IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
____________________
No. 93-8199
____________________
HOLLYWOOD FANTASY
CORPORATION,
Plaintiff - Appellee,
v.
ZSA ZSA GABOR,
Defendant - Appellant.
_________________________________________________________________
Appeal from the United States District Court
for the Western District of Texas
_________________________________________________________________
August 12, 1998
Before KING and WIENER, Circuit Judges, and ROSENTHAL*,
District Judge.
ROSENTHAL, District Judge:
Appellee Hollywood Fantasy Corporation was briefly in the
business of providing “fantasy vacation” packages that would allow
participants to “make a movie” with a Hollywood personality and
imagine themselves movie stars, for one week, for a fee. In May
1991, Hollywood Fantasy planned to offer its second fantasy
vacation package, in San Antonio, Texas. Hollywood Fantasy
*
District Judge of the Southern District of Texas, sitting
by designation.
1
arranged to have Zsa Zsa Gabor as one of two celebrities at the
event. Two weeks before the fantasy vacation event, Ms. Gabor
cancelled her appearance. A short time later, Hollywood Fantasy
cancelled the vacation event, to which it had sold only two
tickets. A short time after that, Hollywood Fantasy went out of
business.
Hollywood Fantasy sued Ms. Gabor for breach of contract
and fraud. After the trial judge found that Ms. Gabor and
Hollywood Fantasy had reached a contract, the jury found that Ms.
Gabor had breached that contract. The jury awarded Hollywood
Fantasy $100,000 for the breach, as well as $100,000 for fraud.
The district court set aside the jury’s fraud verdict for lack of
evidence and entered judgment in favor of Hollywood Fantasy for
$100,000 on the breach of contract claim, plus attorneys’ fees and
post-judgment interest. Ms. Gabor appealed.1 We affirm the
district court’s judgment as to liability; reverse the district
court’s damages award; and render judgment for a lesser amount of
damages.
I. The Facts as to Hollywood Fantasy
Leonard Saffir created Hollywood Fantasy and served as
its chief executive officer. The company Mr. Saffir created
charged each vacation “client” $7,500 for a week of “pampering,”
1
After we heard oral argument in this case, Ms. Gabor
filed a Chapter 11 bankruptcy petition in the United States
Bankruptcy Court for the Central District of California. The
petition triggered an automatic stay of this appeal. On March 5,
1997, the bankruptcy court lifted the stay to permit the parties to
litigate this appeal.
2
instruction on making movies, rehearsals, and a “starring” role in
a short videotaped film with a “nationally known” television or
movie star. Mr. Saffir hoped that “bloopers” and “outtakes” from
the videotapes would ultimately become the basis for a television
series. A new venture, Hollywood Fantasy had conducted only one
vacation event before the package scheduled to take place in San
Antonio in May 1991. The first event, held in Palm Springs,
California, had received some media coverage, but had lost money.
This case began with a letter Hollywood Fantasy sent Zsa
Zsa Gabor dated March 4, 1991. The letter opened with the
following language:
This will confirm our agreement whereby
Hollywood Fantasy Corporation (HFC) will
employ you under the following terms and
conditions: . . .
The letter set out the terms and conditions of Ms.
Gabor’s appearance in fourteen numbered paragraphs. The terms and
conditions specified the dates of employment; the hours of work;
the duties required; the payment; and certain perquisites to be
provided. The letter stated that Ms. Gabor was to be employed from
May 2-4, 1991, in San Antonio, Texas; was to be “on call” from
after breakfast until before dinner each day; was to act in
videotaped “movie” scenes with the clients, using scripts and
direction provided by Hollywood Fantasy, and was to join the
clients for lunch and dinner; was to allow Hollywood Fantasy to use
her name and photograph for publicity; and was to provide media
interviews “as appropriate” during her stay in San Antonio.
Hollywood Fantasy was to pay Ms. Gabor a $10,000 appearance fee and
3
$1,000 for miscellaneous expenses. Hollywood Fantasy would also
provide Ms. Gabor two first-class round-trip plane fares from Los
Angeles; transportation to the Los Angeles airport and in San
Antonio; hair and makeup services; meals; hotel expenses, excluding
long distance telephone calls; and a hotel suite with “two bath
rooms if available.”
Ms. Gabor made three handwritten changes to this letter
before signing and returning it to Mr. Saffir. She inserted the
word “one” into the sentence stating that she would make herself
available for media interviews; inserted the words “two bedroom”
above the sentence describing the hotel suite that was to be
provided in San Antonio; and added the words “wardrobe to be
supplied by Neiman Marcus” to the paragraph outlining the
perquisites.
The last paragraph of the terms and conditions provided
an “out clause”:
[Hollywood Fantasy] agrees that if a
significant acting opportunity in a film comes
up [Gabor] will have the right to cancel [her]
appearance in San Antonio by advising
[Hollywood Fantasy] in writing by April 15,
1991.
The final paragraph of the letter stated: “Please sign
a copy of this agreement and fax it to me . . . as soon as possible
so we can proceed.” Ms. Gabor signed the letter in a signature
blank above the words “Agreed and accepted,” and sent it back to
Leonard Saffir, who had already signed as the chief executive
officer for Hollywood Fantasy.
On April 10, Ms. Gabor and Mr. Saffir talked by
4
telephone. The parties differ as to the substance of that
conversation. Mr. Saffir asserts that they discussed the changes
Ms. Gabor had made and “everything was agreed.” Ms. Gabor asserts
that Mr. Saffir acted as if the original offer had been accepted.
The parties agree that Ms. Gabor sent Mr. Saffir a telegram dated
April 15, 1991, stating:
In accordance with the contract that exists
between us the purpose of this telegram is to
inform you that I must terminate it because I
am due to be involved in preproduction and a
promotion film for a motion picture I am
contracted to do. The name of the film is
Queen of Justice produced by Metro Films of
Los Angeles. . . . I am very sorry to cause
you any discomfort but will be happy to try to
help in supplying you with a replacement and
hopefully we’ll be able to do something
together in the very near future.
