LOS ANGELES (CN) - Producer Saul Zaentz's production company sued Miramax for $20 million, claiming it used Hollywood accounting to hide profits from the movie, "The English Patient."
The Saul Zaentz Company (SZC) sued Miramax Film Corp. and The Walt Disney Co. in Superior Court.
Zaentz claims that Miramax, founded by (nonparties) Bob and Harvey Weinstein, used a variety of accounting tricks to sock away tens of millions of dollars in profits from the movie, while doling out only $5 million to Zaentz.
Miramax in 1995 agreed to co-produce "The English Patient" after a deal with Twentieth Century Fox collapsed during pre-production, the complaint states.
"Miramax was aware that, among other things, the absence of timely availability of the necessary financing would have resulted in severe economic damage to SZC, including causing the loss of nearly three million dollars that SZC had already invested in the production of the picture," the complaint states.
Disney acquired Miramax in 1993. The Weinsteins left the company in 2005 to form the Weinstein Co. Disney sold Miramax to Filmyard Holdings LLC in 2010, according to the complaint.
Zaentz claims: "Miramax capitalized upon SZC's precarious situation in negotiating the agreement with SZC including by requiring SZC to forgo negotiating with any other distributor while it negotiated with Miramax and ... by coupling its refusal to negotiate certain contractual provisions prior to signing an agreement with a promise to negotiate such provisions in good faith after signing."
Zaentz says it granted Miramax exclusive worldwide rights to distribute and exhibit "The English Patient," in return for a $27.5 million purchase price and a share of net profits.
Zaentz claims that it "bore the full financial risks" of producing the picture. As well as committing $7.75 million of its own, it was on the hook for $8 million in deferred compensation to director Anthony Minghella and the movie's stars, Juliette Binoche, Ralph Fiennes, Kristin Scott Thomas and Colin Firth, according to the complaint.
"Miramax refused to negotiate the definition of net profits in good faith as agreed," Zaentz claims. "Instead, Miramax submitted to SZC a succession of different versions of its standard net profits definitions all of which were rejected by SZC as being contrary to the agreement of the parties."
Zaentz adds: "Despite failing to negotiate in good faith to reach a mutually acceptable net profits definition, Miramax nevertheless distributed 'The English Patient,' collected millions of dollars in revenues, far more than sufficient to be required to pay SZC both adjusted gross receipts and net profits."
After the movie's resounding "critical and commercial" success, Zaentz says it received only a $5 million advance on profits.
"To this day, despite the great success of the film, SZC has not even received from Miramax payment sufficient to recoup SZC's costs of producing 'The English Patient.' Miramax, on the other hand, has not only fully recouped the purchase price, but has also withheld and claimed entitlement to tens of millions of dollars in fees, interest and profits," the complaint states.
Zaentz claims that upon auditing Miramax's books it uncovered "multiple acts of self-dealing and unfair business practices designed to ensure that the amount of the true gross receipts generated from the exploitation of 'The English Patient' would be artificially manipulated and understated and that the distribution expenses, distribution fees, interest charges, and other fees and deductions charged by Miramax against the gross receipts would be exaggerated, misapplied and falsified. Miramax and Disney thereby contrived to keep the picture in a paper loss position so that no matter how much money 'The English Patient' earned, Miramax and Disney would reap all of the profits while their co-venturer, SZC, would never even recoup its contribution to the production financing, let alone share in any adjusted gross receipts or net profits."
Zaentz sued Miramax in Superior Court in late 2006. That case was removed to Federal Court, then dismissed.
Zaentz, represented by Brian Wolf with Lavely & Singer, seeks an accounting and at least $20 million in damages for breach of contract, breach of faith, breach of fiduciary duty, and declaratory relief.
Neither Lavely & Singer nor Miramax immediately responded to requests for comment.
Saul Zaentz also produced the well-regarded movies, "One Flew Over The Cuckoo's Nest," "Amadeus" and "The Unbearable Lightness of Being."
"The English Patient," based on a novel by Michael Ondaatje, won nine Academy Awards, including best picture for Zaentz, best director for Minghella and best supporting actress award for Binoche.
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