Franchise Pictures has fought back against German distributor Intertainment Licensing, filing its own suit in the Superior Court of the State of California and issuing a second statement on Friday (Dec 22) saying that it was shocked at Intertainment's public revelations.
Meanwhile Intertainment issued its own statement on Friday, explaining the sequence of events over the last two weeks. "Intertainment has discovered, through thorough research and various sources overcharges in the production budgets that were being represented to them by Franchise Pictures. Intertainment confronted Franchise about this matter. [The weekend of Dec 16-18], Andrew Stevens, president and chief operating officer of Franchise Pictures, flew to Munich to initiate negotiations. Negotiations began with Franchise's proposals to pay between $25m to $35m, in addition to repurchasing the rights to films previously licensed to Intertainment, to resolve Intertainment's claims."
"In the meetings, Intertainment's allegations were confirmed," the statement continues. "Franchise also admitted that their attorneys had mistakenly filed an earlier complaint without instruction. That complaint was subsequently sealed and dismissed at Franchise's request. Intertainment found Franchise's proposals inadequate, and sued Franchise in Los Angeles Federal District Court (Dec 21)."
Franchise's statement alleges that the first complaint against Intertainment was filed on Tuesday Dec 12 but dismissed when CAA and Intertainment's Los Angeles attorney requested it in order to try and reach a settlement. Stevens and Franchise's president of international sales then flew to Germany on Friday (Dec 15) "in a last ditch effort to reconcile."
"At the centre of this issue was Intertainment's desire to convert its 11-picture put deal with Franchise to a first-look deal," says the Franchise statement. "Intertainment has a contractual obligation to take 11 Franchise pictures per year at 47% of the "bonded budget", a term specially defined in the contract drafted by Intertainment. The meetings in Germany were agreed by both parties to be confidential and Franchise is frankly shocked that Intertainment would breach that confidentiality - and mischaracterise the content of those meetings."
"It was Franchise," says the statement, "and not Intertainment, that terminated the meeting and rejected Intertainment's proposal. Franchise intends to vigorously defend against the case filed by Intertainment and whole-heartedly disputes the allegations that have been made by Intertainment."
Franchise's complaint against Intertainment alleges that Intertainment CEO Barry Baeres promised but failed to grant 50,000 shares of stock in Intertainment at the then current price of 75 Euros per share in an effort to "induce" Franchise to enter into a multi-picture output deal in May 1999 as well as agreeing but failing to purchase rights to smaller library titles, failing to share a $300,000 obligation due to Lewis Horwitz Organization, never providing a longform agreement as relates to the output deal, failing to furnish some $7m in minimum guarantees on the films Tracker and Auggie Rose, failing to pay the full amounts due on White River Kid, Animal Factory and The Green Dragon, failing to honour a second promise of 50,000 shares in summer 1999, failing to pay the 15% sales commission on titles sold by Franchise on its behalf at AFM 2000 and, by using the pretext of buying an equity stake in Franchise for $300m-$500m, inducing Franchise to act as its sales agent.