Excerpt from
How the Movie Wars Were Won
by John W. Cones

Sue Us --The Studio Litigation Strategy

"In virtually every film where artists, directors or
writers are promised a percentage of the net or the
gross, a dispute arises in which auditors have to be
called in to see what fell into the cracks. Lawyers
and accountants say every studio in town appears to
have trouble with arithmetic."-
-- Art Buchwald

A review of comments relating to film industry disputes in industry literature suggests that most of such disputes between net profit participants and the studios never reach the litigation stage. Many actors, actresses, directors, producers and screenwriters who are either net or gross profit participants are already involved with the same studio (or another major studio/distributor) on their next film before they realize that the studio may be failing to properly account for their interest in net or gross profits. Thus, many of those people simple choose not to challenge the studio's bookkeeping, because of the reasonable fear that such a challenge might interfere with their ongoing working relationship with the studio. A relatively few others choose to use so- called self-help methods by holding back their services on a future project that the studio wants, until the studio straightens out its accounting. Few people have that kind of leverage, however.

Still others, might choose to audit the studio. But, even then, after the audit is completed and it is determined that the studio has not properly accounted for its revenues, (which is typically the case) the auditor can only make a demand on behalf of his or her profit participation client against the studio. And, the studio typically will admit some mistakes, miscalculations or contract misinterpretations (all of which favored the studio), but then offer some round-dollar amount that is far smaller than what should have been paid. Thus, the profit participant, has an opportunity to obtain some money, but not nearly as much as is actually due, and typically, must agree not to litigate and not to talk about the transaction as part of the settlement.

If on the other hand, the profit participant chooses to sue the studio, the expensive litigation process will be drawn out over a long period of time and eventually, just prior to trial another settlement offer will be made. Again, this offer will be far below what is really owed, and the profit participant again has an opportunity to receive some money, but again, an amount that is not nearly as much as should have been paid. If the profit participant settles, the settlement agreement, again, will include a gag order, so that the profit participant cannot publicly complain about how he or she has been treated. If on the other hand, the profit participant chooses to go to trial, it is much more likely that such a profit participant will be effectively blacklisted in Hollywood (i.e., the profit participant will find it much more difficult to find work in the Hollywood-based film industry).

This appears to be the long-established pattern with respect to how the film industry's major studio/distributors handle litigation. Of course, the studios also do everything they can to prolong the time it takes to litigate such claims and they are typically in a much better position to finance such protracted law suits as opposed to the plaintiff profit participants. In addition, the studios receive some benefit from being able to use the profit participant's money during the course of the law suit. Thus, there is little reason for the studios not to pursue such a strategy with respect to litigation.

Necessary to Sue--On the other hand, director Brian De Palma claims that "[p]art of doing business in this community is that you normally have to litigate to collect money owed you." Again, however, neither Brian De Palma, nor anyone else has developed reliable statistical information to support his contention. In other words, we really do not have any idea what percentage of people in Hollywood have to sue to collect money owed, how many should have sued but chose not to and how well those who did sue came out. And, neither does Brian De Palma.

Cost of Doing Business--Representing the studio perspective, Helen Hahn, the head of legal and business affairs at Walt Disney Studios (at the time of the Buchwald v Paramount lawsuit) is quoted in Pierce O'Donnell's Fatal Subtraction book as saying: " . . . the studio (specifically referring to Paramount) doesn't care if there's a lawsuit. Studios are sued all the time. It's a cost of doing business." In other words, the studios have accepted some level of litigation as a necessary part of the way they conduct their business. They have a legal staff to handle such matters, they either insure against such contingencies or routinely place a value on each such dispute just like insurance companies, and thus have created a successful strategy for dealing with litigation.

Another similar phrase commonly used to describe the studio attitude toward litigation is "business as usual". In other words, litigation from profit participations is an accepted risk of doing business they way the studios do business (i.e., routinely utilizing unfair, unethical, anti- competitive, predatory and illegal business practices). Such distributors take the position that any net profits due the profit participant will generally not be paid to the profit participant voluntarily, thus the profit participant must audit and/or sue in order to be paid. Even then, if an audit is conducted, unpaid profits are uncovered and a lawsuit is filed, the distributor will generally settle out of court for a lump sum that is less than what was originally owed.

Litigation Not Common--Representing the opposing view, the in-house counsel for Universal Pictures Shel Mittleman claims that "[i]f you look at the number of pictures produced, and the number of people in profit-participation deals, and compare that with the relatively few lawsuits, you see that it's not common at all." But, if Mittleman is trying to suggest with that statement, that lawsuits against the majors are not common because they do not deserve to be filed, Nicolas Kent more accurately answers, that for every " . . . Buchwald, who has both the will and the means to contest an injury, there are countless writers who suffer their abuse in silence. The Buchwald case stands out as the exception." It would appear that, in addition to writers, the Kent statement is also true for directors, producers, actors, actresses, investors and all others who may have a net or even gross profit participation in a Hollywood movie.

Reluctance to Sue--As Kent points out, many people are reluctant to bring litigation against a major studio/distributor. As an example, David Prindle points out that it " . . . is very difficult to prove discrimination, and because of the pervasive fear of being labeled a trouble- maker, women are reluctant to bring court cases against the . . . studios." Of course, the Prindle statement applies to others in the film industry besides women and is equally true for other issues besides discrimination (i.e., the profit participation disputes described above).

Costly to Sue--Another part of the problem is pointed out by entertainment litigation attorney Donald Engel, who says that, "[s]tudios try to make it very costly to sue them." Bennett Newman also states: "I don't know if the mistakes we found (auditing the studios) were honest errors or purposeful, or whether they [the studios] just took an extreme position in interpreting the contracts . . . " Considering all of the above, it appears that the studios claim not many people sue because they have no cause to suit, while in reality, it is more likely that most of the people who believe they have a cause of action in Hollywood do not sue because they cannot afford the time, the costs and are afraid of possible detriment to their careers. Also, most of the people who sue settle for an amount which is far less that the amount actually owed, and further, those who actually go to trial are, in fact, informally blacklisted in the filmmaking community. Under these real world circumstances, there is actually little reason for the studio's not to lie, cheat and steal from almost every producer, director, actor, actress, writer and investor that comes along, and that, in fact, appears to be just exactly what is happening in Hollywood.

Confidentiality Agreements--Another of the more common tactics used by the major studios in litigation is to demand that the suing parties sign confidentiality agreements. As an example, "[b]efore Paramount allowed (the Buchwald lawyers) . . . to inspect and copy the documents, it insisted that (they) . . . sign a confidentiality agreement . . . Studios don't want anyone to know anything that might be useful in upsetting their tidy arrangement." Such agreements help to prevent many of the complaints becoming public knowledge and thus helps to keep most of the industry, Congress, federal agencies and the rest of the public in the dark about what is really going on in the film community.

Can't Get Lawyers--Another of the complicating factors working against suing the major studio/distributors is the problem of finding an attorney willing and able to sue such entities. For example, television writer/producer Danny Arnold when first discussing the possibility of Pierce O'Donnell taking the Buchwald case against Paramount reported that the prospective plaintiffs were having an " . . . awful time finding a decent lawyer to even take a look at it. The studios tie up most of the good law firms in town with conflicts of interest by spreading their business around." In other words, here is a situation where the conflict of interest is used to favor the studio. As a general rule, on the other hand, (and as we have already seen) when the conflicts of interest do not involve the studios, they are often ignored by these same attorneys.

