Hollywood accounting suffers a blow in court Lawsuit: Movie studios lose first round in potentially crucial court battle as judge upholds class-action.

June 19, 1996|By David Robb | David Robb,THE HOLLYWOOD REPORTER

A federal judge in Los Angeles dealt a potentially stunning blow to Hollywood's system of "creative accounting" Monday as he certified a lawsuit over "JFK" that was filed by the estate of Jim Garrison as a class-action suit.

If U.S. District Court Judge Robert Takasugi's ruling is upheld on appeal, the case is certain to become the mother of all Hollywood lawsuits, allowing thousands of actors, writers, directors and producers who feel they've been cheated out of net profits from motion pictures to join the plaintiffs as members of the aggrieved class.

"This is a landmark victory and will certainly be a blow to Hollywood," Joseph Cochett, the lead lawyer for Garrison's estate, said after the court ruling Monday.

The case began in November as a lawsuit filed by the children of Jim Garrison, the late district attorney of New Orleans. The lawsuit claimed that Garrison, upon whose book the Warner Bros. film "JFK" was based, was cheated out of his share of the film's net profits. The suit also alleged a conspiracy among all the major studios to fix prices and to cheat all Hollywood talent out of their net profits by establishing a standard, nonnegotiable net profits deal throughout the industry.

Attorneys for the studios -- more than 20 of whom were present at Monday's hearing -- vowed to appeal the ruling to the 9th U.S. Circuit Court of Appeals. Several studio attorneys said they are confident the appellate court will overrule Takasugi.

The judge certified the case as a class-action lawsuit with regard to its antitrust claims but denied class-action status to the suit's breach-of-contract claims.

That means that if the ruling is upheld on appeal -- a big if -- the plaintiffs will have to prove that a conspiracy existed among the studios to fix prices; that the conspiracy impacted the class members; and that the class members suffered damages.

By denying class-action status to the plaintiff's breach of contract claims, however, the judge significantly narrowed the scope of any coming trial.

From the very beginning, the plaintiffs announced that they would seek class certification, and during the past several months, both sides have been filing briefs explaining why the case should -- or should not -- be certified as a class action.

Attorneys for the Garrison estate were jubilant after the ruling.

"This is a great win for the people in the industry who otherwise don't have a voice," said attorney Tom Girardi. "It's wonderful, at this stage of the proceedings, to go on to the next level. We wanted the certification of the class to tell our story."

"This is the first step," said attorney Adam Miller, "in ending the era of 'monkey points' and allowing the vast majority of working talent the ability to receive a meaningful share of the profits of a motion picture."

Studio attorneys argued that the case -- with so many class members attached -- could take more than a decade to litigate. At the end of the day Monday, Judge Takasugi quipped: "If this is going to be a 10-year lawsuit, are we going to be around?"

Pub Date: 6/19/96

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