With the Taiwanese rights to films like "Looper" and "Dredd 3D" hanging in the balance, a nasty legal fight between Asian film distributor Catchplay and film buyer Studio Solutions Group is playing out an ocean away in California courts.
Catchplay, which boasts deep pockets thanks to backing from Cher Wang, the billionaire founder and chairwoman of smartphone giant HTC, is accusing Studio Solutions and its principal Johnny Lin of fraud and self-dealing, according to a suit filed last month in U.S. District Court in Los Angeles. It is seeking at least $35 million in damages.
Catchplay has been in the news of late because of allegations that its former CEO Wayne Chang violated his fiduciary duties and engaged in questionable accounting practices. In its suit, Catchplay claims that Studio Solutions worked in concert with Chang to get the company to pay for films that were never produced or were canceled.
"This is an attempt to swindle my client out of movie rights they have bought and paid for," Valerie Ho, an attorney with Greenberg Traurig who is representing Catchplay, told TheWrap. "It's outright theft. My client has paid millions of dollars to the plaintiffs, and there has been no offer to return any money."
Attorneys for Lin have countered that Catchplay is in breach of contract for failing to pay its bills and that the rights to several movies have now reverted back to Studio Solutions.
"They're trying to scare and intimidate us and the people we do business with by using threats and innuendo," Alex Weingarten an attorney with Weingarten Brown who is representing Studio Solutions, told TheWrap. "They were in breach, they didn't know what they were doing, and they were endangering our ability to operate in Taiwan."
Studio Solutions plans to file counterclaims seeking at least $7 million in damages from Catchplay, Weingarten said.
On Friday, Catchplay was dealt a setback when U.S. District Judge George Wu denied its application for a temporary restraining order to prevent Studio Solutions from licensing six films to other distributors. Those films include not only "Looper" and "Dredd 3D," but also "Lawless" and "Moonrise Kingdom."
However, Ho told TheWrap that Wu's decision was based on misrepresentations made by Studio Solutions. In particular, attorneys for Catchplay argue that Studio Solutions sold the rights to three of the disputed films to a company operated by Chang, but has tried to mask the fact that it was working with Catchplay's former CEO.
Ho described the deal as a "sham transaction" and told TheWrap, "as it stands in Taiwan that company that holds the purported licenses has no approval or government authority to release those movies."
Weingarten does not dispute that MDC, the company that Studio Solutions has licensed films to, has ties to Chang, but he describes the latest filing as a "red herring."
"They're doing business with each other and whatever allegations there are against Wayne Chang is between him and [Catchplay]," Weingarten said. "None of these entities are defendants, so why do they bring it up? Because it's easier to rail against an empty chair than to make these allegations stick."
Catchplay is seeking a court hearing next Monday on its second emergency injunction filing, while Studio Solutions has until Friday to file opposition papers.
In its original suit, Catchplay claims that Studio Solutions is essentially holding several films it plans to release hostage by failing to provide computer codes necessary for their exhibition.
It alleges that the recent premiere of "The Possession" in Taiwan was delayed as a result and could jeopardize the release of several upcoming films, such as "Red 2," the sequel to "The Hunger Games" and "Silver Linings Playbook."
It further claims that Lin and Studio Solutions failed to provide Catchplay with adequate information about the terms of its acquisition deals and asserts that the improprieties were only discovered when new management came in to clean up a teetering fiscal situation left by Chang.
"Realizing that the 'jig is up,' Defendants recently began a smear campaign against Plaintiffs intended to damage Plaintiffs' reputation and disrupt Plaintiffs' relationships with third party studios and producers, as well as manufacturing false claims of contract breach through outrageous demands and accusations," the suit reads.
The suit claims that Chang is being sued in Taiwan. In a Facebook posted translated by Film Business Asia, Chang vigorously denied any wrongdoing and insisted he had pushed the company to adopt more financial guards.
"I personally never handled any financial transactions or payments. Catchplay's company structure is different from normal companies," Chang wrote. "From its establishment until 2012, there was no financial department, only an accounting cash department. All the financial matters were handled by Cher Wang's investment consultant company."
In the suit against Studio Solutions, Catchplay claims that Lin dodged attempts by the company's new management to meet and clear up financial questions during last year's Cannes Film Festival. It claims Lin cited Catchplay's failure to meet certain contractual obligations as his reason, but failed to give any specifics.
Studios Solutions counters that Catchplay's presence in Cannes is evidence that the company was not bankrolling it to buy films on its behalf, but was rather a competitor for distribution rights. When if failed to secure those films, Studio Solutions claims it decided to cast a legal shadow over the film rights.
"Their claims are without merit and they are attempting to achieve in a court room that which they could not achieve in the marketplace," Weingarten said. "They will fail here too."
In addition to damages, Catchplay is seeking attorney fees.
In an article last month with the China Post, Catchplay's new chairman Harvey Chang said the company no longer plans to rely on a buying agent and will instead hammer out deals with studios directly.