Also commenting on this issue, attorney Pierce O'Donnell reports that this practice " . . . was one of the subtle but effective ways the tight-knit entertainment industry protected itself from outsiders. I was not surprised that an out-of-town client, even with the stature of an Art Buchwald, could not find an experienced lawyer who didn't have some obligation to Paramount." Thus, one of the strategies of the major studios seems to be to spread their legal work around to all of the major law firms so as to preclude those firms from suing the studio. In other words, they even make it difficult for a prospective plaintiff to find an attorney.

In addition, it is extremely difficult to find an experienced litigation attorney who will take such cases on a contingency fee basis, without at least requiring the plaintiffs to fund all of the costs of such litigation. Thus, the plaintiff will be required to pay for court costs, deposition fees, court reporters, experts, copying and so forth, for a period of many years before there is any realistic possibility of settlement and reimbursement. Most people are simply not in the position to do that.

Most Settle--Entertainment attorney Norman Garey (now deceased) is quoted in the Jason Squire book, saying that "[l]awsuits are filed in some cases, but most are settled. There is more contention and less completed litigation in the entertainment business than in most other industries." Adam Marcus points out that " . . . despite the unlikely prospect of a particular film actually achieving net profit, the net profit formulation and the accounting system that supports it have rarely been subjected to extensive judicial scrutiny . . . " Marcus also says that "[m]ost litigation centering on the net profit formula ends in settlement."

Entertainment attorney Barry Langberg agrees, saying that "[r]arely have these 'net profits' disputes ended up in court . . . a settlement is usually reached after profit participants band together to conduct an audit." Such observations seem to be consistent with the "sue us" litigation strategy described here.

No Suit but Tradeoff--As already noted above, it is easier to settle with the studios if you have something they want. Although this dispute did not go to court, when the Frank Yablans management team at MGM approached director Stanley Kubrick about doing a sequel to his 2001: A Space Odyssey they discovered that Kubrick " . . . was angry with the studio because one of its myriad regimes supposedly had cheated him out of some video monies." Kubrick would not do the proposed sequel and it took a payment of " . . . $250,000 to convince him to allow a sequel to be made with another director."

The "Sue Us" Strategy--A Century City attorney provides a brief description in the Kathleen Neumeyer article of the major studio/distributor "sue us" strategy. The scenario goes like this: "The studios know that if they hire an actor for $10 million, including profit percentage, and pay him $1 million, and that actors sues, and they settle for $2 million, that studio has saved $7 million . . . It's clearly financially worthwhile for them to do business that way on a regular basis." Another entertainment litigator theorizes: "[l]et's say a big star signed a contract to do a picture and was owed $7 million. If the studio paid $3 million, and we had to sue to collect the other $4 million, it would take five years to get to trial. During that time, the studio would use the interest on the star's money to pay its attorney's fees, and even if we collected 100 percent of what we were owed, it would still be ahead."

To further illustrate the attitude of the studio executives toward litigation, Mark Litwak reports that at a time prior to his suit against Paramount, Art Buchwald told his friend, Paramount Communications, Inc., Chairman Martin Davis, what had happened and of his intention to sue the studio. Davis responded by sending the writer a bottle of champagne and a record of a song titled Sue Me." In other words, the threat of a lawsuit against a major studio/distributor is considered a joke in some circles. In another situation, when independent filmmaker Frank Gilroy tried to self-distribute one of his films he had to threaten to " . . . turn the matter over to . . . " his lawyer to collect monies from the exhibitor. In response the exhibitor said, "[b]ut the lawyer will cost you more than the money involved." In other words, in many instances, exhibitors and distributors in the film industry recognize that relatively small amounts of money are not worth litigating because of the high costs of pursuing such remedies. Thus, they take advantage of the situation by routinely withholding some of the monies owed.

Studio management can also be vindictive. After his experience with Paramount Studios, Art Buchwald felt the studio had set out to destroy his reputation: "Paramount wanted to destroy me . . . The attempt to destroy me left a bitter taste in my mouth." Later during the trial, after Paramount tried to accuse Buchwald of stealing the idea for Coming to America, Buchwald exclaimed: "Paramount is trying to destroy my reputation! They're making me pay for suing them!" Paramount actually accused Buchwald of plagiarism and racism in the course of the lawsuit. This is an example of how far the studios will go when they are sued and the plaintiff actually goes all the way to court. This is also one of the reasons not many people sue, and most that do, settle out of court before the case actually goes to trial. On the other hand, how many careers have been ruined simply because a person wronged by the major studio/distributors, simply sought justice in the courts, and how many of those people turned to drinking, drugs or suicide to deal with this dreadful dilemma (see the chapter entitled "Murder, Suicide and Other Forms of Hollywood Death", in this book's companion volume Legacy of a Hollywood Empire).

As Kathleen Neumeyer reports, "[i]n virtually every film where artists, directors or writers are promised a percentage of the net or the gross, a dispute arises in which auditors have to be called in to see what fell into the cracks. Lawyers and accountants say every studio in town appears to have trouble with arithmetic." "Ironically, few of the cases, even though they involve millions of dollars in profits, actually get to court. They're mostly arbitrated or settled, Lionel Sobel says, 'because . . . all that's at stake is money. No one's honor has been besmirched or reputation damaged.'" "Profit-participation disputes . . . remain commonplace. Artists . . . routinely audit the books of companies they work for, looking for discrepancies in accounting that may mean that hundreds of thousands, even millions, of dollars owed them have been 'overlooked'." Of course, Sobel is wrong when he asserts that "all that's at stake is money." See the discussion relating to "Economic and Human Losses" in Legacy of the Hollywood Empire.

Litigating attorney O'Donnell states that more than " . . . 95 percent of all civil cases are settled or dismissed before trial, and in Hollywood that percentage is even higher. Out of two dozen significant cases filed against Paramount during the decade prior to (the Buchwald) . . . suit, not one went to trial; they either settled out of court or were found to have too little merit to proceed to trial." Of course, "too little merit", in many instances, actually means not enough evidentiary proof, which has little, if anything, to do with whether the studios actually engaged in wrongful conduct.

Santa Monica based entertainment litigator Larry Stein expresses a differing view with respect to suing the studios. He claims that "[o]ne of the unique aspects of Hollywood lawsuits is that, for the most part, artists are not harmed by taking their grievances to court." Stain says, "[i]t is generally recognized that litigation is just a part of doing business in the industry . . . It is just one method of dispute resolution, and it is hoped that you can come to terms . . . Of all the industries in the world, entertainment is the most forgiving . . . The bottom line always is whether it is a good project. If the project has appeal, everybody seems to be willing to deal again and again, even if they have had a bad experience." Of course, what Stein's comments do not reveal is that the studios are "forgiving" because they generally benefit from their "sue us" strategy and the plaintiff's from the creative side or "forgiving" because they have little choice if they want to continue their careers in film. The bottom line is also not "whether it is a good project" but whether the deal is good for those studio executives, attorneys, agents and others who have the power to move the project forward.

