In re Best Film & Video Corp.
| Decision Date | 22 March 1985 |
| Docket Number | Bankruptcy No. 184-40143-21,Adv. No. 184-0084. |
| Citation | 46 BR 861 |
| Parties | In re BEST FILM & VIDEO CORP., Debtor. D.C. FILMS, INC., Plaintiff, v. BEST FILM & VIDEO CORP., Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
Morton Berger, Spring Valley, N.Y., for Best Film & Video Corp.
John S. McBride, Michael Davidoff, Monticello, N.Y., for D.C. Films, Inc.
This is an adversary proceeding brought by D.C. Films, Inc. ("D.C. Films") against Best Film & Video Corp. ("Best Film"), the debtor and debtor-in-possession, involving a contract for the distribution by Best Film of a film entitled "The Last Fight."
D.C. Films contends that this contract has been terminated and rescinded by it as a result of its breach by Best Film. D.C. Films wants "The Last Fight" returned to it, together with all related prints, copies and accessories, together with an assignment of all sub-distribution agreements and other contracts, plus other relief. To this end it seeks relief from the automatic stay imposed by 11 U.S.C. § 362.1
Best Film denies that its contract has been properly terminated or rescinded and asserts the right under 11 U.S.C. § 365(b)(1)2 to cure any default should the Court find any default to be present. It also denies that D.C. Films is the real party in interest.
At the time the complaint herein was filed on May 25, 1984, this Court had jurisdiction to hear it by virtue of 28 U.S.C. § 1471(a) and the "Emergency Resolution" entitled In re Jurisdiction of Bankruptcy Courts, and signed on December 21, 1982 by Chief Judge Jack B. Weinstein. That Resolution explicitly referred to the bankruptcy judges of this District "all cases under Title 11 and all civil proceedings arising under Title 11 or arising in or related to cases under Title 11." See In re Kaiser, 722 F.2d 1574 (2d Cir.1983).
The Court now has jurisdiction because this is a core proceeding which this Court is authorized to hear and determine when such a proceeding is referred to it by the District Court. 28 U.S.C. § 157(a), (b)(2)(G)3, as added by the Bankruptcy Amendments and Federal Judgeship Act of 1984, Public Law 98-353, 98th Cong.2d Sess. (1984). The blanket order of reference signed by Chief Judge Jack B. Weinstein on July 12, 1984, and amended August 7, 1984, embraces this adversary proceeding "to terminate, annul or modify the automatic stay."
This proceeding has its genesis in a distribution agreement entered into by Best Film with respect to the film "The Last Fight." This film is the creation of Gerald Masucci, President of D.C. Films. He wrote the story, selected the musicians, hired the actors and director, and produced it. He was present every day during its production. He supervised the editing which took four months, working six to seven days a week, ten to twelve hours a day. The total cost of producing "The Last Fight" was $750,000.
"The Last Fight" has special appeal to Spanish-speaking people because it stars two Latin musicians and singers; its sound track was performed by the Fania All Stars, a group specializing in Latin music; it revolves around a Spanish boxer and its cast includes two Latin-American fighters, a former Mexican champion, and an ex-Puerto Rican heavyweight champion.
When the film was initially manufactured, prints were prepared with Spanish sub-titles for the purpose of exhibiting the film in San Juan, Puerto Rico and Caracas, Venzuela. D.C. Films still owns twenty such prints. In the United States there are between 200 and 300 theaters that play films with Spanish sub-titles or Spanish dubbed vocals.
On March 7, 1983, Best Film entered into the agreement to distribute "The Last Fight" which is the subject of this proceeding. The agreement gives Best Film the sole and exclusive right in the United States to distribute and exhibit "The Last Fight" during the term of the agreement "in the English language (without foreign language sub-titles)." It gives Best Film no rights in the film with Spanish language sub-titles.
The agreement is between Best Film and "Inter-Ocean Film Sales, Ltd., 9255 Sunset Boulevard, Upper Penthouse, Los Angeles, California 90069 as agent for D.C. Films, Inc., a New York Corporation." In the agreement, Best Film is designated as the "Distributor" and "Inter-Ocean Film Sales, Ltd., as agent for D.C. Films, Inc." is designated as the "Licensor."
