemen" of movie distribution -- usually the major motion picture companies -- by direct transaction between the film's producer and the exhibiting theatres. Under the June agreement, Company sold fifty-six prints of "The Savage Is Loose" directly to UATC, and granted UATC the right to exhibit the film at certain theatres in specified territories for the duration of the copyright. In return, UATC was to pay Company a "flat" fee of $685,500.
However, after paying $400,000. of the fee to Company, UATC refused to pay the balance on the ground that Company had allowed Plitt Theatres, another exhibitor of "The Savage Is Loose," to withdraw from an agreement comparable to the arrangement with UATC. (Hassanein Affidavit, Exhibit E).
In March 1975, plaintiffs filed a complaint charging UATC with copyright infringement, breach of contract and conversion of the prints of the movie, and further alleging that UATC and its executive vice-president, Salah M. Hassanein, also a defendant, had conspired to destroy plaintiffs' business. The answer denies the material allegations and sets forth nine affirmative defenses, as well as counterclaims against Company for breach of the agreement, and against Campbell and George C. Scott for, including the breach of the agreement. UATC and Hassanein have also counterclaimed against Campbell, Company and Scott for defamation, abuse of process and malicious prosecution.
The Sixth and Seventh Affirmative Defenses
In these defenses, UATC asserts that the plaintiffs breached an oral agreement to arrange for other exhibitors to show the movie simultaneously with UATC theatres and thereby obtain contributions to the cost of local advertising; by denying UATC an opportunity to participate in the development of an advertising campaign; and by failing to stage a major national publicity campaign, which was to include personal appearances by George C. Scott at certain UATC theatres.
The written agreement, which does not mention these asserted obligations, contains the following provisions:
"12. No modification of this agreement shall be effective unless in writing and duly executed by both of us."
"15. Entire Agreement: This agreement represents the entire understanding between us. No representations, warranties or promises have been made by either party except as set forth herein."
The plaintiffs, in addition to denying the existence of oral modifications, argue that, since none of the conditions allegedly breached are part of the written agreement, both Section 15-301(1) of the General Obligations Law of New York and Section 2-209 of the Uniform Commercial Code
prohibit proof of any modification of the agreement unless in a writing signed by the plaintiffs. UATC contends that, by entering into the alleged oral modifications, the plaintiffs waived, or are estopped from asserting, Paragraph 12 of the agreement.
We agree that, if plaintiffs did subsequently modify the agreement, and defendant, in reliance on the modification, "[changed] his position to his injury," Metropolitan Life Insurance Co. v. Childs Co., 230 N.Y. 285, 292-93, 130 N.E. 295, 298 (1921), then plaintiffs would be estopped from asserting Sections 12 and 15 of the agreement to bar proof of the breach of the oral modifications as an affirmative defense. We stress that mere proof of oral modifications is insufficient to establish an estoppel; defendants, in order to avoid the stricture of GOL § 15-301(1) must prove that the plaintiffs caused defendants to act in a manner that would not otherwise ...