As Paul Lazarus reports, "[m]ost arguments in the auditing of a picture . . . focus not on production costs, but rather on the revenue and expense sides of distribution." But, Lazarus also confirms that " . . . very few lawsuits ever reach a trial conclusion. Settlements are almost always the order of the day." Lazarus also points out that "[f]rom the producer's (perspective) . . . the expense of suing a distribution company can be staggering, even if the producer's costs are pooled with other profit participants, for studios have no reason to see matters adjudicated with any dispatch. They are unwilling to have their accounting practices and contract definitions dragged into the bright light of a courtroom. Far better from the studios' standpoint is to delay as long as possible, using their deep pockets, and ultimately at the 11th hour to settle. This has been the pattern of disagreements with studios virtually since actors, directors and producers first gained profit participations in films."

Producer Harry Ufland says " . . . the modus operandi of studios is to delay payments as long as possible so they have the use of the money. 'They have these huge legal departments so it is cheaper for them not to pay and get sued. And eventually they will settle."

Thus, it appears that an important part of the major studio/distributor scheme to separate many gross and net profit participants from their money is to force such prospective plaintiffs to sue in order to get paid, even a small part of the amount owed. This can be fairly characterized as an abuse of our system of justice, and the top level studio executives, agents, agents, profit participation auditors are all quite aware of it.

Creation of a Cottage Industry--One of the effects of the studio's approach to handling the profit participations of the creative and investor communities is the development of a unique industry here in Los Angeles call profit participation accounting. Some 7 or 8 boutique accounting firms have sprung up over the years solely for the purpose of representing actors, actresses, directors, writers, producers, investors and others in these profit participation disputes. These firms specialize in auditing the books of film, television and music distributors because they all seem to suffer from the same math-related deficiencies (i..e, their profit participation statements typically do not add up correctly, and all of the mistakes seem to be in favor of the distributors). If this were not the case, there would be no need for these profit participation accounting firms (see related discussion along with a list of these specialized auditing firms in The Feature Film Distribution Deal).

Litigation Row--The following list provides brief descriptions of litigation occurring in the last couple of decades relating to profit participations and mostly involving major studio/distributors as defendants. No claim is made here that the list is comprehensive or that the lawsuits are typical. Rather, the listing is offered merely to illustrate some of the issues involved and who some of the parties to such litigation have been. In addition, this listing is offered to encourage further research in this area.

MGM sued by Raquel Welch: In the early '80s, actress Raquel Welch " . . . filed suit against MGM (over her) . . . widely publicized firing . . . (She charged) . . . that she had been made the scapegoat for cost overruns on (the film) Cannery Row . . . Welch ultimately carried the day, winning a $10 million award from a jury." Of course, following the lawsuit she has found few opportunities in film. Her career was devastated.

MGM sued by Jack Nicholson, Mary Steenburgen and Timothy Hutton: In the late '80s, MGM made certain contractual commitments to Jack Nicholson, Mary Steenburgen and Tim Hutton to appear in the film Road Show which was subsequently " . . . officially . . . abandoned (by the studio) because of (the director's supposed disability. The studio took the position that their commitments need not be honored . . . the actors . . . (filed suit) . . . Nicholson and Steenburgen ultimately settled . . . Tim Hutton (however, went to trial) . . . In February 1989, Hutton was rewarded for his tenacity. A jury . . . awarded him some $2.5 million in compensatory damages and $7.5 million in punitive damages (his lawyer had been able) . . . to convince the jury that the studio had committed fraud in failing to honor its contracts and produce the motion picture . . . (the amount) . . . was marginally reduced in a 1989 settlement . . . " After a promising start in the '80s, Timothy Hutton's career has not been attracting much Hollywood attention of late. Jack Nicholson and Mary Steenburgen have gone on to prosper, however.

MGM/UA sued by Sean Connery: Producer Art Linson reports in his book A Pound of Flesh--Perilous Tales of How to Produce Movies in Hollywood, that Sean Connery " . . . was not compensated from the profits (of the James Bond series) . . . as he believed he'd been promised." Connery subsequently sued MGM/UA " . . . over monies due him on old James Bond movies." Neither Art Linson nor Peter Bart, the sources for the above information on the Connery litigation, report on the outcome of the case, thus it is difficult to determine whether this litigation serves to illustrate the principal that actors who do not settle tend not to get hired or whether Connery continues to work in the U.S. film industry as often as he did in the past because he settled, thus permitting MGM/UA to claim a financial victory. It would also be relevant to such analysis to know whether MGM/UA, during the time of this litigation, was controlled by Hollywood insiders or outsiders.

Disney sued by Barbara Luddy Heirs: The heirs of singer Barbara Luddy " . . . sued the Walt Disney Co. for not paying her or her estate a share of the revenue from video sales of 11 films. According to a complaint filed in Los Angeles Superior Court (in August of 1993), Luddy never granted Disney the right to use her performances in the films on recordings or videocassettes. Despite this, Disney allegedly began selling cassettes of the films in 1987." This litigation does not involve an active career, but a substantial amount of money due to be paid to the rightful heirs.

Warner Bros. sued by "Batman" Executives Producers: Benjamin Melnicker and Michael Uslan and their Batfilm Prods. filed suit in 1992 against Guber/Peters Entertainment, Polygram and Warner Bros., charging that they " . . . conspired to cut them out of profits from a film that, at the time, was the sixth-highest grossing pic of all time (Batman with worldwide sales in excess of $600 million) . . . The Melnicker/Uslan duo have been paid $400,000 in upfront fees, according to their attorney, Thomas V. Girardi; he says their 13% in net profit points has yet to pay any dividends as the studio contends that the film is about $20 million in the red." Guber/Peters was subsequently dropped from the suit as defendants but the case was still scheduled for trial against Polygram and Warner Bros.

Paramount sued by Art Buchwald and Alain Bernheim: On " . . . November 21, 1988 (Art Buchwald's attorney) . . . filed a thirty-three page complaint against Paramount, charging a litany of misdeeds: breach of contract, tortious denial of existence of contract, breach of good faith and fair dealing, breach of fiduciary duty, common law fraud, constructive fraud, negligent misrepresentation, conversion, constructive trust and negligence. Thirteen causes of action in all-- a smorgasbord of legal theories to describe . . . a callous, calculated act of corporate cover-up of literary theft." The script for the Eddie Murphy film Coming to America had allegedly been based on a treatment submitted earlier by Art Buchwald and his producer.

Sidney H. Sapsowitz, a 30-year veteran of the motion picture industry who has conducted audits for profit participants, and at the time of the Buchwald case was acting as a consultant testified that " . . . a studio can only survive in the long run if it is able to achieve and retain a multiple of its total investment in successful pictures and thereby offset unrecovered costs from the many unsuccessful pictures, plus the organizational overhead cost of doing business in the motion picture industry." But that does not mean that the studio should grossly inflate its costs on both the successful and unsuccessful pictures, etc. Why not let these inefficient studios go out of business?

Paramount testified during the trial that the movie had grossed more than $300 million worldwide but had not yet reached net profits. The studio argued that, "[t]he controversy surrounding the term net profit is generated in part by the fact that . . . it is not profit 'in the strict accounting sense.' Rather, it is a contractually defined formula that gives certain contributors to a motion picture a share of the bounty, or a 'bonus,' once the studio recovers its contractually defined share."