Hollywood Fantasy unsuccessfully attempted to replace Ms.
Gabor for the San Antonio event. The San Antonio event was
cancelled; the two ticket purchasers received their money back;
Hollywood Fantasy went out of business; and this litigation began.
Ms. Gabor did not appear at the docket call scheduled
for November 9, 1992. Following a default judgment on liability
and a jury trial on damages, the jury awarded Hollywood Fantasy
$3,000,000. The district court entered final judgment in that
amount. Ms. Gabor moved to set aside the judgment on the ground
that she did not receive notice of the docket call. The district
court granted Ms. Gabor’s motion to vacate the judgment and ordered
a new trial. After a second trial, the jury awarded Hollywood
Fantasy $100,000 on its breach of contract claim and $100,000 on
its fraud claim. In a post-trial order entered February 8, 1993,
5
the district court set aside the jury’s fraud verdict on the ground
that Hollywood Fantasy had failed to show any fraudulent inducement
or material misrepresentation. In the order, the district court
found that a contract did exist between Ms. Gabor and Hollywood
Fantasy, rejecting Ms. Gabor’s argument that her handwritten
changes to the March 4, 1991 letter materially modified and
rejected Hollywood Fantasy’s offer. The district court also upheld
the jury’s finding that Ms. Gabor’s cancellation was not based on
“a significant acting opportunity in a film,” as the contract
permitted. The district court entered judgment in favor of
Hollywood Fantasy for $100,000, plus attorneys’ fees and post-
judgment interest. Ms. Gabor timely appealed.
Ms. Gabor asserts four grounds for appeal: (1) the
parties did not reach a contract; (2) the jury’s finding that Ms.
Gabor did not effectively exercise the cancellation clause was
against the weight of the evidence; (3) the jury’s award of damages
for breach of contract was not supported by competent evidence and
was speculative; and (4) the district judge erred in failing to
recuse himself before the second trial.
II. The Contract Formation Issue
Under Texas law,2 “[w]hen reviewing written negotiations,
the question of whether an offer was accepted and a contract was
formed is primarily a question of law for the court to decide.”
Scaife v. Associated Air Ctr. Inc., 100 F.3d 406, 410 (5th Cir.
1996) (citing S & A Marinas, Inc. v. Leonard Marine Corp., 875
2
The parties agree that Texas substantive law applies.
6
S.W.2d 766, 769 (Tex. App. -- Austin 1994, writ denied)); see also
Gilbert v. Pettiette, 838 S.W.2d 890, 893 (Tex. App. -- Houston
[1st Dist.] 1992, no writ). We review questions of law de novo.
Lubbock County Hosp. Dist. v. National Union Fire Ins. Co. of
Pittsburgh, Pa., 143 F.3d 239, 241-42 (5th Cir. 1998); Williamson
v. Elf Aquitaine, Inc., 138 F.3d 546, 549 (5th Cir. 1998).3
The general rule is that “an acceptance must not change
or qualify the terms of the offer. If it does, the offer is
rejected.” United Concrete Pipe Corp. v. Spin-Line Co., 430 S.W.2d
360, 364 (Tex. 1968); see generally E. ALLAN FARNSWORTH, 1 FARNSWORTH ON
CONTRACTS § 3.21, at 259 (1990). Under this “mirror image” rule, a
modification of an offer qualifies as a rejection and counteroffer
only if the modification is “material.” Hoyt R. Matise Co. v.
Zurn, 754 F.2d 560, 566 (5th Cir. 1985); Gilbert, 838 S.W.2d at
893; MTrust Corp. N.A. v. LJH Corp., 837 S.W.2d 250, 254 (Tex. App.
-- Fort Worth 1992, writ denied). Ms. Gabor asserts that by making
the three handwritten changes to the March 4, 1991 letter, she
rejected Hollywood Fantasy’s offer and made a counteroffer, which
Mr. Saffir did not accept before Ms. Gabor revoked it. Hollywood
Fantasy asserts that the changes were not material and that Ms.
3
Hollywood Fantasy argues that Ms. Gabor waived her
objection to enforcement of the contract by failing to plead it as
an affirmative defense. In a diversity case, state law defines
affirmative defenses that are waived if not timely pleaded. See,
e.g., Davis v. Huskipower Outdoor Equip. Corp., 936 F.2d 193, 198
(5th Cir. 1991); Morgan Guar. Trust Co. of N.Y. v. Blum, 649 F.2d
342, 344 (5th Cir. Unit B 1981). Ms. Gabor’s argument is that no
contract was formed; she does not argue against enforcement of an
existing contract. The argument is not in the nature of an
affirmative defense under Texas law and Ms. Gabor did not waive it.
7
Gabor accepted the offer and entered into a contract, which she
breached.
The cases in which courts find modifications to be
material under Texas law generally involve significant increases in
a party’s financial obligation or exposure or in a party’s duties
under a proposed contract. In Gilbert, the defendants had employed
the plaintiff as an expert witness in a toxic tort case. After the
trial, the plaintiff sent the defendants a letter demanding payment
of his expert witness fees. The defendants sent the plaintiff a
check for the amount of the fees. On the back of the check, the
defendants wrote that their endorsement “constitutes a full, final
and complete release, indemnity, settlement and satisfaction” of
all claims arising out of the trial. Gilbert, 838 S.W.2d at 892
(emphasis omitted). The court found this modification to be
material because the defendant’s indemnity condition “shifts the
entire burden of loss from one party to another. . . . Requiring
[the plaintiff] to indemnify [the defendants] for ‘any and all
claims’ arising from the toxic tort case was a new and onerous
condition on the original offer.” Id. at 893 (citations omitted).
