(CN) - AMC Networks used Hollywood accounting to cheat the creator and former director of "The Walking Dead" of profits from the top-rated cable show, writer-director Frank Darabont claims in court.
Darabont sued AMC Networks, two AMC affiliates and Stu Seagall Productions, in New York County Supreme Court.
Darabont's two loan-out companies, Ferenc Inc. and Darkwoods Productions, are co-plaintiffs, as is his agent, Creative Artists Agency.
Darabont claims AMC's ruthless self-dealing has denied him even a dime from the most popular show on basic cable.
"The Walking Dead" is an hour-long horror series that follows survivors of a zombie apocalypse as they seek safety in a world overrun by bloodthirsty, animated corpses. Darabont tried for years to adapt Robert Kirkman's graphic novel, until AMC agreed to a pilot.
Darabont claims AMC used its affiliates to sell itself licenses to air the show for far below fair market value, turning profits into Hollywood losses.
Successful TV shows earn a great part of their income from licensing fees from networks. After seeing a pilot episode, a network may order an entire season and pay for the license to broadcast it.
Darabont claims AMC originally agreed to have an unaffiliated studio produce the show. But after the network's monetary battle with a third-party studio over its hit show "Mad Men," Darabont says, AMC changed its mind and decided to produce the show in-house.
He claims that AMC agreed in writing to pay him and Darkwoods Productions fair market value licensing fees. Their 2010 contract specified compensation for the first episode, production services, bonuses, directing and consulting services, screen credits, profit percentages, and a promise that licensing fees would be at fair market value when the network decided to produce the show, Darabont says in the complaint.
When "The Walking Dead" became an instant hit, Darabont claims, AMC hired him as executive producer and showrunner through season three
He claims AMC fired him without cause in the middle of season two, and handed over production to its own Stu Segall Productions, a company he says exists for paperwork purposes only.
Darabont claims AMC had no intention of honoring its agreement, and used Hollywood accounting to claim that it loses money on each episode.
Under the formula, licensing fees cover roughly 65 percent of production costs, so AMC claims the show will never recoup its apparent loses. Darabont claims AMC set it up this way so that the Modified Adjusted Gross Receipts, or pool, can never cover the percentages necessary to show a profit.
He claims that at the end of season two, AMC paid itself $49 million in fees for a show that cost more than $100 million to produce, and that it did so to duck its obligation to pay him for years of work adapting and creating what is now the biggest show on cable.
He also claims the network violates his right to derivative works through its hit talk show "Talking Dead," broadcast after each episode, with features, interviews and commentary on the show.
Frank Darabont, a three-time Academy Award-nominated writer and director, has worked on films that include "The Shawshank Redemption," "The Green Mile,"
and "The Mist."
He demands an accounting, declaratory judgment, and damages for breach of contract and breach of faith.
He is represented by Jerry Bernstein with Blank Rose.