MGM Sued for $5M Over Spaghetti Westerns

     SANTA MONICA (CN) — The company that claims rights to “For a Few Dollars More,” “The Good, the Bad, and the Ugly” and “Last Tango in Paris” sued Metro-Goldwyn-Mayer this week, accusing it of “deception and false accounting perpetrated over decades.”
     P.E.A. Films, of New York, claims MGM fraudulently induced it to renew and modify MGM’s distribution rights to the three movies, mischaracterizing its relations with a third party, to enable MGM to keep 50 percent of the revenue rather than 15 percent.
     P.E.A. Films, successor to the Italian company PEA-Produzioni Europee Associate, calls itself a producer and copyright owner in its Sept. 13 complaint in Los Angeles Superior Court. It’s a sequel to a 2014 federal lawsuit, in which P.E.A. accused MGM of underpaying it by $4.6 million for the three classic films by inflating distribution expenses.
     U.S. District Judge Beverly Reid O’Connell dismissed most of that case on Aug. 17 this year, leaving only a dispute as to whether MGM properly investigated its own books to see if they were reasonable. P.E.A. then decided against pursuing the case.
     But in the new complaint, P.E.A. says that during trial, it saw contracts MGM had made with Fox International Home Video and Warner Home Video that “conclusively prove that for the last quarter-century, MGM has not distributed PEA’s films on home video at all, that Warner and Fox have functioned as MGM’s home video subdistributors for decades and that for 23 years MGM has been collecting a 50 percent distribution fee for functioning as merely an intermediary.”
     P.E.A. says this new evidence is creates a new avenue for it to file suit.
     “While the complaint in the federal action contained general allegations regarding MGM’s failure to pay PEA … it did not specifically allege that MGM misrepresented Fox as a ‘servicing company’ rather than as a subdistributor, thereby depriving PEA of 35 percent of the pictures’ profits,” the new complaint states.
     An MGM spokesman called the new lawsuit “entirely without merit.”
     “This new state court complaint is merely an attempt to resuscitate a claim that was dismissed less than a month ago — after years of litigation — by the federal district court. P.E.A.’s claims in this lawsuit are entirely without merit,” MGM said in a statement.
     P.E.A., however, claims a recent audit shows that MGM has wrongfully kept more than $5 million since 2008, but that the fraud began in 1993, when their distribution agreement was modified.
     PE.A. says that agreement makes it clear that MGM can keep only 15 percent of the distribution fees it receives from third-party distributors. But it has been keeping 50 percent under the guise that Warner and Fox are merely servicing companies, helping with “back office, administrative services of the kind provided by home video servicing companies.”
     MGM’s contract with Fox, however, shows something different, P.E.A. says: the document is titled “International Home Video Subdistribution Services Agreement” and details Fox’s services to manufacture, market and distribute home video products.
     But MGM’s entire home entertainment operation “consists of one executive and a handful of employees who split their time between home entertainment and other functions,” the complaint states.
     P.E.A. seeks rescission of the 1993 agreement, restitution, and punitive damages for breach of contract, breach of faith, unfair competition and fraudulent inducement.
     It is represented by Dale Kinsella, with Kinsella, Weitzman, Iser, Kump & Aldisert in Santa Monica. The law office did not return calls seeking comment.

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