Gaumont Battles Ex-CEO Over Whether She Was Tricked in Separation

Narcos Still Mexico - Publicity - H 2018
Carlos Somonte/Netflix

Katie Marsh will have to re-plead her fraud claims against Gaumont Television. On Wednesday, a Los Angeles judge ruled Marsh needs to show more in her suit against the French studio behind such shows as NarcosHannibal and Hemlock Grove.

Marsh was recruited to be Gaumont's chief executive — and first employee — back in 2010, and she served in the position for five years before departing amid a restructuring. During her tenure, Marsh says she took less guaranteed compensation in favor of more incentive pay. As a result, she was due a 3 percent share of the defined net profits from Gaumont's shows. Upon her departure in 2015, Marsh entered into a separation agreement wherein she'd continue to receive such profit participation.

In a lawsuit in Los Angeles, Marsh alleges that despite these shows generating hundreds of millions of dollars, she's been shorted of profits. In particular, Marsh focuses on what Gaumont is deducting in expenses and costs. That includes a 15 percent "self-distribution" fee despite the fact that Netflix is the one responsible for streaming a series like Narcos. Marsh alleges that improper accounting has denied her "many millions of dollars."

Gaumont looked to end Marsh's fraud claims by citing the "economic loss rule," which basically means that one can't dress up an alleged contract breach as fraud.

In response, Marsh focused on the aspect of her suit that alleged that Gaumont knew at the time of entering the separation agreement that it had no intention of properly calculating her profit participation. Additionally, Marsh added that had she known the truth, she wouldn't have entered into the separation agreement. And if she had, she may have chosen a bigger upfront severance payout rather than contingent compensation.

On Wednesday, L.A. County Superior Court Judge Holly Fujie agreed in part with Marsh's arguments. The judge ruled that a fraudulent concealment cause of action wasn't barred by the economic loss rule. However, the judge dismissed the fraud claims for now because of a lack of detail about who exactly had made misrepresentations her way, by what means and when.

Marsh will have 30 days to file an amended suit.

In the meantime, the judge trimmed the litigation in other ways. For example, Fujie has thrown out Marsh's cause of action that Gaumont breached an implied covenant of good faith and fair dealing. There, the claim was deemed to be duplicative of the one for breach of contract. The judge also rejected a pair of Gaumont's counterclaims against Marsh premised on the way the former CEO allegedly kept and then misappropriated work materials. It was ruled that Gaumont filed such claims too late.

UPDATED 10/11: Gaumont gave us this statement: "We take great pride in our strong relationships with talent and executives, and focusing on how we can best support each other to achieve and enjoy success together is one of our top priorities. It is especially frustrating that someone would attempt to apply baseless, never-before-seen arguments, to discredit us in an effort to harm our reputation and our business. Gaumont established itself in the U.S. some years ago by making a large and long term investment in talent, executives and numerous intellectual properties, that as of today have not been fully recouped. We look forward to proving that Gaumont has done nothing wrong and that Katie Marsh is liable on the claims that Gaumont has asserted. No one has been tricked into anything. Ms. Marsh had a number of lawyers who were advising her throughout her relationship with Gaumont.”