In brief, the contract specifies that the first theatrical play date is to be no later than June 15, 1983; that the film is not to be cut or edited without the written approval of the Licensor; that $75,000 is to be spent on films and advertising prior to the first play date; and that the schedule of advertising credits given to Best Film is to be observed. Further, Best Film is to pay an advance of $75,000 on April 30, 1983, to be recouped out of the gross proceeds of which Best Film was to receive certain specified percentages; monthly statements are to be sent by Best Film periodically to the Licensor; advertising and print expenditures are to be substantiated by paid invoices and bills, and books and records are to be maintained to which the Licensor is entitled to access.
In the event of a default by Best Film which is not cured within a specified period after notice, the contract may be terminated upon which event all rights revert to the Licensor. For a default in paying or accounting, the notice period is twelve days, for other defaults, it is thirty days.
Concurrently with the execution of the March 7, 1983 agreement, a one-page schedule of the credits referred to in Paragraph 7 of that agreement was turned over to Best Film. These credits require that the words "A Jerry Masucci Film" precede the title.
"The Last Fight" is the third film which Masucci has produced, all identified to the public as "A Jerry Masucci Film". By identifying the film in this way, Masucci hoped to build up his own reputation and also to increase ticket sales in the Latin community.
Despite the fact that the advertising materials prepared by Best Film conformed to the contract, the advertising of "The Last Fight" by subdistributor of Best Film has not always met the requirements of Paragraph 7 of Best Film's distribution agreement. In some cases all references to "A Jerry Masucci Film" has been eliminated, in other cases, the slogan did not precede the film's title, but followed it. Ibid.
On April 7, 1983, Jerry Masucci arranged for the original negative of "The Last Fight", the sound track and related materials termed the "pre-print" material, to be delivered to Precision Films Labs, Inc., ("Precision"), the laboratory selected by Best Film. Among the items delivered were the internegative and interpositive made from the original negative, the Spanish language sub-titles and the Spanish and English trailers. Before delivery could be made, D.C. Films had to satisfy a lien involving the twenty prints with Spanish language sub-titles.
Because D.C. Films had not yet received from Best Film the $75,000 payment due April 30, 1983, Precision was not immediately authorized to give Best Film access to these materials. Best film did not receive access until May 17, 1983, when an "access letter" addressed to Precision was signed by D.C. Films. Precision and D.C. Films signed this letter on May 17, 1983; Best Film on April 11, 1983. That letter advises Precision that D.C. Films has granted Best Film "the exclusive right to distribute, license and exhibit the English language motion picture `The Last Fight'". Ibid. An access letter does not authorize removal of the pre-print materials from the laboratory.
Sometime prior to the date on which Best Film was given access (probably on May 1, 1983), the parties modified in writing their distribution agreement in an "Addendum", signed by Best Film and by "Jeff Franklin as agent for D.C. Films, Inc." The payment schedule was altered so as to provide for installment payments of the $75,000 due from Best Film with the last payment of $25,000 due on August 30, 1983; Best Film's minimum commitments for prints and advertising were increased from $75,000 to $110,000; and Best Film undertook to advance whatever money was needed for the making of a new internegative or interpositive to be recouped from the film's proceeds. Ibid. Furthermore, "any cost to be incurred for the issuing of an Errors & Ommissions sic policy" was to be shared equally by Best Film and "the Producer sic".
By May 18, 1983, Barnett of Precision had determined that the interpositive was commercially acceptable but that a new internegative would have to be manufactured, and he so advised both D.C. Films and Best Film.
Preparation of a new internegative and of prints from such negative could have been completed by May 28, 1983, in ample time to meet the contracted for July 15, 1983 play date. In fact, however, the first print was not manufactured until the end of July and the balance in August, 1983.
During the intervening period Best Film cut and edited the interpositive from which it made a new edited internegative. The second track was altered to correspond.
No written authorization for such cutting and editing was ever secured from D.C. Films or Inter-Ocean. Possession of the pre-print materials was turned over to Best Films by Precision pursuant to a letter of authorization dated July 5, 1983, from D.C. Films' attorney, S.I. Nigrone.
Masucci testified unequivocally that he was unaware that the film had been edited until after it opened in New York in September, although he had been present on three previous occasions when the film was either exhibited, or was scheduled to be exhibited. His explanation as to why Best Film had been given possession of the pre-print materials...
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