In Arguelles v. Kaplan, 736 S.W.2d 782 (Tex. App. --
Corpus Christi 1987, writ ref’d n.r.e.), the plaintiff prepared and
sent a promissory note payable to the defendant, who increased the
interest rate on the note and included a provision for entry of a
consent judgment if the plaintiff defaulted. The court held that
the defendant’s modifications were material and that the response
was not an acceptance but a counteroffer. Id. at 785. See also
8
Ferrero v. Amigo, Inc., 703 F. Supp. 890, 892 (D. Kan. 1988) (the
plaintiff sent the defendant a letter seeking employment and
listing a proposed annual base salary of $31,200; the defendant’s
reduction of the plaintiff’s annual base salary to $30,000 was a
modification to a material term of the offer); International Paper
Co. v. Suwyn, 966 F. Supp. 246, 254 (S.D.N.Y. 1997) (an employee’s
memorandum in which he interpreted his noncompetition agreement to
permit him to seek employment with companies that were proscribed
under the agreement materially modified the agreement); Hullman v.
Board of Trustees of Pratt Community College, 725 F. Supp. 1536,
1551-52 (D. Kan. 1989) (an employee’s memorandum protesting his
reassignment and refusing to waive a challenge to that reassignment
contained a material modification to his employment contract),
aff’d, 950 F.2d 665 (10th Cir. 1991).
Texas cases finding modifications not material generally
involve changes that do not significantly alter the obligations or
exposures under a contract. See, e.g., Zurn, 754 F.2d at 566 (a
buyer’s modification of a real estate contract to require the
seller to provide the buyer with various documents six days earlier
than originally stated was not a material modification; the change
made the disputed provision consistent with other parts of the
contract); United Concrete, 430 S.W.2d at 365 (holding that a
change in a sales contract of the term “contract price” to “unit
price” was not material because the modification “did not change
the legal effect of the language”); MTrust Corp., 837 S.W.2d at 254
(the plaintiff’s substitution of a “metes and bounds” description
9
of real property for a “cartographical” description of the property
in a real estate contract was not a material modification).
Applying these criteria to the changes Ms. Gabor made
before she signed and returned the March 4, 1991 letter leads us to
affirm the district court’s conclusion that the changes were not
material. The changes did not significantly add to Hollywood
Fantasy’s financial obligation to Ms. Gabor or significantly reduce
the duties she agreed to undertake during her appearance.
As set out in the March 4, 1991 letter, Ms. Gabor’s
obligations included appearing in San Antonio for three days,
acting in scenes with the Hollywood Fantasy clients, and dining
with the clients at lunch and dinner. Ms. Gabor was also obligated
to allow Hollywood Fantasy to use her name and photograph for
publicity and, with her permission, to use the videotaped scenes in
which she appeared for publicity and a possible television pilot.
Hollywood Fantasy’s financial obligation to Ms. Gabor was a $10,000
appearance fee and $1,000 for miscellaneous expenses.
A separate paragraph listed benefits that Hollywood
Fantasy would provide Ms. Gabor during her three days of
employment. Ms. Gabor’s addition of the words “two bedroom” to the
hotel room provision, making it read “one hotel suite with two
bedroom two bath rooms if available,” did not materially alter
Hollywood Fantasy’s financial obligation to Ms. Gabor. In its
letter, Hollywood Fantasy did not specify that the hotel suite was
limited to one bedroom. Indeed, Mr. Saffir testified without
contradiction that Hollywood Fantasy had already reserved the
10
hotel’s “Presidential Suite” for Ms. Gabor.
Whether Ms. Gabor’s addition of the sentence requiring a
Neiman Marcus wardrobe for the fantasy vacation event materially
modified Hollywood Fantasy’s offer presents a closer question.
However, the record leads this court to agree with the district
judge that the change was not a material modification. Ms. Gabor
bases her argument on her trial testimony that a Neiman Marcus
wardrobe would have cost Hollywood Fantasy $8,000. A review of the
trial record shows that Ms. Gabor’s estimate was based on her
assumption that she would be required to do “three shows a day” for
three days, and would therefore need nine “wardrobe changes.”
Leonard Saffir testified that Hollywood Fantasy intended to film
one scene with Ms. Gabor for each of the clients, so that she would
need only one outfit. Although Ms. Gabor testified that she could
not “make nine shows in the same outfit,” she was not aware that
Hollywood Fantasy intended to film her performing the same scene
several times. Mr. Saffir testified that providing Ms. Gabor with
one outfit from Neiman Marcus would have been “a simple thing to
do.”
The March 4, 1991 letter also stated that Ms. Gabor would
make herself “available as appropriate for media interviews during
the time [she was] in San Antonio.” Ms. Gabor changed this
sentence to read “one media interview.” Ms. Gabor’s limitation on
media interviews was not a material modification to the terms of
the proposed contract. Although Mr. Saffir had arranged for
extensive media coverage, he testified that he did not view the
11
limitation on the number of interviews in San Antonio as a
“problem” because “[k]nowing Miss Gabor from past experience, there
was no way she was going to see a lot of press in San Antonio and
only do one interview. . . . The last thing she would want to do
is restrict herself from publicity coverage.” Mr. Saffir also
testified that Ms. Gabor’s participation in the San Antonio
vacation package event would trigger the publicity he sought and
that the number of media interviews she provided during her three-
day stay was much less important to the event’s success.
In the unusual factual context this record presents, we
find that the modifications Ms. Gabor sought were not material
because they did not significantly increase Hollywood Fantasy’s
financial obligations or significantly reduce Ms. Gabor’s
performance obligations under the March 4, 1991 letter. This court
also notes that to apply the mirror image rule in this factual
context would lead to a result inconsistent with the purpose of
that rule. The rule requiring an acceptance to the terms of the
original offer generally serves to protect the original offeror,
the “master of the offer.” FARNSWORTH, 1 FARNSWORTH ON CONTRACTS § 3.13,
at 229. Texas cases generally apply the rule defensively, when an
original offeror seeks to avoid more onerous demands sought by the
offeree. See, e.g., Gilbert, 838 S.W.2d at 892-93; MTrust, 837
S.W.2d at 254; Arguelles, 736 S.W.2d at 785. In this case, by
contrast, Ms. Gabor, the offeree, seeks to use the mirror image
rule offensively, arguing that her own additional demands prevented
the formation of a contract that she “cancelled” a short time
12
later.
