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Assuming the world doesn’t witness an evolution in the current pandemic that turns lawyers into ravenous zombies, Frank Darabont and Creative Artists Agency may finally get their shot at going to trial and winning hundreds of millions of dollars from AMC in 2021. A lawsuit over Walking Dead profits has been lingering ominously for an astonishing seven years. Ever so slowly inching toward a trial date that has been repeatedly pushed back, the parties on Tuesday delivered a list of things they want banned from the forthcoming trial. The list is … esurient.
To quickly recap, Darabont and CAA are entitled to a share of profits from the hit show about survivors of a zombie apocalypse. They claim being cheated on the revenue side of the profits ledger, particularly with regards to what AMC Network pays to license Walking Dead from sister company AMC Film Holdings, which produces the show and must account to profit participants. They allege having self dealing protection in contracts, such that when a transaction is made with an affiliate, it must reflect the kind of arms length negotiation that AMC would make with third party producers like Sony (Breaking Bad) or Lionsgate (Mad Men). AMC responds that it is allowed to impute a license fee without the conditions the plaintiffs wish to impose, and Darabont and his sophisticated reps knew what they were signing up for a decade ago.
On July 22, AMC prevailed on its contractual interpretation in a separate legal fight with The Walking Dead creator Robert Kirkman and four other executive producers on the show. That case was filed in California years after the Darabont suit was lodged in New York yet somehow made it to trial first. AMC hopes to use the win to convince the New York judge to reconsider summary judgment, and thus avoid trial, but what happens in Los Angeles Superior Court isn’t binding on New York Supreme Court.
One of the biggest differences between the Kirkman trial and the prospective Darabont one is the format. The latter will be put to a jury, which means that both sides can be expected to posture when explaining Hollywood economics to regular citizens. Prepare for dueling tales of greed. It also means that both sides are now carefully looking to cull evidence and testimony they consider to be irrelevant and unfairly prejudicial.
No surprise then that in motion papers filed yesterday, Darabont’s side wants to keep the jury from hearing the vile things the Academy Award nominated director (The Shawshank Redemption, Green Mile) told colleagues in profane emails. Stuff like, “Everybody, especially our directors, better wake the f*** up and pay attention. Or I will start killing people and throwing bodies out the door.”
“[T]his is not an employment case,” his lawyers argue. “[W]hether Defendants chose to remove Darabont because he sent some emails that contained profane language or for another reason—or even if Defendants had a sinister motive for removing him, as Plaintiffs believe—is all completely irrelevant to the jury’s determination of the contract issues here.”
More intriguing, perhaps at least for Hollywood insiders, comes a request that the judge foreclose testimony and arguments related to the ongoing strife between talent agencies like CAA and WME on one hand, and the Writers Guild of America on the other. That scribes are accusing their agents of breaching fiduciary duties by collecting packaging fees could have AMC looking to employ some sort of divide-and-conquer stratagem at the Walking Dead trial.
In fact, the new court papers reveal the extent of the interplay between this massive profits case and the war between writers and agents. Remember, there’s a reason — controversial, it turns out — why CAA is a co-plaintiff in this case and a Walking Dead profit participant.
During Darabont’s deposition, according to the latest motion, AMC’s lawyer questioned him extensively about his knowledge of the WGA litigation and whether CAA’s interests presented a conflict of interest. In a question that CAA’s lawyer call misleading, Darabont was asked whether he knew his reps finalized the agency’s packaging fee before finalizing his deal with AMC. He was also asked, “If you learned, sir, that CAA’s packaging fee came off the top before your profit participation fee was calculated, would that upset you?”
Darabont was also told during the depo that his relationship with CAA had become the “number one example” in a WGA manifesto about talent agencies, and when his lawyer attempted to object to questioning, AMC’s lawyer said it “goes directly to the motive of CAA in screwing their client and lining their own pockets,” and “If anything, CAA has an incentive to sell their client down the river.”
New York Supreme Court Justice Joel Cohen is now told by plaintiffs’ lawyers that AMC “cannot fabricate a story out of thin air and then argue this ‘straw man’ theory to the jury for the sole purpose of trying to prejudice the jurors against CAA.”
That CAA screwed Darabont (who had his own lawyer) is deemed “nothing more than an illogical conspiracy theory” that’s irrelevant to the issues of the case.
AMC has its own list of things it wishes to preclude from the trial. Settlement communications, the company’s total profits, and exorbitant pay to its executives make the list.
Perhaps AMC’s most consequential ask pertains to the plaintiffs’ experts. Without the judge’s intervention, they’ll take the witness stand to opine on the fair market value of The Walking Dead. For years, AMC has been imputing a licensing fee for the show that some consider deflated. During the first four seasons, that fee was $1.45 million per episode. More recently, it’s up to $2.4 million. But Darabont’s experts — economic consultant James Dertouzos, transactional lawyers Richard Marks and Lee Bartlett, accountant Elaine Douglas — compute the fair market value as being between $18 million and $28.7 million per episode, which over the course of several seasons, is the impetus behind the estimation that hundreds of millions of dollars is owed to Darabont and CAA. The prospective testimony about the worth of Walking Dead — the highest rated drama in cable TV history, a show that boosted AMC’s fortunes like none other — is another feature that makes Darabont’s trial different than Kirkman’s. The latter never got to the damages phase, so a California courtroom was spared a close-up look at the economics of a monster hit.
In a motion, AMC aims to preclude “fair market value” evidence, which is just short of basically asking for victory in the case.
“Even if fair market value opinions were somehow minimally relevant, they should be precluded because they would result in undue confusion and needless mini-trials,” write AMC’s lawyers. “The jury’s task at trial is to determine whether the imputed license fee in AMC’s MAGR [profit] definition breached the Affiliate Transaction Provision (assuming the jury finds that provision applies). Plaintiffs’ experts’ fair-market value opinions would ‘distract the jury from [that] task’ … because they would incorrectly suggest to the jury that AMC was obligated to set the imputed license fee pursuant to an objective fair market value standard and that deviating from that standard breached the parties’ agreement.”
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