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Last week, a Los Angeles Superior Court jury got to hear a new Columbo mystery and came to the conclusion that Universal City Studios wasn’t allowed to deduct $160 million in distribution fees for the 1970s detective series. The verdict amounts to a big initial win for series co-creator William Link and the heirs of co-creator Richard Levinson, who waited 45 years before getting their first profit participation check despite Columbo taking in more than $600 million in revenue during its life cycle.
Through loan-out companies, Link and Levinson’s heirs are suing Universal with contract and fraud claims. The lawsuit is another on the “Hollywood Accounting” front, and this one is both an investigation of what happened decades ago as well as one of the rare instances of a fraud case against a major studio actually getting to trial.
According to the complaint, Link and Levinson were entitled to at least 10 percent, and up to 20 percent, of net profits from the NBC series arising out of a contract signed in 1971 — but no profits came until 2016 when Universal issued accounting statements and payments totaling about $5 million.
What happened to all the other money for the series that starred Peter Falk?
That question first took a backseat to whether Link and Levinson’s heirs made a timely objection or whether their claims were barred by the statute of limitations.
The plaintiffs pointed to an important 2017 appellate ruling reviving a profits case against Disney over Home Improvement for the proposition that the trigger point for contesting their lack of profits came only after Universal issued an accounting statement in 2016. In turn, Universal argued that any incontestability clause in the profit sharing agreement didn’t excuse Link and Levinson from having to sue within four years of a suspected breach of their contract —accounting statement or no accounting statement.
At trial, both sides presented evidence of what happened decades ago with the jury rendering a verdict that neither Link and Levinson had discovered facts until recently that would have caused a reasonable person to suspect profit cheating. Thus, Universal’s attempt to foreclose claims fail.
Next onto the specifics of how Universal accounted for net profits on Columbo.
The plaintiffs are seeking $135 million in damages for all the ways Universal allegedly kept the show in deficit. That includes issues related to home video revenue, worldwide television syndication, and whether it grossly overstated production costs. One big chunk pertains to whether Universal was allowed to deduct “distribution fees” on top of “distribution expenses.” Both sides had dueling interpretations of the contracts and obligations, and they each had experts testifying about meaning of ambiguous contract language and industry custom. Plaintiffs estimate that once distribution fees are properly put back into net profits, the revenues swell by $162 million with Link and Levinson enjoying a contractual share of $21.5 million. Although the jury didn’t award damages, the jurors last Thursday at least decided that Universal wasn’t allowed to deduct distribution fees when it acted as the distributor of Columbo.
The case now moves onto a new phase, and both sides are scheduled to brief Judge Richard Burdge today on the issues that remain pending.
According to briefing prior to the trial, such issues may include whether the profit agreement entitles Universal to deduct Falk’s own profit participation payment and whether Universal is allowed to offset losses from the second cycle of Columbo — that being when ABC begin airing new episodes in the late ’80s as part of the network’s weekly “Mystery Wheel.” Universal says those episodes were far less successful and remain unrecouped by $65 million. Universal contends “cross-collateralization” was allowed by contract.
The judge will decide whether another jury trial is in order to resolve remaining disputes or whether to appoint an accounting referee to calculate cumulative damages based on an aggregate of all the rulings.
The plaintiffs are represented by a team led by Alton Burkhalter at Burkhalter Kessler while Universal is being handled by a team led by Robert Klieger at Hueston Hennigan.
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