Both sides settle in ‘Grace’ case

Terms of deal remain undisclosed

In the end, both sides of the bitter “Will & Grace” legal battle realized it was in their best interest to strike a settlement.

The deal capped an unusual series of events that led NBC to realize that jurors had rendered a decision against the Peacock — although ultimately thrown out and ruled void before it was ever announced — and left the attorneys for series creators Max Mutchnick and David Kohan concerned that a mistrial might be declared.

Those factors motivated both sides to start discussing terms late Thursday. Neither lawyers for NBC nor Mutchnick and Kohan would reveal the parameters of the settlement, officially announced early Friday.

Kohan and Mutchnick, along with their agent, Scott Schwartz, filed suit in 2003 against NBC for claiming that series producer NBC Studios failed to negotiate a fair license fee from its sibling network buyer — denying the scribes the contested amount of coin.

As for the long-term impact of the case, it’s unclear whether the jury’s tossed out decision — in favor of Mutchnick and Kohan — will spur profit participants on other shows to file similar suits.

For one thing, contracts have changed in the years since the flurry of self-dealing suits from the likes of “Home Improvement” producers Wind Dancer (against Disney) and “NYPD Blue” exec producer Steven Bochco (against 20th Century Fox).

Network and sister studio negotiations are now implicitly allowed in most contracts; disputes these days are also required to go to arbitration rather than the courts. In addition, both sides in major negotiations now usually hire outside consultants to oversee the deal in order to prevent future disputes.

In the 2003 suit, Kohan, Mutchnick and Schwartz sued for around $65 million. At the time, NBC countersued, alleging that Kohan and Mutchnick breached their contract by failing to take part in negotiations at the net to renew “Will & Grace.”

According to the jurors, they were prepared to award $49 million to Mutchnick and Kohan (including $9.8 million for Schwartz) and found fraud by “clear and convincing evidence” — which would have then sent the trial to a punitive damages phase. (The attorneys for Mutchnick and Kohan had only asked for a $1 in damages, however.)

In a brief statement, NBC noted that “the parties have mutually resolved the issues in dispute in a way that is satisfactory to all parties, and the lawsuit has been settled.”

But in a sign of how contentious the proceedings were, by Sunday afternoon the Peacock released a stronger, much more detailed statement on what they believed happened — including their belief that Superior Court Judge Warren Ettinger was about to declare a mistrial.

“We spent three months in trial proving that NBC Studios honored its contract with Kohan and Mutchnick, treated them very well and worked with them to make ‘Will & Grace’ a successful show. We are disappointed that the trial became so corrupted by juror misconduct that the court had to remove the jury foreperson and throw out the jury deliberations in their entirety. It was clear to us that the misconduct by the jury foreperson along with other serious improprieties had completely tainted the trial. We believe that the court was about to order the entire trial to be started over before a new and impartial jury.”

The net pointed to comments the judge made regarding the juror misconduct, strongly hinting that he was leaning toward a mistrial.

“I don’t know how you can say to the other jurors, ‘Now you all go back and we are going to give you one of the alternates,'” Judge Ettinger said, according to court transcripts. ” ‘Start all over again and forget everything that your foreperson said because we have concluded that he demonstrated bias,’ or whatever we conclude.”

What’s more, NBC filed motions for a mistrial for several other reasons — such as inappropriate comments they say were made by the plaintiff’s lawyer.

The attorneys for the “Will & Grace” creators, on the other hand, expressed satisfaction that the jury in the contentious profits case were apparently ready to rule in their favor.

“On the settlement, we can only say that both sides are happy about it,” said Bird Marella Boxer & Wolpert partner Ron Nessim, who tried the case. “But when we talked to the jurors today, they made a lot of interesting comments — and it was apparent that they saw the case the way we saw it.”

