The Money Behind The Movie
September 15, 2014
Making movies is expensive and for amateurs, finding the money behind the movie is an important process that needs to be conducted properly.
An interesting case that I read about recently has dentist and investor, Jordan Cooper, alleging conversion, misrepresentation, fraudulent concealment, breaches of contract and fiduciary duty, violations of the Arkansas Security Act and infliction of emotional distress on the part of movie maker, Keith Patterson.
Cooper invested $43,000 in Patterson’s documentary, All About Ann: Governor Richards of the Lone Star State, expecting to be named a member of Ann Richards Movie LLC and receive compensation based on equity. When the movie was finished, it was sold for $200,000 to HBO, which aired the film. Cooper alleges that he never saw any of the money from this deal, as Patterson borrowed money from another equity partner. This debt was billed as an expense, according to Cooper, meaning that it was paid first, leaving nothing with which to pay other investors. Cooper alleges further that Patterson sold the film at a reduced cost in exchange for a job with HBO.
To be sure, Cooper’s strategy of “throwing the book” at Patterson is a little bit unconventional, but some of his claims seem to potentially hold merit. To work through every single claim exhaustively would take too long here, but I will demonstrate those that I think have the highest chance of success in this case.
This law applies broadly to any time that one person acts in a manner that is inconsistent with the ownership rights of another. Conversion differs from theft in that it does not explicitly require dishonesty. Thus, any theft is a conversion, but not any conversion is a theft.
Cooper’s case for conversion stems from his assertion that Patterson sold the movie for less money than he could have gotten in exchange for being offered a job. If this could be proven true, it is possible that the allegation of conversion would stand. Cooper’s property – in this case, his equity in the film – would have been sold in a way that is inconsistent with his ownership rights to it. In practice, this would likely be very difficult to demonstrate.
Breach of fiduciary duty
Cooper may have more success with his allegation of breach of fiduciary duty. As the managing partner in the LLC in which Cooper invested, Patterson had a fiduciary duty toward Cooper. In other words, he had an obligation to act in his best interests. The law forbids those with a fiduciary duty from acting in a way that is adverse or contrary to the interests of the client.
While selling the movie to HBO for a reduced rate in exchange for a job offer would be a clear-cut breach of fiduciary duty, we have already established that this would be difficult to prove in court. While it would be slightly trickier to demonstrate that the structuring of the second loan as a business expense was intended to deprive Cooper of his rightful due as an equity holder in the film, it may be the best shot that he has to receive compensation.
The ins-and-outs of the movie industry can be tricky, confusing, and riddled with pitfalls. As a chair of the Sports & Entertainment practice at Scarinci Hollenbeck, I’ve been able to learn how to avoid some of these issues. If you are interested in learning the legal aspects of the film industry check out some of my previous posts:
- “The Wolf of Wall Street” Filmmakers Sued for Defamation
- How Do Film Production Tax Credits Work?
- Joe Pesci Settles Salary Lawsuit Over ‘Gotti’ Film
- California Extends Film Tax Credit