March 31, 2004
In this newsletter:
RGH/LIONS SHARE ARBITRATION AWARD
In a recent newsletter, I mentioned an arbitration award I obtained against RGH/Lions Share on behalf of our client, the Florida Film Investment Company. Mr. Eric Louzil, who manages RGH/Lions Share as well as Echelon Entertainment and Singa Home Entertainment, has objected, complaining that I did not describe the arbitrator’s award accurately and as a result his reputation has been tarnished.
Mr. Louzil objects to my statement that the arbitrator found that his company had failed to provide "accurate" accountings. Indeed, the exact words the arbitrator used were that RGH/Lions Share had failed to provide “complete and timely accountings.” The arbitrator also noted that RGH/Lions Share failed to provide backup of its expenses. I am not sure how an incomplete and late accounting could possibly be accurate, but let’s set the record straight.
Mr. Louzil claims that it is not fair to say that his company had engaged in numerous incidents of wrongdoing. The arbitrator specifically found that RGH/Lions Share failed to provide complete and timely accountings, reported questionable expenses, refused to acknowledge my client’s cancellation of the distribution agreement, failed to return materials, entered into an invalid agreement with Singa Home Entertainment that appeared to be a sham transaction, and tortiously interfered with my client’s attempt to enter into a home video distribution deal with another distributor. Sounds like multiple acts of wrongdoing to me.
Another objection concerns my statement that RGH/Lions Share attempted to sell DVD rights to Pathfinder Pictures (which is not a company managed by Mr. Louzil). Apparently, the agreement was between another of Mr. Louzil’s companies, Singa Home Entertainment, and Pathfinder. So it appears that RGH/Lions Share contracted with my client, and then assigned the home video rights to Singa, which in turn attempted to license the rights to Pathfinder. So Mr. Louzil may be technically correct that the agreement was with Singa, not RGH/Lions Share. Of course, we should also mention that the arbitrator specifically found that RGH/Lions Share agreement with Singa was invalid, and had “all the appearances of a sham transaction between related entities serving simply to dilute the proceeds from the distribution and the potential revenues.”
Mr. Louzil is upset that I wrote that “damages” were awarded in the amount of $75,000. In fact, the award was for $50,000 in damages, $25,052.52 in reimbursement of attorney fees, costs and arbitration expenses, for a total award against RGH/Lions Share of $75,052.52. I am not sure, from the perspective of Mr. Louzil’s reputation, how this makes any difference but perhaps he thinks that people will think more highly of his company if a portion of the award is for reimbursement of attorney fees and costs rather than damages.
It appears that Mr. Louzil is not aware that in defamation actions, truth is an absolute defense and a defendant is not required to prove the literal truth of an allegedly defamatory statement in every detail, so long as the imputation is substantially true so as to justify the gist or sting of the statement. Southwell v. Mallery, Stern & Warford 194 Cal. App. 3d 140, 239 Cal. Rptr. 371 (2nd Dist., 1987).
In order make sure that our readers are precisely and accurately informed, we are publishing this correction. Because we don’t want to quibble over words chosen to describe the award, here is a verbatim copy of the arbitrator’s award:
AFMA INTERNATIONAL ARBITRATION TRIBUNAL
In the matter of the Arbitration between AFMA Arbitration No. 03?62
FLORIDA FILM INVESTMENT COMPANY and RGH/LIONS SHARE PICTURES STATEMENT OF DECISION AND AWARD OF ARBITRATOR T
his matter was heard on February 2, 2004, and argued and submitted for decision on February 9, 2004. Roy G. Rifkin, Esq. was duly appointed as Arbitrator pursuant to the parties’ agreement to arbitrate contained in the agreement dated as of March 2, 2000, and the AFMA Rules for International Arbitration effective September 19, 2002 (“Rules”).
Mark Litwak, Esq. appeared as counsel for Claimant Florida Film Investment Company (“Florida Film”), and Eric Louzil appeared on behalf of Respondent RGH/Lions Share Pictures (“RGH”).
The Arbitrator, having considered the evidence and arguments submitted, makes the following Findings of Fact and Conclusions of Law and Award:
FINDINGS OF FACT
1 . Claimant is the producer of a motion picture entitled Oliver Twisted (the “Picture”).
2. Respondent is in the business of motion picture distribution.
3. The parties entered into an agreement (the “Agreement”) dated as of March 2, 2002, for the worldwide distribution of the picture by Respondent.
4. The Agreement provides, inter alia, for: (a) Written approval by Claimant of any sub?distribution agreements (paragraph 3(e)); (b) The allocation of gross receipts (paragraph 14); (c) Recoupable expenses (paragraph 15); (d) Rendering of accountings by Respondent to Claimant (paragraph 21); (e) Claimant’s right to cancel the Agreement based on failure to generate $100,000 net proceeds to Claimant in the first year of the Agreement (paragraph 17) (“performance clause”); (f) Arbitration of disputes (paragraph 24); and (g) Attorney’s fees and expenses to the prevailing party (paragraph 25).
