12:00pm PT by Marilyn Black, Andy Lewis
A Hollywood Power Lawyer's Lost Memoir on Birthing Independent Film
This story first appeared in the May 6 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
At its height in the 1970s, Kaplan Livingston Goodwin Berkowitz & Selvin was the largest entertainment law firm in the world, with clients ranging from talent agencies (William Morris, ICM) to actors (Orson Welles, Ava Gardner, Jack Lemmon) to studios (20th Century Fox, United Artists). Leon Kaplan, the founding partner, was born in Washington, D.C., in 1908 and came to California in 1914 when his parents bought a small grocery in Venice. After UCLA (where, by his own estimation, he was a middling B-/C+ student), he attended USC law school (graduating at the top of his class) and went to work for a two-man firm in Los Angeles. Kaplan got his first entertainment cases in the late '30s. In the '50s and '60s, he was an important figure in the rise of independent producers and production companies following the breakup of the studio system, and some of Hollywood's top lawyers (including Skip Brittenham, Eric Weissmann and former Warner Bros. general counsel John Schulman) got their start at his firm. Kaplan Livingston dissolved in 1980; he remained of counsel at Mitchell Silberberg & Knupp until he was 88. (His brother and former partner, Victor, still is practicing at 102.) Encouraged by his son Robert, an attorney who worked with his father at Kaplan Livingston early in his career, Leon began writing his memoirs, When a Handshake Meant Something, but did not finis before his death in 2003. In this selection from the unfinished manuscript, shared by his daughter-in-law Marilyn Black, he recalls his early career and his role in two pivotal deals in the 1950s: the sale of United Artists by Charlie Chaplin and Mary Pickford to Arthur Krim and Robert Benjamin; and his pioneering pact for independent co-financing for John Huston's The African Queen, which became a model for subsequent films.
Kaplan in his office at the Kaplan Livingston firm, circa 1950.
Our big break occurred in early 1935. Edward Alperson, a cousin of my partner Philip Krasne, had formed a large independent motion picture company, and we were selected to be its California counsel. At that time, the motion picture industry was completely dominated and controlled by the eight major studios — Metro Goldwyn Mayer, 20th Century Fox, Warner Bros., Paramount Pictures, Universal Pictures, RKO Universal Pictures, Columbia Pictures and United Artists. They controlled the production and distribution (marketing) of all pictures of consequence and owned the first-run motion picture theaters. The major companies were made even more arrogant by the lack of competition for the entertainment dollar — no TV, no home video, no night baseball or other pro sports. There were no industry labor unions (or very weak ones). Even the stars were just employees with no creative rights and, with a few exceptions, no ownership or profit sharing in their pictures. The company Alperson organized was called Grand National Films. It was publicly traded, had a reasonable amount of capital (Time magazine was a shareholder), its own studio and its own distribution. If it had been well managed, it could have become large and influential. It was not to be. In three years, it was placed in a 77B bankruptcy proceeding (akin to today's Chapter 11) and by the end of 1939 was liquidated.
If the start of Grand National had occurred under conditions that exist today, Krasne & Kaplan would not have had the slightest chance of getting that account. Neither of us had any experience with motion picture matters: We didn't know any of the people involved — executives, agents, picture lawyers or producers — we didn't know the terminology or the forms to be used. We proceeded to learn on the job. Krasne immediately started spending his time in the "executive suite" with the big brass and involved himself in the negotiations of the more important deals. It fell to me to draft the usual employment agreements, negotiate requests for changes and prepare all the necessary contracts whenever a production went forward. I procured forms of contracts used at the major studios and copied them extensively. I became friendly with a few motion picture lawyers then practicing and drained their brains. Most of them were very gracious about helping a tyro such as me, and I developed lasting friendships with many of them. I made mistakes, but fortunately none of them were disastrous or resulted in litigation.
Director David Lean (right) with producer Sam Spiegel on the set of 1962’s Lawrence of Arabia. Spiegel was nearly broke in 1951 when he produced The African Queen but later made millions on Lawrence of Arabia andThe Bridge on the River Kwai.
