• The Hollywood Reporter on LinkedIn
  • Follow THR on Pinterest
JUL
19
1 years

Horror Filmmaker Gets Court to Release $1.9 Million in Stolen Money

"Siberia" showrunner Matthew Arnold prevails over one of his former film students, who purported to help him raise money for a supernatural thriller.

Shadow People Poster - P 2013
"Shadow People" poster

Matthew Arnold, the writer-director of Shadow People and the showrunner behind NBC's new supernatural drama Siberia, has gotten a California appeals court to affirm the release of nearly $2 million of raised money that landed in the bank accounts of one of his former students.

Shadow People, based on a true story about a small-town radio personality who unravels a conspiracy, was picked up at the Cannes Film Festival in 2012 by Anchor Bay. Before that, it was titled The Door, and in 2007, while Arnold was teaching at the New York Film Academy, he met Sun Jee Yoo, a student who expressed interest in raising money for his film project.

Together, they came to an agreement, put in writing, where Yoo was to use her best efforts to raise $4.5 million. She leveraged her connections back home in Korea and was able to raise the funds.

STORY: Sony Pictures Wins 'Midnight in Paris' Lawsuit Over Faulkner Quote (Exclusive) 

But then a dispute broke out over control.

Yoo's first efforts resulted in approximately $3.7 million raised for The Door, according to the court documents. Later, she raised an additional $1 million, but that money was said to have been put into her personal bank account and not transferred to Arnold's film company called Dark Hall Productions.

In 2007, Yoo's attorney arranged a meeting with Arnold and his own attorney and told the writer-director that he had three choices: "(1) He could continue to control the making of his movie, in which case Yoo’s father would sue him; (2) he could turn over all the investor funds to Yoo; or (3) he could give Yoo some control over the funding of 'The Door.' "

A week later, Arnold was told that he could go ahead with the film on a reduced budget but that the investors wanted $1.7 million of their money back. Arnold and Yoo drove to the bank and issued two checks out of Dark Hall's account -- $1.7 million for the investors and $1,945,000 to be deposited into a joint bank account controlled by both of them.

Instead of returning the money, Yoo is said to have put the $1.7 million into her own Dragon Noon company and later withdrew the other amount to be put into that account as well.

Dark Hall sued, and the case went to trial in 2009, where a jury awarded $3.7 million in damages against Yoo, including $1,945,000 on the film company's claim for conversion. Dark Hall filed an ex parte application seeking release of the funds, and the trial court granted it, but then Yoo informed the judge that her attorney had been disbarred.

Eventually, though, Dark Hall got its judgment confirmed, and Yoo made an appeal that there was insufficient evidence that she breached any contract or made any misrepresentation and that the judge had committed a reversible error by not instructing the jury on the law of agency.

STORY: The 'Butler' Battle: MPAA Appeal Hearing Set for Friday 

On Wednesday, a California appeals court rejected Yoo's arguments, finding there was evidence that she agreed to raise the money but then appropriated it for her own use and that she breached subsequent oral agreements about how the funds were to be used. The appeals court also found evidence of the misrepresentations, found the jury instructions sufficient and agreed that the remedy of ordering a constructive trust imposed on the funds to be proper.

According to the decision, "That the judgment was entered only against Yoo, and not Dragon Noon, does not alter the result. It was Yoo's wrongdoing that gave rise to the constructive trust imposed on the misappropriated funds. When Yoo transferred the misappropriated funds to Dragon Noon, it became an involuntary trustee of those funds for Dark Hall's benefit."

Here's the full ruling -- a victory for Arnold amid his horror story.

E-mail: Eriq.Gardner@THR.com
Twitter: @eriqgardner