Warner Bros. fights back in 'Smallville' profits lawsuit

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Warner Bros. fights back in 'Smallville' profits lawsuit

Tue Jun 01, 2010 @ 06:07AM PST

By Matthew Belloni

Smallville EXCLUSIVE: "Smallville" is turning into a big battle. Warner Bros. TV, the studio behind the young Superman series, and the CW network, which recently renewed it for a 10th season, have responded to the self-dealing lawsuit filed by series co-creators Miles Miller and Alfred Gough and co-producer Tollin/Robbins Prods. The studio and network are trying to knock out key claims at the initial pleading stage of the dispute over profits from the show, which the defendants say "would never have survived this long on another network."

As we first reported in March, the "Smallville" producers filed a breach of contract and breach of fiduciary duty complaint in Los Angeles Superior Court against Time Warner and its divisions -- WBTV, Warner Bros. Domestic TV Distribution, the now-defunct WB network, where the show started -- and the CW, a co-venture with CBS. The lawsuit alleges WBTV made sweetheart license fee deals with the WB and the CW that "were not arms-length," shortchanging the plaintiffs by as much as tens of millions of dollars. 

But in court papers dated Friday, the Warners entities argue that the claims for breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing and declaratory relief must fail because sufficient facts aren't alleged to support them. (A separate motion to strike takes aim at Tollin/Robbins' self-dealing claim, which the defendants say fails because certain "arms-length" language was absent from that deal.) 

Warners is trying to kill the breach of fiduciary duty claim by arguing that no joint venture exists between the producers and the studio. That's a common tactic in Hollywood accounting litigation: A profit participant sues for both breach of contract and breach of fiduciary duty because damages can be higher, and the studio will try to eliminate the fiduciary duty claim on demurrer by arguing, as Warners does here, that it doesn't actually owe any fiduciary duties because the profit-sharing relationship doesn't amount to a partnership or joint venture.     

Here there's a wrinkle, though, because Tollin/Robbins claims in the complaint that its "producers agreement" with Warners actually does explicitly define a joint venture. To this argument, Warners has an interesting response. "In fact, the producers agreement is denominated a 'venture agreement,' not a 'joint venture agreement,' and a 'venture' is not the same thing as a 'joint venture,'' the demurrer reads. The studio then helpfully provides definitions of the two terms from Black's Law Dictionary. 

Is a "venture" the same as a "joint venture"? Warners says no, especially since a partnership was specifically disavowed elsewhere in the deal. The answer could be important in determining the stakes in this litigation, and it could be instructive for all future profits cases. The next hearing is scheduled for July 16 before Jane Lueke Johnson. 

Warners is repped by Scott Edelman, Jessica Lund and Amelia Collins at LA's Gibson Dunn & Crutcher. The producers are repped by Michael Kump and Chad Fitzgerald at Santa Monica's Kinsella Weitzman firm.    

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The Hollywood Reporter
The Hollywood Reporter, Esq. blog focuses on how the entertainment and media industries are impacted and influenced by the law. It is edited by Matthew Belloni with contributions from veteran legal reporter Eriq Gardner and others. Before joining The Hollywood Reporter, Belloni was a lawyer at an entertainment litigation firm in Los Angeles. He writes a column for THR devoted to entertainment law. Gardner is a New York-based writer and legal journalist. Send tips or comments to Matthew.Belloni@thr.com

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