'Millionaire' aftermath: Celador leaves door open to sue agents

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'Millionaire' aftermath: Celador leaves door open to sue agents

Thu Jul 08, 2010 @ 08:09PM PST
By Matthew Belloni

Millionaire About a week before the jury delivered Wednesday’s $270 million final answer in the trial over profits from “Who Wants to Be a Millionaire,” Disney lawyer Marty Katz made a bold suggestion in court.   

“If Celador Prods. is unhappy with the deal they got, they have the wrong defendant here,” Katz said.

He was referring, of course, to the William Morris Agency, which brought “Millionaire” to the U.S. in 1999 and made millions from package fees while its client, Celador, was battling Disney for its share of the pie. 

Clearly, Disney’s legal team was trying to pin blame on an unseen villain, one that was never a defendant in the case (though former WMA agents including Ben Silverman, Greg Lipstone and John Ferriter testified). The tactic failed to sway the jury, which eight days later found major fault with Disney’s accounting practices.

But despite the verdict, issues remain unresolved between Celador and its former agents, who have developed an awkward, semi-adversarial relationship during the six-year litigation. Celador has even left the door open to bring a separate lawsuit against its former representatives. And the “Millionaire” trial only scratched the surface of a larger issue: the potential conflicts inherent in Hollywood when reps make deals that enrich themselves but end up mired in litigation.

Throughout the trial, the former WMA agents were put in a strange position of defending under oath the acts undertaken on behalf of a skeptical former client. Celador attorneys attempted to draw a line between what the agents knew about the fees that were to be paid Celador and what Celador itself knew. Behind the scenes, suggestions were made that WMA rushed to close a deal too quickly with ABC and was interested in protecting its own packaging fees rather than the client’s profit definition.

Those package fees — in which agencies are paid a percentage (typically 5%) of a network license fee plus backend, rather than charging talent a standard 10% commission — have been part of the TV business for decades. They are widely accepted, supported by Hollywood guilds and popular with talent because the package relieves the client from paying an agent. Studios don’t like packages because they end up essentially paying agency commissions, but agents fight like hell to get them.

“But the problem with package commissions is, they’re not a bad thing unless the profit participation is structured where the agency package comes off the top before you calculate the profit,” Celador lawyer Roman Silberfeld said. “If that’s the case, then the talent is essentially paying (a portion of) the package fee.”

WMA’s package on “Millionaire” was 5% of an imputed license fee that ABC paid producer Buena Vista Television, plus a backend. That came off the top, so Celador was impacted on its contingent compensation from merchandising, though it saved a 10% commission on its executive producer fees.

Celador’s Paul Smith complained to WMA about the size of the agency’s package, essentially arguing that if WMA received more money from the package than it would have from a standard commission, Celador should be entitled to that money. According to the court record, a deal was struck to rectify Smith’s concerns — but animosity remained.

“William Morris made $16 million in package fees on ‘Millionaire,’ and until this verdict, Celador had made $21 million,” Silberfeld pointed out.

Conflicts are nothing new in Hollywood. Lawyers, for instance, will often represent two or more gross players on one film, even if the participation that one client receives could affect the money paid to the other (some lawyers get conflict waivers; others don't). Many insiders argue that packaging fees put agencies in a conflicted position because they get paid if the show as a whole does well, not necessarily whether their clients are especially protected (though newer deals often compensate for those situations).

The Celador-WMA relationship got so testy that sources say Celador initially debated whether to sue WMA separately from its claim against Disney or together in one lawsuit. Ultimately, it was decided that a conglomerate like Disney, and what Celador believed was its egregious self-dealing, made it a more appealing defendant.

That strategy worked, at least for now.

Silberfeld said his client has no plans to sue WMA (or its successor, WME), but he wouldn’t rule out pursuing a claim against the agency or the individual agents, none of whom still work for the agency. WME attorney Michael Garfinkel, who represents the former agents in the litigation, declined to comment.

The parties have entered into a “tolling agreement,” meaning Celador has preserved any legal claims it might have against WMA. However, if the $270 million verdict survives an appeal, Celador would have little damages or a reason to continue litigating against anyone. 

“But we are a long way from collecting on this judgment,” Silberfeld added.

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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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