It wasn't long before Krasne decided to give up the law to become an executive of Grand National and I took over Krasne & Kaplan in 1936. The studio gave me a choice: either $500 per month for full time or $300 per month with my having the right to retain my law practice as long as it did not get too heavy. Fortunately, I chose the second alternative. My chat fees (and my collections were net as the studio furnished offices, secretary and office supplies) always exceeded the $200 per month I had passed up; also, by the time Grand National went broke, I had established a modest core of clients. If I had taken the full-time alternative, I would have had to start from scratch.
The seeds of our future growth germinated then. The president of Pathe Laboratory [a commercial film developer] asked me to reduce a bill to my client from $350 to $250, a bill that Pathe had agreed to pay. Months later, Pathe fired its lawyer, and we became its new counsel, leading to work from producer Robert R. Young, who controlled Pathe, and from Bank of America, Security Pacific National and other banks involved in film financing.
In the latter part of our first decade, the Supreme Court handed down its decision in the motion picture anti-trust cases [United States v. Paramount, 1948]. The majors were arrogant and could have made a deal with the Justice Department on less onerous terms but were too stubborn and shortsighted. Generally, they had to sell off their theaters and modify and soften a number of other arrangements like block booking [making a theater take the studio's entire slate]. The anti-trust decree was the beginning of the process that took complete control over production, distribution and exhibition from the majors and began to require a sharing of control with independent producers. Exhibition passed to new companies formed to take over the theaters the majors were required to part with.
The decree and tax changes drove production to independents or joint ventures with talent as opposed to the straight employment arrangements of the past. When the rate of income taxation rose to 70 percent, the big stars and top directors refused to work for a straight salary. They learned that if they formed their own companies and produced the pictures in which they worked, they could transform their profits (including part of their salary) into capital gains and pay only 25 percent. After a few years, the IRS caught up with that, but the tax lawyers created new schemes, and the tax game went on. A natural consequence of the independent production firm was to give the production company considerably more creative control and power than the talent involved had as employees.
In 1952, United Artists, the weakest of the majors, ran into financial difficulties. Its stock was owned 50-50 by Charlie Chaplin and Mary Pickford. Arthur Krim [a business partner of Pathe's Robert R. Young] negotiated a deal with Lloyd Wright, Chaplin and Pickford's lawyer, under which he and partner Robert Benjamin would get half of the stock free if they could obtain specific amounts of financing for United Artists' operations plus another amount for loans to producers. [A few years later, Chaplin and Pickford sold the other half to them for $4.1 million.] Krim persuaded Heller to provide the funds and asked me to draw the contract. Krim and I went to Wright's Beverly Hills office to close the deal. Everyone was there except Pickford. We waited an hour and left. The next day I got a call from Wright asking us to meet that night. Mary explained that she did not appear the day before because she was walking through Beverly Hills talking to "Doug" — Douglas Fairbanks, her husband who had been dead for several years. He advised against her selling. Mary then asked Charlie for his advice. Charlie said he raised very little for the stock and it had no dividends. He was not interested in holding it to increase its value because his estate was already too large for the best interests of his children. Despite this wise attitude in Charlie, his representatives fought like wildcats over every dollar. At any rate, the contract was signed, and Krim and Benjamin made a big success of UA. Krim offered me a job with UA, which I refused. I got a modest retainer for a couple of years.
In the 1950s, we grew from a small, struggling entertainment firm to one that had influential clients and was a significant player in the industry. Some of the clients we signed during this period included Four Star Films, the independent TV company owned by Dick Powell, David Niven, Charlie Boyer and Joel McCrea; The Mirisch Co.; Tyrone Power and his production company; Yul Brynner; Ava Gardner; Robert Mitchum; Jack Lemmon; Burt Lancaster's production company, Hecht-Lancaster; and actor Robert Young.
