ety B, Simon (State Ba No, 26242) ena. “Bar Sse Be Na Tes1S) 905) ISIMON GREENSTONE PANATIER BARTLETT PC P70 ee Apo ay Se 0 Ses tae et Long Beach, California Sb800 s ekprone: 363) 9003408 seP 072016 Foeskle’ Go S001 E-mail jsonczeplaw com Ss genes amercat | Attomeys for Plaintft SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES MIDDLE PICTURES, INC., cascNo: BOSSI 219 COMPLAINT FOR: Plains, ve (1) BREACH OF CONTRACT @) BREACH OF THE IMPLIED PARAMOUNT PICTURES COVENANT OF GOOD FAITH CORPORATION, and DOES 1 ‘AND FAIR DEALING {THROUGH 20, elusive, ete (@) FRAUDULENT INDUCEMENT fendants. (® VIOLATION OF BUSINESS & PROFESSIONS CODE SECTION 17200 (© ACCOUNTING DEMAND FOR TRIAL BY JURY J} commLaner-1 SOW GREENSTONE PanUriCR BARTLETT ICPintff Mile Petues, ne, alleges as follows: 1 le Pictures, Ine. isa small independent film production company that financed and made Mile Men a feetur-Length theatrical motion picture, Upon completing [Middle Men, Middle Pictures had a well-regarded movie, but no means to promote and disibute i to a wide audience, Middle Pictures went 1 defendant Paramount Pictures |Corporation,(“PPC”) and entered an agreement whereby PPC undertook to distribute Middle | en and pay Middle Pitures certain monies based on is revenues. PPC knew Middle Men cost around $21.5 million to produce, and that theatrical dsieibuion represented Middle Pictures first and best opportunity fora return on its investment, Although Middle Pictures Paid PPC an additional $6.8 million to promote the movie's release, PPC itself had no financial investment in Middle Men Having ventured nothing, PPC made little effort o assure Midife Men's box office success. PPC this tok Middle Pictures film and money, but imited the film's release toa scant number of sereens nationwide, thereby eausng ito fat the box office and then suffer the consequential effects on subsequent revenues, 2. Unbeknownst to Middle Pictures, PPC—and the execuivs that created PPC's new media” strategies suchas Brad Grey and Rob Moore—never intended todo what needed tobe done so that Middle Men would succeed atthe box office. Instead, PPC wanted Middle Mer as component of PPC’s broader strategy to iely acquire valuable content that itcould later use to create packaged libraries forsale to video-on-demand and streaming services sch as Netix Hulu, and Amazon Prime. A well-publicized dal with Netflix provided PPC with hundreds of millions of dollersin evenve, very litle of which has been accounted foro paid to Middle Pictures for Midale Men, PPC'scondvet, with Middle Menas leading example, i an updated version of “Hollywood accounting,” a moderized racket that systematically enriches PFC and hei to coverup PPC's own boxoffice “flops.” PPC's failure to account for its “new media” profits also allows it to perpetually best producers, gulds, unions, and other members ofthe entertainment industy out of ther rightful shares of evenue. Indeed, PC's restment of Middle Pitwesisnot isolated, and is instead part ofan overall systematic scheme designed to deprive content provides of their rghtfl profit participation ‘commuamir-2 SIMON GREENSTONE PANATIR BARTLETT PCrey B 4 15 16 1 18 19) 20| 2 2 23 4 2 2 28 3. By thisection, Middle Picture first alleges that PPC filed to give Middle Men the wide theatrical release that PPC knew was necessary forte film to succeed atthe box office. In systematically failing to do s0, PPC deprived Mile Pictures of ts frst and best and marketing, mach less reasonable retum on is investment. More specifically, Middle Pictures also opportunity to enjoy any meaningful income to cover its costs of produ atieges that PPC failed to abide by the tems of its distribution agreement in atleast wo separate and additonal ways since te movie's release: (1) PPC fale to properly and filly account for how it spent the $6.8 million paid by Middle Pictures for promotional and advertsing expenses; and, (2) PPC failed to property and filly account for monies owed to Middle Pictures based on PPC's exploitation of Middle Men since 2009 inthe home video, video-on-demand, and streaming video markets 4. Middle Pictures’ allegations as to PPC's accounting deficiencies and monies Jowed are not based on speculation or conjecture, but on conclusions reached by PC's approved auditors. Atits own expense, Middle Pictures exercised its contractual audit rights snd commissioned a pre-approved accountng firm (Green, Hasson & Janks LLP) to conduct siled review of PPC’s books and records pertaining to Middle Men. Upon that review, Middle Pictures’ auditors concluded, as will be detailed below, that PPC cannot account for now itspent Mide Pictures promotional and advertising funds, and that PPC owes Midle Picturesa substantial payment oft last $7 milion based on “new medi revenues generated by Middle Men sine its original release ‘THE MAKING OF MIDDLE MEN AND PPC’S FAILURE ‘TO GIVE IT A WIDE THEATRICAL RELEASE. 