'Conjuring' Producer Calls Warner Bros.' $750,000 Check Insufficient for Sequels

When Warner Bros. officially announced on July 7 that the sequel to The Conjuring, entitled Annabelle, would come out this autumn, it might have been under normal circumstances a celebratory moment for those involved in building the budding horror franchise. After all, the first film grossed an astounding $318 million worldwide. Instead, the announcement added more fodder to an ongoing legal dispute that has thus far been fought at the Trademark Office, in arbitration and in three federal lawsuits.

Just a few days before the Annabelle announcement, Warner Bros.' New Line division sent a $750,000 check to Tony DeRosa-Grund's Evergreen Media Group. DeRosa-Grund was a producer on the original film and believes himself entitled to participate on the sequels. But the check wasn't fat enough to quell the fighting.

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"While the aforementioned check represents a large amount of money, in making said payment Defendants were the proverbial 'day late and dollar short,'" states a new complaint that was proposed to a Texas judge on Friday. "In this case, five months late and potentially over one hundred thousand dollars short."

The story of how The Conjuring spooked up a great amount of legal arm-twisting starts with real-life paranormal investigators Ed and Lorraine Warren, who in the mid-20th century worked on some 8,000 cases and kept detailed files about their work on such investigations as those involving a demonic Raggedy Ann doll that terrorized a family and a single mother whose children kept witnessing strange things at home.

Imagining that these case files would be ripe for big-screen adaptation, DeRosa-Grund acquired rights from the Warrens, whom he had known for nearly a quarter-century. According to new court filings, DeRosa-Grund almost set up a film project with Summit Entertainment in 2009 before it backed out over concerns about "chain of title," legal speak for whether all rights were properly cleared. At the time, DeRosa-Grund was in the midst of Chapter 7 bankruptcy, and the U.S. Trustee was suggesting that perhaps the bankruptcy estate owned the files, along with the Warren life rights and a proposed story treatment based on one of the case files.

New Line then stepped in to the bankruptcy process to save the day. Or did it? According to Evergreen's lawsuit, the film studio wasn't exactly the savior that provided relief when DeRosa-Grund's assets were on the chopping block. New Line's willingness to get a deal done was "chameleonic," says the plaintiff, but after getting the trustee and bankruptcy court to approve the transfer of assets, New Line began to "show its true colors" by failing to turn a deal memo into a long-form agreement. Faced with the proverbial "take it or leave it," DeRosa-Grund felt he had to execute the deal memo.

The decision paved the way for the top-grossing Conjuring film, but then set off an intense fight over the scope of rights. Lately, the litigation has morphed into cries that New Line has made numerous misrepresentations along the way.

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Right around the time Conjuring hit theaters in July 2013, the parties began pointing fingers at each other at the Trademark Office.

DeRosa-Grund reserved rights for a Conjuring TV series and came close to a deal with Lionsgate (which owns Summit), but Warner Bros. objected to another entertainment property with the same title, covering the Warren case files. Because the deal memo had an arbitration clause, the dispute was then handed off to a private arbitrator, but DeRosa-Grund's company wanted the fight in open court and didn't believe the arbitrator had enough authority to remedy the situation. And so, while the dispute still is being arbitrated, Evergreen has filed several lawsuits, the most recent coming last week in Connecticut against the Warrens directly and their new book publisher.

Meanwhile, in a Texas court, DeRosa-Grund is fighting Warner Bros. and has asked a judge to look into his allegations of breach of contract, fraud, tortious interference, conversion, defamation and more. Besides demanding what he says is owed — $2,777,390 in profit participation from the first film, plus punitive damages — DeRosa-Grund wants the federal judge to order the defendants to halt the Annabelle film.

The basis of his claims is laid out in a fresh new complaint (read in full here), meant to rip up the prior ones with more detail, newly discovered information and some nods to other pending Warners/New Line disputes like Harvey Weinstein's fight over Hobbit profits and Tess Gerritsen's fight over Gravity.

The plaintiff alleges that New Line licensed 25 Warren case files, and that the deal didn't originally include the Annabelle case file nor one covering the "Enfield Poltergeist" case, the basis for another Conjuring sequel said to be in development. The deal contemplated various payments, but according to the lawsuit, New Line initially took the position that it wasn't required to pay anything for Annabelle because it was to be a "direct-to-video" production and outside the scope of the agreement.

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Then came the Annabelle announcement earlier this month, and then a $750,000 check, but Evergreen claims the studio's decision to release it theatrically came much earlier. The lawsuit states, "One of the most telling facts is that registration reports from the MPAA show that, four days after the premiere of the The Conjuring theatrical motion picture, New Line registered the title 'Annabelle,' i.e., on July 23, 2013, for use as a title in connection with a theatrical motion picture."

Even if the movie was supposed to be a direct-to-video production, DeRosa-Grund asserts that New Line had no right to make it under their agreement.

Of course, New Line appears to have made more than the one deal for The Conjuring franchise. The studio made a deal directly with the now-87-year-old Lorraine Warren as well, which, depending on how DeRosa-Grund's court case goes, will mean that Annabelle is fully licensed anyway or will be deemed tortious interference in the dealings between him and Warren. The lawsuit says the film studio "conspired over the past several years" to keep the terms of the allegedly improper arrangement secret until recently.

In a recent motion to dismiss filed by New Line, the defendant cites The Demonologist, a 1980 book about the Warrens that included both the Annabelle and Enfield investigations, as covering historical facts, which can't be copyrighted. New Line believes DeRosa-Grund's claims are preempted by copyright law, but argues he can't make an actionable claim over material that's not protected. Previously in the case, the studio has also pointed to the express terms of its agreement with DeRosa-Grund as providing cause for victory.

The litigation covers more than just a settling of rights, but also compensation, credits and participation on the sequels. According to DeRosa-Grund, he was told during the initial negotiations that he'd be a producer on all films based on the case files and that he'd get profit participation on the sequels too. That latter point appears to have not made its way into the rights agreements. New Line allegedly insisted it never included profit participation in deals, but Harvey Weinstein's dispute over the Hobbit films is coming up as evidence to the contrary.

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DeRosa-Grund is also looking to collect the nearly $2.8 million contingent compensation from last year's successful film, but the lawsuit nods to an argument that New Line has now presented in the arbitration over the withholding of the money. The studio, which declined comment, is said to be raising a claim that he breached contract by failing to hand over the physical Warren case files.

As if the case couldn't get more troublesome, DeRosa-Grund also objects to the defendants "purposely disseminated public relations stories with fabricated scenarios about the origins of The Conjuring," refusals to allow him in to screenings, and statements about his character, reputation and business.

Annabelle is set for release on Oct. 3. Before then, we expect a judge to weigh in on the defendant's motion to dismiss or suspend the proceedings as well as any preliminary injunction motion made by DeRosa-Grund. Those rulings could set the table on just how scary this lawsuit will be for Warner Bros.

Email: Eriq.Gardner@THR.com
Twitter: @eriqgardner