The LA judge overseeing the case had to decide whether to tear down the cornerstones of a profit battle waged by Walking Dead creator Robert Kirkman and several executive producers seeking a bigger stake in the hit zombie series, and saw faced with a simple question: Did AMC intentionally work out its contract to ensure that the creators of the series would never share in the profits?
Judge Daniel Buckley indicated Friday he’s leaning toward the ruling that AMC didn’t reverse engineer its contracts to quell Kirkman. The order would significantly de-escalate the case over winnings from the highest-rated television series in cable history.
In a preliminary ruling, the judge ruled in favor of the network for breach of the implied good faith promise and for tortious interference in summary proceedings. The only remaining allegations in the case relate to audit claims.
AMC scored a big win in 2020 after winning a high-profile lawsuit over allegations that it cheated profiteers out of revenue it received for licensing the show to its affiliated cable network. Buckley noted that the parties’ contracts require adoption of AMC’s definition of modified adjusted gross receipts (MAGR), or the earnings the studios earn from the series less distribution fees, expenses and production costs.
But the case was revived in July when Buckley ruled that Kirkman, Gale Anne Hurd, David Alpert, Charles Eglee and Glen Mazzarpursue can pursue new legal theories by changing their claims. The allegation of violating the implied promise of good faith and fair dealing stems from allegations that AMC, knowing it had negotiated the right to unilaterally define MAGR, waited until it knew of the hit series’ popularity , to define them with the intention of capping payouts for winners. The tort lawsuit describes a plan whereby AMC enticed its subsidiary, which is said to have no direct knowledge of its parent company’s dealings, into breaching its contracts.
AMC called the amended claims an attempt to seek an “overtake” after a defeat in the trial.
During a heated in-person hearing Friday, attorneys for AMC and Kirkman debated the company’s intent when it presented its MAGR definition and whether AMC’s royalties are competitive relative to the rest of the market.
Sheldon Eisenberg, representing the plaintiffs, argued that AMC acted in bad faith by proposing a contract with a “fundamental structural problem” that “made it impossible for Kirkman to obtain contingent compensation.”
“AMC must have done something with that definition that deprived Kirkman of what he reasonably expected — a profit sharing if the show was successful,” he said. “We’re talking about the most successful show in the history of cable television.”
One of Kirkman’s main arguments is that AMC gave its subsidiary a sweetheart deal to license The Walking Dead because its fees aren’t competitive compared to other networks. CBS, for example, agrees to reimburse 100 percent of production costs once a show enters its fifth year, in addition to deficit reimbursement for prior years if the series is among the top 10 rated shows.
Without those stipulations, Eisenberg said, it’s “basic television economics” that there can’t be a positive MAGR number.
AMC attorney Scott Edelman responded that it doesn’t matter what other networks offer. The test isn’t whether the contract doesn’t fit the market, he said, but whether Kirkman got what he negotiated for.
“The test is, ‘Did AMC create a MAGR definition with the intention of harming these particular plaintiffs and withholding conditional relief from them?'” he said. “There is simply no evidence that AMC did this.”
Edelman pointed out that the network used the same MAGR definition in over 400 other agreements. He argued that it wouldn’t have happened if it was as unfair as Kirkman says, because AMC’s terms need to be competitive to attract talent.
At the end of the hearing, Buckley did not signal that he intended to reverse the course of his preliminary decision. He will no longer be handling the case when it comes to court because he is retiring in May.
“I thought at least one thing would be resolved, whether it’s MAGR or MAGR,” he joked.
Kirkman’s attorneys said they plan to forgo arbitration if the court upholds its preliminary ruling. They will likely appeal Buckley’s summary judgment order.