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Spinal Tap – money flow dispute

Christopher Guest, Michael McKean and Harry Shearer first performed together live as Spinal Tap in a television show in the 1970’s. They later, with Rob Reiner, developed the characters in the Spinal Tap band and made a short film with improvised scenes and seven songs. In the process of attempting to turn that short film into a feature-length movie, they formed a joint partnership, “Spinal Tap Productions” (“STP”). On the strength of this work, on May 7, 1982, Reiner, Shearer, Guest, and McKean, as co-owners of STP, signed an agreement with Embassy Pictures for production, financing, and distribution of the motion picture This Is Spinal Tap.

Under the terms of the Agreement, STP and its principals Reiner, Shearer, Guest and McKean were to receive fixed, deferred and contingent compensation for their services in the form of profit participation payments based on all sources of revenue, including, without limitation, merchandise and music. Paragraph 12 of the Agreement acknowledges that STP “is entirely owned by Rob Reiner Productions, United Heathen, Century of Progress Productions and Christopher Guest.”

The Agreement includes identification of the creative team’s services as screenwriters and actors, and in the case of Reiner, additional directorial duties. The Agreement specified various sums of fixed compensation for the creative team, as well as contingent compensation calling for a split of Net Receipts 60% to Embassy and 40% to STP. Under the Agreement, Embassy promises, inter alia, to send Earnings Statements to STP showing the calculation of Net Receipts, first on a monthly, then quarterly, and after approximately three years, on an annual basis.

The catalog of Embassy was acquired several times in a succession of transactions including sales to the Coca Cola Company, Parafrance, a subsidiary of L’Oreal and the DeLaurentiis Entertainment Group, Inc. In or around 1989, predecessors of Vivendi’s subsidiaries acquired pertinent TIST rights.

Vivendi is responsible for accounting under the Agreement. Some profit participation statements were historically submitted to STP, c/o Creative Artists Agency (“CAA”), Reiner’s agent. Those profit participation statements, Plaintiff believe, reflect anti-competitive and unfair business practices in their cross-collateralization of revenues between different Vivendi subsidiaries; unfairly bundle and cross-collateralized unsuccessful films in the Embassy catalogue with TIST; were not delivered to other creators; and fraudulently underreported the revenues owed to Plaintiff and other members of STP. Over the last two years, Vivendi and Canal have failed to account at all on TIST revenues.

Among the counts of suit is breach of agreement and implied covenant of good faith and fair dealing by defendants. Plaintiffs requested the court to enter an order compelling defendants to produce the original books and records of account and to satisfactorily and accurately account to Plaintiff with respect to all expenses and revenues for the film TIST, including associated music, merchandise and other revenues, and to disgorge the monies due to Plaintiff therefrom. Certainly plaintiffs also requested to award compensatory and punitive damages in amounts to be determined at trial, costs of suit, reasonable attorney’s fees and pre- and post-judgment as allowed by law. Also they want other and further relief as the court deems just and proper.