David Copperfield's Disappearing, Inc., a Nevada Corporation, and David Copperfield v. Haddon Advertising Agency, Inc., an Illinois Corporation, and Cash Station, Inc., an Illinois Corporation

Citations: 897 F.2d 288; 1990 U.S. App. LEXIS 3682Docket: 89-1198

Court: Court of Appeals for the Seventh Circuit; March 12, 1990; Federal Appellate Court

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David Copperfield and his corporation, David Copperfield's Disappearing, Inc., filed a lawsuit against Haddon Advertising Agency, Inc. and Cash Station, Inc. for breaching a contract regarding Copperfield's participation in an advertising campaign. Following a favorable jury verdict for Copperfield, the defendants appealed after their motion for judgment notwithstanding the verdict was denied.

Cash Station, a not-for-profit Illinois corporation, provides electronic funds transfer services and merged with the Money Network in late 1986, adopting the name 'Money Station' for its rebranding. To promote this merger, Cash Station hired Haddon Advertising Agency, which proposed an advertising campaign featuring Copperfield. 

In December 1986, Haddon reached out to Copperfield's attorney, Albert Rettig, regarding his availability and fees, which were set at $125,000 for a television commercial, $150,000 for a commercial and print ads, and $175,000 for a package including a personal appearance. On March 27, 1987, Haddon confirmed with Rettig that Cash Station approved Copperfield's fees and discussed the need for a written contract.

On March 31, Dugan from Haddon sent Rettig a letter summarizing their discussions, scheduling filming in May, and tentatively planning a personal appearance in July. However, Copperfield did not approve the initial script and sought a meeting to negotiate changes, which took place on April 24, 1987. During this meeting, Haddon agreed to modify the script, involve Copperfield's technical advisor, and finalize production details, allowing Copperfield to begin work on the project while postponing other commitments.

Cash Station approved revisions to the script and storyboard in early May 1987, after which Haddon took on the responsibility of drafting a contract for Copperfield's services. The first draft was delivered to Rettig on May 15, five days prior to the start of production. In her accompanying letter, Jacqueline Wagner expressed regret for the delay and confirmed Haddon's excitement about Copperfield's involvement. The contract included agreed-upon terms such as services, compensation, and performance details. Specifically, Section 8 outlined a total compensation of $150,000, divided into two payments: $50,000 upon execution and $100,000 after production completion. 

The contract also stated that Copperfield would bear his pension and welfare costs, that Illinois law would govern the agreement, and that disputes would be settled by arbitration—terms that had not been previously discussed. After receiving the draft, Rettig proposed several changes, including governing law modifications, noncompetition clause adjustments, and indemnification against lawsuits, but Wagner did not agree to these changes over the phone and did not indicate that the production would be delayed.

On May 18, Cash Station discovered it lacked rights to the 'Money Station' name, which was critical to the ad campaign's concept. Wagner informed Rettig that the commercial would not proceed, though Rettig and Copperfield were not officially notified of the campaign's cancellation until late May or early June. On December 2, 1987, Copperfield sued Haddon and Cash Station for breach of contract, arguing that it was common in the industry for formal contracts to be finalized after services were rendered due to time constraints. 

Haddon and Cash Station's motions for directed verdicts were denied, and the jury ultimately ruled in favor of Copperfield, awarding him $154,000 in damages. Their subsequent motion for judgment notwithstanding the verdict was also denied, leading to an appeal.

In reviewing a district court's denial of a directed verdict or a Rule 50(b) motion for judgment notwithstanding the verdict, the evidence must be assessed in the light most favorable to the prevailing party. The inquiry focuses not on the absence of evidence but on whether any evidence exists that allows a jury to find in favor of the party bearing the burden of proof. A judgment notwithstanding the verdict presents a legal question, warranting de novo review.

Jurisdiction in this case is based on diversity of citizenship, with Illinois law governing the substantive issues. The primary issue is whether the parties intended for the execution of a written contract to be a prerequisite for a binding agreement or merely a means to formalize pre-existing terms. Generally, the intent behind an oral contract is a factual question, but it can be treated as a legal question if the facts are undisputed and reasonable inferences are clear.

The defendants argue that the evidence supports the conclusion that the execution of a written contract was a condition precedent. They assert that Haddon’s written offer was the only offer made, which Rettig rejected through proposed modifications that Haddon did not accept. However, the court disagrees with this perspective. 

Several factors are deemed persuasive in determining the intent regarding a written contract as a condition precedent: the nature of the business arrangement, the monetary significance, the absence of agreement on key provisions, and indications from negotiations that a writing was expected. Although there were mentions of needing a written contract, no formal contract was executed. Consequently, the parties' behavior and statements following their oral agreement are pertinent to whether a binding contract was established.

Evidence at trial indicated that on April 24, 1987, Copperfield and Haddon representatives reached an oral agreement on the essential terms of their contract, pending Cash Station's approval of script changes. This approval was granted in early May, before the defendants opted to terminate the agreement. By the end of March 1987, Cash Station approved the ad campaign and agreed to pay Copperfield's fee, with the offer communicated to Copperfield's attorney/agent on March 27 and accepted the same day. The specifics of the campaign, including responsibilities, illusions, production staff, and performance timing, were settled by April's end and confirmed by Cash Station in early May. Both parties commenced performance under the oral agreement.

In a letter dated May 15, 1987, Haddon expressed satisfaction in securing Copperfield as a spokesperson and acknowledged the delay in providing a written contract. However, neither party indicated an intention to delay performance pending the written contract's execution. Evidence suggested that in the entertainment industry, formal contracts often follow actual performance. Illinois law stipulates that parties are bound by customary trade practices.

The jury could reasonably conclude that an oral agreement existed by late April or early May 1987, that references to a future written contract did not negate the present agreement, and that the written contract was intended merely to memorialize the existing oral agreement. Consequently, the existing bargain was binding despite the absence of a signed document. The district court's decision to deny the defendants' motion for judgment notwithstanding the verdict was affirmed. Additionally, Copperfield argued that provisions regarding pension and welfare contributions were mandatory and unwaivable under the Screen Actor's Guild contract, rendering Haddon's contrary provision unenforceable. Definitions of 'usage of trade' were also cited, emphasizing the importance of established practices in contractual agreements.