July 14, 2014 10:26am PT by Eriq Gardner
Frank Darabont's 'Walking Dead' Lawsuit: About More Than Zombies, but How Much More?
When Frank Darabont and his CAA agents sued AMC last December, the litigation was destined to explore more than the fired Walking Dead creator's claim of being owed tens of millions of dollars in profits from the mega-successful zombie series. The courtroom battle has already touched on other AMC shows like Breaking Bad and Mad Men, but could go further to investigate how profit deals work for other hit shows on other cable networks.
Darabont's lawsuit is a prime example of why negotiating backend profits in Hollywood is no longer as simple as figuring out the right percentage to give show creators. These days, TV networks prefer to distribute self-produced content. For Walking Dead, AMC the network licenses the show from AMC the studio. Darabont made his deal with the latter while the former collects the revenue. As such, profit participation deals must address such delicate issues as distribution fees, expenses and, in an increasingly consolidated entertainment industry, how studios get proper market value when licensing a show.
In his lawsuit, Darabont alleges that AMC made a sweetheart deal with itself to the extent that Walking Dead runs a deficit and that he and CAA "never see that first dollar" of profit participation. To bolster claims that AMC's so-called "vertical integration" has been harmful, the plaintiffs have successfully pushed to get information about AMC's deals with nonaffiliated studios — namely, Lionsgate for Mad Men and Sony Pictures Television for Breaking Bad. Presumably, Darabont's lawyers aim to show that AMC is on better behavior when it's not negotiating with itself.
The discovery process is sometimes about making the other side feel the pain of disclosure. Here, AMC has its own demands for documents. On Friday, the defendant renewed its push to get contingent compensation agreements handled by CAA. According to a letter sent to the judge, the requested documents "will show how other television studios interpret and administer similar contingent compensation agreements."
Although CAA's lawyers have questioned the relevancy of those documents and have warned the judge that production "would have a devastating impact on CAA's entire business," AMC finds basis in making the requests thanks to Darabont's lawsuit claim that AMC failed to negotiate his agreement in good faith "within customary basic cable television industry parameters."
What's industry custom and practice in the cable TV industry? AMC believes that it is entitled to discover the answer. Having access to non-AMC TV deals, accounting statements and correspondence related to these deals, states the letter, will mean that "AMC will be able to demonstrate that it negotiated with Plaintiffs in good faith and offered Plaintiffs more valuable concessions than are typical for deals of this nature."
As previously reported, AMC is gearing up a defense to Darabont's lawsuit based on its view that it has the contractual right to set an imputed license fee for Walking Dead. AMC argues that it attained this power after agreeing in negotiations to refrain from charging distribution fees — a supposed "give" that cost AMC $7.2 million. In its attempt to score documents pertaining to shows on other cable networks, AMC likely wants to demonstrate that the agreement to not take Walking Dead distribution fees was a real concession on its part.
In their own letter to the judge, CAA's lawyers assert that the relevancy of industry custom and practice only pertains to an alleged failure to account for millions of dollars in tax credits. They also speak to the "enormous prejudice" to CAA and its clients of complying with an "overbroad" request that would mean pouring through over 5,000 active bookings for some 2,000 clients in the TV industry to see which are relevant.
AMC's lawyers respond: "Where documents are as highly relevant as those at issue here, and where Plaintiff alleges damages to be this significant, the law simply does not permit a party to hide behind claims that its own document management system complicates production, or that disclosure might result in 'unhappy clients and negative press reports'... CAA need not search for 'tax credits' or 'imputed license fees' because AMC seeks production of all basic cable contingent compensation agreements and related correspondence regardless of whether they include these terms."