Legal sparks fly on the way to ‘Terminator Salvation’

Derek Anderson and Victor Kubicek were having lunch at the Italian cafe Il Piccolino in West Hollywood in the fall of 2006 when they were served up an irresistible dish that wasn’t on the menu.

The two men were presented with the chance to buy one of the best-known franchises in American cinema, the “Terminator” series, even though their entire producing experience consisted of one low-budget comedy that never made it into theaters.

The Hollywood neophytes were informed of the prospect by dining partner Peter Graves, a veteran movie marketer. “It was shocking,” Anderson recalled. “We were in disbelief.”

Soon after, Anderson and Kubicek swooped in and quietly seized the rights, going on to produce one of this summer’s most anticipated event films, “Terminator Salvation,” which opened over the weekend to a relatively weak $53.8 million. The movie, starring Christian Bale of the “Batman” films, has revived the series and catapulted Anderson and Kubicek into the Hollywood mainstream. But they’ve also encountered controversy along the way. The pair have been enmeshed in several lawsuits -- since settled -- and other disputes involving investors, business associates and a major studio.

“Terminator” now stands alongside George Lucas’ “Star Wars” as one of the few major movie brands to be independently owned and produced outside the studio system. This comes in an age when media conglomerates build their businesses around huge properties that they turn into films, toys, video games and more.

“It’s remarkable that nobody in the business realized that the rights to one of the most iconic brands of all time were available,” said Erwin Stoff, a principal of the management/production firm 3 Arts Entertainment.

Though distributors Warner Bros. Pictures and Sony Pictures put up most of the film’s $200-million production budget, Anderson and Kubicek, who risked little of their own money, stand to rake in half of any profits that might come from box-office, DVD and television sales as well as all the proceeds from a new video game and other consumer products. In addition, the two control the sequel rights.

“It was a huge coup for them,” observed Sony Pictures Vice Chairwoman Amy Pascal. “I wish we owned the rights and controlled every franchise -- that’s the business we’re in.”

Leapfrogging from nowhere into the Hollywood stratosphere took savvy, the right connections and, more than anything, luck.

“At the end of the day, it’s a pretty significant thing,” Anderson said. “I feel like we’ve been so blessed.”

Questioned about the legal issues that trail them, both men declined to address specifics, but Anderson said, “In all our business dealings, we always try to honor our word in any agreement we have. I have to look at myself in the mirror every day.”

Before venturing into Hollywood, Anderson, 41, originally from Ohio, had been running his own brand-marketing firm, and Kubicek, 28, a native of Miami Beach, was an aspiring writer. The pair first discussed working together after meeting at an Oscar party in 2005. “We talked about the possibility of going into the business as outsiders who would do it a little differently,” Kubicek recalled.

By early 2006 they hatched a business plan for their venture, Halcyon Co., positioning it as “a 21st century entertainment company with a unique approach to creating in-demand high-quality entertainment.”

The plan, sent to a potential investor and reviewed by The Times, aimed to raise $2.5 million. In it, the partners listed Stoff as a member of Halcyon’s advisory board and Graves, who was consulting for the pair, as vice president of marketing and distribution. Both men told The Times that they had never held those positions.

Anderson and Kubicek, who ultimately never raised the funds, said the plan was one of many drafts simply meant for “planning purposes” and that the names in it were ones they “thought would be attainable.”

Although the proposal listed six potential film projects, the only one made so far is “Cook-Off,” a “mockumentary” about a baking competition. The pair said they helped raise money and put in some of their own to fund the film’s nearly $1-million cost, but all didn’t end happily. The novice producers had a falling-out with some of the cast and crew, including co-writer and actress Cathryn Michon, during editing. And though the film premiered at the Aspen Comedy Festival in 2007, it never was released.

That same year, one of the investors in “Cook-Off,” Rainer Filthaut, and two of his partners sued Anderson and Kubicek, alleging breach of contract over $250,000 they invested to option a screenplay for a film called “Conspirator,” which was never made. The 2007 suit, later settled, alleged that the producers instead used the money for “their own purposes.”

In an interview, Filthaut said though he was eventually paid back, he still considered the two “dishonest people.”

Seth Renov, another investor in “Conspirator,” said that once the option fell through, Anderson and Kubicek “promptly” returned the funds to investors. He called the duo “honest, ethical and successful.”

Anderson said that “the money went back to the investors to repay all of them 100% in full, which means that logically there was nothing left to use for any other purpose.”

By this time, however, Anderson and Kubicek were making their play for “Terminator.” The pair were tipped off by Graves at their fateful lunch because they believed they had access to millions of dollars of financing from Dubai.

In the 25 years since the original film was released, “Terminator” rights had passed through numerous hands until finally resting with independent producers Andrew Vajna and Mario Kassar, who made “Terminator 2” and “3.”

