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article imageAMC sued for 'Walking Dead' profits, wrongful termination

By Jessica Zuzierla     Dec 18, 2013 in Entertainment
Former executive producer of “The Walking Dead,” Frank Darabont and CAA filed a suit for “unspecified money damages,” against AMC for alleged deprivation of profit, self-dealing, wrongful termination, and related issues on December 17.
Former executive producer of the hit television series “The Walking Dead," Frank Darabont, and Darabont’s talent agency, Creative Artists Agency, filed a lawsuit against the movie giant AMC on Dec. 17, 2013 in the New York Supreme Court, according to a report by Deadline.com.
AMC “fundamentally rebuffed” Darabont and the CAA’s numerous attempts to handle the issue out of court, which led to the filing, says the Deadline.com report.
Denial of profit allegations against AMC
Another company – Lionsgate and Warner Brothers television were mentioned specifically by Deadline.com – were supposed to produce “The Waking Dead,” but AMC instead decided at the last minute to produce the show itself. According to the report, Darabont and CAA agreed to the change:
“After gaining assurances from AMC that Darabont would obtain protections against improper self-dealing,” the complaint says, pointing to this language in Darabondt’s contract: ‘AMC agrees that AMC’s transactions with (Darabont) will be on monetary terms comparable to the terms on which the (AMC) enters into similar transactions with unrelated third party distributors for comparable programs.’”
The “comparable” monetary terms in this case was a profit participation program, of which Darabont would receive about 12.5 percent, and the CAA about 7.5 percent. A profit participant receives a portion of the profits, which are calcualted by deducting all costs for a net profit, which is then shared between all profit participants. This means that if the show does not generate a profit, the profit participants are not paid.
The suit alleges that neither Darabont nor CAA have received a single dime to date.
According to Deadline.com:
“That is the case with The Walking Dead, which has been raking in tens of millions in deficits, due to AMC’s ‘sham imputed license fee formula” that “is clearly designed to ensure Plaintiffs never see that first dollar,’ the suit alleges.”
Darabont claims that AMC’s neglect in reporting the “tens of millions in tax credits” the company receives as the result of tax credit to produce the show and "an unconscionably low license fee formula," helps make it appear as if "The Walking Dead" has a deficit of tens of millions, instead of a profit, says Deadline.
Rolling Stone states that the suit alleges specifically that AMC pocketed the tax credits, which amounted to about 30 percent, tax credits paid out of pocket by Georgia taxpayers.
Other complaints
The NY Daily News states that AMC "rationalizes its position with accounting gimmicks."
Darabont and the CAA also claim that AMC fired Darabont just as season two was about to air in an attempt to “avoid contractual obligations," reports Deadline.
The alleged obligations included a negotiated pay raise and lock in for seasons two and three between AMC and Darabont, a lock in as executive producer for the life of the show, and "first negotiation" rights to all "The Walking Dead" spinoffs, to which Darabont and CAA are also seeking profits.
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