Katharine Hepburn and Humphrey Bogart in 1952’s The African Queen. Kaplan negotiated the financing for the movie, which was the first true co-production deal in Hollywood history and one that gave producer Spiegel and the stars a significant share of the profit as well.
In 1951, I became involved in one of the most fascinating matters in my career — The African Queen. United Artists was desperate for product, and The African Queen with its stars Humphrey Bogart and Katharine Hepburn and director John Huston was its top priority. UA did not have the necessary funds, but Walter Heller's organization, which I represented, was willing to loan 50 percent of the [$1 million] projected cost. A very prominent British production company owned by the Woolf brothers, whose father was one of England's pioneer producers, was willing to advance the other half. Thus was born the first true co-production deal for feature films.
Essentially, United Artists acquired the distribution rights for the Western Hemisphere and Woolf for the Eastern, with each party having a small participation in the other's profits. The concept was simple, but the details were not. What controls or approval rights did each party have, and if there were areas of joint control, how were deadlocks to be resolved? What rights did one party have if the other defaulted — particularly in failing to advance its share of financing? Bear in mind this was not a case of one contract between two distributor companies. The picture would be produced by a company owned by producer Sam Spiegel that would hold the title to the picture and get a substantial share of the profits. The director and the two stars had significant shares of the net or gross profits and certain creative rights. The negotiations were further complicated by Spiegel. He ultimately became rich and famous (Lawrence of Arabia, The Bridge on the River Kwai), but at the beginnings of The African Queen, he was broke and in debt.
He told all the other parties involved what he felt they wanted to hear, ending up with contradiction and utter confusion. This was my first opportunity to go to Europe, and in May of 1952, I flew to London and spent a week or so drafting the co-production agreement. Woolf and UA in England were represented by the large law firm Richards, Butler & Co. I dealt with a senior partner named I.G. Woodham Smith, whose wife was a noted novelist. Most of the work was done by a junior partner named Pembroke Robinson. My wife, Gene, and I became friendly with both men.
In the midst of my intense African Queen negotiations in London, we caught Spiegel in so many shadings of the facts that Walter Heller — who was on holiday there — instructed me to terminate the negotiations, saying for the first time I had heard it, "If you lie down with dogs, you get up with fleas." I disregarded Heller's instruction but used it to scare Spiegel into a more reasonable frame of mind and a more factual presentation. We closed the deal, and Heller quadrupled its investment. All I got from Heller and United Artists (who were saved by this picture) was our ordinary fee plus a lot of material for this memoir.
To illustrate Spiegel's modus vivendi, let me describe one incident: After our negotiations in London started, we realized that a couple of days later was the start of a three-day bank holiday. I was with Milton Gordon, the vp of Heller in charge of entertainment lending. Neither of us had been to Paris, so we decided to go since all businesses would be closed — no plane reservations and no hotel reservations were available. We called UA, and it could do nothing. I mentioned this by chance to Spiegel, who said: "No worry. I will fix it up and go with you."
In no time, we all had reservations on the deluxe Air France flight leaving at 7 p.m. Friday night, and I ended up in a small suite in a second-rate hotel called the Elysse Park Hotel, while Sam had a large two-bedroom suite at the Plaza Athenee. Sam invited us for cocktails and dinner, and when we got to his suite, a full-blown cocktail party complete with chorus girls was in progress. At about 10 p.m., Sam, Milt, two chorus girls and I went via Sam's limo to a very expensive restaurant. After dinner, Sam dropped us at our hotel and left with both girls and our profuse thanks. The next morning, we were awakened by a bellhop from the hotel with a message from Sam. He had to leave later in the day with John Huston to go to the location in Africa and he needed $2,000 for his hotel bill (including the party), dinner, the limo and presumably the girls. Believe it or not, Milt gave the bellboy the money.
Kaplan Livingston’s offices at 450 N. Roxbury Drive in Beverly Hills, where the firm was located during the 1970s.
Kaplan, circa 1960, spent weeks in London negotiating the African Queen deal.