Graves had learned from his longtime friend Moritz Borman, another producer on “Terminator 3,” that the rights were available because Vajna and Kassar were dissolving their business relationship.

“As the little guys, this was a big play,” recalled Kubicek, who said he and Anderson had to ask themselves some hard questions about the practicalities of rebooting the franchise without Arnold Schwarzenegger, who starred in the first three films. “Is there still a story to tell? What’s it worth? Would there be interest?”

Anderson said he and Kubicek were wary of being used as stalking-horses in a bidding war they couldn’t win. The pair put a 24-hour take-it-or-leave-it $25-million offer on the table without disclosing their names.

“Within six hours we received a binding term sheet,” Kubicek recalled. But the deal was far from closed. After several aborted trips to the United Arab Emirates, it became clear that the Dubai funds weren’t going to materialize.

Anderson and Kubicek started searching for other backers and, in another lucky break -- this one on Super Bowl Sunday in February 2007 -- got a commitment from Santa Barbara hedge fund Pacificor.

Andrew Mitchell, now chief executive of Pacificor, said the deal was uniquely valuable “and worth more than we were paying for it,” even though his firm had never before, and hasn’t since, invested in entertainment.

Once the deal closed in May, Borman, a seasoned producer, led talks with the studios to secure funding and distribution for “Terminator Salvation.”

After failing to reach a deal with Metro-Goldwyn-Mayer -- which led to another lawsuit, now settled -- Borman signed Warner Bros. to distribute the film in North America and Sony to release it in all but two foreign markets. Warner paid $60 million and Sony just over $100 million for the rights and eventually kicked in extra money for additional footage, said several people familiar with the deals. Halcyon used that money, along with pre-sales from South Korea and the Middle East, to fund the production.

With a version of the script in hand, Warner’s blessing and a summer ’09 release targeted, Anderson and Kubicek quickly settled on McG to direct and Bale to star. People close to the matter said the director received $6 million and Bale $8 million and both are guaranteed a percentage of gross ticket sales.

They added that Halcyon also made a $10-million deal with McG to direct another sequel, and that Bale is on board for two more films, for which he’ll make about $15 million and $20 million, respectively.

“They included us in all decisions and treated us like partners,” said Jeff Robinov, president of Warner Bros. Pictures.

McG called the pair “delightful to work with.”

In March of this year, as the film was being edited, Anderson and Kubicek were hit with another suit, this time from their producer. Borman, in the suit, accused them of “egregious fraud” for not paying him half of his $5-million producing fee and alleged they had “hijacked the production” by cutting him out of all decision making. The suit was settled a month later. According to people close to the situation, Borman received the money and will be attached as a producer to future sequels but forfeited creative and financial control.

Anderson and Kubicek said they could not discuss the allegations because they were bound by the confidentiality of the settlement agreement.

Borman wasn’t the only one to claim he was owed money after production wrapped. On Wednesday, Graves -- who had originally led the two to “Terminator” -- filed a breach-of-contract claim for arbitration, saying Halcyon owed him $750,000 under his $1-million consulting and executive-producer agreement on “Terminator Salvation.” Graves declined to discuss the claim, which was reviewed by The Times. Anderson and Kubicek deferred to Graves for comment.

Despite the drama, Anderson and Kubicek appeared cool on the evening of May 14, walking the carpet at the premiere of “Terminator Salvation” at Grauman’s Chinese Theatre. The rookie producers made a beeline for Bale when he arrived and posed for pictures with studio executives and director McG, all while being trailed by their own photographer.

“It’s very exciting and very humbling,” Anderson said as he entered the theater, where his and Kubicek’s names flashed on the screen in huge letters above the title.

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claudia.eller@latimes.com

ben.fritz@latimes.com

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BEGIN TEXT OF INFOBOX

‘Terminator’: a timeline

1984

The original “The Terminator” is released. Made for only $6.4 million, it grosses more than $78 million around the globe. Production company Hemdale Films owns 50% of the rights. The other half is owned by producer Gale Anne Hurd, who acquired them for $1 from writer-director James Cameron, then her producing partner and later her husband.

1990

Carolco Pictures, headed by Mario Kassar and Andrew Vajna, buys Hemdale’s 50% stake for $10 million.

1991

“Terminator 2: Judgment Day,” the first movie with production costs of more than $100 million, is a smash hit, grossing more than $500 million worldwide.

1997

After Carolco files for bankruptcy, Kassar and Vajna buy the defunct company’s “Terminator” rights at auction for $8 million through their new venture, C-2 Pictures. Soon after, they acquire Hurd’s 50% interest for $7 million.

2003

“Terminator 3” is released to mixed response from fans and $433 million in worldwide ticket sales.

2006-07

Kassar and Vajna decide to dissolve their business partnership. Hollywood newcomers Derek Anderson and Victor Kubicek purchase the rights with $25 million they received from hedge fund Pacificor and start work on “Terminator Salvation.”

Source: Times research