5. Middle Men, directed by George Gall, stared wellknown actors Luke Wilson, Giovanni Ribis, and James Caan. Film ities lauded Middle Men, and Variety refered toit 2s “compelling [and] skilfully made.” Focus-group screenings likewise resulted in strongly positive audience ratings. Middle Pictures hada completed and well-regarded movie, but means o deliver it to an audience. ‘compcainr-3 ‘SIMON GREENSTONE PANATIER BARTLETT FC6, InNovember 2009, Middle Pitures entered into a writen agreement with PPC whereby PPC agreed to distribute Middle Men (hereinafer“the Agreement.” In secordance withthe Agreement, Middle Pictures delivered Middle Men to PPC, and paid PPC $6.8 to be used for promotional purposes, including but not limited to advertising (elevision, billbcards, te), premier events, and press junkets. By the tems of the Agreement, PPC was obligated to distribute Middle Men “inthe theatrical, television and (home) ... marke in a nondisriminatory manner consistent with its teatment of mation pictures released by [PPC] ofa similar genre, budget and level of enicipated performanes Middle Pictures as, ands, entitled to receive net payments from PPC based ona percentage lofrevenve generated by the picture. Specifically Middle Pictures was to receive 87.5 percent ofall theatrical revenue and 80 percent of non-theatricl revenue. 7. Despite receiving $6.8 million for advertising and promotional costs, PPC released Midale Men only ona limited basis and with litle to no promotion. The New York Pos reported on August 5, 2010 that: Paramount is bowing ‘Middle Men’ tomorrow only in New York (at five Manhattan sreens), Los Angeles, Chicago, San Francisco, Seatle, and Dalls- Fort Worth There's not been as much asa one-inch print ad i the Sunday ‘Times or weekly publications like The Village Voice, The New Yor Observer end Time Out New York. Which seems odd for a fact-based ‘comedy about the birth of intemet porn in 1995, starring Luke Wilson in Hs best performance in nearly a decade. 8. PPCreleased Middle Men ona scant number of sereens, virtually assuring the fim would fil to capture a mass audience. In New York City, on is supposed “opening weekend," PPC showed Middle Men on just one seen, onetime, ona Sunday afternoon, PPC did not show Mite Men in any foreign market theaters. As the London newspaper The JCuordion nota in an article entiled “Why did Middle Men snk in the UK,” awful lot ofbuz2" anda lat of advance publicity forthe film at Cannes in 2009, the movie was released “weirdly... scheduled to land with e sickening thud on Blockbuster shelves a the lend of uly 2011]. Straight wo DVD? What happened?”n 2 3 14 15 16 "7 18 19) 20 2 2| 2 m4 Po 26 2 28 9. Unbeknownst Middle Pictures a the time, PPC never intended to turn Middle Men into abox office success. Because PPC had no financial investment in Middle Meni nad no incentive to widely elewe it hesvcally. Rather, despite its promise to treat Middle [Men ina "manner consistent with (PPC’s] eatment of motion pictures released by it of 8 similar genre, budget and level of anticipated performance," PPC instead tested the aisvibuion agreement with Miedle Pictures as nothing more than a way to freely acquire content tha itso later snonetiz, also to that of every guild, union, and other party ented to residual payments, n pexpeuty (ou just Middle Petares” disadvantage but ‘THE MOVIE INDUSTRY IN TRANSITION 10. “Content i king.” Originally coined by Sumner Redstone, then-chairman of Viacom, his phrase defined the way in which PPC would tum the challenge presented tothe Hollywood studio system by the aascentvideo-streaming industry into one o its biggest cash Jcows. ‘The movie business changed from an industry originally driven by box-office retums and theater atendance to an industry dominated by home video and DVD rentals and sles, and then to one in which a larger percentage of studio profits are derived from video-on- demand and streaming services. 