Thread by @AkivaMCohen

ScarJo complaint here. This is one of those breach of contract claims that should be a law-school example for years to come. The parties are arguing about whether the contract's requirement that Black Widow be given a "wide theatrical release" precluded simultaneous streaming

https://twitter.com/kareimoli/status/1421091219174739968

This is super important, because ScarJo's pay for the movie was tied to box-office receipts, and there's no question that the simultaneous release on Disney+ cost her loads and loads of money.

Her complaint alleges 50M, and while numbers in complaints are not necessarily the best metric (they can be pie-in-the-sky moonshots from plaintiffs), in a case like this that tells me that 50M was one of the potential bonuses on enough box office sales.

Even if it wouldn't have reached that, I have no doubt at all we're talking 10s of millions of dollars.

Given how reluctant Disney is to pay out on contracts where there's any legal argument against it - see #DisneyMustPay for examples - this will probably be a long fight

Anyway, the text of the contract doesn't entirely help ScarJo. While they are emphasizing the word "theatrical", the clause in question appears to define the phrase "wide theatrical release" as meaning "1500+ screens"

Johansson's team will argue that was defining only one modifier in the phrase - "what is 'wide'? it's 1500+ screens" - and "theatrical" meant "exclusively theatrical," while Disney will argue it was defining the whole phrase: "wide theatrical release is met as long as its 1500+"

And here we come to some really core rules of "how do courts interpret contracts" - which is kind of the reason I'm talking about this this morning.

Look, I'm a litigator. That means I tend to get to contracts after deals have blown up. Too often, they blow up because ...

people didn't bother to have a lawyer review their "simple deal that everyone understands" before they signed it ... and it turned out that everyone *did* understand it - just, you know, differently.

Or at least one party is now claiming they understood it differently.

Anyway, people out there, especially folks with small businesses or side hustles who don't have lawyers ready to go over everything, really need to understand how contracts get read, interpreted, and enforced. this is a great case to talk about that, since it hits so many issues

Let's start with the basics.

1) The goal of contract interpretation is to give effect to the intentions of the parties when they agreed to the deal.

2) Also, courts will often refuse to look at any evidence (beyond the text of the contract itself) of what the parties intended.

Here's the reasoning: the best way to figure out what the parties meant to agree to is to look at the actual words of their agreement. If those words have a clear, unequivocal meaning - what the law calls "unambiguous" - then that meaning will be enforced no matter what

For example, if the contract says "on Sunday, August 1, John will clean my car for $100," John isn't going to get out of it by saying "I meant Sunday, August 1, 2038" (yes, I looked it up) and I'm not going to get to say "'my car' is my ironic name for my Winnebago"

Our agreement had a clear and obvious meaning, *and even if those things were what we subjectively meant at the time*, the court isn't going to care. We agreed to what we agreed to.

This is often referred to as the "four corners" rule - only what's in the "four corners of the contract" matters.*

*Note: This can vary from state to state. In NJ, for example, courts can look at communications between the parties, outside the contract, for purposes of deciding

what the words of the contract actually mean (if I'm remembering my NJ contract law correctly). It's why "boilerplate" and "form" clauses at the end of contracts - like "what state's law governs this agreement" - can actually be hugely important. Don't ignore them!

(It's also why I typically advise clients to insist on NY or Delaware law; those states are absolutely hard core on "we enforce the contract as written," which helps with certainty about what you're agreeing to ... as long as you're clear enough in the substantive parts!)

If the language is ambiguous, though - meaning reasonable people could look at the language and think "hey, this could mean either A or B" - then courts will look outside the contract to figure out what the parties meant it to mean.

Back to my example ... what if I have 2 cars?

"John will clean my car for $100" suddenly becomes ambiguous: it doesn't tell you which car I meant. Is it the tiny Kia that's relatively clean, or the monster minivan my kids vomited all over? To figure that out, the court will look at our other communications and circumstances

So ... back to ScarJo v. Disney: is the phrase "wide theatrical release" ambiguous? The specific definition makes that a much harder pitch for ScarJo. If the contract says "anything on 1500+ screens is a wide theatrical release", that's the meaning, right?

But wait, there are other rules that impact how courts read contracts, including this: courts will consider industry standards and terms of art. If people in a particular industry always use a specific term in a specific way, the court will understand that term that way even if

people outside the industry wouldn't necessarily have the same understanding (as long as the contract is between two people in the industry, of course).

Again, an example may help here

Let's say I have a car dealership, and the standard among car dealerships is that "test drives last no longer than half an hour".

And another dealership comes to me and says "I'll pay you 10K to let my customers use your cars for test drives" and we sign a contract for that

And then they have one of their customers "test" how a car "drives" by taking it on a cross-country road trip.

That's not going to fly. Because even if we didn't specifically limit the definition of "test drive", the court will look at the general industry understanding and say "you both knew 'test drive' didn't mean a cross-country road trip"

And that's where ScarJo is going in this complaint:

Disney's response - btw, that contract was with Marvel Studios, who ScarJo amazingly hasn't sued - is going to be "no, theatrical just means 'in theaters' - that nobody released anything direct-to-video simultaneously was a business decision, not the definition of 'theatrical'"

And also "that Marvel never did this before wasn't a promise that they'd never do it in the future. You're the star, you had lots of leverage and sophisticated negotiating teams. If you wanted that promise, you could have gotten it explicit in the contract!"

This is all going to be critical, because if ScarJo can get the Court to consider the communications *outside* the contract, she's going to win (and it won't be close)

So this $50M litigation is going to see a battle of the experts, with ScarJo bringing in industry vets to testify that "wide theatrical release" means "exclusive, no same-day streaming" and Disney bringing its own experts to say "no, it just means released in many theaters...

... streaming is a totally new dynamic and there is no industry standard that covers how it interplays with theatrical releases"

There's also going to be arguments about the "duty of good faith and fair dealing," which in some states means "come on, treat your counterparty the way you know they thought you would" and in other states means "don't act specifically to fuck over your counterparty but if the

contract lets you do a thing, then you can do it even if it fucks over your counterparty"

NY, btw, is firmly in the latter camp. I don't know where California falls.

Anyway, your takeaways here:

1. This is a viable claim by ScarJo, but it's not a slam dunk. Watch this space

2. Law schools are gonna be using this case to teach contract law

3. If something is critical to your deal, MAKE SURE IT'S EXPRESS IN YOUR CONTRACT

I really can't emphasize that last one enough. (literally, Twitter doesn't let me bold-italicize like a normal person). If it's something everyone understands and agrees to, it won't be a problem to say "let's say this explicitly"

And if it isn't something everyone understands and agrees to? You need to know that now, BEFORE YOU SIGN, not later when it becomes a dispute.

Relatedly: if you're going to sign contracts, make sure you have a working understanding of how courts interpret them, and hire lawyers to review them before you sign. This is very firmly in the "ounce of prevention is worth a pound of cure" rule, except you're talking ...

about a difference of tens of thousands or (in this case) millions of dollars at risk because details were missed. It's just not worth it.