It is particularly troubling to use the offeree’s
modifications as a basis for finding that no contract was formed
when, as here, the original offeror agrees that the modifications
became a part of the contract. The record leads this court to
conclude that Hollywood Fantasy agreed to Ms. Gabor’s additional
demands.
To form a binding contract, “there must be a clear and
definite acceptance of all terms contained in the offer.” Engelman
Irrigation Dist. v. Shields Bros., Inc., 960 S.W.2d 343, 352 (Tex.
App. -- Corpus Christi 1997, petition for review filed). “[I]t
must appear that the party to whom the offer is made accepts such
offer and communicates such acceptance to the person making the
offer.” Id. “[T]he mode of expressing assent is inconsequential
so long as it effectively makes known to the offeror that his offer
has been accepted.” Fujimoto v. Rio Grande Pickle Co., 414 F.2d
648, 652 (5th Cir. 1969). An offeree’s acceptance of an offer may
be inferred by his acts or conduct. See Hearthshire Braeswood
Plaza Ltd. Partnership v. Bill Kelly Co., 849 S.W.2d 380, 392 (Tex.
App. -- Houston [14th Dist.] 1993, writ denied) (“If one party
signs, the other may accept by his acts, conduct or acquiescence in
the terms of the contract.”); Augusta Dev. Co. v. Fish Oil Well
Servicing Co., 761 S.W.2d 538, 544 (Tex. App. -- Corpus Christi
1988, no writ); FARNSWORTH, 1 FARNSWORTH ON CONTRACTS § 3.13, at 226;
RESTATEMENT (SECOND) OF CONTRACTS § 19(1) (“The manifestation of assent
may be made wholly or partly by written or spoken words or by other
13
acts or by failure to act.”); see also Karl Rove & Co. v.
Thornburgh, 39 F.3d 1273, 1291 (5th Cir. 1994) (quoting the
RESTATEMENT (SECOND) OF CONTRACTS § 19(2) for the rule that “[t]o
manifest tacit assent to a contract through conduct, one must
‘[intend] to engage in the conduct and know[] or ha[ve] reason to
know that the other party may infer from his conduct that he
assents’”).
The record supports the conclusion that Mr. Saffir
reasonably conveyed to Ms. Gabor that Hollywood Fantasy agreed to
her demands. Mr. Saffir telephoned Ms. Gabor on April 10, 1991 to
“welcome her, to just go over some of the mechanics of what she was
going to be doing . . . .” In the conversation, Mr. Saffir told
Ms. Gabor that her demand for a Neiman Marcus wardrobe would be “no
problem.” There is no evidence that Mr. Saffir refused any of Ms.
Gabor’s handwritten changes to the March 4, 1991 letter. In the
April 10 conversation, Ms. Gabor made some additional demands,
including that she be allowed to bring her personal makeup artist
with her to San Antonio. Mr. Saffir testified that at the end of
that discussion, “everything was agreed.” Even if Ms. Gabor’s
modifications were material and therefore a counteroffer to the
March 4, 1991 offer, Hollywood Fantasy accepted that counteroffer
before Ms. Gabor sent her cancellation notice.
Ms. Gabor’s actions after that conversation made it clear
that she, too, believed that a contract had been formed. On April
15, 1991, Mr. Saffir again telephoned Ms. Gabor to reaffirm the
parties’ agreement. Mr. Saffir testified that Ms. Gabor stated “I
14
could get a doctor’s letter and get out of this contract if I want
. . . .” The same day, Ms. Gabor sent Mr. Saffir a telegram
exercising the “out clause” in the March 4, 1991 letter. Ms. Gabor
wrote: “In accordance with the contract that exists between us . .
. I must terminate it because I am due to be involved in
preproduction and a promotional film.” Mr. Saffir’s telephone
calls, Ms. Gabor’s responses to the calls, and Ms. Gabor’s April
15, 1991 telegram make it clear that Leonard Saffir effectively
conveyed, and Zsa Zsa Gabor understood, that Hollywood Fantasy had
accepted Ms. Gabor’s demands and that the parties had reached a
contract.
The district court correctly found that a binding
contract existed between the parties.
III. The Cancellation Provision
The contract permitted Ms. Gabor to cancel her appearance
obligation by a certain date if a “significant acting opportunity
in a film comes up.” The jury found that Ms. Gabor had timely
cancelled her appearance at the San Antonio event, but not because
of a “significant acting opportunity.” After the trial, Ms. Gabor
moved for judgment as a matter of law under FED. R. CIV. P. 50(b),
asserting that there was insufficient evidence to support the
jury’s finding. The trial court denied Ms. Gabor’s motion. Ms.
Gabor renews her objection here. We review the district court’s
denial of a motion for judgment as a matter of law de novo. Hidden
Oaks Ltd. v. City of Austin, 138 F.3d 1036, 1040 (5th Cir. 1998);
Nichols v. Lewis Grocer, 138 F.3d 563, 565 (5th Cir. 1998). “If
15
there is substantial evidence to support the verdict, the challenge
to it must be denied. . . . ‘Substantial evidence’ means evidence
of such quality and weight that reasonable and fair-minded persons
in the exercise of impartial judgment might reach different
conclusions; a mere scintilla of evidence is insufficient.”
Bradley v. Armstrong Rubber Co., 130 F.3d 168, 174 (5th Cir. 1997)
(citing Boeing Co. v. Shipman, 411 F.2d 365, 374-75 (5th Cir. 1969)
(en banc)).
In her April 15, 1991 telegram to Mr. Saffir, Ms. Gabor
stated that she was scheduled to be in “preproduction and a
promotional film for a motion picture I am contracted to do” called
Queen of Justice. At trial, Ms. Gabor testified that on April 15,
she had “offers” to act in both Queen of Justice and a movie called
Naked Gun 2½ on the dates of the San Antonio event.