Also in the Buchwald case, the trial court found " . . . little agreement among entertainment industry experts on . . . the meaning of the term 'based upon'" This belies another Hollywood myth that there is ordinary and customary understanding among those in the industry with respect to such commonly used terms.

Mel Stattler maintained in his testimony during the Buchwald case that " . . . a studio's need to keep revenues in excess of a film's direct cost is the result of 'three industry maxims': (1) most films fail to recover their production costs and distribution expenses; (2) the success of a motion picture cannot be predicted; and (3) the studio has no contractual right to ask net profit participants to share the risks attendant to a film." Stattler does not make it clear whether his maxim #1 applies only to the domestic theatrical release or all markets and media worldwide. In other words, if he is only talking about films not failing to recover costs and expenses in the domestic theatrical release only, the response is "So what?" After all, the film still has the opportunity to make a profit in all other markets and media worldwide. Certainly, Stattler's point # 2 is true. But with respect to #3, this depends on the motives of profit participants. Such persons may have already accepted some risk by taking a profit participation in lieu of salary. In such cases, the studios have asked the profit participants to participate in the risk.

In the December 21, 1990 decision on the Buchwald vs. Paramount Pictures case, Judge Schneider " . . . found fault with charging overhead in excess of actual costs, charging interest on negative cost balances without credit for distribution fees, charging interest on overhead, charging interest on profit participation payments, and charging an interest rate not in proportion to the actual cost of funds." The plaintiffs in the Buchwald case " . . . did not have to prove that they even attempted to negotiate a more beneficial definition of net profit to show adhesion; rather, the defense was essentially given the burden of persuading the court that the contracts were negotiable." Paramount failed to meet its burden on this issue (see further discussion in The Feature Film Distribution Deal).

The trial judge first ruled in January of 1990 that Paramount breached its option on Buchwald's treatment and that Coming to America was substantially based on the treatment. He later ruled that the net-profit formula used by Paramount was unconscionable. The judge characterized the profit-participation formula used by Paramount (which is similar to the net- profit formulas used by all of the major studio/distributors in the film business) as " . . . an insidious device used by the studios to perpetuate their control . . . and to create an economic caste system in Hollywood . . . " "Three items in particular were found unconscionable because they constituted flat fees bearing no relation to actual cots: overhead, advertising overhead, and interest charges."

According to Adam J. Marcus, "[t]he main thrust of the Buchwald decision was that Paramount retained too much of Coming to America's revenue, without sufficient justification, at the expense of its net profit participants." Marcus argues therefore that "[i]t is likely that were the studios forced to retain less revenue, fewer films would be produced because there would be less economic incentive for studios to make them." On the other hand, this book takes the position that fewer films from the major studios would be quite desirable and of great benefit to the rest of the industry and the general public. In addition, as another option, the studios may take the even more sensible route of producing less expensive movies.

Entertainment attorney Peter Dekom has been quoted characterizing the Buchwald court decision as " . . . a disaster . . . catastrophic for everyone in the industry' and predicted that 'the worst case scenario . . . will just be chaos.'" This is the same Peter Dekom who criticized the net profit formula in his article "The Net Effect: Making Net Profit Mean Something". O'Donnell calls . . . these concerns 'Chicken Little warnings orchestrated by Hollywood spin doctors." By O'Donnell's calculations, Hollywood has more lives than a Transylvanian count, and Dekom's warning is at least 'the fourth time that the death of Hollywood has been predicted. The first time was in 1948, when the government broke up the studios' ownership of theater chains. [United States v. Paramount Pictures, Inc.] The second time was the advent of television and the third time was when video came in.'" Despite all of these "catastrophes" the majors just keep rolling along.

The plaintiffs in the Buchwald v Paramount case were awarded only $900,000 in damages, $150,000 for writer Art Buchwald and $750,000 for producer Alain Bernheim. Thus, even though the plaintiffs won on the important substantive issues in the case (at the trial level), their damage award did not even cover the attorney fees and court costs. Therefore it is difficult to conclude that the plaintiffs won and the studio lost in every respect. In addition, there is little evidence to suggest (aside from the hyperbole contained in Pierce O'Donnell's own book) that the celebrated case has actually resulted in any significant changes in the way the major studio/distributors conduct their business.

Some legal experts suggest that the case will not serve to encourage other plaintiffs who may want to sue the major studio/distributors since an equivalent of some $2 million in attorneys fees and costs were incurred on the plaintiff's side during the trial phase of the litigation. These same experts further suggest that only rarely will anyone hoping to continue to do business in the industry seek a court fight with the major studio/distributors for fear of being blacklisted. In Buchwald's case, he did not have that same concern since he did not ordinarily rely on the motion picture business for his livelihood and producer Bernheim had not been that active in the U.S. film industry for some time prior to the lawsuit.

Columbia sued by Danny Arnold: Emmy award winning television writer/producer Danny Arnold (Barney Miller) " . . . battled for five years against Columbia Pictures . . . distributor for Barney Miller . . . Twice (he and his attorney) . . . accused the studio of antitrust violations, dishonest accounting of profits and fraud. Columbia eventually capitulated before trial, paying handsomely in 1986 to get rid of the suit and buy the show from Danny. While Columbia insisted that the terms of the settlement be confidential, the Wall Street Journal reported that the sum was about $50 million." No information was provided on this case with respect to the possible effect of the litigation on the future career of Danny Arnold. However, the case involved a television writer/producer, not someone working on the film side of the business. On the other hand, this case may also illustrate the point that the studios use the same tactics with their television industry relationships as they use in film.

George Lucas sued by Dean Preston: George Lucas had to appear in a Canadian court to defend himself in a $129 million dollar copyright infringement case in which Canadian writer- producer, Dean Preston, alleged that the Ewoks, the cute, furry, and rather irritating teddy bear- like creatures featured in Lucas' Return of the Jedi, were his own invention. Preston alleged the Ewoks made their debut in his screenplay, Space Pets, which he said he had mailed to Lucas five years before the movie's release.

Paramount sued by Edward Deleo: A screenwriter filed suit (in the summer of 1993) to stop production of a Barry Levinson film starring Joe Pesci because he claims it's based on his script. Edward L. Deleo, in a complaint filed in Los Angeles superior Court, said a film scheduled to begin shooting in August of 1993 was based on his script called The Playmaker or No Kinks, No Kooks. Deleo claimed the screenplay and treatments were submitted to, among others, the William Morris Agency, Tribeca Prods., CAA and a reader working for Levinson. Defendants also included Levinson and Paramount Pictures Corp. The suit sought an injunction against production of the film and at least $1 million in damages."

