Courthouse Steps

CASE CAPTION: Drew Carey, Work Hard Inc. and International Mammoth Entertainment Inc. v. Dennis Ardi, L.A. Superior Court # BC320468.

CAUSES OF ACTION: Fraud; fraudulent concealment; breach of fiduciary duty; constructive fraud; rescission; declaratory relief; and legal malpractice.

COMPLAINT ALLEGATIONS: In 1994, Carey retained the firm of Shearman & Sterling as legal counsel. Ardi, the attorney at the firm responsible for Carey, left the firm in December 1995 and became a sole practitioner. Carey left Shearman and then retained Ardi, who worked as Carey's lawyer from December 1995 to Nov. 22, 2002. Carey paid Ardi 5% of all episodic payments and advances (but not residuals) that Carey received from “The Drew Carey Show.” In June and October 2000, Ardi asked Carey to sign two sworn declarations for use in Ardi's pending divorce proceeding. By doing so, Ardi circumvented Carey's independent counsel, Burt Deixler of McCambridge, Deixler & Marmaro, and his other personal representatives, including his personal managers, Richard Baker and Rick Messina of Messina Baker Entertainment Corp. Ardi knew he was required to bring such matters to the attention of Carey's business representatives. Carey signed the two declarations, which stated that Carey didn't have to continue paying Ardi once Ardi's services were terminated. Ardi intentionally delayed preparing a written retainer agreement with Carey until after Ardi finalized his divorce because Ardi allegedly intended to defraud his ex-wife. The divorce was finalized in June 2002. In late 2002, Ardi insisted that he had a “lock-in” clause that entitled him to 5% of Carey's earnings on the series forever as well as additional compensation on other entertainment projects, in direct contravention of their agreement. (Ardi allegedly earlier fraudulently told Carey that the payments would not be locked in so that Carey would continue using his services and so he could later claim he was entitled to continuing compensation.) Carey terminated Ardi as of Nov. 22, 2002. On Nov. 21, 2003, Ardi sued Carey's accountants and business managers claiming that they interfered with the attorney-client relationship and caused Carey to terminate Ardi. In actuality, Carey decided to terminate Ardi on his own after consulting with another law firm, Edelstein, Laird & Sobel. Carey has been damaged in an amount equal to his payments made to Ardi from Dec. 1995 to Nov. 2002.

RELIEF SOUGHT: At least $4 million and a declaration that any agreements between Carey and Ardi are null and void.

PLAINTIFFS' COUNSEL: Martin D. Singer and Charles J. Harder of Los Angeles' Lavely & Singer (310-556-3501).

CASE CAPTION: Barry L. Hirsch, Robert S. Wallerstein, Howard A. Fishman and David J. Matlof v. Hirsch Jackoway Tyerman Wertheimer Austin Mandelbaum & Morris, James R. Jackoway, Alan S. Wertheimer, Barry W. Tyerman and Geoffry W. Oblath, L.A. Superior Court # BC320128.

CAUSES OF ACTION: Declaratory and equitable relief.

COMPLAINT ALLEGATIONS: Plaintiffs are all shareholders of the defendant firm. Jackoway is president of the corporation and the other defendants are members of the board of directors. The firm consists of 27 lawyers, 20 of whom are equal shareholders in the corporation (each with 5%). Recently, the board member defendants have created a “term sheet” to set up a new limited liability partnership as of Sept. 1, 2004. The term sheet is unfair in that it deprives the plaintiffs of any value of their shares if they don't join the new partnership, undervalues the corporation assets, and implements a new management structure that improperly concentrates control in the hands of certain defendants to the exclusion of the plaintiffs. The LLP conversion is not a good-faith change in corporate form but instead effectively dissolves the corporation and transfers assets to a new partnership without compensating the plaintiffs.

RELIEF SOUGHT: A declaration that the corporation has been dissolved, judicial supervision of the winding up of the corporation, an injunction against proceeding with the conversion or disposing of assets, and an appointment of a receiver.

CASE CAPTION: The Saul Zaentz Co. v. New Line Cinema Corp., L.A. Superior Court # BC320254.

CAUSES OF ACTION: Breach of contract; declaratory relief; and breach of the implied covenant of good faith and fair dealing.

COMPLAINT ALLEGATIONS: New Line has failed to pay tens of millions in dollars in royalties due for exploitation of Zaentz's right to “The Lord of the Rings: Fellowship of the Ring,” which is part 1 of the film trilogy. A partial audit of only the first of the three films reveals that New Line has refused to pay more than $20 million. However, New Line has also repeatedly refused to produce key documents, so there could be many more millions due. New Line is supposed to report and pay Zaentz royalties on a percentage of adjusted gross receipts received by New Line and its sales agents and distributors, without deductions for distribution costs. Instead, for example, on foreign distribution, New Line is reporting what it has received, without including the distributors' receipts. The resulting underreporting is more than $198 million. New Line has also deprived Zaentz through self-serving practices such as delaying payments and packaging Part 1 with lesser films.

RELIEF SOUGHT: In excess of $19,890,000 and a declaration of rights.

PLAINTIFF'S COUNSEL: Patricia L. Glaser and Mark L. Block of Los Angeles' Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro (310-553-3000).

