German entertainment co. to replead

A federal judge in Los Angeles threw out Intertainment’s RICO claims against Franchise Pictures late last week, finding that Intertainment had failed to allege the requisite criminal enterprise.

Ruling on a motion to dismiss by Franchise, U.S. District Court Judge Carl Moreno also dismissed Intertainment’s claim for breach of the covenant of good faith and fair dealing. He refused to dismiss Intertainment’s claims of fraud, breach of contract and unfair competition. Intertainment can refile these claims at a later date.

Franchise attorney Larry Stein said, “We’re delighted that the judge decided to rule on the RICO claims, and we’re pleased with the decision.”

Intertainment attorney Scott Edelman said, “Dismissal of RICO claims in the early stages of a case is very common. The important thing is that the judge gave Intertainment leave to replead, and we will file amended RICO claims.”

As expected, Judge Moreno also granted a motion to require arbitration of Intertainment’s claims against Imperial Bank. Last Monday, Moreno announced a tentative decision to send that portion of the case to arbitration. (Daily Variety, April 17).

Intertainment takes the position that its case against Franchise will go forward in federal court while the bank claims are in arbitration. Franchise, however, believes the entire case is on hold until the AFMA (American Film Market Arbitration) is concluded.

Franchise and Intertainment have been warring since late December. Franchise charges that the once high-flying German entertainment company, which put up nearly half the budget on Franchise’s films in exchange for foreign distribution rights, breached its output deal. Intertainment claims that Franchise inflated budgets on numerous films, including “Get Carter,” “The Pledge,” “The Art of War,” “3000 Miles to Graceland” and “Battlefield Earth.”

Intertainment also sued Imperial Bank, Franchise’s primary lender, claiming it knew the budgets were padded and benefited by receiving additional fees.

‘Carter’ suit

With Intertainment still on the hook for payments under its multipicture deal with Franchise, more litigation is on the horizon. Intertainment put up a letter of credit for about half of its portion of the budget on “Get Carter,” a box office bomb in the U.S. Imperial Bank recently drew down the letter of credit on the film, triggering Intertainment’s duty to pay the remaining amount it owes, some $14 million.

Franchise is taking the position that with Intertainment in default on that payment, it is free to seek another distributor. Intertainment, however, claims that the film has not met technical delivery requirements.

Edelman said, “We’ve advised Imperial Bank and Franchise that we will be commencing an arbitration under AFMA because the film was not properly delivered to Intertainment.”

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