Infamous Franchise Pictures Blow-Up Ends with Arbitrator Clearing Bank of Wrongdoing

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Elie Samaha

After years of litigation, an arbitrator has rejected claims that Comerica Bank breached its duties and obligations when loaning a large fortune for making of dozens of films. The arbitrator has ordered German film distributor Intertainment to pay the bank, Comerica, more than $9 million in attorney fees and costs, marking what looks to be the final chapter in the Franchise Entertainment saga, one of the biggest Hollywood blow-ups of all time.

The dispute dates back to the turn of the century when Intertainment and Franchise, led by Elie Samaha, signed a deal, with the help of a bank and bond-holders, that had the potential of creating the next big Hollywood studio.

More than $500 million was put up for the making of more than two dozen films. Intertainment made a financial commitment in exchange for rights to distribute the pictures overseas. Unfortunately, many of Franchise's films were huge bombs, including Get Carter, 3000 Miles to Graceland, Angel Eyes, Heist, and Battlefield Earth.

The failures left the parties pointing fingers at each other, leading to a high-profile lawsuit that culminated in a 2004 judgment. For wrongfully inflating budgets, Franchise was ordered to pay Intertainment $121.7 million.

But that wasn't the end of the dispute.

For the past eight years, Intertainment has been battling Comerica (the successor to Imperial Bank) over the financier's role in what happened.

Comerica first brought an arbitration claim against Intertainment for more than $73 million allegedly owed as part of loan agreements. Intertainment hit back with counterclaims that the bank had aided and abetted the fraud, made misrepresentations, and had induced it into making loan agreements.

The loans were eventually repaid, taking care of Comerica's claims, but Intertainment continued to seek a finding that its financier was involved in a conspiracy that had left the Germans defrauded.

On Monday, Sol Rosenthal, the presiding arbitrator, dismissed with prejudice Intertainment's remaining claims. The arbitrator ruled that insufficient evidence was presented to establish that Comerica, repped by Stroock & Stroock & Lavan, participated in the preparation of the budget or had knowledge about what was going on. Because Comerica didn't accept any contractual obligation to participate in the process of budget preparation, it was also found that the bank didn't owe any duty of care to make sure things turned out well.

As the prevailing party, Comerica got its attorneys' fees and legal costs, which were considerable considering the lengthy time spent on the case and the complexity of the issues involved. Intertainment has been ordered to pay $9,278,075. Ouch.


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