August 23, 2012 7:54pm PT by Jonathan Handel
Judge Rules DGA Foreign Levies Reports Acceptable But Lawyer Claims They Don't 'Make Sense'
A California judge ruled Wednesday that the Directors Guild is complying with a 2008 settlement agreement requiring it to report certain data related to foreign royalties, brushing aside the motion of a lawyer who told the court that the DGA reports were all but incomprehensible.
“We’ve engaged consultants,” Neville Johnson of Johnson & Johnson LLP told The Hollywood Reporter. “But they say they can’t make sense (of the DGA reports).” Johnson represents a class of non-DGA members who are entitled to receive foreign royalties paid out by the guild.
The DGA countered in a statement that it “has distributed more than $121 million in foreign levies, including over $13 million to more than 3,400 non-members.” The guild added, “It was a hard-fought effort to attain these funds and we are very proud of our efforts.”
Johnson’s position is that even if the DGA is complying with the letter of the settlement agreement, it wasn’t in tune with the spirit of the pact, and he urged Judge John Wiley to require more. The judge declined, notwithstanding Johnson’s argument that since he maintained jurisdiction over the case, he should ensure that the information provided be clear and adequate.
But Wiley – in Johnson’s words – said that “if you make a settlement agreement, that’s all you get.”
The judge’s denial of Johnson’s motion was “with prejudice,” meaning that it can’t be refiled. Johnson can, however, appeal, and said his office was deciding whether to do so. He has 60 days to decide and said it was likely that he would.
Foreign royalties are complex. Collection societies in certain countries collect the sums based on various government regulations, then remit a portion of the U.S.-destined payments to the DGA, WGA and SAG for payment to individual “authors” (i.e., writers and directors) and performers.
Another portion of the collected monies is paid to the U.S. studios or producers, who under U.S. law and customary entertainment contracts are deemed the authors of the movies, television shows and other audiovisual works at issue. The fact that monies are split between the studios and the individuals is a consequence of balancing the contrasting U.S. and foreign definitions of “author” and was arrived at in agreements between the guilds and studios in the early 1990s.
According to a geographic breakdown prepared by the WGA, 51 percent of the $147.5 million it’s collected in the last 20 years came from Germany. Next, with 8 percent to 11 percent each, were France, Argentina, Switzerland and Spain. No other territory constituted more than 3 percent of the total.
More information can be found on the DGA, SAG-AFTRA and WGA West websites. The SAG-AFTRA royalties collected as of mid-2011 totaled under $21 million, or less than one-fifth of what the WGA and DGA collected. That’s due in part to the fact that fewer countries provide for performers to receive foreign royalties than do for authors.
Foreign royalties are distinct from foreign residuals. The latter are computed according to the terms of the collective bargaining agreements between the unions and studios. As confusing as residuals – and especially foreign residuals – can be, foreign royalties are even murkier.
Whether the unions even have the right to collect such royalties, let alone on behalf of non-members and/or for movies and TV shows that aren’t under their jurisdiction, was the subject of three class-action lawsuits – one against each union – filed in the mid-2000s.
Those lawsuits were settled, with the unions permitted to make collections and disbursements, subject to reporting. But for various reasons, the reporting requirements ended up being different for each union, notwithstanding the fact that all three lawsuits were assigned to the same L.A. Superior Court judge, Carl West. None of them is particularly detailed, however.
West ultimately retired and was succeeded on the case by Wiley. Johnson said that Wednesday’s hearing was Wiley’s first on the case and attributed his decision in part to not having been on the three cases for the more than half-decade that West was.
Johnson also failed to persuade the judge to award additional attorneys fees beyond what he had already received. Johnson told THR that he might seek to withdraw from the case as a result and have new counsel appointed.
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