The Weinstein Company Crow-ing over Distribution Rights.

By: Jay Lewis

 

Hollywood has lost the ability and/or the willingness to foster new ideas.  Instead, millions of dollars are invested in remaking prior films —especially superhero movies. (Batman, Spider-man, X-men).  Even lesser known superheroes are getting a reboot. (Thor, Green Lantern, Green Hornet). One production company, Relativity Media, Inc. (“Relativity”), plans to remake a middling 1994 superhero film called The Crow.  The original film gained notoriety after its lead, Brandon Lee, was accidentally shot and killed on the set, and the film has since developed a cult-like following.  

With half-baked reboots easily grossing over $50 million in U.S. theaters, it is common for distribution companies to compete for sole rights to distribute these films both in the States and internationally.  The Weinstein Company (“TWC”) is a film production and distribution company that has recently produced or distributed highly acclaimed films such as The Fighter and King’s Speech.  However, TWC lacks a portfolio of the higher grossing action features that the industry covets.  For them, rights to distribute The Crow, which already has a built-in fan base, could prove lucrative.

On April 20, 2011, TWC filed for Injunctive Relief against Relativity.  See Complaint here TWC alleges that it entered a contract with Relativity on March 25, 2009 (“Contract”) wherein TWC was granted exclusive distribution for any and all remakes, sequels, and prequels to The Crow.  TWC further alleges that Relativity plans on selling those distribution rights to other companies in breach of the Contract.  I have not yet read the Contract but I have read a letter from Carol Genis of K&L Gates on behalf of Relativity.  Ms. Genis alleges that TWC has already breached the Contract or as she refers to it, the Termination Agreement.  She goes on to discuss the “NDA” but never defines it. She states the NDA sets forth in great detail that all disputes shall be arbitrated.  However, she later states that the NDA is terminated and therefore Relativity is not bound by it. See the letter here.

Part II will be posted tomorrow.

NFL: Is the Judge Trying to Punt? (Part 2)

(Blog written by: Jay Lewis)

An initial hearing was held on April 6, 2011 regarding the injunction sought by the players against an NFL owner imposed lockout. For background on how we got here, see my previous post below. As for the hearing, US District Court Judge Susan Richard Nelson questioned the sides for over 5 hours but did not make a ruling. She said she wants to take a couple of weeks to make a decision to ensure a fair ruling for both sides. This may allow time for the litigants to negotiate their own resolution. Additionally, the National Labor Relations Board (“NLRB”) is separately investigating whether the players legitimately decertified and the Judge may defer to them as to whether or not the decertification was a sham. If the NLRB makes a determination the players are still a union, the players will lose anti-trust standing in the Brady case.

This preliminary injunction is a fairly straightforward civil matter-- the Plaintiffs have the burden of proving four factors: 1. The Plaintiffs will suffer irreparable harm if they are locked out by the Defendants or not allowed to sign freely with teams in a competitive market. 2. The Plaintiffs are likely to prove the lockout and restrictions on employment are violations of antitrust law. 3. The Defendants will suffer less harm with an injunction than the Plaintiffs will suffer without one. 4. Public interest favors an injunction preventing the lockout.

The players must demonstrate not only irreparable harm but also monetary damages will not adequately compensate for the harm. Here the players argue that “due to the short length of NFL careers, the virtually constant need for NFL players to demonstrate their skill and value…and the difficulty in estimating and proving the amount of monetary damages…” their injuries are not fully compensable with cash. (Complaint ¶ 86). However, the NFL responded that the players would in reality be compensated with paid leave once the lockout ends and have the benefit of avoiding serious injuries because of the halt in activities. (Response p. 43).

The NFL suggests that the players are unlikely to prove the lockout violates antitrust law because the decertification was made within an hour of ending CBA negotiations. The NFL claims that until a point “sufficiently distant in time and in circumstances from the collective bargaining process” the labor exemption is still in effect. (Response p. 37, citing, Brown v. Pro Football, Inc., 50 F.3d 1041 (D.C. Cir. 1995)). The NFL alleges that the players were not negotiating in good faith and a lockout would force them back to the negotiating table. The NLRB’s decision on the legitimacy of decertification may be a game changer.

Additionally, the NFL argues that the balance of harms sway against them if the injunction is granted. They make a Catch-22 argument: If the league is enjoined from locking the players out and move forward with the season, they will be forced to further violate antitrust laws. By the nature of the sport, the teams must cooperate with each other by setting rules and schedules. Thus, the NFL argues, they are susceptible to additional antitrust actions. (Response pp. 45-47). The players The NFL suggests that the public interest favors applying federal labor laws over antitrust laws. (Response p. 47-49). The league claims that the Norris-LaGuardia Act prevents the court from intervening in a labor dispute, arguing that the Act prevents any court from issuing an injunction against a lockout. Check back for analysis of the Judge’s eventual decision.

Kraft vs. Starbucks: The Beginning To The End (3)

In response, Starbucks argued that an injunction was unnecessary because Kraft failed to show that it would suffer irreparable harm in the absence of injunctive relief. Starbucks stated that it had the undisputed right to terminate the contract at any time because Kraft had materially breached the terms by failing to perform its obligations under the contract by “withholding sales presentations and other materials” and failing to improve Starbucks’ declining sales, thereby releasing Starbucks of its obligations under the contract. (Response, pp 6). Further, pursuant to the termination provision of the underlying contract, the damages that Kraft would suffer would be compensable by money damages based on Kraft’s alleged harm of losing the exclusive right to distribute a product through Starbucks. Kraft is the largest food company in North America, and revenues from Starbucks account for 1% of Kraft’s annual revenue. (Response, pp 16).

Is this numerical value significant enough to demonstrate irreparable harm to Kraft? Starbucks said no and cited the following cases. In Litho Prestige, Div. of Unimedia Group, Inc. v. News Am. Publ’g, Inc., 652 F. Supp. 804, 808 (S.D.N.Y. 1986), the court stated that an argument that a four percent business loss would cripple the plaintiff was “wholly unpersuasive”. In Reiter’s Beer Distribs., Inc. v. Christian Schmidt Brewing Co., No. 86 CS 534, 1986 WL 13950, at *11 (E.D.N.Y. Sept. 9, 1986), the court found no irreparable harm where sales of beers at issue constituted between 17% and 29% of distributor’s total sales. Based on these holdings, the potential 1% loss of Kraft’s annual revenue is far from demonstrating irreparable harm.