May 18, 2011 9:25am PT by Eriq Gardner
Investors Now Suing Each Other Over Natalie Portman Film
When Hesher, starring Natalie Portman and Joseph Gordon-Levitt, arrived at the 2010 Sundance Film Festival, it generated a fair amount of buzz. Unfortunately, when it was finally released in theaters last week, it didn't take off. Made for an estimated $7 million, the film about an anarchist who plays counselor, grossed only about $126,000 in the U.S at about 40 theaters.
The carnage doesn't end there. The film has already provoked litigation from investors claiming they were defrauded by "slick lawyers" in Hollywood who allegedly hid that the production was on the verge of defaulting on loans as well as their own financial participation in the film. Now it's gotten even uglier, with investors suing each other, looking to recoup whatever they can from the film that took millions of dollars to make and may be on its way to bombing.
Last month, we reported that Gerald Fruchtman and Ian Fruchtman were suing Hesher Prods and the law firm of Eisner Frank & Kahan after investing $750,000 in Hesher. The two claimed they were only told at the late stage about the existence of defaulted loans, including one note-holder who was threatening to foreclose on the film's revenue stream, which might be fairly meager anyway.
What's left might be whatever money the production got by pre-selling foreign distribution rights. According to court documents, Nu Image advanced $1 million for unsold territories. The full proceeds from foreign sales are not publicly known, and may be modest, but could be enough to at least repay one of the investors. The question is who.
On Tuesday, Dreamagine Entertainment stepped up to make a claim with a new lawsuit filed in Los Angeles Superior Court against Hesher Prods, Cold Fusion Media, and the Fruchtmans.
Dreamagine says it financed $1.2 million of the budget, plus advanced a foreign sales agent $167,707. It claims it was entitled to first priority of the foreign sales under the so-called "first in/first out" provision, and got a substantial part of its investment back, but is still owed $375,000.
However, now that the Fruchtmans are claiming part of the meager pot, it endangers recoupment by Dreamagine.
"The Investors' lawsuits threaten to jeopardize Plaintiff's right to recoup ahead of the Investors," says Dreamagine in its new lawsuit. "Despite the fact that they have previously expressly acknowledged that their interests are subordinate to Plaintiff's, they now disclaim those acknowledgments and claim that no such priority exists."
Dreamagine alleges breach of contract, good faith and fair dealing, and wants a court declaration that it should receive all proceeds of foreign distribution sales. Who is getting the life preserver on the sinking ship?