Sylvester Stallone Suing Warner Bros. for Fraud and "Dishonesty"

Sylvester Stallone 88th Annual Academy Awards  - Getty - H 2016
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In the 1993 science-fiction film Demolition Man, Sylvester Stallone's character is brought out of a decades-long state of cryopreservation to pursue a nemesis. The actor himself has now wakened from a slumber of a different kind to take on Warner Bros. over its accounting of profits on the film. 

On Wednesday, through his loan-out company Rogue Marble, Stallone filed contract and fraud claims against the studio. In a complaint lodged in Los Angeles Superior Court, he alleges that the participation statement doesn't make sense while demanding a fuller accounting on Demolition Man, which also starred Wesley Snipes and Sandra Bullock. The film made about $58 million upon its theatrical release and much more in home video sales.

In taking on Warner Bros., Stallone is fighting the same studio that distributed 2015's Creed, which earned him an Oscar nomination. But the 70-year-old actor believes the time is right and is making a stab at doing something about "Hollywood Accounting" with the stated intention of helping others in the creative community.

"The motion picture studios are notoriously greedy," states the complaint. "This one involves outright and obviously intentional dishonesty perpetrated against an international iconic talent. Here, WB decided it just wasn't going to account to Rogue Marble on the Film. WB just sat on the money owed to Rogue Marble for years and told itself, without any justification, that Rogue Marble was not owed any profits. When a representative of Rogue Marble asked for an accounting, WB balked and then sent a bogus letter asserting the Film was $66,926,628 unrecouped. When challenged about this false accounting, it made a double-talk excuse, then prepared an actual profit participation statement for the same reporting period, and sent a check for $2,820,000 because the Film had in fact recouped its deficit."

According to the lawsuit, Stallone got 15 percent of defined gross once the picture earned $125 million. When Demolition Man earned more than $200 million, his take would escalate to 17.5 percent, and when it surpassed $250 million, his profit participation would climb to 20 percent.

Demolition Man, states the complaint, achieved at least $125 million, so Stallone asserts he's entitled to at least 15 percent.

Stallone says that after 1997, he got no profit participation statements until his agent reached out to Warners in 2014 to inquire. 

In January 2015, he received a short summary which noted an alleged deficit for the film and stated that no payment was due. Stallone's company then questioned the validity of numbers "because they did not make any sense." Soon, a second statement came along with a $2.8 million check. It was only one page. There wasn't much detail.

"Rogue Marble alleges on information and belief that it is owed additional contingent compensation on the Film," states the complaint.

The actor is seeking an unknown amount of restitution for the alleged contractual breach and also targeting much greater damages with a fraud claim. Stallone will be attempting to support the fraud claim by showing that the studio misrepresented and intentionally concealed facts. However, as the case moves forward, he'll likely need to demonstrate why such a claim isn't duplicative of the asserted contract breach.

Somewhat unusually, Stallone is also bringing a cause of action that alleges Warner Bros. has engaged in unfair business practices. The complaint characterizes the studio's conduct as "unscrupulous, unethical and offensive, and causes substantial injury to consumers" and "threatens or harms competition because other studios (that compete with WB) have their own agreements with profit participants and account using their own accounting methods. ... WB attempts to keep its accounting methods hidden from competitors and the public at large because revealing such methods will have an impact on competition."

Besides money, the actor wants injunctive relief. The complaint states, "Mr. Stallone is entitled to, among other things, a full accounting, an explanation of how this practice came to be, interest, damages, and an end to this practice for all talent who expect to be paid by WB for the fruits of their labor."

We've uploaded a full copy of the complaint. Stallone is represented by attorney Neville Johnson.

Warner Bros. had no comment.