11, By the mid-2000s, ie profitability of Hollywood studios rested largely on their success in monetizing thei conten by selling (and, indirectly, renting) movies on DVDs and other physical media, North American home video revenue peaked a about $28.4 billion in 2007. PPC, however, recognized that the increasing popularity of streaming video on demand, especially Netix, would dramatcally disrupt this business mode 12, With DVD sales fling, the premium movie channel Star pioneered the monetization of existing content through new media when it reached an agreement with Nest i Oetoher 2008, Under his agreement, Stare licensed its content for etreaming on Netix for $30 million per year. °PC recognized that to maximize the value ofits content, it ed to maximize its leverage in negotiations ~ the more content it brought tothe table, the beter the Financial results. Thus, oe yer afer the Starz-Netflix deal, PC established. joint]venture—known as Epix—with two other sudioe (Lionsgate and MGM). PPC owns approximately 42 percent of the Epix joint venture, 13, Like Stare, Epixisa premium movie channel availabe to pay-cable subserbers Reflecting PPC’s commitment to new content delivery swategies, though, Epi was also 'V Everywhere” reflects the purpose of the Enix joint venture ~to make the founding studios vast library of content [promoted as the pioneer of the “TV Everywhere” concep. avaiable not only on television, but also online et Epix com and via video game systems. Today, Epixpromores th availability ofits content on its website, videogame systems suchas the Sony Playstation and MicrosoR Xbox, Apple iPhones and iPads, Ancroi# phones and tablets, connected television ses, Roku players, Chromecast players, and other media. 14, PPC created Epix inorder to generate anew source of revenue and profit fom and furue content controlled by PPC by making licensing deals with Netflix and other sueaming vdeo on demand services. In 2010, just ten months after Epix was formed, Epix and Netix fnalized an agreement by which Epix content would stream onNetflix, This dea! was substantially larger than the easier Stare agreement; over the course ofits five-year tera, Neti would pay Epix approximately one billion dollars. In 2012, Epix content was ais licensed to Amszon Prime, and in 2016, the Epix brary vansitioned to Hulu, The value of these licenses has not been publicly reported, but is believed to bein the hundreds of millions of dollars. As a result ofthe licensing deals negotiated forthe Epix cenent library, PPC has received on information and belief, many hundreds of milions of dlls, 15, IFPPC, rather than Middle Pictures, had produced Mile Men, PPC would have promoted the film more vigorously, and distributed i atthe box office more widely, x0 sto realize a greater return on its investment in the production ofthe fl, But having made no capital investmentin Middle Men, and slteady having Middle Pictures’ more tan $6 milion in hand, PPC opened under diferent, and discriminatory, incentives. PPC viewed Mie Pictures as more of «production competitor than a contacts! partner ~ competitor whose high-quality and cosveticently produced film Midale Men PPC wanted to ots so thatthe ii could become part of its “new media” strategy. ‘CoMPLAINT-6 SOW GREENSTONE PANATIEP BARTLETT PC16. By employing that stategy, content (vanches of films that included Middle | Men) is king and revenue owed to independent producers and ater profit participants can be, and hasbeen, obscured by the use of 3 techniques: (a licensing ofthat lm catalog to media outlets tha are owned by PPC, such as Epi; coupled with () licensing agreements executed by PPC’s cable outlets to provide that catalog to on-line streaming vendors, lke Netflix, for itl oro consideration tobe pad to independent producers like Mile Pictures; and e)the lonacity of PC's newly implemented Jmoiceworks accounting system that leaves insufficient beckup documentation for independent producers in distribution ageements with PPC, even those uilzing mutually agreed-upon qualified auditors to comprehensively tack how money was spent in exchange for which particular services, and how much revenue remains owed funder the distribution agreement. The use of Znviceworks, in particular, is designed to Neverage PPC’s grip on information unavailable, but required abe dislosed, to independent producers and leveraging PPC’s relative size and financial strength in withholding that information under pretext of efficient recordkeeping, EPIX: EXTENDING OLD “HOLLYWOOD ACCOUNTING” TO NEW MEDIA 17, Middle Pictures is informed and believes that PPC acsigned certain ofits aisibuton rights over Middle Mon to Epix for nominal or no consideration, and that as & result ofthis erangement Middle Pictures as been denied revenue properly allocated to Midite Men, Following the assignment of rights to Epi, Middle Men has been broadcasted numerous times on Epix and various other cable stations, and has been avilable at various times on Netflix, Amazon Prime, Hula, Fuse, and other new media sources pursuant to agreements between Epix ad those entities. 