Texas tornado hits Hollywood
That proximity could bring increased financial liability for the studios if they lose the case, and raises the specter of additional public scrutiny of their homevid deals.
On Jan. 31, a group of 200 indie retailers filed suit in Los Angeles Superior Court, charging Blockbuster and the studios of entering into "secret revenue-sharing agreements" for terms not available to other vidtailers, with the intent and effect of "driving independent retailers out of business."
The group seeks damages to recover lost revenue going back to 1997, when the alleged agreements were first made.
Texas redux
The charges are substantially similar to those made in the federal case in Texas nearly two years ago, and could keep alive an issue many in the industry thought was dying, if not actually dead.
Indeed, Blockbuster and the studios find themselves battling on a second front with the potential for even greater financial penalties and public embarrassment.
With the latest maneuver, the plaintiffs -- who call themselves the Fairness Alliance for Independent Retailers (FAIR) -- have attempted to separate the claim of damages for themselves from the claim for injunctive relief against Blockbuster and the studios being pursued in Texas. Only the damages portion of the suit is being transferred to California.
Under California law, any damages awarded in an antitrust case are tripled, so even without the class-action status the retailers unsuccessfully lobbied for in the Texas suit, the studios could face substantial penalties.
Moreover, should the case go ahead, some or all of the details of the studios' deals with Blockbuster could end up on the public record.
Accounting scrutiny
Even assuming those deals fall within the letter of the law, the situation could raise embarrassments similar to those of the Buchwald v. Paramount case of a decade ago, when details of the studio's accounting practices were made public.
For its part, Blockbuster accuses the indie retailers of "court-shopping" because things were going badly for them in the federal case.
"This latest filing reflects yet another desperate court maneuver by many of the same people involved in the cases filed in Texas almost two years ago," the company says in a statement. "The plaintiffs and their lawyers have moved from court to court as their chances diminish in an existing court and they search for a new one that they believe will be more hospitable to their claims."
The California court is, in fact, the third to tackle the case. The indie retailers first brought suit against Blockbuster in Texas state court, where the vidtailer is headquartered, while simultaneously filing against the studios in federal court in San Antonio.
After the case started moving in Texas state court, however, the plaintiffsabruptly moved to have the cases against Blockbuster and the studios consolidated in federal court.
The federal court in Texas, however, expressed irritation at the move, and has asked both sides for new briefs on whether to allow the separation or dismiss the matter altogether.
In its statement, Blockbuster calls the claims in the California case "just as meritless as their previous efforts to challenge revenue-sharing agreements between the studios and retailers, arrangements that have greatly benefited consumers and the industry."
New landscape
In the two years since the initial cases were filed in Texas, the studios have come a long way toward extending revenue-sharing beyond Blockbuster and the biggest chains. Indeed, most independent retailers today have access to revenue-sharing from most studios through one mechanism or another.
Those arrangements may not be on the same terms as Blockbuster, but agreements between suppliers and their biggest customers -- or their smallest -- never are.
The studios have lots of reasons to want to keep the details of their video revenue stream under wraps, however -- not the least being their current negotiations with the Writer's Guild of America over video royalties.
In that climate, no matter how solid their legal case might be, the studios could find themselves seeking a settlement to preclude any evidentiary findings from becoming public.
Whether Blockbuster would go along with that strategy is another question.