Ms. Gabor and Richard Heard, who referred Hollywood
Fantasy to Ms. Gabor, testified that Queen of Justice was a
significant acting opportunity because Ms. Gabor would have had an
important role in the movie. However, undisputed testimony
established that Ms. Gabor was not involved in any activity
relating to Queen of Justice during the three days she was
scheduled to be in San Antonio working for Hollywood Fantasy. Ms.
Gabor did film a part in Naked Gun 2½ during those three days.
However, undisputed testimony established that Ms. Gabor’s role in
Naked Gun 2½ consisted of a fourteen-second cameo during the
opening credits. Ms. Gabor testified that her appearance in Naked
Gun 2½ was a significant acting opportunity because she received
16
positive reviews for the cameo. Richard Heard testified that Naked
Gun 2½ was a significant opportunity for Ms. Gabor because “it was
a wonderful opportunity to introduce her to a different audience
that she doesn’t have now.” Mr. Saffir testified that he did not
consider Ms. Gabor’s part in Naked Gun 2½ to be a “significant
acting opportunity” under the contract because her role was a
fourteen-second cameo role during the opening credits. The jury saw
this portion of Naked Gun 2½ and concluded that Ms. Gabor had not
cancelled her San Antonio obligation on the basis of a “significant
acting opportunity.”
Ms. Gabor argues that the trial court erred in permitting
Mr. Saffir to testify as to whether Ms. Gabor’s role in Naked Gun
2½ was a significant acting opportunity because Mr. Saffir was not
a “movie industry” expert qualified to give such an opinion. At
trial, Ms. Gabor’s counsel objected to Mr. Saffir’s testimony only
on the basis that there was “no foundation” for the testimony. Ms.
Gabor did not object that the question called for an expert opinion
from an unqualified witness. Nor did Ms. Gabor seek to offer
herself or Heard as experts on what constituted a “significant
acting opportunity.”
We review the trial court’s evidentiary rulings for abuse
of discretion. Snyder v. Trepagnier, 142 F.3d 791, 801 (5th Cir.
1998); Snap-Drape, Inc. v. Commissioner of Internal Revenue, 98
F.3d 194, 197 (5th Cir. 1996); Eiland v. Westinghouse Elec. Corp.,
58 F.3d 176, 180 (5th Cir. 1995). Rule 701 of the Federal Rules of
Evidence states in pertinent part:
17
[T]he witness’ testimony in the form of
opinions or inferences is limited to those
opinions or inferences which are (a)
rationally based on the perception of the
witness and (b) helpful to a clear
understanding of the witness’ testimony or the
determination of a fact in issue.
FED. R. EVID. 701.
Mr. Saffir testified that he had extensive experience in
public relations and in television production. Mr. Saffir also had
experience in negotiating with film actors. Mr. Saffir himself
drafted the March 4, 1991 letter containing the language at issue.
Mr. Saffir’s testimony was “helpful to a clear understanding” of
whether Ms. Gabor had a “significant acting opportunity” that
conflicted with her San Antonio appearance obligation. The trial
court did not abuse its discretion in allowing Mr. Saffir to
present the testimony at issue.
Even without Mr. Saffir’s testimony, substantial evidence
supported the jury’s determination that Ms. Gabor did not cancel
the contract because of a significant acting opportunity. Ms.
Gabor testified at trial that she had contracted to do Naked Gun 2½
on or before April 15, 1991. However, plaintiff’s counsel
impeached Ms. Gabor with her deposition, in which she testified
that she did not know on April 15, 1991 whether she had a contract
to appear in a cameo role in Naked Gun 2½. In addition, Ms.
Gabor’s role in Naked Gun 2½ was a fourteen-second cameo appearance
during the credits. The jurors viewed the relevant part of the
film. The jury had a sufficient evidentiary basis to conclude that
this part was not a “significant acting opportunity in a film.”
18
There was also substantial evidence that Queen of Justice
did not present Ms. Gabor with a significant acting opportunity.
Mr. Saffir testified that he had never heard of Queen of Justice;
that no money had been raised to produce this film; and that this
film had no preproduction or production work scheduled on April 15,
1991 or in May 1991. Ms. Gabor testified that Queen of Justice was
never made. Ms. Gabor never signed a contract to make Queen of
Justice and never did any preproduction or other work for the film.
Although her April 15, 1991 telegram stated that she was to do
“promotional work” for Queen of Justice, Ms. Gabor testified at
trial that she did not even know what “promotional work” she was
referring to in the telegram. The evidence showed that Ms. Gabor
was not committed to work in Queen of Justice that would conflict
with her Hollywood Fantasy appearance when she cancelled that
appearance.
Substantial evidence existed to support the jury’s
finding that Ms. Gabor did not cancel the contract because of a
significant acting opportunity. The trial court properly denied
Ms. Gabor’s motion for judgment as a matter of law under FED. R.
CIV. P. 50(b).
IV. The Evidence on Damages
At trial, Ms. Gabor moved for judgment as a matter of law
that there was insufficient evidence to support the jury’s award of
$100,000 for breach of contract. The district court denied Ms.
Gabor’s motion. Ms. Gabor renews her objection here.
“In a federal case involving a state law claim, state law
19
determines the kind of evidence that may be produced to support a
verdict, but federal law establishes the quantum of evidence needed
to support a verdict.” Parham v. Carrier Corp., 9 F.3d 383, 386
(5th Cir. 1993) (citations omitted); see also Jones v. Wal-Mart
Stores, Inc., 870 F.2d 982, 986 (5th Cir. 1989). This court will
uphold the district court’s denial of a challenge to the
sufficiency of the evidence if there is substantial evidence to
support the jury’s verdict. Bradley, 130 F.3d at 174.
“It is a general rule that the victim of a breach of
contract should be restored to the position he would have been in
had the contract been performed.” Mistletoe Express Serv. of Okla.
City, Okla. v. Locke, 762 S.W.2d 637, 638 (Tex. App. -- Texarkana
1988, no writ); see also General Resources Org., Inc. v. Deadman,
907 S.W.2d 22, 32 (Tex. App. -- San Antonio 1995, writ denied);
Sassen v. Tanglegrove Townhouse Condominium Ass’n, 877 S.W.2d 489,
493 (Tex. App. -- Texarkana 1994, writ denied); General Elec.
