"Conjuring" Producer Sues WB and New Line Cinema

While some wait for the release of the sequel to the Conjuring, I'm waiting for the release of a decision on 'Conjuring' producer Tony DeRosa-Grund's lawsuit against Warner Bros. and New Line Cinema.  Aside from my interests in the case from a legal perspective, I find it indicative of what can happen when business discussions in initial negotiations don't end up in the final deal.

The litigation covers more than just a settling of rights, but also compensation, credits and participation on the sequels. According to DeRosa-Grund, he was told during the initial negotiations that he'd be a producer on all films based on the case files and that he'd get profit participation on the sequels too. That latter point appears to have not made its way into the rights agreements. New Line allegedly insisted it never included profit participation in deals, but Harvey Weinstein's dispute over the Hobbit films is coming up as evidence to the contrary. (THR, ESQ)

I also wonder what effect negotiating during a bankruptcy proceeding could have had on DeRosa-Grund's decision-making leverage and process.

The story of how The Conjuring spooked up a great amount of legal arm-twisting starts with real-life paranormal investigators Ed and Lorraine Warren, who in the mid-20th century worked on some 8,000 cases and kept detailed files about their work on such investigations as those involving a demonic Raggedy Ann doll that terrorized a family and a single mother whose children kept witnessing strange things at home. 

Imagining that these case files would be ripe for big-screen adaptation, DeRosa-Grund acquired rights from the Warrens, whom he had known for nearly a quarter-century. According to new court filings, DeRosa-Grund almost set up a film project with Summit Entertainment in 2009 before it backed out over concerns about "chain of title," legal speak for whether all rights were properly cleared. At the time, DeRosa-Grund was in the midst of Chapter 7 bankruptcy, and the U.S. Trustee was suggesting that perhaps the bankruptcy estate owned the files, along with the Warren life rights and a proposed story treatment based on one of the case files. 

New Line then stepped in to the bankruptcy process to save the day. Or did it? According to Evergreen's lawsuit, the film studio wasn't exactly the savior that provided relief when DeRosa-Grund's assets were on the chopping block. New Line's willingness to get a deal done was "chameleonic," says the plaintiff, but after getting the trustee and bankruptcy court to approve, New Line began to "show its true colors" by failing to turn a deal memo into a long-form agreement. Faced with the proverbial "take it or leave it," DeRosa-Grund felt he had to execute the deal memo. 

The decision paved the way for the top-grossing Conjuring film, but then set off an intense fight over the scope of rights. Lately, the litigation has morphed into cries that New Line has made numerous misrepresentations along the way. (THR, ESQ)

In the end, the loser is either "a company who took advantage of a situation to extract maximum benefit for itself at minimal cost" or "a person who failed to read the fine print and look out for his long-term interests."  

That's the scary story, I hope to know the end of by October 3rd.