12:51pm PT by Eriq Gardner
Playboy Hit With $12M Lawsuit Over "Enron-Style Accounting" on Branded Vodka
Playboy Enterprises is being accused in a $12 million lawsuit of a naked attempt to hide commission obligations over Playboy-branded liquor.
The complaint was filed on Monday by Broad Street Licensing Group, which says that in 2012 it came to an exclusive two-year agreement to act as Playboy's exclusive licensing agent for spirits. Thereafter, the plaintiff claims it arranged a deal with VuQo Inc., a Philippines-based company to manufacture Playboy-branded vodka made from coconut nectar. Playboy was to get tens of millions of dollars in minimum guarantees with BSLG extracting a 30 percent commission, according to court papers.
BSLG says it got its promised cut of $2 million in advance payments made in 2012 and 2013, but was informed in July 2014 that the VuQo deal was terminating.
However, Playboy allegedly then made a direct deal with VuQo's lead investor. "Not surprisingly, this 'new' Playboy-branded vodka is identical to the VuQo-manufactured Playboy-branded vodka: the vodka, the bottles, the label — everything is the same," states the complaint.
The plaintiff says that its agreement with Playboy is such that it is entitled to commissions for any deal during the term it acts as exclusive licensing agent, plus one year following termination. "To make matters worse," the complaint continues, "Playboy has also refused to pay BSLG commissions on $800,000 in royalty advances Playboy received in March of 2014 from VuQo, claiming — in a feat of accounting that would make Enron jealous — that these funds were 'returned in the form of a credit to [VuQo's lead investor] toward a future relationship with Playboy.' "
BSLG says "credit or not," it is entitled to commissions, and after challenging Playboy's "sham accounting," it was given the explanation that Playboy "independently" formed a relationship with VuQo's investor.
And so, in a dispute that somewhat mirrors what happens when talent switch talent agents and look to avoid paying commissions to old reps (except this time, vodka stands in as the talent), BSLG asserts breach of contract as well as breach of implied covenant of good faith and fair dealing while praying for damages not less than $12 million. The plaintiff is represented by David Swift at Kinsella Weitzman.
The Hollywood Reporter has reached out to Playboy for comment.