Disney Beats Lawsuit From 'Home Improvement' Creators (Exclusive)

A judge rules that claims of being cheated out of profits came too late
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The Walt Disney Co. has struck a major blow in its long-running battle with the creators of the 1990s sitcom Home Improvement.

At a hearing on Wednesday, Los Angeles Superior Court judge William Highberger fully granted the ABC parent company’s motion for summary adjudication against the claims filed by Matt Williams, Carmen Finestra and David McFadzean and their affiliated production companies.

In the lawsuit, the creators claimed Disney and its subsidiary Buena Vista had mishandled the hit sitcom, which ran on ABC for eight seasons, and failed to pay the plaintiffs their fair share of the profits. The creators of the show starring Tim Allen alleged that Disney licensed the show for syndication in New York and other territories for less than the market value and didn’t consult with the show’s creators about its distribution, as the contract required. This was the second time that the Home Improvement creators raised hackles with how the show was licensed. An earlier lawsuit made its mark in the entertainment industry as one of the first "vertical integration" claims, taking aim at how Disney was licensing the show to its own affiliates to the disadvantage of profit participants.

This lawsuit, filed in February 2013, was also about accounting. The creators claimed their cut of the profits wasn’t what it should have been due to alleged errors, although the plaintiffs said they were frustrated by Disney's non-cooperation with audit attempts as well as alleged failures to detail accounting practices from 2001 through 2005.

Disney and Buena Vista focused on that timeframe in their motion for adjudication. The defendants argued that the plaintiff’s claims were time-barred. The contracts at issue limit the time to two years in which the profit participants could dispute their participation statements.

In court, the plaintiffs’ attorney, Roman Silberfeld of Robins Kaplan Miller & Ciresi, argued for a different interpretation of the contract. The two-year limitation, he said, is for situations where the error in the profit participation statement is obvious, like a clear discrepancy with the contract or a clerical error. If the dispute concerns unreported calculations that result in hidden errors, he believed that the clock starts from discovery of those discrepancies. He wanted a green light to proceed in the lawsuit.

“The only rational way to read these provisions is that we have two time periods, one for the simple stuff, which is two years, and one for the more complicated,” he said.

Dan Petrocelli at O’Melveny & Myers, attorney for the defendants, responded that there’s no such interpretation to be found in the creators’ contracts.

Highberger sided with Disney and Buena Vista. In the judge’s tentative ruling, adopted at the hearing and obtained by The Hollywood Reporter, he decides to hold the creators to the express terms of the contracts that were made.

In typical contract cases, it's the discovery of an error that begins the countdown of time by which a lawsuit must be filed, but the parties may agree to adjust the timeframe. The judge notes a 2013 opinion by a California appellate court that concluded that contractual provisions altering the clock are valid and enforceable.

In coming to the same conclusion in this case, Highberger highlights the sophistication of the creators as they were well-known in the entertainment industry and presumably had good agents and lawyers representing them when the deals were made between 1989 and 1994. "This was not a situation where talent had to passively accept an adhesion agreement forced on them by Disney," he writes.

Ultimately, the judge says he "agrees with Disney’s interpretation of the agreement that the summary participation statements provided ... were sufficient presentations of the amounts conceded owed by Disney to the talent under the Operative Agreement and thus the incontestability term started to run ..."

Here's the full opinion, which also reveals that Home Improvement has grossed more than $1.5 billion in revenue from inception, including more than $1 billion through syndication alone.

Even if this case concludes, however, the conflict between Home Improvement’s creators and Disney could still continue. The creators filed another lawsuit against the company and Buena Vista in January 2014. That action covers Disney’s accounting from 2006-2012. It has no proceedings currently scheduled.

The plaintiffs were represented by Silberfeld and Robins Kaplan Miller & Ciresi's Marcia Harris and Mark Passin. The same trio filed the 2014 lawsuit.

Email: Austin.Siegemund-Broka@THR.com
Twitter: @Asiegemundbroka

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