9:02am PT by Eriq Gardner
Fox Settles 'Bones' Suit, Ending Profits Case That Stunned Hollywood
After nearly half a decade battling the creative team behind one of TV's biggest hits, Fox has finally reached a settlement that will end the huge lawsuits over profit sharing for Bones. On Wednesday, the parties filed dismissal papers in Los Angeles Superior Court. The dispute draws to its conclusion, but amid continued consolidation in the media sphere and new streaming platforms being launched by studio giants the brawl over Bones is not likely to be forgotten anytime soon.
Back in 2015, actors Emily Deschanel and David Boreanaz, Kathy Reichs (a forensic anthropologist who authored the Temperance Brennan novels that formed the basis for the series) and executive vp Barry Josephson went to court with the allegation that they had been defrauded by Fox of their rightful profit participation in a show that ultimately lasted 12 seasons. The profits, or lack thereof, became heavily dependent on what Fox's studio division (a production arm now owned by Disney) charged Fox's distribution affiliates — a broadcast network, foreign stations and, especially, the part-owned Hulu — for rights to air and stream the show. The main issue in the case was whether Fox undercharged license fees to its sister companies to derive much of the spoils of the series to the detriment of those expecting honest accounting.
In February, arbitrator Peter Lichtman released an eye-popping decision.
Awarding $179 million in damages, Lichtman rejected Fox's proposition that Bones was just a middling show with middling ratings that would have been canceled but for higher license fees. The arbitrator saw evidence of multiple frauds on Fox's part, including the underhanded way the production company attempted to limit its liability over the years by having creative talent sign releases. Additionally, Lichtman found it nearly inexplicable that the Fox studio producing Bones permitted its parent company to exploit streaming rights and license those rights to Hulu without much of anything in return.
But the truly shocking part of Lichtman's decision was his attack on Fox's top television executives (many of whom now work for Disney). The arbitrator said these individuals "appear to have given false testimony in an attempt to conceal their wrongful acts" and that Rupert Murdoch's Fox at large has taken a “cavalier attitude toward its wrongdoing" while exhibiting a "company-wide culture and an accepted climate that enveloped an aversion for the truth."
Lichtman believed in the necessity of punitive damages given Fox's "reprehensible" fraud.
The parties then went back to open court, and an L.A. judge in May trimmed the award down to $51 million on the basis that Deschanel, Boreanaz and Reichs were entitled to actual damages and legal fees under their Bones agreements, but not any punitive damages.
The parties — led by John Berlinski on behalf of the actors and Reichs; Dale Kinsella representing Josephson; and Daniel Petrocelli on behalf of Fox — have now reached a settlement and avoided an appeal that would have been put $128 million on the line (in addition to the $51 million that Fox previously acknowledged it would pay pursuant to the arbitrator's decision). Neither side has made the terms of the resolution available, but both sides had cause to be confident in the appeal, so the settlement is likely to be a significant sum.
The arbitration award, subsequent tussling and ultimate resolution come at a particularly significant time for Hollywood.
Many of the entrenched powers in Hollywood are growing bigger (see AT&T's acquisition of Time Warner or the recent merger between CBS and Viacom) and aiming to take on Netflix. The vertically integrated giants are now pulling hits — like NBCUniversal's The Office or Warner Bros.' Friends — from Netflix in favor of distributing these series on their own splashy streaming platforms being launched in the coming year.
Perhaps influenced by the Bones decision, new license deals for shows including The Office and Friends to wholly owned streaming platforms are being completed carefully and generating a lot of money for profit participants. Meanwhile, Disney is said to be experimenting with a new compensation structure for top TV creatives.
Will the industry change?
In his decision, Lichtman was doubtful of anything meaningful, questioning whether awarding even a nine-figure sum "given Fox’s financial condition and lack of contrition serves to deter the wrongful conduct at issue here, or whether it will be considered part of the cost of doing business."
It's also true that entertainment executives will often brush off legal strife.
Last month, for example, at the Television Critics Association's summer press tour, Fox Entertainment CEO Charlie Collier touted profit participation as being the company's competitive weapon against Netflix. The exec, who could be featured next year at a trial in a similar profits fight over AMC's The Walking Dead, said, "We at Fox Entertainment believe in creating and sharing with talent the holy grail of television: the backend."