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An L.A. judge in July breathed new life into a profit battle waged by Walking Dead creator Robert Kirkman and several executive producers seeking a bigger stake in the zombie franchise when he allowed them to pursue new legal theories, but AMC is now fighting back by arguing that the court doesn’t have the authority to rewrite its contracts.
AMC scored a win in 2020 in a high-profile trial over accusations that it shortchanged profit participants from revenue it receives for licensing the show to its affiliate cable network. Judge Daniel Buckley ruled that the parties’ contracts require the adoption of AMC’s definition and computation of modified adjusted gross receipts (MAGR), or the revenue the studio receives minus distribution fees, expenses and production costs.
But the case didn’t end there. Buckley allowed Kirkman, Gale Anne Hurd, David Alpert, Charles Eglee and Glen Mazzara to seek amended claims for breach of the implied covenant of good faith and fair dealing as well as tortious interference. The first allegation is based on accusations that AMC, knowing it negotiated the right to unilaterally define MAGR, waited until it knew about the popularity of the hit show and then defined it to limit payouts for profit participants. The second claim details a scheme in which AMC intentionally induced its subsidiary, which is not supposed to have direct knowledge of its parent company’s dealings, to breach its contracts.
In a motion to fend off another trial, AMC called the amended claims an attempt at seeking a “do-over” after losing at trial.
Plaintiffs want to “sweep away the contract interpretation trial as if it never happened, and obtain what this Court ruled they could not get: a court-created MAGR definition they never negotiated for and to which the parties never agreed,” reads the motion filed on Friday.
The argument is based on the theory that Kirkman and the producers cannot move for the court to strike and ultimately reinterpret their contacts with AMC because the issue was already decided.
To prove damages their implied covenant claim, plaintiffs would have to convince a jury that MAGR should be calculated using another method. AMC argued that would effectively nullify Buckley’s prior ruling that its definition is binding.
“Because the parties did not implicitly agree to a court rewriting the MAGR definition to comply with some judicially imposed definition of reasonableness, fair market value, or industry standards, Plaintiffs cannot recover damages for their implied covenant claim—and the claim fails,” wrote Scott Edelman, a partner at Gibson, Dunn & Crutcher, in the motion for summary judgment.
AMC also claimed that discovery confirmed that there’s no basis to allegations that it crafted a MAGR term to specifically limit recovery by Kirkman and the producers. Hundreds of other profit participants for numerous TV shows are under the same contract, it said.
AMC, which was a fledgling television company with no original series at the time Kirkman inked his deal, set its licensing fee at 65 percent of production costs.
“The undisputed evidence demonstrates that AMC did not deprive Plaintiffs of the benefits of their contracts—rather, AMC canvassed the market and selected a market-competitive imputed license fee that was equivalent to, and often better than, the terms offered by other cable networks,” the motion states.
On the tortious inference claims, AMC maintained that it cannot be liable for interfering with its own contract.
The limitations of this defense may become increasingly significant as others in the entertainment world might take to advancing the same tortious interference theory against companies that fund original series and license them to affiliate networks.
A summary judgment hearing is set for April 1 with a trial scheduled to start on May 2.
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