(1998) Tags: Buena Vista
Ilshin Investment Co., Ltd. v. Buena Vista Home Entertainment, Inc.
Ilshin Investment Co., Ltd., a Korean company, loaned funds to Last Patriot Productions, Inc., to enable production of The Patriot, a film starring Steven Seagal. Last Patriot obtained the necessary bank financing and completed the film, but was unable to repay its obligations to Ilshin and others.
When the completed film failed to obtain theatrical distribution, Last Patriot entered into an exclusive agreement for its home video distribution by Buena Vista Home Entertainment, Inc., for an eight-year term ending in approximately June 2007. The Agreement provided that Buena Vista’s fee would be a percentage of the distribution proceeds, and permitted Buena Vista to recoup its expenses before paying the balance of the proceeds to Last Patriot. But the Agreement expressly required Buena Vista to obtain Last Patriot’s consent before incurring recoupable distribution expenses in excess of $900,000.
Buena Vista distributed The Patriot from mid-1999 until October 2005, with sales far exceeding the parties’ expectations. Between May 1, 1998, and September 30, 2006, United States distribution receipts were almost $13.5 million, from which Buena Vista earned fees of $3 million and paid over $4.7 million to Last Patriot and its creditors. But when distribution costs reached the $900,000 threshold early in the venture, Buena Vista did not seek or obtain Last Patriot’s consent to continue recouping expenses, as the Agreement required.
In February 2006, Ilshin filed suit against Buena Vista. As a judgment creditor standing in Last Patriot’s shoes, Ilshin alleged that Buena Vista had breached the Agreement by incurring and recouping distribution costs above the $900,000 threshold without Last Patriot’s consent, and by ending the film’s distribution before the natural expiration of the Agreement’s eight-year term. Its complaint also included a cause of action for conversion. For its contract claims Ilshin sought to recover the excessive costs Buena Vista had deducted, and the profits Last Patriot would have earned from continuing sales; for its tort claim, Ilshin sought the same compensatory damages, plus punitive damages.