Update at Bottom Of This Post.
May 24, 2013 | 02:40PM PT
Union accused of misconduct in handling residuals, foreign royalties.
Film Reporter @Variety_DMcNary
More than a dozen members of SAG-AFTRA — including former SAG president Ed Asner — have sued the actors union, alleging misconduct in its handling of foreign levies and residuals they are owed.
The suit, filed Friday in federal court in Los Angeles by the United Screen Actors Committee, alleges that SAG-AFTRA has improperly withheld funds and stonewalled requests for information about $110 million held in trust by the union. Those funds, the suit alleges, have been collected by the union through foreign collecting societies without authorization or knowledge of union members.
SAG-AFTRA had no immediate response to the suit, which was assigned to U.S. District Court Judge Manuel Real.
The 52-page action seeks a jury trial, damages and a court order that would prevent SAG-AFTRA from continuing to collect foreign levies and set up an indepedent body to handle those funds.
“With foreign royalties, injunctive relief is sought for issuance of an order authorizing an independent body to collect and pay all monies received from foreign collecting societies, subject to court supervision, as SAG-AFTRA is clearly incapable of acting as a collecting society, not only on behalf of its own members, but non-members as well,” the suit said.
The suit alleges that SAG-AFTRA has often claimed an inability to locate the actors to whom it owes money and that such funds should have escheated to the state of California. Additionally, the action alleges that the union has withheld information by filing incomplete LM-2 annual reports with the U.S. Dept of Labor and by seeking to seal court records.
The suit was filed eight months after the most of the United Screen Actors Committee plaintiffs served the union with a “demand for accountability” letter seeking a “full and complete accounting” on foreign royalties and residuals.
The union strongly denied the allegations in September, reiterating its insistence that it had done nothing wrong in how it handled the funds — which began to flow two decades ago as compensation for reuse, such as taxes on video rentals, cable retransmissions and purchases of blank videocassettes and DVDs.
At issue is how SAG-AFTRA, which was created in March 2012 from the merger of SAG and AFTRA, accounts for and distributes funds it receives from foreign collecting societies.
The lawsuit filing comes three years after SAG settled a 2007 class-action suit by Ken Osmond, who alleged that the guild lacked the authority to collect the funds and had mishandled them.
Besides Asner, the plaintiffs in the lawsuit include former board members Steve Barr, Clancy Brown and George Coe along with Tom Bower, Terrence Beasor, Dennis Hayden, Alex McArthur, Ed O’Ross, William Richert, Russell Gannon, Stephen Wastell, James Osburn and Eric Hughes. Richert (“Winter Kills”) filed a similar suit against the Writers Guild of America in 2005 and settled in 2011, and Hughes consulted on the suit.
When the demand letter was served in September, SAG-AFTRA general counsel Duncan Crabtree-Ireland denied the assertions and noted PricewaterhouseCoopers audits the union’s distribution of the funds — which total $14.2 million since 2007 with $7.4 million to distribute.
“These claims are baseless and false,” he said at the time. “SAG-AFTRA’s foreign royalties program has been tremendously successful. We put significant time and energy into creating an automated system to track and speed up payment of the foreign royalties we collect on behalf of performers. The system is more efficient than ever.”
Crabtree-Ireland asserted at the time that the funds would not have been collected had SAG not pursued them.
“The court decided the settlement was fair and appropriate, so I don’t know what more anyone can expect,” Crabtree-Ireland said at that point. “If we hadn’t gone and collected the money, the money would have been lost to our members forever.”
The Directors Guild of America was also sued over alleged mishandling distribution of the foreign levies and reached a settlelement in 2008. In a ruling last August, a judge found the DGA was in line with the class-action settlement, and there was no cause to modify it — over strenuous objections that the DGA has been stonewalling over how it handles millions in funds.
The DGA said last year that it had distributed more than $121 million in foreign levies, including over $13 million to more than 3,400 non-members. The WGA reported last year that it had collected nearly $130 million in foreign levies over the past two decades and distributed $104 million of those funds.
The suit was filed by Helena S. Wise. The case number is CV13-3741.
It’s nice to know that Ed and the plaintiffs chose Wise counsel for this suit.
The SAG Watchdog
SAG-AFTRA Responds to Foreign Royalties Lawsuit
A new suit apparently charges the union with failing to properly disburse about $110 million received from foreign collection societies.
Responding to a lawsuit filed Friday against SAG-AFTRA regarding its foreign levies program, the union told The Hollywood Reporter that it had not yet been served with the suit but that “the claims as presented in the plaintiff’s earlier correspondence have been thoroughly reviewed and are completely without merit.”
The union added that it would “vigorously respond in the appropriate forum in due course.” The suit was reportedly filed by former SAG president Ed Asner and others. Counsel for the plaintiffs did not respond to a message left Friday afternoon.
Foreign levies (also called foreign royalties) result from sums that collection societies in certain countries collect based on various government regulations. The societies then remit a portion of the U.S.-destined payments to the DGA, SAG-AFTRA and WGA for payment to individual “authors” (i.e., writers and directors) and performers – both union members and non-members.
Another portion of the collected monies is paid to the U.S. studios or producers, who under U.S. law and customary entertainment contracts are deemed the authors of the movies, television shows and other audiovisual works at issue. The fact that monies are split between the studios and the individuals is a consequence of balancing the contrasting U.S. and foreign definitions of “author” and was arrived at in agreements between the guilds and studios in the early 1990s.
The SAG-AFTRA royalties collected as of mid-2011 totaled under $21 million, or less than one-fifth of what the WGA and DGA collected. That’s due in part to the fact that fewer countries provide for performers to receive foreign royalties than do for authors. But, according to the report, today’s lawsuit alleges that SAG-AFTRA has improperly withheld funds and stonewalled requests for information about $110 million held in trust by the union.
In essence, the unions have contended that without their willingness to step up and take on the collecting and disbursement role, all of the collected monies would have gone to the studios and producers, while litigants have contended that the unions cut a bad deal with the studios (i.e., that more or all of the monies should go to talent) and that they have done a poor job administering, accounting for and disbursing the sums they do receive.
Foreign royalties are distinct from foreign residuals. The latter are computed according to the terms of the collective bargaining agreements between the unions and studios. As confusing as residuals – and especially foreign residuals – can be, foreign royalties are even murkier.
Whether the unions even have the right to collect such royalties, let alone on behalf of non-members and/or for movies and TV shows that aren’t under their jurisdiction, was the subject of three state-court class-action lawsuits – one against each union – filed in the mid-2000s.
Those lawsuits were settled, with the unions permitted to make collections and disbursements, subject to reporting. Today’s suit, filed in federal court, apparently would undo that settlement, at least as regards SAG-AFTRA, since reportedly seeks appointment of “an independent body” to collect and pay foreign levies received in the U.S.
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Here’s a link to that suit courtesy of Attorney Stephen J. Diamond: