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ARTICLE ID 29110

$________ INCLUDING $29 MILLION PUNITIVE DAMAGE AWARD - ENTERTAINMENT LAW - MOTION PICTURE LICENSING DISPUTE - BREACH OF CONTRACT - FRAUD - OVERPAYMENT OF LICENSING FEES FOR MOTION PICTURES DUE TO ARTIFICIALLY INFLATED BUDGET BY DEFENDANTS.

Orange County, California

The plaintiff purchased film distribution rights and was responsible for paying licensing fees. The plaintiff alleged that the defendant artificially inflated the production budgets for films to incorporate other expenses. The plaintiff consequently was paying millions of dollars in inflated licensing fees. The defendant maintained that the plaintiff was aware of this budget structuring and even was the one to initiate it.

The plaintiff, Intertainment Licensing GmbH is a German film distributor that purchased European distribution rights for Hollywood motion pictures before the films were created. As part of the process of buying those films, Intertainment received budgets from the defendant, Franchise Pictures and its related companies that appeared to represent the production costs for the films under discussion. The plaintiff licensed such films as "Whole Nine Yards," "Art of War," "________ Miles to Graceland" and "The Pledge" for distribution in Europe. The defendant provided the plaintiff with various budgets for these films. The plaintiff alleged that it had agreed to license these films based upon a percentage of the budget (usually 47% for all of Europe) and that the budgets were overinflated. For example, the plaintiff was told that the budget on the movie "The Pledge" was $55 million when in fact it was $37 million. The plaintiff paid licensing fees based upon a percentage of the budgets. Consequently, the plaintiff overpaid the defendant for the licensing fees.

The parties agreed that the budgets that Franchise Pictures sent to Intertainment were inflated by tens of millions of dollars with expenses that Franchise Pictures never anticipated might ever be spent. The plaintiff alleged that it based its decision to purchase the films on these budgets and that it calculated its license fees with reference to the budgets (normally 47% of the represented budget). As the result of inflated budgets, the plaintiff was duped into agreeing to pay tens of millions of dollars in license fees that were not appropriate.

The defendant Franchise admitted that the budgets were inflated but contended that Intertainment did not agree to pay on the basis of the budgets. The defendant further contended that Intertainment knew or should have known the budgets were inflated and in fact contended that the plaintiff’s own executive had originally suggested the budget inflation. The defendant also counterclaimed and asserted various breaches of contract and promissory fraud claims against the plaintiff alleging that the plaintiff had promised to license certain additional films and to provide additional compensation to the defendant and/or its principals, which the defendant maintained that the plaintiff failed to do. The plaintiff denied any liability as to the counterclaim allegations.

The trial lasted approximately twenty days. At its conclusion, p 7 3 the jury deliberated for approximately one and one-half days on compensatory damages and approximately two to three hours on punitive damages. The jury returned a verdict in favor of the plaintiff Intertainment Licensing GmbH for $________ in compensatory damages including prejudgment interest jointly and severally against the defendant Franchise Pictures LLC, Elie Samaha, and all sixteen other related defendants. The jury also awarded punitive damages in the amount of $4 million against defendant Elie Samaha individually, $1 million against defendant Franchise Pictures, and $1.5 million against each of the other individual defendants (for a total punitive award of $29 million dollars). The jury found in favor of the plaintiff on the defendants’ counterclaim.

There are posttrial motions for directed verdict and a new trial filed by the defendant which are presently pending before the court.

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