18. On informition and belief, PPC has allocated overhead and other expenses related to Epix to Midle Men, thereby reducing the amount of compensation due Middle Pictures. In effect, Epix serves asthe new iteration fhe age-old “Hellywwood Accounting in th al layer of overhead to content providers (suchas the producers, itrepresents an adit ‘CoMPLAIT-7 SIMOW GREENSTOKE PANATIER BARTLETT PCprofit participants, and actors, writes, and directors eniled to residual payments) tht enhances studio revenue while systematically and intentionally depriving participant oftheir ight shares, 19, PPCis required, pursuant to the Agreement to “keep books of account with respect o the distribution ofthe Picture.” The Agreemest also provided Middle Pltures, Jupon the passage of five years from release of the picture, the right to audit those books. Midle Pictures’ efforts to audit PPC’s books, however, hive been frustrated de to FPC's accountng practices, unsupported financial statements, and failures to provide sufficient information. Middle Pictures is informed and believes that PPC has nt paid tall moneys due land owing under the Agreement, including & percentage of revenue generated by PPC's distribution of Aide en via multiple streaming video services 20, In exereising its audit sights, Middle Pictures leamed that PPC uses an cletrnie/igil invoicing system called Jmoiceworks. While volceworks maintains end provides certain basic accounting information, it does not preserve backup date or writen | documentation regarding payments for goods and/or services purportedly provided by third ery vendors. The inherent and purposeful limitations of Imoiceworks, including its inability to preserve and maintain basic confirming documentation, rakes it dificult, int impossible, ies such as Middle Pictures to conduct meaningf! audits in accordance with theit for en contractual ight even with approved thi party auditors as Middle Pictures engegedin this mates, PPC’s use of Imviceworks was not an agreed-upan term of the Agreement an, if nothing ese, contradicts the sprit of Middle Pictures’ contractual accounting rights and PC's recordkeeping obligations 21, Middle Pitures'auditand accountng rights have been materially Frustrated by PC's intentionally derelict accounting practices and fils to maintain documentation to support both income and expense statements related to Middle Men. The ability to conduct such a meaningful audit was a material tem ofthe Agreement and is necessary for Middle Pictures to determine not only how PPC spent the milions of dolar provided by Middle Pictures to promote Middle Men, bu sso to determine i PPC has pid al proceeds duly oved ‘COMPLAINT: € SIMON GREENSTONE PANATIER BARTLETT PCte Middle Pictures. Although unable to conduct complete audit, Middle Pictures’ pre approved industry-exper auditors have been able to detemine thet Middle Pitures is owed substantial sums inthe millions of dollars—not only based on PPC’s misuse (or nonuse) of promotional funds—but also for contractual percentage of revenue generated by Midile. Men, including but not limited to revenues generated by new media and on-demand video steaming services suchas Netflix, Hulu, Fuse, and Amazon Prime, PARTIES, JURISDICTION, AND VENUE 22, Middle Pictures isa California corporation whose principal place of businesis locsted inthe County of Los Angeles, State of Califor 23, PPC is Delaware corporation whose principal place of business is located in the County of Los Angeles, Sute of California, 24. Middle Pictures is ignorant ofthe tue names and capacities of the defendants (both as to individuals and entes) sued hereinasDoes 1 through 20, inclusive, and thereire sue such defendants by fictitious names. Middle Pictures will sek leave to amend tis complaint to llege theirtue names end capacities when they have been ascertained, Midsle Pictures is informed and believes that each of the fletitiously named defendants was, responsible in some manner for the occurences alleged here, and that Middle Pictures" alleged damages were proximately caused by such conduct. 25, Thiscourtmay appropriately exercise jurisdiction, in accordance with Code 3f Civil Procedure section 410.10, because PPC was, at all relevant times, domiciled in andor doing business inthe State of California. Moreover, the subject agreement was made, entered nto, performed, and breached within the State of California, 26, Finally the Agreement states tht it "shall be governed by the laws ofthe Sate of Califomis applicable to agreements made ina wholly tobe performed in that jurisdiction, and te partes hereto submit end consent othe jurisdiction of he cours present in the State of California in any action brought to enforce (or otherwise relating to) this agreement.”27. Venues proper inthis County pursuant to Code of Civil Procedure sections 395 snd 395.5 because the parties, and each of them, have their principal place of business in the [Couny of Los Angeles and becaus: the contractual agreement that i the subject of this dispute was made, entered in, performed, and/or breached inthis