Having to decide whether to knock down the cornerstones of a profit battle waged by Walking Dead creator Robert Kirkman and several executive producers seeking a bigger stake in the hit zombie series, the L.A. judge overseeing the case was faced with a simple question: Did AMC intentionally craft its contract to ensure that the makers of the series would never share in profits?
Judge Daniel Buckley indicated on Friday that he’s leaning toward ruling that AMC did not reverse engineer its contracts to shortchange Kirkman. The order would significantly whittle down the case over profits from the highest-rated television series in cable history.
In a tentative ruling, the judge granted summary judgment in favor of the network on claims for breach of the implied covenant of good faith and fair dealing as well as tortious interference. The only remaining allegations in the case are for audit claims.
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AMC scored a major victory in 2020 after emerging victorious in a high-profile trial over accusations that it cheated profit participants from revenue it receives for licensing the show to its affiliate cable network. Buckley found that the parties’ contracts require adoption of AMC’s definition of modified adjusted gross receipts (MAGR), or the revenue the studios gets from the series minus distribution fees, expenses and production costs.
But the case was revived in July when Buckley decided that Kirkman, Gale Anne Hurd, David Alpert, Charles Eglee and Glen Mazzara can pursue new legal theories by amending their claims. The breach of the implied covenant of good faith and fair dealing 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 to define it with the intention of limiting payouts for profit participants. The tortious interference claim details a scheme in which AMC induced its subsidiary, which is not supposed to have direct knowledge of its parent company’s dealings, to breach its contracts.
AMC called the amended claims an attempt at seeking a “do-over” after losing at trial.
During a heated in-person Friday hearing, attorneys for AMC and Kirkman sparred over the company’s intent when it came up with its MAGR definition and whether AMC’s licensing fees are competitive compared to the rest of the market.
Sheldon Eisenberg, representing the plaintiffs, argued that AMC acted in bad faith by proposing a contract with a “fundamental structural problem” that “made it impossible for Kirkman to earn contingent compensation.”
“AMC had to have done something with this definition that deprives Kirkman of what he reasonably expected — some profit participation if the show was successful,” he said. “We’re talking about the most successful show in history of cable television.”
One of Kirkman’s primary arguments is that AMC gave its affiliate a sweetheart deal to license Walking Dead because his fees are not competitive when compared with other networks. CBS, for example, agrees to reimbursement of 100 percent of production costs once a show reaches its fifth year on top of deficit reimbursement for previous years if the series is among the top 10 rated shows.
Without those provisions, Eisenberg said it’s “basic TV economics” that there cannot be a positive MAGR figure.
AMC attorney Scott Edelman responded that it does not matter what other networks offer. The test is not whether the contract is out of sync with the market, he said, but whether Kirkman got what he negotiated for.
“The test is, ‘Did AMC craft a MAGR definition with the intent to harm these particular plaintiffs and deprive them of contingent compensation?'” he said. “There’s just no evidence AMC did so.”
Edelman emphasized that the network has used the same MAGR definition in over 400 other agreements. He argued that it would not have done so if it was as unfair as Kirkman says because AMC’s terms need to be competitive to attract talent.
At the end of the hearing, Buckley did not signal that he planned to reverse course on his tentative ruling. He will no longer oversee the case if it goes to trial because he retires in May.
“I thought that at least one thing that would be resolved is if it’s MAGR or M-A-G-R,” he quipped.
Kirkman’s attorneys indicated they plan to forgo mediation if the court sticks with its tentative ruling. They are likely to appeal Buckley’s summary judgment order.