Orion and Hemdale sued by Gale Anne Hurd, James Cameron and Arnold Schwarzenegger: The Terminator producer (Gale Anne Hurd), writer/director (James Cameron), star (Arnold Schwarzenegger ) and special effects supervisor (Stan Winston) sued Hemdale and Orion in October of 1990 seeking " . . . unspecified damages, payment of profits owed and court costs." According to the suit, Hurd's production company was to receive 60% of the net profits that The Terminator generated, while Cameron was to receive 10%, .Schwarzenegger 5% and Winston 2%. The plaintiffs alleged that Hemdale and, to a lesser degree, Orion " . . . underreported rentals, improperly claimed incidental expenses as distribution fees and overreported travel and other expenses." In addition, the suit claimed that Hemdale entered into " . . . certain ancillary agreements that altered the creative team's original deals, including a 30% underwriting of the production by Eurofilm Funding that caused profits to be diverted and a $372,076 loan to be paid out of distribution fees." The Terminator suit was the second time within a two month period that a creative team headed by Cameron and Hurd sued the studios that released their films. The pair (along with others creatively involved) sued 20th Century Fox over profits from the 1986 film Aliens. James Cameron subsequently went out and secured his own funding for future films, Schwarzenegger may be too big at the box office, for the moment, to be hurt by such litigation, but Gale Anne Hurd's next movie (The Waterdance was released by independent Samuel Goldwyn in 1992), although her other 1992 effort (Raising Cain) was released by 20th Century-Fox. Again, it would be important to know whether the 20th Century- Fox suit was settled.

Warner Bros. sued by Handmade Films: Handmade Films " . . . filed a breach-of- contract suit against Warner Bros. in Los Angeles Superior Court (in February 1993) . . . claiming that Warners failed to spend specified minimums on advertising for its films including Checking Out and How to Get Ahead in Advertising in 1989. Handmade is seeking at least $3 million in damages plus unspecified punitive damages in the suit, which alleges breach of contract, fraud, negligent misrepresentation and interference with prospective economic advantage. In the filing, Handmade said that when it entered into a video license agreement with Virgin Vision . . . (in March of 1988) . . . for 10 of its films, Handmade agreed to spend a specified minimum amount on broadcast ads in certain designated markets in connection with the films. When Handmade entered into another license agreement (in August of 1988) . . . with Warners for theatrical distribution of the films, the suit contends, this contract called for spending the same amounts on ads by Warners within five months of the films' theatrical release. Handmade sued Virgin in the United Kingdom for money due under the contract. Virgin claimed Handmade had not spent the specified minimums. Handmade, which had been relying on Warners to fulfill its spending obligations, said it later learned that Warners' reports did not reflect the amount of money spent on ads, but rather estimates that it anticipated spending; Handmade also discovered what it claims was a fraudulent billing invoice. As a result, Handmade was forced to settle its suit against Virgin."

20th Century Fox sued by Irv Levin and Samuel Schulman: In December of 1988, Irv Levin and Samuel Schulman (former professional sports franchise owners who co-founded New Century Entertainment) " . . . filed a lawsuit against Twentieth Century-Fox charging breach of contract, constructive fraud and failing to properly account for money due them from investments made in Fox movies. The suit (sought) . . . $21.5 million in actual damages and at least $42.3 million in compensatory damages.

Warner Bros. sued by James Dean's Family: "Warner Bros. (was) . . . ordered to pay $1.6 million to the family of James Dean and their agent, Curtis Management Group, related to a suit the studio . . . lost over merchandising rights . . . The studio had filed a $90 million suit in 1991, claiming that it was the rightful owner of Dean's likeness and image because of a clause in a contract that the actor had signed in 1954 prior to the filming of East of Eden. The clause, located in a standard contract, allowed the studio to use Dean's likeness and image in perpetuity for commercial tie-ins to the film. While the studio claimed that the clause also carried over to the use of merchandising unrelated to the film, a U.S. District Court judged . . . ruled that it only related to the selling and advertising of the three films he starred in before his death. The Dean image has generated some $30 million since 1984."

Universal sued by James Garner: James Garner waited six years to go to trial on his $16.5 million lawsuit against Universal Studios, charging he was " . . . cheated out of his fair share of syndication profits from the television series The Rockford Files. The case was settled a few days after jury selection began in mid March." The Universal series The Rockford Files, starring James Garner " . . . ran on NBC from 1974 to 1980 and then moved into off-network sales, where it is still going strong. After determining that the show had taken in more than $120 million from syndication, foreign, and other markets, the studio's accountant informed the actor that it had earned less than $1 million in profits and that his share . . . fell a little short of $250,000. Garner sued and nearly a decade later settled out of court for a reported $5 million."

Commenting on this litigation, university professor and author David Prindle stated that "[a]lthough this court action satisfied one star . . . it did nothing to alter studio accounting practices, which will endure until they are forbidden by the courts." On the other hand, the above described settlement may not have really satisfied James Garner. It was more likely he realized it was all he could get without going to trial. It also took nearly ten years to get to settlement. That involves a considerable amount of aggravation, frustration and disruption of one's life. It is also inaccurate to suggest that the courts are the only answer to studio accounting practices (see discussion of remedies in this book's companion volume Motion Picture Industry Reform).

Orion sued by Brian De Palma: Director Brian De Palma reported an incident in which the studio executives at Orion, who had originally passed (i.e., decided not to produce or release) his movie Dressed to Kill moved over to another company (Filmways), but subsequently " . . . their contracts were bought by Orion--which ultimately released the film." De Palma then reported that the creative team had " . . . to sue Orion for monies owed us. So the same people who passed on the movie originally were now the ones we are suing for monies owed."

Universal sued by Jane Fonda, Katharine Hepburn and Mark Rydell: Jane Fonda, Katharine Hepburn and Mark Rydell waged " . . . a legal battle for their percentages from the Oscar-winning On Golden Pond. They claim Universal Studios gave an unfair accounting . . . "

Disney sued by Jeffrey Kouf: An independent screenwriter filed " . . . a $10 million lawsuit against Walt Disney Co. (in June of 1991) saying that the company's hit movie Honey, I Shrunk the Kids was based on his screenplay. In the lawsuit . . . Jeffrey Kouf, of Saugus, Calif., accuses Disney of copyright infringement and breach of contract. Kouf said his screenplay The Formula was rejected by Disney in 1986 after his brother, a Disney writer, submitted it anonymously."

Hemdale sued by Jerry Goldsmith: Hollywood composer Jerry Goldsmith " . . . filed a lawsuit against Hemdale Films and HBO, claiming they failed to pay him $150,000 in profit participation from the 1986 film Hoosiers. Elcajo Prods., the loanout corporation for Goldsmith, claims in the Los Angeles Superior Court lawsuit breaches of contract, fiduciary duty, written guarantee and covenant of good faith and fair dealing. The suit said Goldsmith signed an agreement with Hemdale in April 1986 to score Hoosiers for $50,000 up front and 1% of the gross from, among other things, video distribution. Goldsmith claims Hemdale and HBO tried to get around paying profit participants by the way in which they settled the distribution rights with Vestron . . . which had originally contracted with Hemdale. The suit alleges Hemdale settled litigation by paying $15 million to HBO, which in turn paid the money to Vestron."