Coun. FIRST CAUSE OF ACTION (Breach of Contract) Negation previouly allege in paragraphs 1 through 27 are re-alleged and incorporated herein by reference as though set out lly herein, 29, Middle Pictures entered into the Agreement with PPC dated November 25, 2 All 2008, forthe dstibuion of Midle Men, {A copy ofthe Agreementis attached as Exhibit A) xhibit NP” is incorporated within the Agreement and discusses various aspects of profit ericipstion, including the procedurefor auditing PPC. {Copies of “ExhibitNP” andits rider are attached as Exhibits B and C, respectively) The Agreement was amended in or round July 2010. (A copy of the Amendment tothe Agreement is attached as Exhibit D) 30. “Exhibit NP” othe Agreement provides forthe auditing of PC's books related to Midate Men. Speciically, the Agreement states a follows: PPC shal keep books of account with espct othe distribution ofthe Picture, ‘Summary books of record shall be located at PPC's Los Angeles offices Books of account, othe exer they have not become incontestable or have not been previously examined, may be examined at Participant's expense in Los Angeles or wherever suchrecord are customarily kept, once in each 12- ‘month period (commencing from the issuance of the fist statement to Participant) by anational firm of reputable CPA's sc) the selection of which issubjectto PPC approval, note be unreasonably withheld, andthe signing of PPC’s confidentiality agreement, (Ex. B, pp. 14-15) ‘compLancr- 19 SIMON GREEASTONE PAMATIER BARTLETT PC31 Middle Pictures performed al the terms and conditions required oft under the Agreement. Middle Pictures, with PPC’s approval, selected and retained the firm of Green Hasson & Janks LLP (“GHY") to perform en audit of PPC’s books. GH initiated work, at Middle Picru's expense, to review and audit quarterly statements provided by PPC pursuant tothe Agreement, A fll audit could not be completed, however, because PPC filed and refused to provide certain information nd documentation necessary to condvet thorough and accurate evaluation, The missing information and documentation relates, for example 10 more than $5 million in unsupported, or insufficiently supported, thestrial distibution expenses; unsupported deductions to income: unreported receipts; and, other accounting Jambiguites. Moreover, GH's final report, « copy of which ie atached as Exhibit E, Jconcludes that PPC owes Middle Pictures more than $7 million under the contrast for revenues generated from home video, video-on-demand, and steaming video. 32. PPC’s currensystem of record forthe accounting of expensesis Invoiceworks, an electronic software application that—according o PPC’s own admissions —does not store, preserve, orotherwise maintain supporting documentation fr invoices submited for payment by tind pany vendors. On information and belief, mlceworke is “paperless” accounting system tha, es used by PPC, is effectively also “dataless" to the extent it dacs not store, preserve, or maintain actual invoies or other writen documentation issued by the vendor secking payment. As used by PPC, and in these circumstances where Middle Pictures and others are contratualy-required to rely on PPC for accurate and complete accounting, the Jinmoiceworks system effectively conceals and obfuscates material information related to PPC’s books of account. On informatio and belief, PPC unessonsbly utilizes Jnvoiceworks asits system of record because itnot only provides away to delay rightful audit that Middle Pictree and other similarly situated partis might ack to conduct but also Lecause it Jobfuscates andlor fails to record and preserve Key information that might, in certain circumstances, result in material increases in the emount of net proceeds paid by PPC to Middle Pictures and others,12 3 u 5 16 "7 18 19) 20 a 2 2 25 26| 27] 2% x, PPC materially breached the Agreement inthe follwing ways: Withholding Key information necessary for meaningful exercise of Middle iceare'saudit rights under the Agreement; Failing touse generally acepted accounting principles in maintaining its books of accourt as required by the Agreement; Uilicing invoiceworks as an accounts payable system of record despite that system's inability to preserve, maintain, identify, or access supporting documentation for entries; Filing tomeaningfully account for and document substantial expenses charged {Middle Men for purposes of reducing Middle Pictures net proceeds; CCommingling and uilizing funds provided by Middle Pictures for the promotion of Middle Men to promote other pictures released by PPC; Failing to disuibute Middle Men “ina nondisciminelory manner consistent with its teatment of motion pictures released by (PPC) of a similar genre, ‘budget ant level of anticipated