Franchise-Intertainment War Rages On: Samaha Reclaims Rights To Five Films After German Distributor Allegedly Fails To Pay Update

Firing the latest salvo in its escalating battle with German distributor Intertainment Licensing GmbH, Franchise Pictures claimed on Sunday that international distribution rights to five pictures -- four of which have already been released in the States -- have reverted back to Franchise after Intertainment failed to make required payments.

Franchise, which is being sued by Intertainment over alleged budget-padding, said it has been authorized by the production lenders for Angel Eyes, Get Carter, The Pledge, 3,000 Miles to Graceland and Viva Las Nowhere to re-sell the rights in territories originally licensed by Intertainment. Franchise claims it is honoring deals Intertainment originally made with its customers for these pictures, including Warner Bros. International, Italy's CDI and Spain's Manga.

''We are pleased that we have been able to step in and assure that these companies, which have already paid a sizeable deposit, receive the product they were promised,'' Franchise chairman and CEO Elie Samaha said in a statement.

Not surprisingly, Intertainment doesn't see it that way. ''They have no right to do that,'' Intertaiment USA president Stephen Brown told Inside Monday. Brown acknowledges that Intertainment paid Franchise only half the originally agreed upon license fee for European rights to the films. But he claims that Franchise exaggerated the cost of production by so much that Intertainment's payments have already nearly covered the cost of making the movies.

''Our agreement called for us to pay 47% of the direct production costs for European rights,'' says Brown. ''In paying 50% of the license fee, we've already paid 80-90 percent of the films' entire budgets in certain cases.''

Brown noted that in Intertainment's pending lawsuit against Franchise, the company seeks, in addition to monetary damages, a ''constructive trust'' entitling it to the distribution rights for the films. ''We're seeking to enjoin Franchse from conveying the rights to third-parties. The pictures are part of a case of fraud.''

Franchise on Sunday also announced it had filed suit in U.S. Federal Court in New York against German Bank HypoVereinsbank, for ''failing to act in good faith and failing to honor its payment obligations in connection with a letter of credit for the film Caveman's Valentine.'' HypoVereinsbank is the German bank that issued letters of credit on behalf of Intertainment to secure Intertainment's payment obligations, according to the statement.

In 1999, Intertainment and Franchise signed multi-picture agreement calling for Intertainment to purchase the rights to distribute 60 films in a five-year period. However, Intertainment claims it was forced to pay a higher percentage for the films than it should have because Franchise inflated the budgets of 10 of the 26 films to which Intertainment acquired rights.

The films at the heart of the dispute include box office clunkers Battlefield Earth and 3,000 Miles to Graceland. A federal judge ruled earlier this month that the case would be tried in court -- and not arbitrated, as he had previously determined -- after Intertainment dropped production lender Imperial Bank as a co-defendant.

''Intertainment will take all necessary measures to ensure that its assets are protected and looks forward to the discovery process which has been renewed as a result of the Court's recent order,'' says Brown. In a separate suit, Franchise is suing Intertainment, claiming it was promised hundreds of millions of dollars in Intertainment stock that it never received.