'Spinal Tap' Co-Creators Urge Judge to Keep Fraud Claim Against Vivendi

Reiner - Spinal Tap - H - 2016

Does the profits lawsuit against Vivendi over This Is Spinal Tap amount to no more than an alleged failure to properly account for royalties? Or has Vivendi and its subsidiaries perpetrated a fraud? The difference, especially as it implicates potential damages, is quite meaningful, and so on Thursday, Spinal Tap co-creators Harry Shearer, Rob Reiner, Michael McKean and Christopher Guest opposed a motion to throw out a fraud claim.

In the ongoing $400 million case, Vivendi wishes to limit the stakes to what the four co-creators are owed for the exploitation of a 1984 movie that generated less than $5 million in theaters when it came out. In Vivendi's motion submitted in late December, the defendant argues there's nothing more here than an "ordinary" breach of contract claim.

Believing that Vivendi has lied over the years and used shady accounting subterfuge to hide the success of a cult film, the plaintiffs argue otherwise. They tell a California federal judge on Thursday that the "economic loss rule," which pretty much disallows the tortification of contractual harm, doesn't preclude them from pursuing fraud because Vivendi's actions were intentional.

In some respects, this is the typical give-and-take that one will find in Hollywood accounting cases at this stage. Vivendi sees a quibble over what's owed. The plaintiffs see knowing misrepresentations. 

However, there may be something unusual in the way that Shearer's crew is pointing to the way Vivendi's alleged fraud supposedly devalued the Spinal Tap property.

"This devaluation has injured Plaintiffs far beyond the loss of accounting royalties," states the plaintiffs' brief prepared by the firm of Ballard Spahr. "It has led to unauthorized and widespread use of their Spinal Tap characters' and the Plaintiffs' own names and likenesses; has frustrated Plaintiffs' ability to market related creative projects; has, by promulgating the fiction that This Is Spinal Tap was a commercial failure, blocked a host of related opportunities which these artists, notwithstanding their success in other areas, would otherwise have developed."

The plaintiffs say they've experienced personal damages like reputational harm from what they call "the public slander of commercial failure," and tell the judge they're prepared to further amend the complaint to allege these facts in greater detail.

As to the core issue of contract vs. fraud, the Spinal Tap co-creators are emphasizing the representations over the years that accounting statements were truthful and accurate as well as how defendants' agents allegedly told them of "using all available means to promote Spinal Tap assets and enforce Spinal Tap intellectual property to maximize revenue for the creators."

Studios are often afforded wide discretion over the exploitation of entertainment works, so here, the plaintiffs further attempt to highlight alleged "anti-competitive and unfair business practices" ranging from how assets have been shifted among affiliates to the cross-collateralization of revenues stemming from the bundling of Spinal Tap with unsuccessful films in distribution agreements.

"Had Defendants disclosed to Plaintiffs these concealed material facts, Plaintiffs would have acted differently, including by, without limitation, shifting control of the exploitation of these assets away from Vivendi and seeking to recover and enforce trademarks and other intellectual property rights many years earlier," states the opposition brief.

Here's the full filing, which also argues that Universal Music Group is properly a defendant in this case because of its responsibility over sound recording revenues. The plaintiffs also object to UMG's argument that an attempt to reclaim rights through copyright termination isn't ripe for adjudication.

"The notion that UMG will take a position different from its corporate parent defies credulity," continues the brief. "But in any case, judicial economy supports joint adjudication of the validity of termination notices which have identical effective dates and will terminate copyrights related to the same property, This Is Spinal Tap. Vivendi's public threats have also placed at issue the future ownership of rights controlled by Vivendi entities."