Supply Co. v. Gulf Electroquip, Inc., 857 S.W.2d 591, 599 (Tex.
App. -- Houston [1st Dist.] 1993, writ denied). “However, an
injured party may, if he so chooses, ignore the element of profits
and recover as damages his expenditures in reliance.” Nelson v.
Data Terminal Sys., Inc., 762 S.W.2d 744, 748 (Tex. App. -- San
Antonio 1988, writ denied) (citing RESTATEMENT (SECOND) OF CONTRACTS §§
347, 349); see also FARNSWORTH, 3 FARNSWORTH ON CONTRACTS § 12.16, at
262.
The $100,000 damages award cannot be supported as the
recovery of lost profits. Mr. Saffir testified that Hollywood
20
Fantasy lost $250,000 in profits from future fantasy vacation
events and at least $1,000,000 in future profits from the creation
of a television series based on “bloopers” and “outtakes” from the
videotapes of clients “acting” with Hollywood personalities.
Although “[r]ecovery of lost profits does not require that the loss
be susceptible to exact calculation,” Szczepanik v. First Southern
Trust Co., 883 S.W.2d 648, 649 (Tex. 1994), lost profits must be
proved with “reasonable certainty.” Texas Instruments, Inc. v.
Teletron Energy Management, Inc., 877 S.W.2d 276, 279 (Tex. 1994).
“[A] party claiming injury from lost profits need not produce in
court the documents that support his opinions or estimates.” Ishin
Speed Sport, Inc. v. Rutherford, 933 S.W.2d 343, 351 (Tex. App. --
Fort Worth 1996, no writ). A witness may testify “from personal
knowledge as to what profits would have been.” Naegeli Transp. v.
Gulf Electroquip, Inc., 853 S.W.2d 737, 740 (Tex. App. -- Houston
[14th Dist.] 1993, writ denied). However, “[a]t a minimum, opinions
or estimates of lost profits must be based on objective facts,
figures or data from which the amount of lost profits may be
ascertained.” Szczepanik, 883 S.W.2d at 649; see also Ishin Speed
Sport, 933 S.W.2d at 350. “Mere speculation” of the amount of lost
profits is insufficient. Thedford v. Missouri Pac. R.R. Co., 929
S.W.2d 39, 47 (Tex. App. -- Corpus Christi 1996, writ denied)
(citing Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 85
(Tex. 1992)).
Leonard Saffir’s testimony that Hollywood Fantasy lost
$250,000 in future profits was based on his estimate that Hollywood
21
Fantasy would make a $25,000 profit from each of ten future events.
Hollywood Fantasy was a new venture. It had put on one event, in
which nine people participated, and in which it had lost money. Two
weeks before the San Antonio event, only two people had bought
tickets for the event. Hollywood Fantasy had no commitments to, or
arrangements for, specific future events. “Profits which are
largely speculative, as from an activity dependent on uncertain or
changing market conditions, or on chancy business opportunities, .
. . or on the success of a new and unproven enterprise, cannot be
recovered.” Texas Instruments, 877 S.W.2d at 279 (emphasis added).
“The mere hope for success of an untried enterprise, even when that
hope is realistic, is not enough for recovery of lost profits.”
Id. at 280. In Texas Instruments, the Texas Supreme Court made it
clear that the relevant “enterprise” in the lost profits inquiry is
“not the business entity, but the activity which is alleged to have
been damaged.” Id. (emphasis in original). There was no evidence
at trial that the “movie fantasy vacation” enterprise promoted by
Hollywood Fantasy had been a successful enterprise in any context.
There was no evidence that the Hollywood Fantasy management had
ever been involved in any prior fantasy vacation enterprise, let
alone a successful one. See id. (“The focus is on the experience
of the persons involved in the enterprise and the nature of the
business activity, and the relevant market.”); Ishin Speed Sport,
933 S.W.2d at 351.
In Texas Instruments, the Texas Supreme Court stated
that even a new enterprise may attempt to recover lost profits when
22
there are “firmer reasons” to “expect [the] business to yield a
profit.” Texas Instruments, 877 S.W.2d at 280; see also Hiller v.
Manufacturers Prod. Research Group of N. Am., Inc., 59 F.3d 1514,
1521 (5th Cir. 1995); National Union Fire Ins. Co. of Pittsburgh,
Pa. v. Insurance Co. of N. Am., 955 S.W.2d 120, 131 (Tex. App. --
Houston [14th Dist.] 1997, writ denied). There was no evidence at
trial that Hollywood Fantasy had “firm” reasons to expect a profit.
Nine participants attended the Palm Springs event; not all of those
participants paid the full $7,500 price of admission and only
“some” of the Hollywood Fantasy employees were paid for their work.
As of April 15, 1991, two weeks before the San Antonio event, only
two tickets had been sold. Mr. Saffir’s testimony that he still
expected twenty participants was based on the optimistic but
unsupported assertion that people generally “don’t send in their
money right away.”
Hollywood Fantasy’s claim for loss of television revenue
is even more speculative. Mr. Saffir admitted that he had not sold
a television pilot, let alone a series, based on the fantasy
vacation videotapes. Mr. Saffir testified that the actors
appearing in the videotapes could have unilaterally declined to
permit Hollywood Fantasy to use the tapes in a television pilot.
Mr. Saffir testified that unidentified producers and others were
enthusiastic about the “concept” of such a television series, but
he had difficulty even estimating what the profits from a series
might be. No “objective facts, figures, or data” substantiated the
estimate of lost profits.
23
Hollywood Fantasy’s claims for lost profits also fail
because there was no evidence of how Hollywood Fantasy estimated
the profits or what data it used to do so. See National Union
Fire, 955 S.W.2d at 132 (noting that lost profits may be recovered
“if factual data is available to furnish a sound basis for
computing probable losses”); Thedford, 929 S.W.2d at 49
(“[T]estimony about lost profits must at least be based upon some
factual data.”); Szczepanik, 883 S.W.2d at 650; Holt Atherton, 835
S.W.2d at 84.