Bette Midler and All-Girl Productions sued by Martha Raye: Singer-actress Martha Raye " . . . known for her morale-boosting excursions into the battlefronts of WW II, the Korean War, and Vietnam War . . . unsuccessfully sued the producers of For the Boys, claiming that the film's plot and the character played by Bette Midler was based on her own personality and exploits." Raye filed the suit July 31, 1992, against Bette Midler claiming that Midler " . . . ripped off her life story to make the film For the Boys." The suit claimed " . . . breach of contract, fraud and negligence . . . " and sought $5 million in damages. "The suit claims Raye offered to sell her life story to Midler several years ago for $1 million (and continues) . . . Midler 'expressed great interest in the project,' but no contract was signed . . . '" On Friday, February 25, 1994, CNN Headlines News announced that the court had dismissed the lawsuit filed by Martha Raye against Bette Midler.

Disney, CAA, Bette Midler and Whoopi Goldberg sued by Donna Douglas: Donna Douglas filed a " . . . $200 million suit against Whoopi Goldberg and Bette Midler, their production companies, Creative Artists Agency, Walt Disney Pictures and others (Thursday, June 10, 1993) alleging the film Sister Act was improperly derived from a property owned by the actress and her partner. The suit, filed in U.S. District Court in Manhattan, claims some 200 similarities and direct plagiarisms between Sister Act and a Douglas-owned book and screenplay. Douglas, best known for her role as Elly May Clampett in the TV series The Beverly Hillbillies, and Curt Wilson, her partner in Associated Artists Entertainment, allegedly optioned the book A Nun in the Closet in 1985 and had it developed into a screenplay. They claim in their suit that the work was submitted three times during 1987-1988 to Walt Disney Pictures, Midler's All Girl Prods. and Goldberg's production company, Whoop, Inc. The pair's proposal to co-produce was rejected, although Douglas and Wilson claimed offers were made to purchase the screenplay outright."

The Samuel Goldwyn Co. sued by Virgin Vision: Los Angeles Superior court judge Richard C. Hubbell ruled in March of 1993 that the Samuel Goldwyn Co. " . . . engaged in unfair competition, breached its agreement with (a small British video company named) Virgin Vision and violated provisions of the Lanham Act, which covers the wrongful designation of origin . . . " in credit misappropriation disputes. "Virgin Vision filed suit in October of 1990 after Goldwyn removed Virgin's name from foreign prints and promotional materials of sex, lies and videotape and replaced it with its own." In September 1994, Judge Hubbell, ordered the Samuel Goldwyn Co. " . . . to pay $3.3 million plus legal costs to . . . Virgin Vision to cover damages involved in removing Virgin Vision's name from foreign prints of sex, lies and videotape. Having entered into a deal with Virgin Vision covering certain foreign territories . . . " the judge said " . . . Goldwyn acted in 'willful, deliberate or in conscious disregard for the plaintiff's rights' by turning their back on Virgin Vision."

Paramount sued by David Kirkpatrick: Paramount executive David Kirkpatrick was unceremoniously ousted from his offices on the Paramount lot November 17, 1993, and Kirkpatrick retaliated with a lawsuit " . . . charging the studio with fraud, infliction of emotional distress and breach of implied contract. He also claimed that he " . . . was forced 'under duress' to accept a multi-million-dollar production deal . . . " that he " . . . was forced into an unfair contract when he stepped down as motion picture group prexy."

Columbia sued by Lester Persky and Richard Bright: In the fall of 1988, feature film producers Lester Persky and Richard Bright accused Columbia Pictures of " . . . failing to pay millions of dollars of profits on twelve movies their partnerships owned which were being distributed by Columbia. The list included Shampoo, Funny Lady, The Front and The Last Detail . . . "

Universal sued by Mae West Estate: In the late '80s the Mae West estate sued Universal " . . . for failing to pay net profits on the 1940 comedy My Little Chicadee . . . "

Dino De Laurentiis sued by Limited Partnership Investors: A New York judge ruled in the summer of 1991 that a " . . . film distribution and production firm headed by Dino De Laurentiis (was) . . . liable for damages in connection with seven limited partnerships that were formed starting in 1979 . . . damages (were reportedly) . . . in the millions of dollars . . . The partnerships were formed for the purpose of investing in pictures produced and distributed by Dino De Laurentiis Corp. (also) . . . known as Paradise Films Inc . . . The plaintiffs alleged that the defendant breached the distribution agreements by failing to make payments of film distribution proceeds when due."

Warner Bros. sued by Marlon Brando and Mario Puzo: Mario Puzo and Marlon Brando's profit-participation dispute over Superman and Superman II eventually was resolved. "Warner Bros. took the position that the actual film distributor was a Panamanian company and that the percentages owned under the contract applied to that firm's profits and not to Warners' share."

Filmstar sued by Penelope Films: Penelope Films Ltd " . . . filed a $360,000 suit in federal court, accusing Filmstar Inc. of breach of contract in connection with a distribution agreement executed on behalf of the film Kamilla and the Thief. According to the complaint, Filmstar agreed to pay $400,000 plus the gross minus 20% for distribution fees and other expenses. But Penelope Films alleges Filmstar paid only $40,000 . . . "

Carolco sued on "Cliffhanger": Carolco " . . . paid $750,000 to settle disputes with writers who claimed (Mike) France plagiarized their work (on Cliffhanger), the company (then sued) . . . France for fraud and breach of contract."

Columbia sued by Norman Maurer: Norman Maurer, son-in-law of Moe Howard and Jeffrey Scott, a grandson, filed a complaint in August of 1993 against Columbia Pictures seeking " . . . to end a contractual relationship with the studio, charging that Colpix sandbagged efforts to get the project (a new feature film based on the Three Stooges) going." " . . . Columbia Pictures is claiming it spent more than $1.5 million during two years of pre-production, while sources close to the project can only account for $1,119,195 . . . Columbia sources have indicated that the Stooges film may have had funds written against it for illicit activities." Those "illicit activities" were reportedly tied in with the Heidi Fleiss case (the so-called "Hollywood Madam" of the 1990s). She was found guilty on pandering charges, but Columbia was never actually implicated at the trial, although it was widely believed in the Hollywood community that Columbia executives and other name personalities in the motion picture business were involved.

Universal sued by Paul Newman and George Roy Hill: The U.S. Supreme Court, in the summer of 1988, " . . . refused, on a technical question, to reconsider a 1985 (federal antitrust) lawsuit filed against Universal Studios and its parent, MCA Inc., by actor Paul Newman and director George Roy Hill (" . . . alleging price fixing because the studios refused to pay more than their standard 20 percent royalty on video receipts . . . ") However, as Alex Ben Block points out, . . . the ruling does nothing to quash the allegation made in the suit that the major Hollywood studios are conspiring to deny profit participants in movies and TV shows their fair share from the sale of videocassettes . . . The crux of the matter is what Hollywood lawyers, agents and studio business affairs executives call 'the 20% rule.' It means that the studios, in dividing up each dollar received from home video (and laser video disc) sales and rentals, assigned an arbitrary share of 20% of the total as profits. Those profits are the amount later used to calculate how much will be paid to profit participants in a movie or TV program. That means if an actor or director or writer is to get 10% of the net profits, they are actually getting 10% of the 20%." According to Alex Ben Block, "[i]t is one of those issues that frequently raises cries of 'creative accounting.'" See further discussion of this issue in The Feature Film Distribution Deal.