5. Respondent reported to Claimant total gross receipts in the amount of $8,232.89 from the distribution of the Picture.
6. Respondent reported to Claimant expenses in the amount of $36,460.11 in connection with the distribution of the Picture.
7. Claimant canceled the Agreement pursuant to the performance clause by letter dated February 22, 2003.
8. As of February 22, 2003, Claimant demanded from Respondent the return of all materials in connection with the Picture. Respondent did not return any materials.
9. By agreement dated as of January 15, 2003, Respondent purported to license domestic home video rights to the Picture to Singa Home Entertainment (“Singa”). Singa is affiliated with Respondent. Claimant was not aware of and did not consent to the distribution agreement between Respondent and Singa.
10. In or about April 2003 Claimant had an agreement to license the Picture for domestic home video (including DVD) to BCI Eclipse. The transaction was aborted due to the assertion by Respondent and/or Singa that it had the rights to the Picture.
CONCLUSIONS OF LAW
1. Respondent was in violation of the terms of the Agreement by its failure to provide complete and timely accountings of its distribution activities. Respondent never provided the backup which Claimant requested regarding reported expenses. Furthermore, many of the reported expenses are questionable, including, but not limited to, $2,000 for advertising, $4,000 for M&E tracks, $4,000 for poster, and $500 each for legal/handling fee in connection with various territories. However, even assuming the invalidity of many of the expense items reported, Claimant has not established that it was damaged by any of these breaches. For example, no evidence was offered challenging the market expenses reported by Respondent, under paragraph 15(i) of the Agreement, in the amount of $10,000; and the evidence does not support a finding that Respondent received gross receipts in excess of the $8,232.89 reported. Accordingly, even if all of the questionable distribution expenses were to be disallowed, Claimant still would not be entitled to any producer’s revenues under the terms of the Agreement.
2. Claimant was entitled to cancel the Agreement under the terms of the performance clause because the Picture did not generate $100,000 in producer’s revenues the first year. Such cancellation was effective as of February 22, 2003. Respondent’s refusal to acknowledge the cancellation and return the materials was unwarranted. Respondent’s assertion of prior breach by Claimant in connection with Claimant’s limited attempt to market DVDs of the Picture is not compelling as Respondent had knowledge of and impliedly consented to such activity; and, in any case, there is no evidence of such activity having any detrimental commercial effect on Respondent’s distribution activities. However, Claimant offered no evidence establishing that Respondent’s failure to recognize the cancellation of the Agreement and failure to return the materials proximately caused any damage to Claimant. See Postal Instant Press v. Sealy, 43 Cal.App.4th 1704 (1996). Accordingly, while Claimant is entitled to the return of the materials, it is not entitled to any monetary damages in connection with this claim.
3. Respondent’s distribution agreement with Singa is invalid. It was entered into without the consent of Claimant as required by the Agreement; it exceeded the allowable term of years; and it has all the appearances of a sham transaction between related entities serving simply to dilute the proceeds from the distribution and the potential revenues.
4. Respondent tortiously interfered with Claimant’s domestic home video distribution deal with BCI Eclipse. Respondent had no legitimate basis to deny Claimant’s cancellation of the Agreement nor to rely upon Respondent’s distribution agreement with Singa. Accordingly, Respondent had no reasonable basis to assert to BCI Eclipse its own rights to the Picture as of April 2003. Although the evidence of actual damage based on Claimant’s loss of the distribution deal with BCI Eclipse is somewhat sketchy, there is support for a finding that, had Respondent not interfered with the deal, revenues from the home video distribution of the Picture to the producer would approximate $50,000 (see Exhibits 16 and 25).
AWARD
1. The Agreement dated as of March 2, 2000 is terminated effective as of February 22, 2003. Respondent RGH/Lions Share Pictures retains no rights in the motion picture Oliver Twisted, and Claimant Florida Film Investment Company is free to deal with the Picture as it sees fit in all territories.
2. Respondent RGH/Lions Share Pictures is permanently enjoined from advertising, selling, distributing, manufacturing, or shipping the motion picture Oliver Twisted in any media or any territories whatsoever.
3. Respondent RGH/Lions Share Pictures is ordered to deliver immediately to Claimant Florida Film Investment Company at the office of its counsel, Mark Litwak, Esq. any and all materials in its possession, custody, or control relating to the motion picture Oliver Twisted including, but not limited to, masters, submasters, negatives, videotapes, video disks, stills, cue sheets, boxes, posters, photographs, artwork, advertising material, access letters, and distribution agreements.
4. Respondent RGH/Lions Share Pictures shall pay to Claimant Florida Film Investment Company the following: (a) damages in the amount of $50,000.00; (b) attorney’s fees in the amount of $22,702.52; (c) costs in the amount of $850.00; and (d) reimbursement for one?half of the compensation and expenses of the Arbitrator in the amount of $1,500.00; for a total monetary award in the amount of $75,052.52.
DATED: February 12, 2004