Mr. Saffir also testified that Hollywood Fantasy lost
$200,000 in “goodwill.” Under Texas law, the loss of goodwill or
business reputation is not recoverable in a breach of contract
action. See, e.g., Rubalcaba v. Pacific/Atlantic Crop Exch., Inc.,
952 S.W.2d 552, 558 (Tex. App. -- El Paso 1997, no writ); Nelson,
762 S.W.2d at 748.
Hollywood Fantasy also seeks to support the damages
awarded as based on evidence of lost investment in the corporation.
Mr. Saffir testified that Hollywood Fantasy lost $200,000 that had
been invested in the corporation. Under Texas law, “actual damages
may be recovered when loss is the natural, probable, and
foreseeable consequence of the defendant’s conduct.” Mead v.
Johnson Group, Inc., 615 S.W.2d 685, 687 (Tex. 1981). The record
must contain evidence that permits the jury “to assess with
reasonable certainty the . . . degree of causation of the damage by
the breach or interference relative to other factors.” University
Computing Co. v. Management Science Am., Inc., 810 F.2d 1395, 1398
24
(5th Cir. 1987). It is pure speculation that but for Ms. Gabor’s
breach, Hollywood Fantasy would not have gone out of business.
Hollywood Fantasy had lost money on the Palm Springs event despite
the fact that it had not charged the full fee to several
participants and had not paid all of its employees. Hollywood
Fantasy had sold only two tickets to the San Antonio event.
Hollywood Fantasy is not entitled to an award of damages
representing a return of $200,000 invested in the corporation.
Although Hollywood Fantasy did not present evidence to
base an award of compensatory damages on either lost profits or
lost investment, it did present sufficient evidence as to certain
out-of-pocket expenses to justify their recovery. Mr. Saffir
testified that Hollywood Fantasy incurred the following out-of-
pocket expenses for the San Antonio event: (1) $8,500 in printing
costs for color brochures and press releases; (2) $12,000 in
marketing costs for mailings and advertising; (3) $22,000 in
personnel and miscellaneous expenses, including air fares, staff
accommodations, script-writing costs, telephone calls, and logo t-
shirts; (4) $9,000 in travel expenses for Mr. Saffir and members of
the Hollywood Fantasy “staff,” including Margo Mayor, Hollywood
Fantasy’s president; and (5) $6,000 in expenses relating to
preparations to film the San Antonio event for a possible
television pilot. These expenses total $57,500.4
4
The general rule is that the nonbreaching party may only
recover out-of-pocket expenses incurred after the contract was
formed. See, e.g., Autotrol Corp. v. Continental Water Sys. Corp.,
918 F.2d 689, 695 (7th Cir. 1990) (applying Texas law); Hough v.
Jay-Dee Realty & Inv., Inc., 401 S.W.2d 545, 551 (Mo. Ct. App.
25
Ms. Gabor objects that this evidence cannot form the
basis of a damages award because Mr. Saffir testified that there
were documents relating to a few of these expenses, but did not
produce any documents at trial. However, the Texas cases Ms. Gabor
cites to support her argument do not hold that documentary evidence
is required for the recovery of out-of-pocket expenses. In Black
Lake Pipe Line Co. v. Union Constr. Co., 538 S.W.2d 80 (Tex. 1976),
the plaintiff attempted to prove damages by introducing summaries
of records. The court held that the summaries were inadmissible
hearsay because the plaintiffs had failed to make the underlying
records available to the defense. Id. at 92-94. The court’s
holding was based on the plaintiff’s failure to comply with the
rules governing the admissibility of summaries of voluminous
underlying information. Id. at 93-94. The court did not hold that
the summaries were inadmissible because they were not the “best
evidence” of damages. Nor did the court hold that oral testimony
regarding damages, if based on sources other than the flawed
summaries themselves, would have been inadmissible. Id. at 94.
Ms. Gabor also cites Gulf Coast Inv. Corp. v. Rothman,
506 S.W.2d 856 (Tex. 1974). In Rothman, the plaintiff stipulated
during trial the amount of damages he had suffered from the
defendant’s breach of contract, without providing the basis for his
1966); see also 3 FARNSWORTH, FARNSWORTH ON CONTRACTS § 12.16, at 262-63
n.2; Gregory S. Crespi, Recovering Pre-Contractual Expenditures as
an Element of Reliance Damages, 49 SMU L. REV. 43, 44 (1995).
Saffir’s testimony does not make it clear whether each of these
expenses were incurred after Ms. Gabor returned the March 4, 1991
letter. However, Ms. Gabor does not challenge the jury’s award on
this ground.
26
damages figure. The trial court found that although the defendant
breached the contract, the plaintiff had not proved that he
sustained any damages. The plaintiff appealed. The plaintiff
argued that he was not required to show the “exact” amount of
damages he had suffered. Id. at 858. The Texas Supreme Court
affirmed the trial court, holding that the plaintiff had failed to
show any basis for an award of damages. Although the plaintiff did
not have to show his “exact” damages, this rule “did not mean that
a guess or surmise on the part of the jury would suffice.” Id.
“While mathematical precision is not required to establish the
extent or amount of one’s damages, one must bring forward the best
evidence of the damage of which the situation admits, and there
must be some basis for reasonable inferences.” Id. (citing C.
MCCORMICK, THE LAW OF DAMAGES §§ 26, 27 (1935)).
Although Rothman stated that a plaintiff must provide the
“best evidence” of damages, the Texas Supreme Court used this term
in the context of examining the requirement that a plaintiff must
provide a basis for estimating damages sought. Rothman does not
prevent the admission of oral testimony as evidence of damages,
even when the oral testimony is based on documentary evidence. See,
e.g., Vance v. My Apartment Steak House of San Antonio, Inc., 677
S.W.2d 480, 483 (Tex. 1984) (noting that a witness’s oral testimony
was “competent evidence” of damages for breach of contract, without
mentioning the need for production of supporting documentation);
cf. Holt Atherton, 835 S.W.2d at 84 (noting that oral testimony
alone may be sufficient to establish lost profits without the
27
production of supporting documentation); Pena v. Ludwig, 766 S.W.2d
298, 304 (Tex. App. -- Waco 1989, no writ) (stating in the context
of recovering damages for lost profits that “[t]his court has not
found any blanket requirement that a witness’ testimony, which is
based on first-hand knowledge of financial data, must be
supplemented in every instance by the financial records from which
actual knowledge is gained”).