Disney sued by Peggy Lee: A Los Angeles Superior Court Judge ruled in April of 1991 that " . . . singer Peggy Lee (Norma Deloris Engstrom) can get $2.3 million of the total $3.8 million a jury awarded her in a lawsuit against Walt Disney Co. over video cassette profits from Lady and the Tramp . . . Lee, 70, sued Disney for a share of profits from video sales of the 1955 animated classic. She co-wrote six songs and provided the voices for four characters . . . " Lee had been paid " . . . only $3,500 for her initial effort. Sales of the videocassette as the trial opened were estimated at $90 million." On March 20, 1991 The " . . . jury awarded her $2.3 million for breach of contract and four other awards totaling $1.5 million for unjust enrichment and unauthorized use of her voice." Disney said it would appeal the trial court ruling. The studios do seem to favor long periods of litigation, particularly with the plaintiffs are elderly.

Columbia/Tri-Star sued by Renee Taylor and Joe Bologna: Actors/writers Renee Taylor and Joe Bologna " . . . sued Columbia/Tri-Star for using their screenplay as the basis for the 1989 release, See No Evil, Hear No Evil, and failing to pay them net profits."

Columbia sued by Saudi Arabian Financier: The Saudi Arabian financier behind the production of The New Adventures of Pippi Longstocking filed a " . . . $5 million breach of contract suit against Columbia Pictures (in February of 1992), alleging that the studio 'dumped' the film after its former president, Dawn Steel, and other studio brass conspired to 'sabotage' the film's release. The suit . . . further claims that Columbia and the Coca Cola Co., the studio's former parent company, arranged for 'secret financing' of the film, released in 1988, and set up 'sham outside production units' so as to avoid union contracts the studio had with the International Alliance of Theatrical Stage Employees." This case also serves as another illustration as to what typically happens to outsiders and their money if they are foolish enough to invest in Hollywood movies.

Columbia sued by Sidney Sheldon, Robert Wagner and Stephanie Powers: Although the popular television series Sidney Sheldon created, Hart to Hart, had grossed more than " . . . $360 million worldwide, and although Spelling/Goldberg Productions had promised him 15 percent of the net profits, Sheldon (says he has ) . . . yet to see his first dollar . . . Sheldon's attorney, Donald S. Engel, says a decade's worth of studio accounting statements showed that (the show) . . . was still in deficits." Sheldon, along with costars Robert Wagner and Stefanie Powers and Tom Mankiewicz, who cowrote and directed the pilot and acted as creative consultant during the show's run, sued for approximately $5 million, " . . . alleging 'willful, consistent and habitual' underaccounting of the profits and 'willful and intentional disregard' of the terms of the original contract. It was all part of a premeditated plan, the suit said, to deprive profit participants of their share of the proceeds . . . Sheldon claims that Spelling/Goldberg and Columbia Pictures, the show's syndicator to whom Spelling/Goldberg transferred certain rights, deducted inappropriate overhead and excessive studio profits against the cost of production, improperly deducted a 10 percent distribution fee against residuals reimbursed by network television, imposed an excessive, below-the-line fringe-benefits surcharge and also imposed a 15 percent overhead fee and a 10 percent distribution fee against costs reimbursed by the network."

20th Century Fox sued by Sigourney Weaver and James Cameron: Actress Sigourney Weaver and director James Cameron joined producer Walter Hill and several others in a suit charging Twentieth Century Fox with " . . . failing to pay net profits on the 1986 science fiction thriller Aliens."

Columbia sued by Warren Beatty, Elaine May and Dustin Hoffman: Warren Beatty, Elaine May and Dustin Hoffman " . . . each sued Columbia for more of the profits from . . . Ishtar."

Cannon Pictures sued by Panda Pictures: In March of 1994, " . . . Panda Pictures filed a $20 million suit that accuses . . . " Cannon Pictures of, among other things, " . . . lying about its financial condition . . . " during a period when Panda was negotiating a corporate re-financing deal with Cannon. Panda stated in its suit that " . . . Cannon stymied efforts to determine its fiscal health."

Research Project: If it were possible to develop a more comprehensive list of litigation involving major studio/distributor defendants and profit participants as plaintiffs, it may be possible to determine what percentage of the law suits were settled before trial and what percentage of those settlements imposed a so-called gag order on the participants. To the extent that no gag orders were imposed, it would be possible to determine whether the settlements accepted came anywhere close to the damages sought. On the other hand, for those cases that actually went to trial, it may be possible to determine how many plaintiffs prevailed and whether their courtroom victory appeared to detrimentally affect their Hollywood film careers.

The above described research project sets forth many of the questions relating to the so- called major studio litigation strategy. Unfortunately, like so much of the really useful information about the business and legal aspects of the U.S. film industry, such information is difficult, if not impossible, to obtain.

Conclusion--In addition to the numerous unfavorable provisions of the feature film distribution deal imposed on the rest of the film community by the major studio/distributors, this book explores some 114 specific tactics that have been used by these same studios and their associates during the nearly 90-year history of the Hollywood-based U.S. film industry to gain and maintain their control of the Hollywood empire. These include:

Chapter 1

1. Abusing the law of supply and demand;

2. Anti-competitve involvement in acquisition, development and production financing;

3. Imposing excessive controls in conjunction with film financing;

4. Extracting unconscionable amounts for distribution fees and expenses;

5. Routinely overstating distribution expenses; 6. Providing favored treatment in distribution for their own productions as opposed to independent films;

7. More aggressively collecting revenues for their own films as opposed to the movies of independent producers;

8. Consistently failing to properly implement the terms of the distribution agreements;

9. Consistently misinterpreting the distribution agreement terms in favor of the distributor;

10. Limiting their film choices to certain time-worn genres;

11. Opting for sequels instead of more creative films;

12. Cross collateralizing an entire slate of films even when not authorized to do so;

13. Using wide releases to take the public's money before bad word-of-mouth gets out;

14. Wasting huge amounts of money in development;

15. Using development deals to take competing projects off the market;

16. Using the turnaround transaction to shift moneys back and forth between studios;

17. Shamelessly promoting the star system to a gullible American public;

18. Exploiting stars for commercial gain;

19. Raiding the talent of competitors;

20. Cooperating with the agencies in utilizing illegal packaged deals;

21. Studio executives accepting loans from producers who make films for the same studio;

22. Studio executives cashing checks written for certain stars;

23. Hiring a screenwriting represented by the studio executive's wife;

24. Using films to promote other businesses;

25. Tying up most of the major law firms in Los Angeles with studio business, thus preventing the use of their services by others;

26. Agent involvement in film finance;

27. Hiring attorneys as in-house counsel and continuing to use the attorney's outside firm;

28. Attorney packaging ;

29. Law firms pressuring their own attorneys to improperly represent the interests of their clients;

30. Ignoring well-established ethical standards for attorneys;

31. Engaging in rampant nepotism, cronyism, favoritism, blacklisting and other forms of employment discrimination;

32. Participating in an insider's executive shuffle among the studios;

33. Utilizing the threat of the executive mass exodus to retain studio control even though financial control of the studio may be held by Hollywood outsiders;