performance”; Failing to properly allocate revenues eared from an agreement with Epix in which Middle Men was licensed in packages with other pictures; Failing to properly allocate o Midile Men revenues eared from new media, Including but not imited to those earned from Netix ‘Miselasstying certain revenues and expenses to Middle Pictures’ detriment; and Improper accountng for home video and electronic sllthrough receipt to Middle Pictures’ detiment Because ef PC's breaches, and each of them, Middle Pictures has been deprived of is ability to succesfully perform a fll informative, pproprite auit of the sisuibution expenses and likewise, to successfully perform a complete audit of PPC’sbooks of account related to Middle Men. Among other material items, Middle Pietures eannotdetermine how PPC spentits $6.8 million o promote Middle Men, how much PPC received in ross receipts attributed to Middle Men, or what Middle Pictures is flly owed under the Agreement. Middle Pictures ths alleges, on information and belie that PPC didnot properly the promotional money it received from Middle Pictures to exclusively promote Middle | Men, prevented Middle Men from reaching a level of success hat it could have if properly promoted as required by the Agreement and, therefore, impreprly and unfiny reduced the net proceeds payable to Middle Pictares. SECOND CAUSE OF ACTION (Breach ofthe Implied Covenant of Good Faith and Fair Dealing) 35. _Allallegatons previously alleged in paragraphs trough 34 are re-alleged and incorporated herein by reference as though full set forth hee. 36. Midale Pictures has performed al conditions, covenuns, and promises requied tobe performed by itn accordance withthe tems ofthe Agreement, 37. _Alleonitions and required for PPC's performance ofthe conditions, covenans, land promises required to be performed by them in accordance with the tems of the Agreement have occured ‘38. PPC breached the implied covenant of good fath and imtetering with Middle Pietures' right to receive the benefits ofthe Agreement by, among other things + Withholding key information necessary for meaningful exercise of Middle Pictures’ ait ights under the Agreement + Failing to use Generally Accepted Accounting Principles (GAAP) in ir dealing by uafily ‘maintaining ita books oF account ax required Uy the Agsccuen, + Uiliing dmvoiceworks as an aecounts payable system of record despite that system's inability t© preserve, maintain, identify, oF access supporting documentation fr enties; ‘COMPLAINT 13 SIMON GREENSTONE PANATIER BARTLETT PC*+ Failing romesningfully account for and document substantial expenses charged to Middle Men for purposes of reducing Mile Pictures’ net proceeds; + Comminging and utilizing funds provided by Middle Pictures for the promotion of Midafe Mento edvertise and promote ether picture released by PPC; + Falling to diseibure Midate Men “in « nondisriminatory manner consistent ‘wih is teatment of motion pictues released by [PPC] of a similar gente, ‘budget ane level of anticipated performance”; + Failing o properly allocate revenues eared from agreements in which Middle Men was licensed in packages with ther pictures; + Falling to property allocate to Middle Men revenues eamed fio new media, including bu not limited to those eamed from Netflix; + Misclassifjng certain revenues and expenses 1o Middle Pictures’ detriment; and + Improperly aseouning for home video and electonie sel-tough receipts to ‘Mile Pictures’ detriment, 59. As aditectand proximate result of PPC's breaches ofthe implied covenant of ood faith and fur dealing, Middle Petues has suffered monetary damages in an amount to be proven a tial, Moreover, PC's conduct was done with a conscious disregard of Mile Pictures’ rights, with the intent to vex, annoy, and/or harass Middle Pictures, and to unjustly profit at Middle Pictures’ expense. Such conduct was unauthorized and constitutes oppression, fraud and/ormalice under Civil Code setion 3294, entiling Middle Pictures to lan award of punitive damages fn an amount appropriate to punish or set an example of PPC land inan amount tobe determined atta, ‘coumtaner=1¢ SIOW GREENSTONE PANTER BARTLETT PC‘THIRD CAUSE OF ACTION (Fraudulent Inducement) 40. _Allallegations previously alegedin paragraphs | through 39 are realleged and incorporated herein by reference as though stout lly bersin. 41. Assetforthabove, Middle Pictures produced afinished feature-length theatial motion picture in 2009, buthad no means by which to dliverit toa wide theatrical audience PPC represented to Mile Pictures thet it would underake distribution of Middle Men in accordance with industry stander in order to maximize and fully effectunte Middle Men's success, Atal relevant times, PPC represented to Middle overall theatrical and commer Pictures it was ready, willing, and able to distribute Middle Men withthe same efforts and resources that it would devote to distibution of PPC’s ow theatres releases. Believing PPC’s representations tobe treat the ime they were made, Middle Pictures entered into the |Novernber 2009 uritten distribution agreement and pad PPC $6. million fr advertising and promotional costs. 