Lawyers to Laid-off Digital Domain Freelancers: Pay Us or We’ll Sue

Lawyers Laid-off Digital Domain Freelancers: Pay

Production on Digital Domain Media Group’s animated feature “The Legend of Tembo”  shut down when DDMG declared bankruptcy last September, and many of its freelance artists lost not only an important client but weeks of back pay.

Now some of those artists are facing the possibility of having to return some money they did receive.

Numerous artists, mainly people who were working remotely for DDMG and were considered independent contractors, have received letters asking them to return any payment they received from DDMG or face the threat of a lawsuit to recover those funds.

The letters are from law firm Brown Rudnick of New York, which represents the court-appointed Unsecured Creditors Committee in the DDMG bankrupcty. Brown Rudnick is trying to claw back any preferential payments DDMG sent out in the 90 days prior to the company’s September 11 bankruptcy. Any recovered fundswould go back into the DDMG bankruptcy estate to be split among all unsecured creditors.

That pool of unsecured creditors would then include all of those same artists, but they might receive far less than they originally were paid or were due.

Digital Domain’s visual effects business was split from DDMG during the bankruptcy is not part of these ongoing bankruptcy proceedings.

Brown Rudnick provided Variety with a template for the letter. It reads in part: “The Debtors’ books and records indicate that your company received one or more Preferential Transfers in the aggregate amount of (Amount) (the “Preference Amount”) within the 90 days preceding the Petition Date. The Preference Amount, unless you have any valid defenses, must be returned to the Debtors’ estates.”

The letter asks that either payment or defenses and supporting documents be provided by April 30. It goes on to say that should they not be able to reach a resolution, the Committee “would have no choice but to commence an action” to recover those funds.

The legal issue in the case is that payments from an insolvent company not made “in the ordinary course of business” or “made according to ordinary business terms” can be considered a “preferential” payment, and therefore can be clawed back. It falls on the payees to show their payment meets the definition of “ordinary.”

However payments can only be considered preferential and subject to clawback if they’re for work done before that 90-day period. Payment for new work done during that period isn’t recoverable by the estate.

According to Brown Rudnick, such letters are going out to all companies and individuals, other than salaried employees, who were paid by DDMG during the 90 days before the Sept. 11 bankruptcy filing. Artists who can show their payment was made according to a regular schedule specified in their deal should have no problem. However if payment was irregular or long delayed, then they could be considered preferential.

Some artists and their reps report delays in payment from DDMG ranging from days to months before the bankruptcy. Payment to individuals may not be worth the legal fees it would take to recover them, but agencies or other reps who process payment for multiple clients might represent a large enough pool of funds to make litigation worthwhile.

The letter from Brown Rudnick did offer some small consolation to artists facing the possibility of having to return money they’ve been living off of for six months: A discount of 10% should they return the payments in question before the April 30 deadline.

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  1. lucas says:

    “Sure, I’ll pay you back. First lets get in the time machine and go back and let me undo all the work I did for which this was payment.”

  2. dularr says:

    Nothing new here. I uses to work for a major electric utility in Texas. When companies are failing, they like others they tend to pay some bills before others. Big surprise, they pay their electric bill to keep the lights on. Every so often, we would get contacted by the Bankruptcy court asking to return payments to the court. I imagine the same thing happened here, the company paid some contractors for artwork and failed to pay other creditors.

  3. Rob says:

    Another good example why I refuse to work in the US, even though the career opportunities would be great. People let themselves get screwed in basically all countries but in the US, it seems especially deep and rough to me.

  4. I wonder if the lawyers at Brown Rudnick, representing the private equity investors group that originally created the scam at Digital Domain are sending that same letter to the City of Port St. Lucie, City of West Palm Beach, the state of Florida and Florida State University, real estate firms, construction firm among others; in other words the citizens and taxpayers of Florida’s central coast are presumably also on the hook for money they lost. These people, along with 230 unpaid employees, not counting another 100 more students who won’t get their money back — are now going to have to pay more in legal fees to protect what credit they have. It appears that Mitt Romney’s vision for America is alive and well at Brown Rudnick, where they’ve found ” a new way to fail in America. http://michaelshandrick.blogspot.ca/2012/09/hasty-sale-of-digital-domain-to-foreign.html

    • interesting comment i like how you threw Romney’s name in there even though it has nothing to do with him. i certainly did not vote for the guy but dude seriously i can throw names around too. oh it happened while Obama is in office so it must be Obama’s vision of a nation oh and he is a lawyer too so this must be what Obama wants…it has nothing to do with either one of these guys so chill out ans stop with the hate.

