Palladium-Catalyzed Sequential Carbon-Carbon Bond Cleavage/Formation Producing Arylated Benzolactones

3-(2-Hydroxyphenyl)cyclobutanones react with aryl bromides in the presence of palladium catalysts to afford 4-arylmethyl-3,4-dihydrocoumarins in high yields through a sequence involving carbon-carbon bond cleavage and formation. In the case of the reaction with 2-(2-hydroxyphenyl)cyclobutanones, five- or seven-membered lactones were produced depending on the presence of an additional substituent at the 2-position.