Last week, the Hollywood Reporter Hollywood reported on a $179 million ruling against Fox for underpaying the creators and stars of Bones.
There's a lot of typical self-dealing stuff here -- Fox the studio selling the show to Fox the TV network, insisting it was for a fair market value, but being unable to produce evidence that it actually did due diligence in determining what a fair market value was. But on top of that there are some more egregious examples of fraud. In one instance, when Fox sold the streaming rights to Hulu, which it owns a 30% stake in, the same executive signed the contract as both seller and buyer.
And here's one particularly jaw-dropping grift:
During the show’s run, Bones' profit participants were continually rebuffed in their attempts to argue for more money. [Executive producers Barry] Josephson and [Kathy] Reichs signed releases barring them from challenging license fees for the fifth and sixth seasons upon Fox's word that unless everyone signed these releases, Bones would be canceled. According to [21st Century Fox president Peter] Rice, though, Fox already had committed contractually to keep the show on the air and knew that [stars David] Boreanaz and [Emily] Deschanel would never sign such a release. Nevertheless, Fox kept up the impression the stars would sign, even going so far as to include blank signature spaces for the actors in the releases sent to the producers.
Studios do this sort of Hollywood accounting all the time. And they get away with it, because most creators -- actors, directors, producers, etc. -- choose not to sue. Most don't have the money, and of the ones who do, many don't want to run the risk of pissing off the studios.
This suit was decided in a private arbitration court, so it doesn't set any legal precedent. But it does show everybody that the talent can sue the studio and win -- and I expect that will mean more suits like this.
Unfortunately, I don't expect it will cause the studios to change their behavior. One of the plaintiffs' attorneys, John Berlinski, says, "What we have exposed in this case is going to profoundly change the way Hollywood does business for many years to come." I'm more inclined to agree with arbitrator Peter Lichtman's more cynical opinion:
Slamming the company with a punishment that includes $128 million in punitive damages -- or five times the amount of compensatory damages -- Lichtman points out that the award is 0.6 percent of 21st Century Fox's stipulated net worth.
He muses whether it's really enough.
"In fact, one could question whether a five to one ratio given Fox's financial condition and lack of contrition serves to deter the wrongful conduct at issue here, or whether it will be considered part of the cost of doing business," writes the arbitrator.
I think he's right. This won't make the studios stop ripping off the talent; it will merely mean that the studios will continue ripping off the talent while pricing in the risk of the occasional lawsuit.
Meanwhile, there's another Hollywood accounting lawsuit I've been keeping one eye on: Century of Progress Productions v. Vivendi S.A. et al, more popularly known as the Spinal Tap suit.
... according to Vivendi, the four creators’ share of total worldwide merchandising income between 1984 and 2006 was $81 (eighty-one) dollars. Between 1989 and 2006 total income from music sales was $98 (ninety-eight) dollars. Over the past two years, Vivendi has failed to provide accounting statements at all.
The other three creators, Christopher Guest, Michael McKean, and Rob Reiner, have since joined the suit. There don't appear to be any updates since August 2018, but the litigation is still ongoing.
Century of Progress could be the suit that finally sets some legal precedents regarding Hollywood accounting. Other artists who have filed suits like this have either wound up in private arbitration, as in the Bones case, or agreed to settle. This is different. Shearer, Guest, McKean, and Reiner don't want to settle. They don't need the money. They're in it to set a legal precedent to make it harder for studios to rip off their artists.
I look forward to hearing more from that case.