California Appeals Court Finds Against Disney in Home Improvement Lawsuit

In a contract between Walt Disney Pictures and the creators, writers, and producers of the hit comedy show Home Improvement, there was a provision that limited the plaintiffs’ right to object to Disney’s quarterly production statements to two years after the statements were sent and to commence legal action within six months thereafter. The plaintiffs, in June 2008, following an audit of Disney’s books of account, objected to the statements for the period of June 1, 2001 through March 2006. Disney claimed that the objection was untimely, and the plaintiffs sued. Disney moved to dismiss based on the contractual time limits, and the trial court agreed, dismissing the case.

On appeal, the Court of Appeal of the State of California, Second Appellate Division reversed. The court held that there were triable issues of fact as to whether Disney had waived or was estopped from asserting the time limits set out in the contract. The court found that notwithstanding a provision in the contract that prevented oral modifications of the contract, the parties may, by their words and actions, waive contractual rights. The court found that there were issues of fact showing that either Disney had waived its right to assert the time limits with respect to certain statements and/or had acted in a manner that caused the plaintiffs to refrain from objecting, possibly warranting estoppel of Disney’s defense.

_{Sanford Hausler is of counsel with Cox Padmore Skolnik & Shakarchy LLP in New York, New York.}

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