Hollywood Docket: 'Crash' Ruling; Grammy Lawsuit; Oscars Battle

A roundup of entertainment law news, including a lawsuit against TBS for allegedly ruining a Sunset Boulevard restaurant.
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Paul Haggis

Paul Haggis, Brendan Fraser and others involved in Crash have successfully gotten a California appeals court to affirm a trial judge's determination that they are due $12 million from the the 2005 Academy Award best picture.

The long-running dispute involves companies controlled by the film's producer Bob Yari, alleged to have employed "creative accounting" to divert money from profit participants. Haggis, Crash's director, was to receive 50 percent of adjusted gross receipts, but after an audit, the film's principal backer, Persik Productions, stated it had miscalculated the third-party participations of other investors, reducing the profits available to Haggis and others.

The dispute went to a bench trial in 2011 and afterward, a judge gave Haggis a victory, determining that Yari's companies "breached the contracts with the plaintiffs by diverting funds to third parties; adopting bogus contractual interpretations; refusing to correct accounting errors in a timely manner; adopting inappropriate accounting procedures that were contrary to industry standards; and, ultimately, using all of these to avoid paying plaintiffs money due under contracts."

On Friday, a California appeals court affirmed the trial judge's interpretation that the contract provided Haggis with profit participation on all of the film's gross revenue and not just gross revenue after deducting a third-party investor's share. Additionally, the appeals court ratified the way the trial judge had calculated contingent compensation and classified payments to Lions Gate. Here's the full ruling.

If there's a small saving grace for Yari, the appeals court in a separate ruling reversed the trial judge's decision that Yari be held personally liable. The $12 million judgment impacts many of Yari's companies, but the appeals court failed to establish the application of alter ego liability.

In other entertainment law news:

  • The National Academy of Recording Arts & Sciences is suing music website Hitlab for allegedly breaching an agreement to become a promotional partner on the Grammy Awards. The lawsuit filed in California federal court claims $1.675 million in damages. By becoming a sponsor, Hitlab got the right to use the Grammy mark. The lawsuit also contains a copy of Hitlab's Grammy agreement, which provides free tickets and party passes as well as the right to hold contests. See here.
  • Meanwhile, the Academy of Motion Picture Arts and Sciences has kept the judge overseeing its Oscars trademark battle with GoDaddy. Last month in a motion to recuse U.S. District Judge Audrey Collins, the domain registrar giant accused AMPAS of attempting to "game" the judicial system by having all of its lawsuits referred to the same supposedly favorable judge. The matter was referred to another federal judge, who called GoDaddy's motion frivolous and potentially sanctionable.
  • More games: The owner of an Indian-Mexican fusion restaurant on Sunset Boulevard says in a lawsuit that his hotspot was ruined by TBS' hidden-camera prank show Deal With It. The plaintiff says that TBS, Howie Mandel and the show's host Theo Von promised to avoid property damage, but that in October, Four Years Productions allowed an actress to "create loud noise, curse, yell obscenities, jump up and down on the Moroccan tiles of the fire pit and violently throw and break $200 worth of dishes on the floor." He says his "in shambles" restaurant has lost customers as a result.
  • Two notable Hollywood deal lawyers are reuniting. Liner LLP has added veteran Robert Kahan to its stable. Kahan was a partner with Stanton "Larry" Stein for 33 years until the two went their separate ways in 2009. At the time, Stein joined Liner while Kahan decamped to Eisner & Frank. Now, Kahan, who is a board member at the Tony Hawk Foundation, has joined Stein at Liner in the interest of bolstering the firm's corporate law practice.