Kagan v. K-Tel Entertainment, Inc.

Brief Fact Summary. Company 1 was "engaged" by Company 2 to "place a pilot and locate a distributor for a successful television series."  Company 1 placed the series with Company 3.  Company 2 went bankrupt and assigned its rights and obligations to Company 4.  Company one sued Company 3 for certain monies.

Synopsis of Rule of Law. "The mere assignment of a bilateral executory contract may not be interpreted as a promise by the assignee to the assignor to assume the performance of the assignor's duties, so as to have the effect of creating a new liability on the part of the assignee to the other party to the contract assigned."

Facts. The Plaintiffs are International Program Consultants, Inc. ("IPC"), and its principal shareholder, officer and director, Russell J. Kagan (collectively referred to as the "Plaintiffs").  The Defendants are K-Tel Entertainment, Inc. ("K-Tel") and Metro-Goldwny-Mayer/United Artists Entertainment Company ("MGM/UA")(collectively referred to as the "Defendants").  The Plaintiffs were "engaged" by K-Tel to "place a pilot and locate a distributor for a successful television series."  The agreement between K-Tel and the Plaintiffs was never written down, however certain payments were made.  The Plaintiffs placed the series with MGM/UA.  K-Tel entered into a written agreement with MGM/UA in February 8, 1984 for MGM/UA "to pay certain fixed amounts for each episode."  K-Tel fell into financial difficulty after producing only eight episodes of the program.  As a result of this default, MGM/UA notified K-Tel that it was removing its producer.  K-Tel declared bankruptcy.  MGM/UA had paid K-Tel all the money it owed it at the time it was pulling its producer.  In an attempt to remedy its default, K-Tel assigned its rights and obligation under the agreement to Hal Roach Entertainment, Inc. ("Roach").  MGM/UA was not a party to the assignment agreement, but did agree in a separate agreement to substitute Roach for K-Tel as a producer.  The Plaintiffs brought this action to recover from MGM/UA certain monies (a 10% fee), promised to them by the producer (K-Tel and, later, Roach) under a theory of unjust enrichment.

Issue. Can the Plaintiffs recover under a theory of unjust enrichment?
•    Doe the assignment by K-Tel to Roach afford the Plaintiffs a basis of recovery?

Held. No.  For the Plaintiffs to recover under quasi contract the "[the] plaintiff[s] must demonstrate that services were performed for the defendant resulting in its unjust enrichment."  It is irrelevant that the defendant receives a benefit "from the activities of the Plaintiff."  If the Plaintiff were to perform services "at the behest of someone other than the defendant, the plaintiff must look to that person for recovery."  The court found this case was analogous to [Callano v. Oakwood Park Homes Corp.].  The "Plaintiffs performed services at the request of K-Tel, locating MGM/UA as distributor for the series.  K-Tel went bankrupt without making full payment under its contract with plaintiffs, Roach was substituted as producer, and defendant MGM/UA continued distribution of the series. Plaintiffs expected payment from K-Tel and lacked privity of contract with MGM/UA."  The Plaintiffs remedy would be to "pursue their claim against K-Tel in the bankruptcy proceeding." 
•    No.  "The mere acquiescence in the assignment by MGM/UA does not imply any obligation to assume duties owed by either the assignee or the assignor under K-Tel's separate agreement with plaintiffs." MGM/UA did not incur any obligation unless it expressly assumed these duties.  "The mere assignment of a bilateral executory contract may not be interpreted as a promise by the assignee to the assignor to assume the performance of the assignor's duties, so as to have the effect of creating a new liability on the part of the assignee to the other party to the contract assigned."

Discussion. This case provides another interesting manner by which assignments are construed by courts.