Ovitz Is Target of $9.6-Million Suit

In the latest of a string of setbacks for Michael Ovitz’s entertainment enterprise, the head of his ill-fated television company has filed a $9.6-million fraud, defamation and breach-of-contract suit against Ovitz and his companies.

Ovitz is struggling to steady his core management company during the current barrage of bad news. Three years after launching a venture designed to leverage a star-studded roster of clients through an array of companies in all facets of the entertainment industry, his Artists Management Group is cutting back in an effort to survive.

The lawsuit claims that Ovitz, a former Walt Disney Co. executive and co-founder of Creative Artists Agency Inc., made “grandiose promises” and “false representations” to Eric Tannenbaum when he hired him to run the now-defunct Artists Television Group, a sister company to Artists Management Group.

Ovitz promised he would personally finance the television company for five years and boasted of a “billion-dollar line of credit” Tannenbaum could access as he built the enterprise from the ground up, according to the suit.

“The parties named in this lawsuit deny the allegations and are confident that these claims will be determined to be legally and factually meritless,” Ovitz’s lawyer, Terry Sanchez, said in a statement. “Mr. Tannenbaum ran Artists Television Group from its inception with substantial funding, and despite the efforts of many people, ATG was not financially successful.”

After five months of on-again, off-again negotiations to settle Tannenbaum’s claims against Ovitz, lawyers for the parties spent much of Thursday in last-minute talks before the suit was filed, according to sources on both sides.

The television unit officially shut down in August after two years and a reported $100 million had been spent developing shows. Though “Madigan Men” aired on ABC, “Cursed” on NBC, “The Street” on Fox and “Grosse Point” on WB, none of the shows survived beyond their first season.

The lawsuit follows on the heels of this week’s news that comedian Robin Williams has fired AMG and returned to his former talent agency, CAA.

The move is a meaningful victory for the talent agency, which three years ago broke off all professional contact with Ovitz’s management company after he lured Williams away from CAA. The cold war between the companies has continued ever since.

Also last month, StudioCanal, a division of Vivendi Universal, backed out of its three-year multimillion-dollar pact with Ovitz’s film production arm, Artists Production Group.

Ovitz’s company, with no films in production, has yet to secure another film financing and distribution partner.

At the same time, Ovitz recently slashed costs and reorganized his sports management division, ending a foray into managing hockey players as well as an effort to establish a foothold in tennis.

Last month, key sports manager Jill Smoller left AMG to join William Morris Agency, taking clients including Pete Sampras and Rick Fox with her.

The co-heads of Ovitz’s Los Angeles music management office left this year as that unit cut costs and trimmed staff.

Now, rather than the multifaceted entertainment enterprise he boasted he was building in spring 1999, Ovitz’s enterprise rests on the talent management firm run by Julie Silverman Yorn and her brother-in-law, Rick Yorn.

Their clients, who include Cameron Diaz, Leonardo DiCaprio and Samuel L. Jackson, along with Ovitz’s clients, including Martin Scorsese, Sydney Pollack and Oliver Stone, are the bedrock of Hollywood’s largest management company, which serves primarily younger and lesser-known clients.

In the lawsuit, Tannenbaum claims Ovitz lured him away from a secure job at Sony Corp.’s Columbia TriStar Television in spring 1999 with promises of a minimum annual salary of $1.5 million and complete control of his fledgling television company.

“Ovitz represented that he had a $1-billion line of credit with J.P. Morgan and that Ovitz was personally committed to the venture

Executives with Ovitz’s company said all other employee claims associated with the television operation have been settled without litigation.

The dozen or more contracts with writers, producers and other Hollywood talent have mostly been resolved, they said.

According to the lawsuit, Tannenbaum’s contract was different from the other ATG employment arrangements because Ovitz guaranteed that he would personally be responsible for covering the full five years of his deal.