42. PPCdidnotenteinto the Agreement withthe intent wo fihfully and adequately dissibuteAfdale Men in testers, but with the intent to otherwise gain contol over valuable content that it could later utize for its own benefit, a fodder for various content desls with Epix, Netix, Hulu, and other new media providers. PPC took Middle Pictures’ movie andits money, filed to promote and distribute the movie in full accordance with its Agreement, and—by vine ofits deal with Epix— generated substantial revenue and profit from Middle Men without passing any material percentage to Middle Pictures as required by the Agreement 43. PPC knew tsrepresenatons to Middle Pictures about the theatrical distibution of Middle Men were false when made. Likewise, PPC knew that Middle Pictures was junaware of PPC's intent profit substantially from Mldde Men, through self-dealing and other means, in ways that would generate substantial revenue fr PPC, but not for Midle Pictues. PPC made these representations, and concealed is tue intent, forthe purpose of inducing Middle Picture ito entering the Agreement and delivering Middle Mento PPC.44, Middle Pictures actually and justifiably relied on PPC’s fle represeniations in entering the Agreement with PPC. Given PPC’ representations and expressed willingness to fatally distribute Midile Men, Mile Pictures had no basis to know or understand that the Agreement vas, in actuality, a means by which PPC would cquire content that t woud later exploit for solely its ovm benefit and to Middle Pictures’ exclusion, 45. As a dircet and proximate result of the fraudulent conduct by PPC, Middle Pictures has suffered, an wil continue to sue, damages in an amount tobe proven a ra Mile Picturesis currently unaware of the fll amount ofits damages, but will eck leave to amend this complaint when t ascertains such information, 46, Middle Pituesis informed and believes, and on that bass alleges, that PPC acted willfully, maliciously, and with knowledge and deliberate disregard ofthe effect of ite conduct on Middle Pictures such a to consiute oppression, fraud andlor malice. Asa result Jof PC's fraudulent, malicious, and wilful conduct, Middle Pictures is entled to punitive damages pursuant Civil Code section 3294 in an amount tobe determined by the jury. FOURTH CAUSE OF ACTION (Violation of Business & Professions Code Sections 17200 et eq.) 47, _Allallegatons previously alleged in paragraphs | through 4 are re-alleged and incorporated herein by reference as though fll set forth here. 448. Business and Professions Code sections 17200 et eq. prohibits any unfit of unlawful business act orpractce. As described herein, PPC uilizes an accounting system of record, particulary with regard to expenses, that is advantageous to PPC and detrimental to Middle Pictures and othe similrly situated parties. PPC"s pracices and systems enableitto conceal, or atleast obfuscate, key information related to revenue and expenses related tothe exploitation of commercial assets like Middle Men Such concealment and obfuscation systematically inhibits, and thus effectively eliminates, the contractual auitrights providedto Middle Pictures under the Agreement COMPLAINT 16 SOW GREENSTONE PaNarieR BARTLETT PC49, Asdescribed herein, Middle Picturesisinformed and believes that PPC assigned eertsin of ts distribution right over Midile Men o Epix, which in tur licensed those rights (tong with mumerous other pictures and shows ine package) Netflix, Huly, Amazon Prime, andor other services in deals to make Epix’s entire catalog available for streaming. Middle Picrues is informed and believes that PPC licensed Middle Men to Epix for fee of for ¢ nominal sum, and that Epix received (orisreveiving) substantial sum fom these entities for eckages that include Middle Men. Middle Pictures i informed end believes thet PPC has derived significant revenue from these deals, none of which has been considered revenve sib is informed and believes that PPC intentionally suuctured the deal with Epix to avoid the le to Middle Men or paid to Middle Pictures under the Agreement. Middle Pictures appearance of direct revenue to PPC related to Middle Men percentage of which would then be payable to Middle Pictures under the Agreement. 