6:41am PT by Eriq Gardner
AMC Seeks Victory in 'Walking Dead' Accounting Suit
Circle the calendar: June 1, 2020. That's when AMC is set to square off at trial against Walking Dead co-creator Frank Darabont and Creative Artists Agency. There's hundreds of millions of dollars on the line plus accusations of self-dealing and underhanded accounting.
On Monday night, AMC sought victory in the dispute's undercard — the follow-up suit that targeted AMC's specific accounting practices. AMC is now seeking summary judgment from a New York judge on the basis that an agreement with Darabont governs profit participation and forecloses any claim that the contract was breached. In other words, AMC asserts that it has honored the profit deal for the zombie series.
Like many showrunners in the TV business, Darabont negotiated for a percentage of the show's backend, but that alone means little. As many Hollywood accounting cases have proved time and time again, what matters is the details — how the series' "modified adjusted gross receipts," or "MAGR," was defined. For instance, what sort of production costs and distribution fees could AMC charge in the calculation of profits?
In summary judgment papers, AMC asserts that in February 2011, a few months after Darabont signed his Walking Dead agreement with AMC, he was provided with a MAGR definition. Darabont's lawyers will perhaps object to the significance of this, but for now, AMC wants the judge to deem its MAGR formula as operative.
"Despite the fact that Plaintiffs cashed their checks and pocketed the millions of dollars in MAGR payments that AMC made in accordance with that contractually-agreed upon formula, Plaintiffs now attempt to rewrite the contract to seek even more money," states the summary judgment memorandum.
AMC has its interpretation of what the MAGR formula means.
As the summary judgment brief continues, AMC is expressly allowed a 20 percent distribution fee on home video distribution, allowed to keep revenue derived from product placement, allowed a 50 percent distribution fee on merchandising, allowed to deduct fees for lawyers and security consultants, allowed a 50 percent distribution fee and 15 percent administration fee on music publishing receipts, allowed to deduct advances to other profit participants, and has applied interest appropriately.
Here's the full memo spelling out AMC's arguments.
The plaintiffs had this statement: "Having had their deceptive and faulty accounting practices exposed, it is little surprise that AMC again seeks to avoid facing a jury. The motion is based on a bogus interpretation of Darabont’s contract and should be denied. We look forward to trial on June 1."
Darabont's side appears ready to look to the 2010 agreement plus settle any ambiguity with industry custom to arrive at a more favorable accounting treatment.
No matter how the judge rules on this summary judgment motion, it won't obviate the need for a trial on the larger-stakes issue of whether Walking Dead requires arms’ length, fair market license fees.