Variety Magazine in Nasty Court Brouhaha

LOS ANGELES (CN) - Variety magazine and Beverly Hills Media Group sued each other in a dispute over a multimillion-dollar sponsorship deal with the magazine's previous owners.

Beverly Hills Media Group sued Variety Media on Tuesday for $10 million in lost revenue, claiming Variety owner Jay Penske cut the company out of a multimillion dollar joint venture formed in March 2012. Penske is not named as a defendant, though he is named in the complaint.

Variety Media countersued on Wednesday, claiming Beverly Hills Media Group and its principal Bert Bedrosian fraudulently negotiated the agreement, not with Variety's former owner, Reed Elsevier, but with an unnamed Variety "officer."

Both complaints are in Superior Court.

Bedrosian is named as a defendant in the countersuit, but Reed Elsevier is not.

Penske acquired Variety in October 2012.

Variety Media claims the sponsorship deal was not part of the buyout, and that it never was a party to the deal.

The joint venture was formed for a planned weeklong film and television festival in Beverly Hills, Variety says.

It claims that Beverly Hills Media Group and the unnamed officer conspired to enter into terms that gave the media company a right to 50 percent of revenue from sponsorships in other entertainment industry events.

Variety claims that Beverly Hills Media Group entered into the deal 16 days before Reed Elsevier announced that it planned to sell "Variety" magazine, that the officer used his personal attorney to seal the deal, and that the deal was made behind Reed Elsevier's back.

Variety says it became aware of the joint venture operating agreement after it had acquired the magazine, when Bedrosian sent it a copy.

"Bedrosian and the Officer either conspired to conceal the existence of the operating agreement from Reed and RBI [Reed Business Information] or else backdated the operating agreement after the close of the transaction for the purpose of committing a fraud upon cross-complainant by leading it to wrongfully believe it had assumed the operating agreement as one of scores of agreements assumed by cross-complainant as part of the transaction," Variety says in its cross-complaint.

It claims that Beverly Hills Media Group secured $500,000 in sponsorship money and that $125,000 of that money is in the media company's bank account. Despite promising to pay that amount to Variety Media to cover expenses, it has failed to do so, Variety says in its complaint.

Beverly Hills Media Group tells a different story in its lawsuit.

It claims that before Penske's "ill-fated takeover" in October 2012, it entered into a joint venture agreement with Variety's previous owners. Daily Variety Ltd. was its partner, Beverly Hills Media says.

It claims that it introduced Variety to sponsorship deals worth tens of millions of dollars, with some of the world's biggest brands.

"Relying upon the agreement between the parties, BHMG [Beverly Hills Media Group] continued to hold itself out to major sponsors as the exclusive representative of Variety for arranging major year round multiple activations for Variety's events," the complaint states.

After Penske took over, Variety tried to negotiate "lopsided and unreasonable" terms, Beverly Hills Media says. It claims that when it refused to amend the agreement, Variety usurped the company.

"Penske's Variety was so brazen in its conduct that it continued to use the exact same work product, business model and solicitations already in process, almost entirely developed by BHMG and the property of the joint venture, but simply excluded BHMG from any mention or participation, including participation in profits. Penske's Variety was doing exactly what BHMG was doing before on behalf of the joint venture but simply excluded BHMG from all involvement, including revenues," the complaint states.

When Beverly Hills Media Group objected, Variety told sponsors that it was not associated with the media company, according to the complaint.

"Losing credibility in the marketing world is a poison pill and Penske's Variety understands this," the complaint states.

Beverly Hills Media Group claims Variety confirmed the agreement when it wrote to terminate some provisions of the joint venture.

"(S)uch purported termination of 'certain provisions' of the agreement is itself a breach of the agreement and an overt move to simply steal the opportunities belonging to the parties' joint venture," the complaint states.

"Beverly Hills Media claims that Variety billed it for "bogus" expenses, and has refused to confirm which sponsorship deals have closed, or pay it its share of revenue.

"Penske's Variety has closed or will close sponsorships worth tens of millions of dollars, all of which are opportunities that belong to the joint venture and for which BHMG must be compensated," the complaint states.

Beverly Hills Media Group seeks damages for breach of fiduciary duty, conversion, breach of contract, and breach of faith and fair dealing.

It is represented by Steven Morris with Turner Aubert & Friedman of Beverly Hills.

Variety Media seeks damages for fraud, interference with contractual relations, interference with prospective economic advantage, trademark infringement, and unfair competition.

It is represented by Matt Hinks with Jeffer Mangels Butler & Mitchell.

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