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This blog: REMEDIES FOR BREACH. The info below I actually used against a few distributors I signed deals with, working as a producer’s rep, and then was forced to use when the agreements were not honored. For the record, they have always worked for me to some degree.
Legality clause: The article below is based on my experiences as a distributor, filmmaker and producer’s rep. I am not responsible in any way, shape or form for any results from any actions taken by you, the reader, based on my experiences detailed below. I am not lawyers, I am not giving legal advice, I am just citing examples from my experience. Often I paid a lawyer a hefty fee for the actions we have taken against unscrupulous distributors, and am passing this experience on to you. I recommend you always consult a lawyer when taking legal action against anyone. I also recommend you consult with a lawyer before using any of the below experience to be certain your agreement and/or the law in your area allows for such actions. In my opinion, and based on my experiences in this business, I would recommend that all distribution contracts you sign, esp those that pay you a % of profits made, should have a “Remedy for Breach” clause. This clause protects you from distributors who fail to honor the terms of the agreement you have signed with them. A “Remedy for Breach” may read as follows: REMEDIES FOR BREACH: If either party breaches any of the terms and provisions of this Agreement on its part to be performed, whether such breach pertains to a default in payment of royalties or otherwise, the nonbreaching party shall have the right, if it so elects, to serve upon the breaching party a written notice of its intention to terminate this Agreement. (a) The breaching party shall thereupon have a period of 30 days within which to remedy the breach. (b) If the breaching party fails to remedy the breach, then upon expiration of the 30 days, this Agreement and the license herein granted shall in all respects cease and terminate, and the breaching party shall have no further rights hereunder. (c) Notwithstanding such termination, the non-breaching party’s rights arising out of this Agreement or in connection therewith or existing prior thereto shall nevertheless continue in full force and effect, including the non-breaching party’s rights to institute a proceeding for damages caused to it by the breaching party’s breach. If the above legal mumbo jumbo is hard to swallow, then let me break it down for you. What it says above is that say the distributor’s due date for a statement or payment comes and goes… well you give them 30 days notice to rectify the situation. If they don’t, then the rights to the movie return to you and they can no longer sell it. But as (c) states, they are still obligated to pay you monies owed. This 30 days notice would be detailed in another clause of the agreement – an example can be seen below: NOTICES: All notices and other communications made in connection with this Agreement shall be in writing and shall be deemed to have been duly given if (a) mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, (b) transmitted by hand delivery, or (c) sent by next-day or overnight mail or delivery charges prepaid by a nationally recognized overnight courier: If to Distributor: (Distributor Address Goes Here) If to Producer: (Your Address Goes Here) If you can get them to agree to it, you may ask that Fax or Email be acceptable as a notice. This is harder to prove delivery of so using the above 3 choices would be a safer bet for you. Getting back to the Remedy for Breach, once this notice has been served to the Distributor, the clock is ticking. They have 30 days to send you the statement or check or they lose the rights to your movie. If the 30 days do pass without remedy, then any additional sales by them after that date are illegal. Things you can do at that point: 1) Follow up letter stating they no longer have rights to your product and any additional sales are illegal and violate your IP rights (Depending on what state you are in, the penalties will vary. For example, I believe in NY, unknowingly violating IP rights brings a $30k penalty per count; knowingly brings a $120k penalty per count – a distributor who got notice yet continued to sell your movie would “knowingly” be violating your IP rights). Demand they send final payment, return all masters and destroy any remaining stock.
2) Inform any major outlet listing your movie that the Distributor has violated his agreement with you and can no longer sell your movie. Inform them that they too can no longer sell your movie and should immediately cease all sales, pull the title from shelves and call back any inventory possible from other stores, warehouses, etc. Give them 30 days to do so (in reality, you won’t take any action for 60 days).
3) Re-release the title yourself in a new form – say a “Director’s Cut”, or new extras. You won’t make as much but at least you’ll make something!
4) Or seek a new distributor. Other distributors may not want it if a) someone else released it; or b) they fear there may be pending litigation on the movie. The Distributor, once they see they are losing sales or looking bad to their buyers may be forced to rectify the situation with you. Or they may just ignore your efforts and try selling it elsewhere. What are your options if they still don’t pay or keep selling your movie? Well, you are still at a disadvantage. Suing them will be costly if you have to pay out of pocket. It’ll cost you at least $30k to take it to court and $100-$200k to go through court. You may be able to find a lawyer who will take the case on a “contingency” basis, but most will decline. Why? Because during the process of a lawsuit, the distributor could simply transfer their assets to another new company. You go thru the whole case, win, and then when you try and collect you find they have nothing left. They claim bankruptcy. Yet they continue to exist. Yes, this is 100% possible. So a lawsuit out of your pocket is probably the last thing you want to do. The reality may be to just move on, sell your copies and block their sales, and deal with that bitter feeling for life. Sorry, that’s the reality of this business for the low budget filmmakers. There is one potential saving grave tho: if one of their buyers continues to sell it, refuses to pull it from shelves despite your request, then depending on the size of the outlet, you may find more success with getting a lawyer on a “contingency” basis (meaning they take the case for free and keep a portion of the winnings). If it’s a sizeable outlet, say Walmart, Best Buy, Dollar Tree, etc., then the lawyer would know these companies wouldn’t be able to transfer assets, wouldn’t go bankrupt from a lawsuit because of your movie, and have a long history of being in business. Lawyer will drool over themselves to get a case like this. In most cases, this larger companies would settle before even going to court. This would be the dream come true for the filmmaker wronged by an unscrupulous distributor. But… don’t expect this to happen. These companies will pull the titles quickly if they even smell a potential problem. I had to inform Dollar Stores and Walmart of illegal sales of movies I represented, and both pulled copies quickly and needed little from me. For the Dollar Stores, I faxed them a copy of my original agreement with the Distributor, highlighting the clause of Remedy, and the letter from my lawyer to the Distributor giving them 30 days notice or rights were rescinded. For Walmart, my letter faxed to them was all they needed – I offered up the same things I sent to Dollar Stores as proof, and they said they didn’t even need to see them. They pulled the titles no questions asked. This will require vigilance on your part – keeping an eye out for copies sold elsewhere. And it may get tiring for you. It will also mean that likely you’ll never get the monies from the distributor. They’ll be pissed and feel more so you don’t deserve to get paid. But at least they won’t be able to make more money off your effort. I hope this information helps. Definitely take this info to a lawyer if you need to take legal action against a distributor, and if they give you additional good ideas on how to further handle these sorts of situations, please feel free to pass it on to me for inclusion in this blog. The lawyer can confirm that this sort of action can be taken – some distributors may actually include clauses in their agreement that prevent you from doing this and the last thing you want to do is be in violation of the agreement and risk being sued. So definitely consult first with council before taking any action. A safer bet, if possible, is for you would be to take this info to a lawyer BEFORE you sign a distribution deal, and make sure the contract allows you to take these courses of action. Best of luck,
-Ron Bonk
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