Investors Claim Voltage Pictures Hid Foreign Profits, Misrepresented Proceeds Owed From Dallas Buyers Club
Dallas Buyers Club (“Picture”), the 2013 Oscar-winning biographical film about the AIDS crisis in the 1980s, was almost never produced. Ten weeks before production was scheduled to begin, its financing fell through and the Picture’s producers were left scrambling for money.
Joe D. Newcomb, the chairman of Truth Entertainment, LLC, reviewed the script and wanted to be involved in the Picture. Knowing about the time limitation, Newcomb and Truth Entertainment immediately solicited investors, quickly raising $1.6 million to keep the Picture afloat. In exchange for the investment, Truth Entertainment and its investors were to receive a 15% return on their investment and 35% of the Picture’s net proceeds. Voltage Pictures, LLC, was also hired on as a producer and a foreign sales consultant, and contributed a $3 million investment to finish funding the Picture.
The Picture was a success, lauded by critics, and garnered Matthew McConaughey an Academy Award for Best Actor, and Jared Leto an Academy Award for Best Supporting Actor. The Picture grossed approximately $27 million in box office sales in the U.S. and Canada, and approximately $28 million overseas.
After the Picture was released, Truth Entertainment and its investors claimed that the earnings statements showed that Voltage Pictures’ full $3 million investment was returned, along with 15% return. However, Truth Entertainment and its investors claimed they were still short over $720,000, and had yet to receive any profits.
After Truth Entertainment began investigating the situation, Truth Entertainment and its investors pressed Voltage Pictures for information concerning the foreign returns. According to Truth Entertainment, Voltage Pictures had yet to provide them with the actual foreign return agreements, and had not accounted for millions of dollars in foreign guarantees. Also, Truth Entertainment and its investors alleged that the income statements they received indicated that Voltage Pictures did not collect any money for foreign pay-per-view or video sales.
In response, Truth Entertainment and its investors filed a lawsuit against Voltage Pictures alleging fraud, breach of contract, and breach of fiduciary duty. Truth Entertainment and its investors are seeking a full accounting of the Picture’s foreign income and the amounts paid to Voltage Pictures, as well as the proceeds that they are owed and damages for the breach of contract.
For its part, Voltage Pictures has alleged that the foreign markets are not as profitable as Truth Entertainment believes, and that they are missing proper documentation from their foreign contracts.
The dispute between Truth Entertainment and Voltage Pictures boils down to mistrust between the parties.
Therefore, when investors provide their money to a film, they may receive a return on their investment if the film is profitable. When a film is clearly profitable, but the lines of communication between the producers and the investors are broken and there seems to be a lack of transparency, investors get nervous and will likely file a lawsuit to protect their investment.
Keeping investors happy ensures that future projects have a better chance of being financed. If you are producing a film, or investing in a film, it is important to set clear expectations on both sides; to provide detailed contracts, which outline each party’s responsibilities, as well as to issue updated financing income statements after the film’s release.
Before you seek financing for your film project, make sure that you understand your rights and obligations, whether or not a film is successful. Contact the experienced entertainment attorneys at Pierce Law Group LLP; our entertainment lawyers can assist you in securing the rights you need in the applicable financing agreements, and can help defend you in a lawsuit if you are unsure of what you owe or are owed after a film is released.
For more information on our firm or significant legal issues affecting the film industry, sign up for Pierce Law Group LLP’s free monthly email newsletter. If you would like to discuss a legal issue or case, call (310) 274-9191 to schedule your free initial consultation today.
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