Counsel Concerns

A law firm represents a film production company. But as organizing both the company and a film project proceed, the company fails to raise sufficient funds to complete the project. Later, the director, a costumer, a construction coordinator and a production designer hired to work on the movie file suit for payment of services rendered and goods supplies. The suit alleges fraud and conspiracy. The law firm and its principals are named as defendants in the action.

Is the law firm liable in the case? This was an action that involved the formation of My Left Hook LLC (MLH) and its attempted production of a film titled “Out on My Feet.” Attorneys Steven Lowy and Andrew Zucker and their California firm Lowy & Zucker were hired by the production company as counsel. The complaint alleged that the lawyers knew that the film project lacked proper financing but joined the other defendants in misrepresenting the project's financial stability.

The trial court dismissed the suit in favor of all of the defendants. The Court of Appeal of California, Second Appellate District, Division Four, largely affirmed in an unpublished opinion. Parmet v. Lapin, B164170. The court noted that the law firm defendants had made no direct misrepresentations regarding financing to the costumer and construction coordinator.

But the court went on the rule that Barry Primus, the director, had adequately stated that he had been harmed by direct misrepresentations made to him by the law firm's co-defendants and that the director's conspiracy-to-defraud allegation against the law firm was sufficient to survive demurrer. The court of appeal noted it was enough that the complaint alleged, among other things, that the law firm “at some point had actual knowledge that the [financing] representations were false. Nonetheless, Zucker [allegedly] intentionally conspired to conceal the fact that financing was not assured, as evidenced by his actions in providing the Directors Guild of America (DGA) with documents that continued to advance the misrepresentations and further conceal the true state of the financing. … By making the purported [alleged] misrepresentations to the DGA, Zucker intended to and did induce Primus to stay on as the director.”

But the court of appeal upheld dismissal of the production designer's conspiracy claim against the law firm. The court noted, in part, that memoranda “authored by Zucker, indicate that Zucker was well aware … that the project was in crisis due to lack of funding. In that regard, Zucker offered [co-producer David Pritchard] advice to enable MLH to minimize its liability, for example, by avoiding making misrepresentations or signing contracts. Nothing in these memoranda provides evidence that Zucker was colluding with the other defendants in representing that the Movie was fully financed. … The Zucker respondents' conduct was as consistent with their engaging in permissible client advocacy as with engaging in an unlawful conspiracy.”

Under the court's view, an entertainment lawyer may work for a financially troubled client who is struggling with financing a project. But the court's ruling on the director's claim indicates that a firm's dealings with third parties on behalf of a production client may allow a party that enters into an agreement with the client to at least have a day in court against the firm.

A law firm represents a film production company. But as organizing both the company and a film project proceed, the company fails to raise sufficient funds to complete the project. Later, the director, a costumer, a construction coordinator and a production designer hired to work on the movie file suit for payment of services rendered and goods supplies. The suit alleges fraud and conspiracy. The law firm and its principals are named as defendants in the action.

Is the law firm liable in the case? This was an action that involved the formation of My Left Hook LLC (MLH) and its attempted production of a film titled “Out on My Feet.” Attorneys Steven Lowy and Andrew Zucker and their California firm Lowy & Zucker were hired by the production company as counsel. The complaint alleged that the lawyers knew that the film project lacked proper financing but joined the other defendants in misrepresenting the project's financial stability.

The trial court dismissed the suit in favor of all of the defendants. The Court of Appeal of California, Second Appellate District, Division Four, largely affirmed in an unpublished opinion. Parmet v. Lapin, B164170. The court noted that the law firm defendants had made no direct misrepresentations regarding financing to the costumer and construction coordinator.

But the court went on the rule that Barry Primus, the director, had adequately stated that he had been harmed by direct misrepresentations made to him by the law firm's co-defendants and that the director's conspiracy-to-defraud allegation against the law firm was sufficient to survive demurrer. The court of appeal noted it was enough that the complaint alleged, among other things, that the law firm “at some point had actual knowledge that the [financing] representations were false. Nonetheless, Zucker [allegedly] intentionally conspired to conceal the fact that financing was not assured, as evidenced by his actions in providing the Directors Guild of America (DGA) with documents that continued to advance the misrepresentations and further conceal the true state of the financing. … By making the purported [alleged] misrepresentations to the DGA, Zucker intended to and did induce Primus to stay on as the director.”

But the court of appeal upheld dismissal of the production designer's conspiracy claim against the law firm. The court noted, in part, that memoranda “authored by Zucker, indicate that Zucker was well aware … that the project was in crisis due to lack of funding. In that regard, Zucker offered [co-producer David Pritchard] advice to enable MLH to minimize its liability, for example, by avoiding making misrepresentations or signing contracts. Nothing in these memoranda provides evidence that Zucker was colluding with the other defendants in representing that the Movie was fully financed. … The Zucker respondents' conduct was as consistent with their engaging in permissible client advocacy as with engaging in an unlawful conspiracy.”

Under the court's view, an entertainment lawyer may work for a financially troubled client who is struggling with financing a project. But the court's ruling on the director's claim indicates that a firm's dealings with third parties on behalf of a production client may allow a party that enters into an agreement with the client to at least have a day in court against the firm.