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Six-Year Legal Battle Over Kenneth Lonergan's 'Margaret' Finally Ends (Exclusive)

After a heated fight that included Martin Scorsese's interjection and an attempted Twitter campaign by many film critics, a lawsuit over a film "masterpiece" is settled after film financier Gary Gilbert takes the witness stand at trial.

Margaret
Myles Aronowitz/Fox Searchlight
Matt Damon and Anna Paquin in "Margaret"

As time stands divided against potential, there will be no marching back of the clock to relive the unfulfilled commercial promise of Kenneth Lonergan's Margaret, released in 2011 amid legal intrigue. The film can now be judged on its artistic merits as the lawsuits that dragged in its wake have now been regulated to the past. On Wednesday, film financier Gary Gilbert filed a formal request for dismissal to the once high-profile turf battle.

While Hollywood has experienced notable fights throughout the years over final cut, the lawsuits over Margaret were extraordinary by any measure. Here was Longeran with his follow-up to the Academy Award-nominated film You Can Count on Me. The movie counted on its production team many celebrated filmmakers, including Scott Rudin, Sydney Pollack and Anthony Minghella. It boasted a top-notch cast of Matt Damon, Mark Ruffalo, Matthew Broderick and Anna Paquin. And if that's not enough, when the situation got rough, none other than cinematic maestro Martin Scorsese collaborated on his own edit in an attempt to broker peace.

All that was not enough.

In 2005, the movie looked promising enough whereby Fox Searchlight and Gilbert came to an agreement to split about $12.6 million in production costs. Gilbert previously produced Garden State and The Kids Are All Right as well as the owner of the Cleveland Cavaliers basketball team.

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Principal photography commenced and was completed that autumn, but Lonergan needed extra time to edit Margaret. With a loan from Broderick, Lonergan spent $1 million to pay for extensions during the post-production process.

Eventually, Lonergan delivered a final cut on the film, but around 2007, Gilbert had become unhappy with the results, and according to Lonergan's side, attempted to seize control of the film despite not having cutting rights as an investor. Gilbert considered the two-and-a-half hour film at that point to be "incoherent" and with the consent of Searchlight and Rudin, worked with Dylan Tichenor, who edited Brokeback Mountain, to cut a two-hour version.

Searchlight accepted Lonergan's version in the summer of 2008 and attempted to invoice Gilbert's company for nearly $6.2 million. When Gilbert hedged, Searchlight said Gilbert had "invented a number of flimsy excuses" and sued the financier on July 18, 2008 for allegedly reneging on a co-financing agreement. That led to counterclaims a few months later against Searchlight and Lonergan. Gilbert claimed that the Tichenor edit -- dubbed the "Peggy Cut" -- was better.

Then, Scorsese, who had first screened the Lonergan edit a couple years earlier and had hailed it as a "masterpiece," took time during the making of his own Hugo to try his own edit of the film -- apparently free of charge. It was later proposed that Scorsese would become an executive producer, and Margaret would be released with a "Martin Scorsese Presents" credit. Lonergan says that written consent was never given. Gilbert later pointed out that some $800,000 would be required to do sound editing and the like and get the cut ready to be exhibited. (UPDATE: Gilbert maintains that he did not pass on the Scorsese cut.)

Gilbert and Searchlight would come to a settlement with each other, and in 2011, Lonergan's initial cut was released in extremely limited release. Few saw it despite ample critical praise. The New Yorker, for example, said it "was one of the best things to happen in the movies" that year.

For the hard-core cinephile, it was the must-see You Can Count on Me follow-up from Lonergan, who had previously written Analyze This and Gangs of New York.

For everyone else, it was a curio whose luster faded with nary much official marketing hype nor awards. Many prominent film critics attempted a grassroots campaign for the film on Twitter under the hashtag #TeamMargaret, and press attention reached its apex with a New York Times Magazine feature titled "Kenneth Lonergan's Thwarted Masterpiece," but soon thereafter, the spotlight shifted, and time marched on. That seemed to be it for Margaret.

Except it wasn't.