Nessim said he particularly focused on a unique “maximized revenue obligation” clause in Mutchnick and Kohan’s contract with NBC demanding that any decision regarding “Will & Grace” be motivated by the show’s best interest, not that of NBC or NBC Studios. The attorney pointed out several instances to jurors in which it appeared decisions were made that benefited the network and studio more than the show.

As for the complaint that NBC didn’t conduct an arm’s length negotiation with NBC Studios to renew “Will & Grace” in 2002, Nessim pointed to a 2001 renewal for Paramount Network TV’s “Frasier,” which received a $5.5 million per episode license fee — higher, he said, than “Will & Grace” did, despite the latter’s place as a cornerstone of NBC’s Thursday night lineup. (NBC says the number was $5.3 million.)

“In my mind, it seemed like a monopoly in a sense,” said one juror, Rick J. Gonzales.

Nessim said he was even more gratified by the jury’s decision (even if it was ultimately not applied) because he was barred from introducing several pieces of what he called “smoking gun” evidence at the trial. That included what he claimed were contradictory statements made by then-NBC business affairs chief (now NBC West Coast prexy) Marc Graboff about the “Frasier” negotiations while speaking at Harvard vs. what he testified to on the stand.

Nessim also said he hoped to introduce evidence that NBC had made a play for CBS’ “Everybody Loves Raymond” soon after the “Will & Grace” negotiation, allegedly offering $7 million per episode for the show. (NBC says that wasn’t the case — and points out that the judge sided with them, agreeing that those facts weren’t true or relevant.)

Friday’s settlement ended what Nessim called “a roller coaster” of a case.

“I’ve never had a more difficult experience in my life,” he said. “I think everything that happened in this case was bizarre.”

Nessim also described an unusual amount of animosity between the two sides in the case. Nessim previously had served as a lawyer in two other suits against NBC: one filed by “Homicide: Life on the Street” exec producers Tom Fontana and Barry Levinson, and another by novelist Danielle Steel.

The case was rocked at the start, as Los Angeles Superior Court Judge Emilie Elias — who handled most of the pre-trial litigation — recused herself after jury selection because her husband owns GE stock. Ettinger took over the case but clashed with both sides.

Nessim in particular said he grew frustrated after Ettinger didn’t allow what he saw as those crucial pieces of evidence.

Then came the trial’s dramatic denouement. After a week of deliberation, the jury came to a decision on Wednesday — and sent their sealed verdict to the judge.

But on Thursday, just as the decision was about to be read, NBC filed a surprise motion, telling the court that it had discovered jury foreman Dean Hartwell’s personal blog, which included an entry critical of NBC (accusing the network of covering up stories because of its ownership by General Electric).

Ettinger granted a motion to dismiss Hartwell and then took the unusual step of unsealing the jury’s verdict to decide whether its decision may have been affected by Hartwell’s personal beliefs.

If the jury ruled in favor of NBC, he surmised, the jury wasn’t tainted — and it could proceed new deliberations with an alternate juror. But if it ruled in favor of Mutchnick and Kohan, then there was a bigger problem, and each juror would have to be interviewed.

When Ettinger announced that he would indeed need to talk to each juror and decide whether a mistrial would be declared, it was clear which way the ju
ry went. Ettinger also told NBC that it would need to bring financial documents to the court — a sign that the jury would be considering punitive damages.

Jurors were surprised by the turn of events, particularly because Hartwell was a soft-spoken foreman who never gave much of his own viewpoint, Gonzales said.

“We weren’t tainted by Dean’s Web site — we never knew about it, and he never aggressively pushed an issue,” Gonzales said. “He was very docile with us. He followed the pack and never voiced his opinion.”

Gonzales said he would have felt “very betrayed” had a mistrial been declared. “Now that it’s over, another group doesn’t have to clean it up.”

The judge was set to tell the courtroom Friday at 9 a.m. whether a mistrial would be declared, or if the jury would be sent back to deliberate with an alternate juror. Instead, the court was told that a settlement had been reached.

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