Lawsuit alleges revs fell to $70,000 from $4 mil
The majority rights holders of those adorable singing rodents, Alvin and the Chipmunks, have launched a massive lawsuit against Universal Studios, claiming they have been damaged to the tune of $100 million because the studio reneged on its promise to actively license Chipmunks products and develop the Chipmunks brand through its motion picture, television and theme park arms.
The Chipmunks were created by the late Ross Bagdasarian in 1958 and operated as a one-man shop. According to the complaint, filed Monday in L.A. Superior Court by attorney Bonnie Eskenazi of Greenberg, Glusker, Fields, Claman & Machtinger on behalf of Bagdasarian Prods., the family-run corporation.
The Chipmunks generated $4 million a year in license fees, but the family felt the characters would be better served as part of a media empire.
Negotiations with Universal began in 1995, and in 1996, Universal induced Bagdasarian to sell a 35% interest in its business for $12.5 million and enter an exclusive licensing agreement by promising that the Chipmunks would become the center of their animated programming and family entertainment division. Universal also was to avail itself of the expertise of family members Janice and Ross Bagdasarian Jr. in developing the Chipmunks.
But, alleging, fraud and breach of contract, plaintiffs contend that Universal never intended to honor its agreements. Instead, Universal only wanted to lock up rights in the Chipmunks because director Bob Zemeckis had expressed interest in a live-action Chipmunks feature. When he moved on, Universal lost interest in the Chipmunks.
The complaint also alleges that while Universal was promising to make the Chipmunks the centerpiece of its children’s programming, it was secretly planning to dismantle its family entertainment and animation arms. Specifically, the complaint claims that while negotiating with the Bagdasarians, it was planning to sell USA Networks to Barry Diller. Also alleged is that Universal has recently begun quietly dismantling its television animation production division.
Painting a picture of complete corporate dysfunction and lack of communication between divisions, the complaint alleges Universal let the Chipmunks brand languish to the point that annual revenues dropped to $70,000 from $4 million.
Plaintiffs declined to comment on the suit, and Universal did not return a call seeking comment.