34. Arbitrarily excluding outsiders from the Hollywood social activities that lead to advancement;

35. Regularly engaging in illegal reciprocal preferences with other Hollywood insiders;

36. Artificially inflating the cost of film production for self-serving reasons;

37. Paying excessive studio executive compensation;

Chapter 2

38. Utilizing the power of censorship for commercial and cultural purposes;

39. Inconsistently applying rating standards with respect to violence and sex;

40. Providing preferential treatment for MPAA company films at ratings time;

41. Failing to provide adequate information to prospective parents regarding film content;

42. Studio suppression of films for various reasons;

43. Allowing Jewish interest groups, and no others, to effectively censor films;

Chapter 3

44. Consistently engaging in antitrust law violations throughout the history of the industry;

45. Engaging in anti-competitive practices by means of vertical integration;

46. Using massive political campaign contributions to influence government law enforcement policy;

47. Continuing the practice of block booking through the use of the blockbuster strategy;

48. Using blind bidding and other more contemporary techniques to place independent theatres at a competitive disadvantage;

49. Squeezing independent films off the desirable screens through the use of the wide release;

50. Using so-called standard form contracts that are contracts of adhesion and contain numerous unconscionable provisions;

Chapter 4

51. Engaging in discriminatory practices directed towards Hollywood outsiders;

52. Operating as a shared monopoly or oligopoly;

53. Destroying the lives and careers of some of the most talented filmmakers because they would not play the Hollywood insiders' game;

54. Using the trade press and other publications to defame Hollywood outsiders;

55. Using the trade press to spread harmful rumor and innuendo;

56. Rewriting history in books and articles about these same Hollywood outsiders;

57. Falsely accusing Hollywood outsiders and film industry critics of being anti-Semitic;

58. Misleading the public about Hollywood's responsibility for the problems associated with the so-called McCarthy era;

59. Accusing Congressional investigators of being anti-Semitic;

60. Stealing ideas for films, stealing scripts and stealing profits;

61. Using the early censorship offices to deny approval to competing films;

62. Rushing similar films to production to interfere with the prospective success of others;

63. Refusing to offer the same level of cooperation among studios depending on which one was owned by the outsider;

64. Making false accusations of theft;

65. Repeatedly cheating net and gross profit participants out of film revenues and thereby systematically denying their ability to influence future production and distribution choices;

66. Fraudulently misrepresenting the ability of talent to extract exorbitant sums from competitors negotiating to purchase the services of such talent;

67. Failure to provide distribution support for the films of unfavored producers;

68. Intimidation of talent to prevent them from working for outsider controlled studios;

69. Using influence to suppress unfavorable stories in the press;

70. Using mob connections to force the loan of talent;

71. Hypocritically criticizing an outsider for engaging in the same conduct as other studios;

72. Wrongfully criticizing the motives of outsider producers;

73. Engaging in malicious whisper campaigns directed toward outsiders;

74. Bad mouthing prospective studio purchasers in attempts to prevent purchases by outsiders;

75. Executive interference with a studio owner's right to run the studio;

76. Vigorously criticizing films that reflect a more conservative political view;

77. Routinely overcharging outsiders for the services of actors and actresses under contract;

78. Using block booking and other tactics to prevent wider releases for unfavored films;

79. Crediting employees for victories but the outsider studio head for the studio's mistakes;

80. Denying an outsider the ability to purchase raw film stock;

81. Discriminating against Mormons and other non-Jewish religious groups;

82. Accusing outsiders of being involved with organized crime even though there is a long history of Hollywood insider involvement with organized crime;

83. Pressuring studio executives out for refusal to purchase the inflated agency packages;

84. Using the false allegation of anti-Semitism to damage the credibility of film industry critics;

85. Attempting to carve out a class of people in our society that are above criticism;

86. Regularly engaging in discrimination directed against all non-Hollywood insiders;

Chapter 5

87. Refusing to provide reliable statistical information about the industry;

88. Using its power and control over the press to perpetuate numerous myths about the industry;

89. Engaging in blatantly misleading advertising with respect to films;

90. Using the studio's relationship with film critics to obtain favorable advertising blurbs;

91. Constantly and falsely proclaiming that the industry will be destroyed whenever anyone proposes something that does not favor the Hollywood control group;

92. Using the false argument that simply because something occurs in real life it is appropriate to show it on the screen;

93. Constantly claiming that Hollywood outsiders do not understand the film business;

94. Repeatedly misrepresenting that films are merely entertainment when it is obvious that all movies communicate ideas;

95. Refusing to accept that films influence human behavior;

96. Trying to shift the blame for children's behavior to the incompetence of parents;

97. Making the false claim that movies merely reflect society;

98. Regularly crying about violations of their free speech rights when the same rights of others are repeatedly being violated by the Hollywood system;

99. Falsely claiming significant financial benefits for the national economy when movie revenues only benefit a small insular group of people;

100. Using the censorship smokescreen to distract people's attention from the real issues in Hollywood (rampant employment discrimination and antitrust law violations, among others);

101. Using the Academy Awards to promote MPAA films;

102. Using the "winners must pay for losers" concept to justify grand larceny;

103. Falsely claiming that distributors take all of the economic or other risk;

104. Misleading the public about why film companies fail;

105. Misleading people in the film industry into thinking that "there are no rules";

106. Encouraging film schools to turn out more film students when there is no need;

107. Suggesting that there is no racial discrimination in script selection;

Chapter 6

108. Falsely claiming that the film industry is anything close to actually being a free market;

109. Regularly failing to properly account for film revenues to profit participants;

110. Consistently offering significantly less than the amount contractually due in settlements;

111. Interfering with the ability of profit participation auditors to effectively conduct audits;

112. Refusing to settle litigation for reasonable amounts;

113. Dragging litigation out over extended periods of time; and

114. Requiring litigants to sign gag orders in order to settle.

When you consider the overview of Hollywood business practices presented by this book and its companion volume The Feature Film Distribution Deal, it is difficult not to reasonably conclude that something is incredibly rotten in Hollywood. It appears that the major studio/distributors have taken a basic economic advantage, that of a favorable law of supply and demand, and exploited it for nearly 90 years, to the point where there is no merit system left in Hollywood, the lives and careers of talented people are being destroyed on a regular basis and the motion picture medium is a detriment to society.

It is important to recognize that he who controls the money in Hollywood also controls the right to choose which movies are produced and released, who gets to work on those movies at the highest levels and the actual content of those movies. Thus, the economic dominance of the major studio/distributors, gained and maintained as these books reveal, through the use of unfair, unethical, anti-competitive, predatory and illegal business practices, is also responsible for the blatant employment discrimination that occurs daily in the Hollywood-based U.S. film industry and the outrageous patterns of bias seen in Hollywood films (see Legacy of the Hollywood Empire and Patterns of Bias in Motion Picture Content).

At a minimum, it would appear that the Congress and federal agencies of the United States have negligently avoided their oversight and regulatory responsibilities with regard to the implementation of U.S. laws relating to employment discrimination and competition in the marketplace (antitrust laws), specifically as such laws are supposed to be applied to the U.S. film industry. At the other extreme, it may be fair to argue that years of enormous political contributions to U.S. Presidents, key members of Congress and Los Angeles District Attorneys have effectively negated both the federal government and the DA's office as factors in the Hollywood game. Thus, until someone in such a position decides to take on the Hollywood establishment, it may actually be accurate to say that there really are no rules in Hollywood, after all, no one has accepted the responsibility of enforcing the rules that currently exist.


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