Gilbert and Lonergan continued to be in court with each other, pointing fingers about who was to blame for what went wrong. Gilbert continued to pursue claims that Lonergan had breached a director agreement for not delivering Margaret on time and providing writing services on another film. Gilbert demanded more than $8.2 million in damages for allegedly never receiving the benefit of his bargain in funding the movie. Gilbert argued that Lonergan had requested extension after extension, had never really delivered a final cut and also declared in a March, 2013 deposition that Lonergan "did not promote the film in any way, shape, or form."

Lonergan had evidence to show he gave Margaret ample support at film festivals and screenings. The director also painted Gilbert's claims of a contract breach and fraud as an attempt to bully him and cause him anguish and distress.

Part of the legal dispute focused on what role, if any, an investor should have in the final version of a movie.

Rudin himself testified that Gilbert "badly hurt the movie" and "exacerbated" its problems. "The financier does not belong in the cutting room," said Rudin during a deposition. "He's not an editor, he's not a director, he's not a writer, and he's not a producer. He's a guy who wrote a check. That does not buy him a place in the editorial suite."

In contrast, Gilbert presented the question of interference in the editing process as some form of smokescreen from the issue of whether the director lived up to his contractual promises to deliver a real final cut on the agreed upon schedule and then support it. If Lonergan eventually got behind the version of the film that's now out, Gilbert argued that it had come too little, too late.

Although few knew about it, the Margaret litigation went to trial last June before a retired judge acting as referee. After several days of hearing, the trial was adjourned until October, where Lonergan prepared to call to the witness stand many stars included Matt Damon, Mark Ruffalo, and yes, Scorsese.

Gilbert's side didn't want the celebrities to speak at trial. His attorneys brought a motion to preclude Scorsese's testimony on the basis that it covered inadmissible settlement discussions and believed that "Lonergan's outrageous tactic is to march celebrities in as witnesses to intimidate Gary Gilbert and try to get him to drop the case."

The referee denied it. As a result, just as Scorsese was gearing up to deliver his own The Wolf of Wall Street, Lonergan hoped Scorsese would testify how Gilbert had rejected overtures towards a "Lonergan/Scorsese" cut to be sent to the Toronto Film Festival. Had this happened, Lonergan maintained it would have led to a new life for the film. Lonergan's defense was based, in part, on Gilbert's alleged failure to mitigate damages by giving approval of the Scorsese edit. (Lonergan also pointed to Gilbert's "profligate litigation" as casting a "pall over the film.")

The trial resumed Oct. 21. That day, Gilbert took the witness stand and was cross-examined. The case didn't get much further because the following day, just as Scorsese was going to give his own opinion, the parties found a way to come to resolution.

However, it wasn't until very recently when the settlement finally executed. Lonergan hasn't paid anything to resolve the $8 million case. However, the settlement provides that if he gets another writing assignment from a studio, he will be handing over five percent of that amount up to $50,000. If Lonergan never writes another film -- devoting himself to his good career as a playwright or just taking film director gigs -- Gilbert will never see a penny.

On Wednesday, the dismissal request filing came from Michael Plonsker representing Gilbert's Camelot Pictures, which told The Hollywood Reporter in a statement, "After supporting Mr. Lonergan for years, Camelot finally had enough. Mr. Lonergan finally agreed to pay some money to Camelot in settlement and now the parties can put their dispute behind them."

As for Lonergan, he credits Matt Rosengart, his attorney at Greenberg Traurig for the outcome, expressing relief at how the long battle turned out. He says, "After five years of expensive and highly contentious litigation, the plaintiff suddenly dropped all of his claims in the middle of the trial, without any guarantee of ever receiving a dime."

"Kenny Lonergan is a brilliant and talented director, yet he was attacked in this case in a vicious and unfair way," says Rosengart. "Kenny’s movie has been declared a 'masterpiece,' by people ranging from Martin Scorsese to critics from The New York Times, The New Yorker and others.  Despite the attacks and having to deal with five years of litigation, Kenny persevered and prevailed -- both as a director and as a defendant.  Plaintiff’s case will likely go down as one of the biggest debacles in recent Hollywood litigation.  There is just no other fair way to describe it.”  

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