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Maker Studios Claims Former CEO Owes $325K as Result of Disney Merger (Exclusive)

After a judge refuses the digital video company's bid to kill Danny Zappin's claims, the new Disney subsidiary files a cross-complaint.

Danny Zappin Horizontal - H 2013
Christopher Patey
Danny Zappin

Since former Maker Studios CEO Danny Zappin filed a lawsuit alleging a conspiracy forced him from the multichannel network, he and Maker have gone in new directions. Maker sold its business to Disney for $500 million and recently hired veterans from AOL and Yahoo to run its original content division. Zappin has raised $25 million for Zealot, a new digital media company. Although good news abounds, Zappin and Maker remain in court with each other — and there's no sign the litigation will be ending anytime soon.

On July 25, for example, Maker filed a cross-complaint against Zappin alleging that he owes $325,000 from two promissory notes that weren't due until 2021 but became "immediately due and payable upon the occurrence of a change in control of Maker."

Namely, the Disney merger, which closed May 7.

Maker is attempting to use the merger to its advantage in the ongoing litigation, but hasn't been completely successful on that front.

The company spent months attempting to have most of Zappin's claims dismissed as a result of the Disney acquisition. The defendant attempted the argument that as a result of the merger, Zappin lost standing to pursue his claims.

According to the defendant's failed demurrer motion, "Mr. Zappin has a choice as a result of the Merger: he can accept the consideration Maker's other shareholders have agreed to accept from Disney for their interests in Maker, or he can dissent from the Merger, perfect his dissenter's rights and pursue an action for appraisal. If he accepts the Merger consideration, his claims will be extinguished. If he rejects the Merger consideration and perfects his dissenter's rights, his exclusive remedy will be to obtain through appraisal the fair market value of his interest in Maker taking into account whatever value, if any, his claims may have, but without the increase in value due to the Merger."

Zappin opposed the motion on the basis that he wasn't objecting to the merger, but rather what happened earlier — he claims he was induced into stepping down by Ynon Kreiz, board members, and others at the company who had misled and pressured him.

In court filings, Zappin emphasized that his lawsuit had been filed before the Disney merger and that Maker also was trying to rehash an earlier dismissal argument premised upon Zappin's severance agreement, which allegedly releases claims.

Last month, Los Angeles Superior Court Judge Elihu Berle overruled Maker's demurrer.

Discovery in the lawsuit, including depositions, is set to commence. We wouldn't bet on those being videotaped and posted on YouTube, however.

E-mail: Eriq.Gardner@THR.com

Twitter: @eriqgardner