12:32pm PT by Eriq Gardner
Disney Can't Escape $37 Million Fraud Claims From Bill Nye the Science Guy
Based on the observation that his 1990s television show continues to be enjoyed by audiences, Bill Nye the Science Guy has a theory that Disney and its subsidiaries have shortchanged him of millions in profits. On Thursday, over Disney's objection that Nye needed better support to test his hypothesis, a Los Angeles Superior Court judge suggested he would be allowed to move forward on various claims, including fraud.
Nye filed his lawsuit in August. He alleges that he had a deal with Disney's Buena Vista Television that ultimately entitled him to 16.5 percent of the net profit pool. Nye says that a decade ago, he became suspicious of royalty calculations based on an "accounting error" but had to wait several years to get an audit. He now identifies alleged underreported payments and accuses the defendants of failing to produce license agreements with Netflix and Apple so he can determine what's really owed.
This might sound like the setup to a typical Hollywood accounting case, but there's one element here that perhaps transcends the usual into the legal equivalent of quantum physics.
Nye alleges a joint venture relationship with the Disney defendants for the promotion, exploitation, and distribution of Bill Nye the Science Guy. What that means, in the judge's eyes, is that with one caveat, Nye has properly alleged the existence of a fiduciary relationship.
It's a notable development, as Nye is certainly not the first profit participant in the entertainment industry to ever assert fiduciary duties in regard to accounting. Most famously (at least among insiders), Gary Wolf, who authored the book that was turned into Who Framed Roger Rabbit, once lost a claim that Disney breached fiduciary duties when a judge determined that contingent entitlement to future compensation does not alone give rise to such a fiduciary relationship.
So how is the Nye case different?
According to L.A. Superior Court Judge Dalila Lyons, "Unlike Wolf v. Superior Court, which Defendants rely upon and in which the plaintiff had created a finished product and assigned rights to Disney so the plaintiff was only entitled to future compensation from the use of the rights and there was no joint relationship between the two, here there is such joint relationship and the parties were working on a continuing product with subsequent improvements made for the benefits of all parties involved in the joint venture."
That comes from a tentative ruling, and according to one of the plaintiff's lawyers, the judge's analysis at the hearing didn't really change, although Nye may need to re-plead his fraud claims given that Disney won an acknowledgement that a joint venture would cover losses as well as profits. That might mean extra language in an amended complaint and perhaps would become important down the line, but doesn't seem like a barrier towards asserting the existence of a joint venture in the first place.
The judge's tentative went on to accept as sufficient for the time being Nye's claim that for over two decades, Disney and its subsidiaries engaged in a fraudulent scheme to conceal the true profits from the exploitation of the series. At least $37 million in damages is alleged. As for a second fraud claim about how Nye was allegedly induced into an agreement and how the defendants made false promises and misrepresentations thereafter, Nye was allowed to move forward in the tentative against Disney and Buena Vista, although again, based on some small wrinkles articulated at today's hearing, he may need to do a bit more work on the amended complaint.
Nye does lose his fraudulent inducement claim against ABC and Touchstone Television, with leave to amend to more specifically show their respective obligations to him. The same largely goes for other causes of action, including breach of contract and breach of the covenant of good faith and fair dealing, where Nye is at least in the game with Buena Vista.
Disney may have wished to limit this case to what was owed under a contract, but Nye appears primed to explore a bit more than that. At the moment, Disney is cheering what it did get. The company sent us a statement that reads, "We're pleased the court ruled in our favor. As we've said, this lawsuit is a publicity ploy, and we will continue to vigorously defend against it."
The plaintiff is represented by the firm of Hamrick & Evans, while the defense is being handled by Mitchell Silberberg & Knupp.