Ms. Gabor presented no evidence controverting Mr.
Saffir’s testimony as to Hollywood Fantasy’s lost out-of-pocket
expenses for the San Antonio event. Mr. Saffir’s testimony as to
Hollywood Fantasy’s out-of-pocket expenses is sufficient to support
an award of $57,500 for breach of contract, but not to support an
award of $100,000.5 The award of $100,000 is reversed in part on
the basis that the evidence disclosed in the record does not
support compensatory damages beyond $57,500.
V. The District Judge’s Failure to Recuse
Ms. Gabor finally argues that the district judge should
have recused himself because he was biased against her. The
obligation to recuse is governed by 28 U.S.C. § 455, which states
in pertinent part:
(a) Any justice, judge, or magistrate of the
United States shall disqualify himself in any
proceeding in which his impartiality might
5
Hollywood Fantasy cannot recover the $15,000 it refunded
to the two individuals who had bought tickets to the San Antonio
event before it was cancelled. The ticket price refund was not an
out-of-pocket expense. Hollywood Fantasy presented no testimony as
to what portion, if any, of this amount it would have kept as
profit had the event gone forward with Ms. Gabor’s participation.
28
reasonably be questioned.
(b) He shall also disqualify himself in the
following circumstances:
(1) Where he has a personal bias or
prejudice concerning a party . . . .
28 U.S.C. §§ 455(a)-(b)(1).
Ms. Gabor’s argument is frivolous. Ms. Gabor asserts
that the district judge’s remarks criticizing her after she failed
to appear at the first trial reveal bias against her. A review of
the remarks do not show bias warranting recusal.6 Ms. Gabor
asserts that the bias manifested itself when the trial judge
allowed counsel for Hollywood Fantasy to ask Mr. Saffir a leading
question and when the judge made an evidentiary ruling against her.
Ms. Gabor ignores the fact that after she demonstrated that she did
6
The United States Supreme Court has stated:
[O]pinions formed by the judge on the basis of
facts introduced or events occurring in the
course of the current proceedings, or of prior
proceedings, do not constitute a basis for a
bias or partiality motion unless they display
a deep-seated favoritism or antagonism that
would make fair judgment impossible.
Liteky v. United States, 114 S. Ct. 1147, 1157 (1994). The Court
noted that “remarks during the course of a trial that are critical
or disapproving of, or even hostile to, counsel, the parties, or
their cases, ordinarily do not support a bias or partiality
challenge.” Id. The district court’s comment to the first jury
and isolated comment to the media do not display a “deep-seated
favoritism or antagonism” that “would make fair judgment
impossible.” At most, the comments revealed the district judge’s
temporary frustration with a defendant who he perceived to have
ignored her trial. When Ms. Gabor argued that she had not had
notice of the trial, the district judge granted Ms. Gabor’s motion
for a new trial and set aside the default judgment of $3,000,000.
29
not receive notice of the first trial setting, the judge set aside
the $3,000,000 default judgment and ordered a new trial. Ms. Gabor
also ignores the fact that at the conclusion of the second trial,
the judge set aside the jury’s finding of fraud. A review of the
record, including the evidentiary rulings, reveals no bias.
Ms. Gabor’s argument is also untimely. Despite her
assertion that the judge revealed his bias in remarks made after
the first trial, Ms. Gabor did not raise the argument until this
appeal. This court has not yet “clearly defined the scope of our
review of § 455 issues raised for the first time on appeal.”
McKethan v. Texas Farm Bureau, 996 F.2d 734, 744 n.31 (5th Cir.
1993), quoted in Mangum v. Hargett, 67 F.3d 80, 82 (5th Cir. 1995).
Although a disqualification challenge raised for the first time on
appeal is not per se untimely, the timeliness requirement of
section 455 obligates a party to raise the disqualification issue
“at a reasonable time in the litigation.” United States v. York,
888 F.2d 1050, 1055 (5th Cir. 1989). Application of this standard
is an additional bar to Ms. Gabor’s argument; she failed to present
her disqualification argument at a reasonable time in the
litigation. See Stephenson v. Paine Webber Jackson & Curtis, Inc.,
839 F.2d 1095, 1096 n.3 (5th Cir. 1988) (declining to consider the
plaintiff’s argument that the district judge, who had an attorney-
client relationship with defense counsel, should have recused
because “[p]laintiff has waived any objection by not raising it at
an earlier stage of the litigation”); cf. Delesdernier v. Porterie,
666 F.2d 116, 122-23 (5th Cir. 1982) (declining to consider a
30
disqualification argument made under section 455(a) because the
plaintiff raised the argument for the first time on appeal); York,
888 F.2d at 1056 (finding the defendant’s post-trial motion for
disqualification untimely because the defendant was aware of the
grounds of the motion before the trial began).
Ms. Gabor’s recusal argument, too little and too late, is
rejected.
VI. Conclusion
We affirm the district court’s judgment with respect to
Ms. Gabor’s liability for breach of contract. We reverse the
district court’s award of $100,000 for breach of contract and
render judgment in the amount of $57,500, with post-judgment
interest from the date of the district court’s judgment to the date
it is paid, at the rate previously set by the district court, and
the attorneys’ fees awarded by the district court.
AFFIRMED IN PART AND REVERSED AND RENDERED IN PART.
31
Hollywood Fantasy Corp. v. Gabor
Court: Court of Appeals for the Fifth Circuit
Date filed: 1998-08-12
Citations: 151 F.3d 203
Copy CitationsCombined Opinion