Main Line Pictures v Kim Basinger for Breach of Contract
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Prepare a report with an analysis of plaintiff and defendants arguments as indicated in attached document. See attached document for more details to this problem. Please support your answers with financial computations where appropriate.
In 1991, Main Line Pictures, Inc. sued actress Kim Basinger (and others) for breach of contract. Basinger had been in negotiation with Main Line to star in the film, "Boxing Helena" but had withdrawn from the project. The suit was heard in early 1993 in the Superior Court of the State of California, for the County of Los Angeles. I need help in preparing a report with an analysis of plaintiff and defendants arguments as indicated below. Please Support your answers with financial computations where appropriate.
1. Should Main Line's maximum and minimum lost profit amounts be revised downward for the following? Why?
a. The domestic distribution revenues of $3 million because the deal had not been finalized.
b. The $800,000 of foreign pre-sales because they were "probable" not actual.
c. The loss of $2.1 million on the "Without Basinger" film.
2. Are the following relevant to the determination of lost profits to Main Line? Why?
a. Basinger's $3 million salary for "Final Analysis."
b. The comparison of revenues for Basinger films with revenues for Fenn films.
3. Is plaintiff's expert correct in not attempting to estimate revenues for "Boxing Helena" beyond pre-sale amounts? Why?
4. Should Main Line's lost profits be adjusted downward to include an estimate of domestic revenues for the "Without Basinger" film? Would it have been valid to use the $1.7 million advance against domestic revenues as the estimate? Explain.
5. Suppose Basinger had remained with the film and assume the $3 million profit shown in the plaintiff expert's minimum damage calculation was correct. Is it reasonable to assume that Main Line's pretax cash position would have increased by $3 million or would some part of this have been paid to others? Why?
6. If you disagree with the jury's lost profit assessment, briefly prepare one of your own.
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Solution Summary
This response looks at the case study Main Line Pictures v Kim Basiner and the loss of profits involved in a breach of contract.
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1. Should Main Line's maximum and minimum lost profit amounts be revised downward for the following? Why?
a. The domestic distribution revenues of $3 million because the deal had not been finalized.
No, I do not believe that the lost profits should be scaled down due to the fact that the private negotiations for the cost of domestic distribution was lacking market efficiency and had not shown the eventual cost of the film if it were to be released. If Ms. Basinger had played the role in the film, the domestic revenues would have been much more than $3M. Although the film had been made without Basinger, the domestic box office grossed $2M. This shows that if Ms. Basinger were to play the role in the film the revenues would have been much higher than the $3M.
b. The $800,000 of foreign pre-sales because they were "probable" not actual.
No, the foreign pre-sales should not be scaled down due to the fact that the foreign pre-sale markets had been well organized. The buyers and sellers meet in well defined places. The information about the foreign pre-sales was excellent. Therefore, when the film was released without Ms. Basinger, it brought in $5 M.
c. The loss of $2.1 million on the "Without Basinger" film.
I do not feel that this would be a loss to the film, but this amount is the amortization of the $5M cost to the film with the rate of 3/7. This is a cost that is in accordance to SFAS 53.
2. Are the following relevant to the determination of lost profits to Main Line? Why?
a. Basinger's $3 million salary for "Final Analysis."
This would represent an ...
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