3:10pm PT by Eriq Gardner
'Bones' Profit Participation Lawsuits Moved to Arbitration
Fox has managed to bury the eyebrow-raising Bones dispute deep in the bowels of arbitration.
The longest-running hourlong drama in Fox's history triggered not one but two lawsuits last year, the first from executive producer Barry Josephson and the second from stars Emily Deschanel and David Boreanaz. The allegations included word that 21st Century Fox CEO James Murdoch once said that Bones was perhaps the most profitable show in the network's history, as well as arm-twisting on the part of 20th TV chairmen Dana Walden and Gary Newman and executive Peter Rice, who were said to have threatened the profit participants into taking a lower license fee or face immediate cancelation.
What made the litigation even more noteworthy was the explicit details of so-called "Hollywood accounting," or as Josephson's complaint put it, the "veritable mother lode of accounting chicanery and self-dealing."
Court papers provided an almost Sony hack degree of secrets, including the precise licensing fees earned from countries worldwide and what the show paid for things like animal handlers, music and insurance, not to mention salaries for the directors and editors who worked on the series. Ultimately, a drama that took in nearly a half a billion dollars in its first seven seasons was in the red after expenses and distribution fees. A suspicious auditor's report flagged everything from the manner in which Fox was licensing the show to itself to the failure to report advertising revenue from episodes exhibited on Hulu and Fox.com. There were also claims related to VOD package deals, product integration, foreign taxes, home video money, a spinoff titled The Finder and much, much more. Not that any of the hiccups would be apparent from the basic accounting statement handed over by Fox:
Fox made its deals with the producer and stars in 2004, and the agreements included a provision ordering up arbitration for disputes pertaining to Fox TV's distribution of the series. Four years later, the participants came to a method for defining modified adjusted gross receipts.
The plaintiffs argued that this profits definition contained no arbitration provision and thus "superseded" the earlier deal. Fox disagreed. In its view, the definition merely became incorporated into the 2004 agreement and thus disputes regarding distribution were still arbitrable.
Regardless, Josephson's attorneys at Kinsella Weitzman portrayed the lawsuit as not a distribution objection, but as "plain vanilla" accounting claims challenging the way Fox categorizes certain revenues and expenses. They argued they weren't challenging Fox's decision to broadcast the series. Nonsense, retorted Fox, emphasizing the nature of Josephson's self-dealing claims and that the contract dealing with distribution also pertained to exhibition and exploitation. The deal over distribution "is not a narrow provision," wrote Fox's lawyer Glenn Pomerantz at Munger, Tolles & Olson.
Ultimately, Los Angeles Superior Court Judge Richard Ricco has sided with Fox's motion to compel arbitration, also rejecting plaintiffs' position that the arbitration provision was "unconscionable" because Fox didn't permit it to be negotiated and failed to attach JAMS rules. At a hearing earlier this month, the judge initially indicated that he'd wait until a May 4 conference to decide, but appears to have had a change of heart, issuing a decision to throw the case to arbitration and pause the litigation in the meantime. A post-arbitration status conference has been set for October, but as Bones now heads into its 12th and final season, don't expect to hear that much more detail about this case. At least for the time being. Maybe one day, dem bones gonna rise again.