After months of unsuccessful negotiations for a production deal with Arnon Milchan, MGM has turned around and filed a multimillion-dollar suit against the indie producer, saying he reneged on a separate $ 8 million foreign distribution deal for the film “Six Degrees of Separation.”
The suit, filed Wednesday in Los Angeles Superior Court, charges breach of contract, bad-faith denial of the existence of a contract and fraud. It not only names Milchan, but all of Milchan’s numerous corporate companies, including Embassy Intl. Pictures, Regency Enterprises, Meespierson Trust, Caribbean Management Company, Monarch Enterprises and New Regency Prods.
MGM contends that Milchan, through Embassy, Regency and Monarch, had a signed agreement for the foreign distribution of “Six Degrees,” in return for which the Milchan Group would pay half the production costs. In the studio’s suit, execs say their agreement was separate and distinct from earlier negotiations to draw up a production deal.
Yet Milchan execs say that it’s MGM that is reneging on a larger production and distrib deal.
New Regency Prods. exec veepee and chief operating officer Adam Platnick said: “‘Six Degrees’ was part of an overall arrangement entered into with the prior management of MGM and Credit Lyonnais in early 1993. The arrangement involved multi-picture co-financing and overseas distribution by Regency of MGM/UA’s existing feature catalog and the jointly created Regency/MGM films. The current management of MGM has breached that agreement.
“We have sought to enforce our rights and are continuing to try and amicably resolve our dis-pute with the current management of MGM,” Platnick added. “We are confident we will prevail in any litigation.”
Ironically, when Milchan was in negotiations for a production deal with MGM, he had an ongoing exclusive deal with Warner Bros.
While Warner Bros. officials had no comment, sources report that Credit Lyonnais toppers met with WB brass and Milchan’s company during the MGM negotiations — meetings in which, they said, WB gave permission for Milchan to enter the deal. WB’s motive for doing so was that the studio would be part of any overseas distribution deal Milchan would strike with MGM, according to sources. WB already distributes MGM/UA video fare worldwide.
Deal fell through
The production deal never came about, though, with talks breaking off last August, said MGM attorney Pierce O’Donnell. According to court papers, the studio contends Milchan then entered into a separate agreement in September 1993 to obtain the international distribution rights to “Six Degrees.”
The formal signatories to the “Six Degrees” contract were Embassy, Regency and Monarchy.
As part of the agreement, the Milchan Group promised to reimburse MGM one-half of the studio’s costs to produce the film, up to $ 8,050,000, court papers state.
The Milchan people were also obligated to pay MGM interest at the prime rate accruing from the date MGM had to pay production costs.
Yet when it came time to pay the money, after MGM had delivered the final product for international distribution, the Milchan Group waited two weeks and then sent a “go to hell” letter to the studio, O’Donnell said.
“We think this is a blatant case of reneging on a contract and denying the very existence of the contract,” said O’Donnell, of the law firm Kaye, Scholer, Fierman, Hays & Handler.
He pointed to the Milchan’s group’s efforts to begin distribution in some foreign territories.
“In a Dec. 15 (1993) letter, Milchan’s attorneys state that they had begun licensing rights to some foreign entities,” O’Donnell said. “That’s what’s particularly outrageous about their claim that the deals were linked. The other deal had already fallen apart in August (1993).”
Platnick vigorously denied that “Six” was ever distributed overseas: “That is untrue. We have not released the picture anywhere overseas. Certain television sales were made prior to this dispute in reliance on our overall agreement with MGM.”
The TV deals still exist, but have not been serviced yet.
O’Donnell denied Platnick’s statement that the Milchan people were trying to reach a resolution with MGM.
“Mr. Milchan’s lawyers, as recently as this morning, refused to engage in any negotiations and stuck to their position that the deals were all linked,” O’Donnell said. “But we want them to understand that MGM is taking this case very seriously. The new MGM lion is back and roaring again.”
Ironically O’Donnell was the attorney who represented Art Buchwald in his “Coming to America” case against Paramount, which at the time had MGM brass Frank Mancuso and Robert Pisano in Paramount’s executive ranks.
In a turnaround, Mancuso has now hired O’Donnell to represent him.
Mancuso, meanwhile, did not return calls.