Embattled MGM Sued in 3 Contract Disputes : Entertainment: The lawsuits await the winner of a court case going on in Delaware over control of the firm.
As Giancarlo Parretti and his French bankers battle for control of MGM-Pathe Communications Co. in a Delaware court, a trio of lawsuits over contractual obligations await the victor.
MGM is accused of violating licensing agreements with foreign distributors in Germany and South Korea in two separate cases filed in Los Angeles Superior Court. In the third suit, MGM’s former president of foreign distribution has charged that he was illegally fired.
The latest case, filed Wednesday, involves Hermes Synchron, one of Germany’s largest distributors of movies to television. Ingo Hermes, the firm’s owner, says Parretti’s Pathe Communications Co. last year accepted $10 million in advance payments from him for the rights to nearly 500 MGM movies.
Those funds helped to finance Parretti’s $1.3-billion acquisition of MGM last November, according to the lawsuit, which seeks unspecified damages.
But Hermes says he subsequently learned that MGM and Pathe did not own 16 of the movies licensed to him. His attorney, J. Michael Hennigan, alleges that MGM also withdrew the rights to such hits as the “Rocky” and “Pink Panther” series and refused to refund Hermes’ money.
“They axed the good contracts and left him with payment contracts for the bad ones,” Hennigan said Wednesday. “He entered into the deal because of the good product. He is not at all interested in what he has left.”
MGM on Wednesday filed a separate claim seeking to rescind its agreement with Hermes. And in a court hearing Wednesday, MGM agreed not to strike another German television distribution deal until a mid-October hearing is held. Hermes was also given approval to continue distributing his existing library of MGM movies.
The second licensing dispute involves the Korean rights to MGM’s “Thelma and Louise.” Myong O. Yoon contends that his Hwa Chun Trading Co. made a $120,000 down payment to MGM at the Cannes Film Festival in May in return for a five-year licensing agreement for the film. Later, MGM denied the contract existed and refused to refund his money for nearly two months, Yoon alleges.
In its court response, MGM says Yoon’s $120,000 check bounced the first time it was deposited and that he failed to produce a required $480,000 letter of credit. Moreover, two pre-existing contracts supersede Yoon’s, according to MGM. United International Pictures--co-owned by MGM, Paramount Pictures and Universal/MCA--has theatrical rights to the South Korean market under one deal, MGM maintains, while Warner Home Video has video rights under a separate contract.
Last week, Superior Court Judge William Huss put the Korean future of “Thelma and Louise” in doubt by granting a temporary restraining order against MGM. Huss barred the studio from allowing “Thelma and Louise” to be distributed in Korea by anyone except Yoon, pending a Sept. 10 hearing.
Yoon’s suit says he negotiated the “Thelma and Louise” deal with Danny Dimbort, MGM’s president of international distribution at the time. But Dimbort is now suing MGM for unlawful termination.
In that U.S. District Court case, filed Tuesday in Los Angeles, Dimbort claims that MGM abruptly fired him, canceled his health insurance and locked him out of his office on May 31.
Dimbort was fired after Credit Lyonnais Bank Nederland, Parretti’s chief lender in the MGM deal, took control of the financially troubled company. Dimbort, who says he is owed more than $1 million under the terms of his contract, says he was fired because of his allegiance to Parretti. His suit accuses MGM of “willful and reprehensible conduct.”
In the Delaware case, Credit Lyonnais is seeking to prove it legally removed Parretti from power because of management abuses.