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05 January 2012

Paramount Pictures Seek Dismissal of John Singleton's Fraud Case

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Paramount Pictures enjoyed a fantastic 2011, both in Australia, as well as in the United States and other markets.

However, now they seek to rid themselves of an unwelcome legal challenge.

Paramount is looking to dis a $20 million lawsuit brought by American film director John Singleton for allegedly reneging on a promise to back two films as part of a 2005 deal to acquire the breakout hit “Hustle and Flow.”

In response to Singleton’s lawsuit in October, the studio filed a demurrer in November 2011 that aims to demonstrate that even if the facts as laid out in the plaintiff’s complaint are true and correct, it won’t support the allegation that any fraud was committed, according to entertainment news giant The Hollywood Reporter.

“Hustle and Flow” was a hit at the 2005 Sundance Film Festival. Singleton claims that he passed on a higher advance offered by another studio to accept Paramount’s $9 million offer because the studio promised to “put” two additional features as long as their budgets didn’t exceed $3.5 million each and his producing fee wasn’t higher than 7.5 percent.

The director says that Paramount Pictures reneged on that deal by concocting new conditions on the “puts.” In his lawsuit, Singleton said he needed to make sure he was not taken advantage of and that his rights were protected.

In response, Paramount points to alleged flaws in the lawsuit prepared by Singleton’s attorney, Marty Singer:

“Plaintiffs’ fraud claim fails because it is not supported by a single fact — much less one with the required level of specificity for fraud claims — showing that Paramount or MTV harbored an intention not to perform the put provision at the time of the HAF Agreement’s formation.”

Paramount advised that Singleton can’t simply rely upon the alleged contractual non-performance to show the studio intended to deceive him, and as such, Paramount requests that a Los Angeles Superior Court judge dismiss the fraud claim.

Similarly, Paramount also wants to dismiss a rescission claim because it partly relies upon the same fraud theory and partly because its contract with Singleton’s company, Crunk Pictures, limits remedies for a breach of contract to monetary damages. (In the lawsuit, Singleton wants money from the exploitation of Hustle and Flow plus a reversion of rights in the picture.)

Paramount Pictures is also seeking to dismiss a claim for unjust enrichment because Paramount says there is no cause of action for this claim in California.

If a judge accepts these arguments, that would leave the dispute turning on a question of how to interpret the main contract between the parties.

From the media reports thus far and public comments about the dispute, it appears that Paramount is prepared to argue that Singleton never produced and delivered two pictures by a Jan. 22, 2010 deadline.

But Singleton suggests that development work on those films was already underway and that there wasn’t any express contractual obligations that the work be completed by that date. According to the original complaint:

“When plaintiffs attempted to exercise their right to ‘put’ the two pictures to Paramount, Paramount for the first time informed Plaintiffs that…the Put Pictures had to be fully completed films rather than films in production, and that the Put Pictures had to be scripted full-length theatrical or direct-to-video motion pictures.”

Absent the fraud claim, the lawsuit becomes a “What came first — the chicken or the egg” controversy. Did Singleton have to complete the two films to get Paramount’s distribution guarantee? Or did Paramount have to guarantee distribution to get Singleton to complete the two films?

Either way, the outcome is unlikely to have any real impact of Paramount Pictures success in Australia.


Paramount Pictures Enjoyed Banner 2011...

In the U.S they totally dominated the box office and knocked off the former global leader Warner Brothers. Paramount's studio has enjoyed more success distributing films via expiring partnerships with Marvel Entertainment / Marvel Studios and Stephen Spielberg's DreamWorks Animation than it has had creating its own in-house franchises.

Let's see... there was “Transformers: Dark of the Moon” and “Paranormal Activity 3,” and these contributed heavily to Paramount's bottom line.

In 2011, Paramount has fielded nine films that have crossed the $100 million barrier in U.S ticket sales, including 2010’s “True Grit,” which snatched the majority of its $250 million worldwide gross in this calendar year.

With $1.73 billion at the U.S box office thus far and two tentpoles in for the end of the year, "Mission: Impossible - Ghost Protocol" and Spielberg's "The Adventures of Tintin," Paramount ended Warner Brothers' three-year reign at the U.S box office.

And with $2.84 billion in international revenue and $4.6 billion in global receipts to date, Paramount Pictures ended Warner's international and worldwide leading streaks.

"Going into the summer, we certainly felt like we had a number of big tentpole movies, and on balance, they all delivered,” said Don Harris, Paramount's president of domestic (U.S) theatrical distribution. “They all opened at high numbers."

But get this. There's an imminent departure of partners Marvel and DreamWorks Animation, the team behind such recent winners as “Thor,” "Captain America: The First Avenger," “Kung Fu Panda 2” and "Puss in Boots."

Combined, those films comprised four of Paramount's top five grossing movies this year.

Paramount gets distribution fees from DreamWorks Animation and Marvel, but it doesn’t own the rights to the superhero and family films.

Paramount's deal to distribute Marvel films has ended, and its deal with DreamWorks Animation expires in 2012. Though Paramount received an 8 percent distribution fee for its efforts with the two studios, the departure of Marvel and DreamWorks Animation will take a big chunk out of the studio’s market share.

Emboldened by the average success of “Rango” ($245 million), Paramount recently launched its own animation division with an eye toward owning the family films it distributes outright. It expects to release its first film through via the new arm in 2014.

The DreamWorks deal was relatively low-risk and good money.

Paramount appears to believe hat after a number of years of serving as a distribution house for other companies, it has developed enough of its own intellectual property to move forward without the comic book based company and the animation studio.

It's hoping that Pixar whiz Brad Bird (“The Incredibles”) can reinvigorate its “Mission: Impossible” franchise after 2006’s disappointing third installment, and it already successfully rebooted the wilting “Star Trek” franchise. A sequel to its hit 2009 "Trek" film is due out in two years.

"Transformers” - "Dark of the Moon" grossed $1.1 billion worldwide and was more positively embraced than its predecessor.

Paramount Pictures has enjoyed a burst of lower budget successes, adding to their whale size film portfolio.

Created for a cost of a modest $13 million, the studio’s Justin Bieber concert film “Never Say Never,” took in nearly $100 million worldwide. Likewise, “Paranormal Activity 3” continued the ultra-low budget series’ knack for healthy profit margins. Produced for a tiny $5 million, the haunted house film clocked up $201.9 million worldwide.

Almost everything Paramount Pictures touched turned to gold. The big write-off would be "Hugo", with a budget of $170 million and grossing just $33 million globally. Let it be noted that Paramount only distributed the film and this means that the dip falls on the head of producer Graham King.

The remake of '80s dance film “Footloose” failed to bring in audiences. The $24 million film snatched a $62 million worldwide gross, which is well below par for Paramount.

What's in Paramount's future? Paramount appears unlikely to duplicate its record breaking success in 2012 at the box office. The studio expects big things for its zombie flick "World War Z" with Brad Pitt and “G.I. Joe: Retaliation,” but appears that's not comic book films in the works to excel this years numbers.

Take note that in the 2012 more of the films that Paramount Pictures releases are owned by them. This means that the studio will be able to keep more of the profits for themselves, but that appears to be a higher risk strategy than the one they employed this year.

Paramount will survive, no doubt, but it may be more of a stock market - roller-coaster type ride than the relatively smooth sailing they enjoyed over the past 12 months.

See you at the movies.

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