At end of Rainbow, a Hollywood union dispute

Elaine Karamanos ran a thriving business for 18 years supplying film and sound editors who worked on movies such as “Independence Day” and TV shows including “The Shield.”

Now she’s hung up a “for sale” sign.

Karamanos, 64, doesn’t blame the woes of her Rainbow Editorial Services in Burbank on a tough competitor or weak market. Instead, she alleges, the union representing film editors teamed up with an industry benefits plan to drive her out of business because she was supplying workers to reality TV shows with nonunion crews such as “Survivor” and VH1’s “Celebrity Fit Club.”

“I feel I have been terribly wronged,” complained Karamanos, who said she spent $200,000 suing the plan. A trial is set for the summer. “This business has been my life. Now I have to give it all up. I’m very, very angry.”

The dispute highlights simmering tensions that occasionally erupt between Hollywood unions representing film crews and small production outfits that often work on nonunion shows in the burgeoning reality TV and cable industries. Entertainment unions have been waging an aggressive effort to organize workers in those sectors.

Union officials have portrayed Rainbow as a rogue operation whose employment arrangements “completely violate our collective bargaining agreement.” They contend that they had no part in Rainbow’s closure.

Last March, the Motion Picture Industry Pension & Health Plans -- trust funds whose directors include union and management representatives -- barred Rainbow from sending health and pension contributions on behalf of its employees.

Production companies had little incentive to use her company because that ruling prevented them from providing union health and pension benefits for the workers who wanted them. Representatives for the health and pension plans declined to comment.

The move came after the plans alleged that an audit found Karamanos was acting as more of a payroll service than post-production business, and that she was sending benefit contributions on behalf of workers who weren’t qualified to receive them. Shortly afterward, the International Alliance of Theatrical Stage Employees, or IATSE, ended its collective bargaining agreement with Rainbow, the company alleges in the lawsuit.

What makes Karamanos’ case unusual is that she had operated her business in much the same way for nearly two decades under a union agreement and that she was respected by many.

“Elaine has always been such an upstanding person and a good friend to all our employees and helped out so many people when they needed her,” said sound editor Sean McCormack, who was nominated for an Academy Award for Mel Gibson’s film “Apocalypto.” “It’s a shame this has happened to her.”

Anne-Marie Slack, owner of Widget Post Production, to which Rainbow supplied sound mixers, said, “I don’t think they had cause to shut her down. It was handled very much like a bully.”

Karamanos launched her business in 1988, after she noticed while working as a bookkeeper that many film and sound editors were struggling to keep their union health and pension benefits. That’s because they often worked on low-budget film and TV shows that weren’t covered under union agreements, so the hours they put in didn’t count toward the total they needed to qualify for benefits.

So Karamanos created a company that would lease out film editors, camera operators and others, enabling them to keep their union benefits even if they worked on nonunion productions.

To ensure that she was following the union’s rules, Karamanos said she met several times with Ron Kutak, executive director of IATSE Local 700.

Karamanos signed agreements with IATSE, which represents film editors and a host of mostly blue-collar entertainment workers, and the benefits plans.

Rainbow would hire its own group of film editors and other crew members, agree to pay them union rates and collect contributions from studios toward their union benefits.

The plan was a success and business boomed. Sales more than doubled in a decade, reaching a peak of $10 million in 2001, Karamanos said. At one point, Rainbow had nearly 60 mostly film and sound editors on its payroll, in addition to a seven-employee office staff.

Karamanos said she did nothing wrong. She said the plans offered no specifics to support their claims of improper conduct and gave her no opportunity to respond. Disputing the allegation that Rainbow wasn’t an actual postproduction business, she said she spent more than $1 million in 2005 to rent production space for film and sound editing and has contributed roughly $350,000 a year in union benefits for employees.

“I wasn’t running a rogue operation,” she added.

Last spring, Karamanos sued the plans for breach of contract, alleging that their action was triggered by a falling-out with union officials. Karamanos contends that friction mounted when her company began sending employees to work on various reality TV shows.

Union officials dismiss such claims. “That’s silly,” Kutak said. “We can’t tell the plans what to do, and we don’t.”

Local 700 has filed several grievances against Rainbow, including one on behalf of a member who complained of being underpaid. Karamanos later settled the dispute, which she attributed to a clerical error.

In court documents, the plans dismissed Rainbow’s claims as baseless and accused the company of “intentional or grossly negligent practices.” The plans sued Rainbow in November to complete an audit of the company’s books amid the allegations of improper contributions.

The audit is pending, but Karamanos said she had nothing to hide. “I did things by the book,” she said.

richard.verrier@latimes.com