CASE CAPTION: Drew Carey, Work Hard Inc. and International Mammoth Entertainment Inc. v. Dennis Ardi, L.A. Superior Court # BC320468.

CAUSES OF ACTION: Fraud; fraudulent concealment; breach of fiduciary duty; constructive fraud; rescission; declaratory relief; and legal malpractice.

COMPLAINT ALLEGATIONS: In 1994, Carey retained the firm of Shearman & Sterling as legal counsel. Ardi, the attorney at the firm responsible for Carey, left the firm in December 1995 and became a sole practitioner. Carey left Shearman and then retained Ardi, who worked as Carey's lawyer from December 1995 to Nov. 22, 2002. Carey paid Ardi 5% of all episodic payments and advances (but not residuals) that Carey received from “The Drew Carey Show.” In June and October 2000, Ardi asked Carey to sign two sworn declarations for use in Ardi's pending divorce proceeding. By doing so, Ardi circumvented Carey's independent counsel, Burt Deixler of McCambridge, Deixler & Marmaro, and his other personal representatives, including his personal managers, Richard Baker and Rick Messina of Messina Baker Entertainment Corp. Ardi knew he was required to bring such matters to the attention of Carey's business representatives. Carey signed the two declarations, which stated that Carey didn't have to continue paying Ardi once Ardi's services were terminated. Ardi intentionally delayed preparing a written retainer agreement with Carey until after Ardi finalized his divorce because Ardi allegedly intended to defraud his ex-wife. The divorce was finalized in June 2002. In late 2002, Ardi insisted that he had a “lock-in” clause that entitled him to 5% of Carey's earnings on the series forever as well as additional compensation on other entertainment projects, in direct contravention of their agreement. (Ardi allegedly earlier fraudulently told Carey that the payments would not be locked in so that Carey would continue using his services and so he could later claim he was entitled to continuing compensation.) Carey terminated Ardi as of Nov. 22, 2002. On Nov. 21, 2003, Ardi sued Carey's accountants and business managers claiming that they interfered with the attorney-client relationship and caused Carey to terminate Ardi. In actuality, Carey decided to terminate Ardi on his own after consulting with another law firm, Edelstein, Laird & Sobel. Carey has been damaged in an amount equal to his payments made to Ardi from Dec. 1995 to Nov. 2002.

RELIEF SOUGHT: At least $4 million and a declaration that any agreements between Carey and Ardi are null and void.

PLAINTIFFS' COUNSEL: Martin D. Singer and Charles J. Harder of Los Angeles' Lavely & Singer (310-556-3501).

CASE CAPTION: Barry L. Hirsch, Robert S. Wallerstein, Howard A. Fishman and David J. Matlof v. Hirsch Jackoway Tyerman Wertheimer Austin Mandelbaum & Morris, James R. Jackoway, Alan S. Wertheimer, Barry W. Tyerman and Geoffry W. Oblath, L.A. Superior Court # BC320128.

CAUSES OF ACTION: Declaratory and equitable relief.

COMPLAINT ALLEGATIONS: Plaintiffs are all shareholders of the defendant firm. Jackoway is president of the corporation and the other defendants are members of the board of directors. The firm consists of 27 lawyers, 20 of whom are equal shareholders in the corporation (each with 5%). Recently, the board member defendants have created a “term sheet” to set up a new limited liability partnership as of Sept. 1, 2004. The term sheet is unfair in that it deprives the plaintiffs of any value of their shares if they don't join the new partnership, undervalues the corporation assets, and implements a new management structure that improperly concentrates control in the hands of certain defendants to the exclusion of the plaintiffs. The LLP conversion is not a good-faith change in corporate form but instead effectively dissolves the corporation and transfers assets to a new partnership without compensating the plaintiffs.

RELIEF SOUGHT: A declaration that the corporation has been dissolved, judicial supervision of the winding up of the corporation, an injunction against proceeding with the conversion or disposing of assets, and an appointment of a receiver.

CASE CAPTION: The Saul Zaentz Co. v. New Line Cinema Corp., L.A. Superior Court # BC320254.

CAUSES OF ACTION: Breach of contract; declaratory relief; and breach of the implied covenant of good faith and fair dealing.

COMPLAINT ALLEGATIONS: New Line has failed to pay tens of millions in dollars in royalties due for exploitation of Zaentz's right to “The Lord of the Rings: Fellowship of the Ring,” which is part 1 of the film trilogy. A partial audit of only the first of the three films reveals that New Line has refused to pay more than $20 million. However, New Line has also repeatedly refused to produce key documents, so there could be many more millions due. New Line is supposed to report and pay Zaentz royalties on a percentage of adjusted gross receipts received by New Line and its sales agents and distributors, without deductions for distribution costs. Instead, for example, on foreign distribution, New Line is reporting what it has received, without including the distributors' receipts. The resulting underreporting is more than $198 million. New Line has also deprived Zaentz through self-serving practices such as delaying payments and packaging Part 1 with lesser films.

RELIEF SOUGHT: In excess of $19,890,000 and a declaration of rights.

PLAINTIFF'S COUNSEL: Patricia L. Glaser and Mark L. Block of Los Angeles' Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro (310-553-3000).