Lorimar, Disney Exchange Suits Over Film Processing Lab Deal

The Lorimar unit of Time Warner Inc. has demanded $126 million from Walt Disney Co. in a lawsuit that charges Disney with breaching an agreement under which the two companies co-owned the now-defunct Metrocolor film processing laboratory. Disney, in turn, has filed a countersuit.

The Lorimar suit, filed Thursday in Los Angeles Superior Court, claims that Disney illegally “rescinded” its agreement to co-own Metrocolor. The suit also claims that Disney contributed to the laboratory’s demise late last month by refusing to pay more than $8 million in film processing bills.

A Disney spokesman said the company filed a cross complaint late Thursday charging Lorimar with “fraudulent inducement to enter into a contract” and “fraud by suppression of the truth.” The spokesman said Disney agreed to buy the lab with Lorimar while intending to resell it later; Disney then learned that Lorimar was contractually prevented from selling for five years.

The Disney spokesman also said the company’s suit charges that Lorimar-affiliate Warner Bros. was obligated to process its film at Metrocolor but had not done so. The Disney suit seeks $42.85 million plus punitive damages.

The dispute is the latest in an unusual series of legal actions that have pitted major studios against each other.

Merger Battles

Last month, Warner Communications defeated Paramount Communications in a complex legal battle over competing plans to merge with Time Inc. Several weeks before that, Disney and Fox Inc.’s corporate parent--Australian-based News Corp.--settled a short-lived legal dispute in which News Corp. had demanded $1.5 billion from Disney for allegedly breaching an agreement to collaborate on a British satellite television venture.

Lorimar’s Metrocolor suit seeks about $26 million in actual damages and an additional $100 million in punitive damages from Disney.

Metrocolor was previously part of MGM/UA Entertainment Co. In late 1987, Disney bought the lab with Lorimar as part of a transaction in which Turner Broadcasting System purchased MGM, then sold off everything but its film library.

According to the suit, Disney officials tried to renegotiate their agreement with Lorimar earlier this year, citing what the lawsuit described as “spurious, trumped-up claims” about the lab’s operations. The suit didn’t detail the Disney claims.

“Not coincidentally,” the suit said, Disney’s unpaid lab charges approximately equal the amount of cash that Disney originally put into the venture.

Bertram Fields, an attorney who represented News Corp. in the earlier suit against Disney, filed the current suit for Lorimar. Asked whether the suits, both of which challenge Disney’s business practices, constitute a pattern, Fields said: “I think you’ll have to draw your own conclusion.”