  5. xpez says:

    They can clawback all they like. Can’t squeeze blood from a stone. That money is gone! Take me to court, whatever, I will tell the judge the same thing, “that money is gone!” Sorry Charlie!

  6. Arkham Grundy says:

    The difference between lawyers and roosters is that roosters cluck defiance while lawyers…

  7. drew says:

    This is criminal. Shame on you!

  8. John says:

    Now look into my eyes and repeat after me, you don’t need a union, you don’t need a union. Unions have outlived their usefulness, you don’t need a union. The Company will take care of you. Wink, wink.

    • Aaron says:

      That’s kind of the problem. There IS a union for animators.

      • CD says:

        Missing payroll is against the law and as employees a person would be on that said payroll. A company couldn’t “claw back” paymentts from said employee. End of story. The Union would at least provide workers with places that actually stuck to the law. I am speaking if the unions worked directly with the shops with contracts of course, without contracts a union is kind of pointless, I don’t think it would have the resources to follow up on every claim that came it’s way.

      • B Dunk says:

        Yes, freelancers, if they are union members and in good standing would be represented. If they have enough banked hours and all their dues are current. It’s if the union would enforce it or defend them is the question.

      • CD says:

        Actually Bdunk they probably would. Since freelancers are misclassified and should be classified as temporary employees, the union could enforce that, which would mean freelancers would not be “contract workers” or “unsecured creditor”. Meaning you would get paid.

      • B Dunk says:

        Tim, I’m sure Aaron is talking about The Animation Guild and he means just join the union that alredy exists, they’ve been trying to get the VXF field for years. It’s also the same union I was talking about.

        And I meant there is no way they would have any real defense against this kind of thing.

      • Tim says:

        Could you explain? What union are you referring to and how did it cause this problem?

      • B Dunk says:

        And what does that union do for it’s members? Most of the TV work is sent overseas, like 80%-90%.Ignores grievances, takes a rather not be bothered attitude. Never gives a straight answer.
        Sure good benefits if you can keep your hours up and a decent pension, but there is no way they would any real defense against this kind of thing.

        I know, been a member for a long time.

      • lmf says:

        I’ve been a member for a long time too-in Los Angeles. Florida has no union so no union protection. If you think this would be happening in L.A., think again. I suspect that there might actually be help for freelancers working under a union contract to prove that getting paid for their work is “ordinary”. FL freelancers are on their own. Our union isn’t perfect by any means but it’s much better than nothing.

  9. Grailpuffin says:

    “in the ordinary course of business” or “made according to ordinary business terms”
    Usually in the course of business, and in ordinary business terms, freelancers get paid for their work.

  10. CD says:

    This opens an interesting bag of worms. I am sure the Lawyers are aware that freelancers are misclassified employees. All these freelancers have to do is to prove they are in fact misclassified (this is an easy task) and DD becomes liable for the past 3 years of unemployment as well as other Fees and taxes.

  11. EK says:

    Sadly, this claw back tactic is indeed legal and used more often than publicized. It is obnoxious and sick-making. As the Bard so famously said: “The law is an ass!” He also said: “Kill all the lawyers” but these defendants will need legal representation so that’s not practical.

  12. Skip Greenwood says:

    This fills me with angst. Seriously. The fact that this course of action is considered ‘legal’ is frankly disgusting.

  13. matt eeks says:

    I’d rather burn the money & see them in court. What sacks of shit. Unreal & seems like something completely illegal but apparently not. Just jacked up beyond belief.

  14. Matt Ulrich says:

    I find this litigation offensive. These people entered an agreement with the company to receive pay in return for there work. The company pays them late, then files bankruptcy. So the lawyers sweep in and intend to sue people who did nothing wrong but receive payment for what they were promised for services rendered. Some of these people went months without pay, and to have it ripped away and given back minus the lawyers fee is insanity. Why should the lawyers get paid before the workers. Vultures!

  15. billgilman says:

    WHISKEY TANGO FOXTROT
    We’ve now entered the land of the absurd. “However if payment was irregular or *long delayed*, then they could be considered preferential.”

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