July 7 (Bloomberg) -- Walt Disney Co. was found liable for not paying the U.K. creators of “Who Wants to Be a Millionaire” their share of profits from the quiz show broadcast on Disney’s ABC network.
A jury in Riverside, California, today awarded $269.4 million in damages to Celador International Ltd. The jurors agreed that Disney’s Buena Vista Television and ABC breached an agreement that entitled Celador to 50 percent of the profits from the show, which first aired in the U.S. in 1999 and helped lift the network to first place from third in audience ratings.
“We believe this verdict is fundamentally wrong and will aggressively seek to have it reversed,” Disney said in an e-mailed statement.
Closely held Celador sued Disney in 2004, claiming Buena Vista and ABC “through a complex web of self-dealing transactions” allowed ABC to keep the advertising revenue and pay Buena Vista only a licensing fee equal to the cost of producing the show. That kept Buena Vista from earning a profit from “Millionaire” that it would have had to share, Celador said.
“The moral of the story is people should honor their contracts and treat others fairly,” Roman Silberfeld, a lawyer for Celador, said outside the courtroom. “That is what this jury said today. Even Disney is not immune.”
The verdict is the third-largest jury award in the U.S. this year, according to data compiled by Bloomberg.
Major studios have taken a hard line defending lawsuits over profits and Disney in particular is notorious for its aggressive legal strategy, said Michael Kump, a partner with Kinsella Weitzman Iser Kump & Aldisert in Santa Monica, California, who has litigated cases against Disney.
“Studios have been very reluctant to settle these kind of cases,” Kump said in a phone interview. “They’re afraid of setting a precedent and have every profit participant come after them.”
To succeed on appeal, Disney will have to show that the trial judge erred, possibly in instructing the jurors, Kump said. Appellate courts generally are reluctant to overturn jury verdicts, the lawyer said.
Disney, based in Burbank, California, argued that the creators, who received a flat producers’ fee for each episode, knew that the network run of “Millionaire” wouldn’t generate a profit. There wasn’t anything unusual or secret about the way Buena Vista and ABC, which took all the financial risks, divided the rights, said Disney lawyer Martin Katz during the trial.
Disney Chief Executive Officer Robert Iger said the judge and the jury got it wrong and should have had more opportunity to review the contract.
“It’s all there in the contract,” Iger said today in an interview at the Allen & Co. media conference in Sun Valley, Idaho.
The quiz show came on the air in the U.S. in 1999 and its success prompted ABC to run the program four times a week. “Millionaire” was first broadcast in the U.K. in 1998 and has been carried in 106 countries, including Australia, India, Japan, Germany and Russia, according to the creators. The show also was featured in the movie “Slumdog Millionaire,” which was co-produced by Celador and which won eight Oscars in 2009.
Former Disney Chief Executive Officer Michael Eisner said in a 1999 e-mail introduced by Celador as evidence in the trial that “Who Wants to Be a Millionaire” was as important to Disney’s ABC network as its deal with the National Football League.
Eisner estimated the value of the rights to the game show at $1 billion and said it would turn ABC around, according to a separate 1999 e-mail message forwarded to Disney’s board of directors.
Celador Chairman Paul Smith said in a phone interview that the verdict was a great relief and that the company had been willing to settle the case before it went to trial.
“Disney did a fine, fine job producing and exploiting the show,” Smith said. “The problem was they exploited it for their own benefit only.”
The case is Celador International Ltd. v. Walt Disney Co. 04-03541, U.S. District Court, Central District of California (Riverside.)
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