Class Accuses MGM of Hollywood Accounting

LOS ANGELES (CN) - The daughter of a late Hollywood producer sued MGM, claiming it miscalculates home video revenue, shortchanging her and other profit participants of royalties, in a class action in Superior Court.

Joan Buck seeks her fair share of home video revenue from the 1965 comedy "What's New, Pussycat?", produced by her late father, Jules Buck.

Buck claims that MGM fails to properly account for income derived from the sale of movies on home video, including VHS tapes, DVDs, laser discs, video-on-demand, digital downloads and streaming.

MGM "engages in a common and systematic practice of paying less revenue than it receives by including only 20 percent of said revenue when calculating the amount payable to the profit participants," the lawsuit states.

Buck says the studio takes the remaining 80 percent for itself.

Before studios such as MGM established their own in-house home video department or subsidiaries, independent video distributors paid a flat 20 percent royalty to the studios from home video sales. The studios, in return, paid profit participants based on this 20 percent royalty, the complaint states.

"However, after the studios established their own home video divisions, they continued the practice of only reporting 20 percent of actual receipts to profit participants, as if the profits earned by these divisions were not their own and not subject to eventual disbursement to the profit participants as well," Buck says in the complaint.

MGM has been handling its own home video distribution to wholesalers and retailers throughout the world since 1999, yet continues to pay profit participants based on 20 percent of the revenue, instead of 100 percent, the complaint states.

Buck says she is entitled to 10 percent of 100 percent of MGM's gross receipt home video revenue for "What's New, Pussycat?", pursuant to 1964 distribution and financing agreements.

"What's New, Pussycat?" was a comedy written by Woody Allen and starring Allen, Peter Sellers and Peter O'Toole. Its title song was nominated for an Academy Award in 1966 and Allen was nominated for a Writers Guild of America award for "Best Written American Comedy," also in 1966.

Buck seeks punitive damages for breach of contract, breach of implied covenant, money had and received, unfair competition and conversion.

She also seeks an order forcing MGM to abide by its profit participation agreements by including 100 percent of income when calculating each class member's cut of the profits.

In January 2013, five class actions similar to Buck's were filed in Los Angeles Superior Court, against Paramount, Sony, Fox, Universal Studios and Warner Bros. All of the plaintiffs are represented by Neville Johnson with Johnson & Johnson, who also represents Buck.

Consumers spent $18.2 billion in home entertainment in 2013, 50 percent of which was spent on streaming and digital downloads, according to the Digital Entertainment Group's year-end report.

Accounting tricks are so prevalent in the movie world that "Hollywood accounting" has come to be a slang term for accounting sleight of hand.

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