How unusual it is for "talent"--actors, screenwriters, and directors--to challenge a Hollywood studio. Except for a very few stars, most actors until recently have accepted the unfair and sometimes unconscionable terms demanded by the major Hollywood studios.
One of Hollywood's most nefarious practices has been its empty promise to pay "net profits." This was disclosed in the early 1990s when columnist Art Buchwald sued Paramount Pictures. Although it had made millions on Coming to America, starring Eddie Murphy, the studio claimed to have no net profits. You probably read about how the movie Forrest Gump grossed over $660 million, yet the author of the book from which that that film was adapted was advised that there was no net profit.
In this and my next column, I will describe to you two famous lawsuits in which people have attempted to take on the Hollywood studios by challenging their failed promise to pay "net profits." Renowned talent in these suits were Buchwald and the late Jim Garrison, who led the prosecution of an alleged conspiracy in the assassination of President John F. Kennedy.
Next I'll discuss what you as an actor in an independent film can expect to receive of "the profits" of the filmmaker who engages you, and how you can be sure that the contracts you sign have realistic profit-participation provisions.
The Buchwald Case
My information about the Buchwald case comes from "Risky Business," an article which appeared in the September 1992 issue of Premiere magazine. It was co-authored by Art Buchwald's attorney Pierce O'Donnell and Dennis McDougal, an entertainment industry investigative reporter. In the case, described as a "David and Goliath drama," renowned writer-humorist Art Buchwald sued Paramount Pictures for breach of contract. He alleged that the studio had used his treatment called King for a Day--an outline about an African king who was forced to live in a U.S. ghetto after he was overthrown while visiting America to buy arms for his country.
Buchwald alleged that the film Coming to America, which the studio advertised as having a "story by Eddie Murphy," was based upon the treatment by Buchwald who, therefore, should have received 1.5% of the net profits, as the contract between Buchwald and Paramount had provided.
Of course, the studio, which is used to being king of the jungle, did not take Buchwald's lawsuit seriously. Martin S. David was then chairman of Gulf and Western, which owned Paramount. Upon receiving the complaint in the lawsuit, David sent his friend "Art" a bottle of champagne and a tape of a song from Guys and Dolls, called "Sue Me."
"Sue him" Buchwald did, with the judge in the infamous Los Angeles County courthouse ruling against Paramount for Buchwald and his co-plaintiff, producer Alain Bernheim. At that point, the battle was only half won, because Paramount claimed that the movie was $18 million in the red, and Buchwald and Bernheim could only collect if there actually were profits.
Buchwald's lawyers hired accountants to audit Paramount's books, which proved to be quite a trip. First, some big accounting firms bailed out, allegedly because of pressure from the studio. Secondly, Buchwald's accountants worked on site at Paramount under conditions so repressive that they were not allowed to go to the rest room or to buy a cup of coffee unescorted. However, the accountants discovered a gold mine. Paramount had two accounting systems: one for its stockholders, which showed the actual profits made by the films, and one for its net-profit participants, which showed that no matter how much the film actually grossed there were no net profits.
O'Donnell in his fascinating article describes a brilliant tactic that convinced the judge that he himself ought to examine these bogus books. Realizing that movie executives always brag about their successes in the trades, he went to Variety and found articles in which Paramount's executives boasted of huge receipts on movies they later claimed yielded no net profits.
The judge realized that, although a picture made millions, it paid no net profits because the studio kept huge chunks of money for itself: "Two accounting systems, two sets of rules--one for winners, the other for losers. Everyone in the motion picture business knew that net profits were not really profits. They represented what was left after the studio got back all its costs, generously paid its big-name talent, and took out a hefty chunk for itself. Little wonder Eddie Murphy called net profits "monkey points."
Thus, the court in a landmark ruling held that the standard net profit is one of adhesion (i.e., a contract one is forced to sign), that the studios refuse to negotiate in good faith over the definition of net profits, and that the existing definition is unconscionable because it subtracts numerous costs that are inflated or unjustified.
This was an amazing victory, although the award was only $900,000. Yet talent other than stars continue to sign these unconscionable contracts--because, as we know, sheer bargaining power sometimes is much more powerful than one legal precedent.
In our next column, we'll discuss the Garrison case, which could have more far-reaching effect than the Buchwald case, because it is brought against all the major Hollywood studios on behalf on Garrison's estate and "Hollywood Talent." Also, we'll discuss your net-profits provision and how to be sure you do see them.