50. PPC’s intentional and systematic conduct, both with regard to its use of eotceworks and its slf-dealings with Epix, constitutes unlawful business acts or practices within the meaning of Business and Professions Code 17200et :e9, PPC's ats and practices are ongoing and continue lo this date. Furer, PPC'sunfir and unlawful business act and practices present continuing thea! to Middle Pictures and others similarly situated in tht [PPC has refused to correct its wrongdoing. 51. Middle Pietures, because of its inability to exercise contractual rights and to recover monies owed tit by PPC, has sufTered injury in fact and has ost, and will continue to lose, money 2s a result of PPC’s unftirand unlawful business atsand practices, The harm to Middle Pictures resulting fom PPC’s conduct outweighs the sly, if any, ofthat conduc ‘CoMPLAT=17 WN GREENSTONE Panarion aanTuETT PCFIFTH CAUSE OF ACTION (Accounting) 52, _Allallegations previously alleged in paragraphs I through SI are e-alleged and {incorporated herein by reference as though fully se forth ere, 53. _Arelationship exists between Middle Pituresand PPC for which an accountng of PPC’s books and records is appropriate and was a materi inducement for Middle Pictures to contract with PPC. Middle Pictures is informed and believes that PPC has derived and received significant income, profit and other benefits from its distribution of Middle Men Middle Pictures is entitled to fll and accurate aecounirg of how PPC utilized all of the millions of dollars provided by Middle Pictures to use fr promotion of Middle Men, Middle 11 Pictres is also ented toa ful and accurate accounting of proceeds generate from, by, ot 12 in connection withthe distribution, licensing andlor other expleitation of Middle Men. 13]) 54. The Agreement provide fr the suditing of PPC’s books related to Middle Men 14 Specifically, the Agreement sats s follows 15]] _PPC-shall keep books of account with respect to the distibtion ofthe Picture 16]] Summary books of record shall be located at PPC’s Las Angeles offices. Books 17] of account, tothe extent they have not become incontestable or have not been 18|] previously examined, may be examined at Panicipants expense in Los Angeles 19]] or wherever such records are customarily kept once in each 12-month period 20]) (commencing from the issuance of the first statement to Participant) by © 21]]nationa fim of reputable CPA's sic) the selection of which s subject to PPC 22]) approval, not to be unreasonably withheld, and the signing of PPC’s 23|] —confidentiatity agreement. (Ex. B, pp. 14-15) 24] 55. Middle Pictures has not exercised any coatol or management over the sb Hicensng, and explitation of Middle Men o: the collection, reporting, and 26 | sccountng of revenues generated ffom such exploitation, The amounts due to Middle 27) Pictures under the Agreement is therefore unknown and cinnot be reasonably ascertained 28|{ without ftl and complete secounting of PPC’s books andrecords. PPC has, sofa, filed CouPLAT 18 SION GAEENSTONE PANATIER BARTLETT PC10 n n B “ 1 6 0 8 19 20 a n 2 24 2 26! » 28 and refused to supply the information nd documents necessary to complete that accounting, 56, Due tothe circumstances, it i impractical to ascertain a fixed sum that is curently owed to Middle Pi Pictures can only be determined pursuant to fll and accurate accounting ofall proceed nd Jexpenses generated in connection withthe production, distribution, licensing, and other exploitation of Middle Men tures. Accordingly, the full amount due and owing to Middle PRAYER WHEREFORE, Middle Pictures prays for judgment agninstPPC and Does 1 -20, and each of them, as follows: 1. For monetary damages in an amount ta be proven at ral; 2 For a judiciat declaration of the partis’ contractual rights and dutis in ‘connection with Middle Men, the Agreement, and al cligtions alleged herein; 3. For an order requiting PPC to cease use of Imvoiceworks in & manner that precludes. the retention, storage, andlor preservation of underlying documentation: 4. Foran onder enjoining PPC ftom self.dealing with related or partally-owned centties such a Epix for purposes of packaging multpe assets for streaming on demand; 5. Foran accounting under court supervision of (8) PC's se of monies paid tit by Middle Pictures forthe promotion and advertisement of Midle Men; and, () the profits of Midéte Men and the amounts due and payable to Midle Pictures in accordance with the Agreement; 6. Forthe imposition ofa consrutive rst on monies wrongfully withheld from Midale Pictures; 7. Forpunitive damages in an amount o be proven attra 8. Forall prejudgment interest allowable by lav; 9. Forany atiomeys fees and costs allowable by law; and COMPLAINT 19 SION GREENSTOVE PaNATIER BARTLETT PC10. Forsch further reefas the Court may deem just aud prope, DATED: September 7, 2016 ‘SBMON GREENSTONE PANATIER BARTLETT 2C ‘Atornys for Paintiet