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Judge rules on SAG tax distribution

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March 18, 2008

Judge rules on SAG tax distribution

Osmond lawsuit to move back to state court

A federal judge has dealt a setback to the Screen Actors Guild over how it disburses millions of dollars from foreign tax revenues to actors.In a ruling kicking the case back to state court, U.S. District Court Judge Margaret Morrow has written that SAG has limited the rights of plaintiff Ken Osmond (“Leave It to Beaver”) to recover those funds. Osmond’s lawsuit alleges that SAG has mishandled those funds and the guild lacks the authority to handle them in the first place.

Morrow issued the opinion March 11 as part of a motion allowing Osmond to move the case out of federal court and back to state court. The original suit, which seeks class-action status, was filed in state court last September.

What’s at stake are so-called “foreign levies” collected from countries by such mechanisms as taxes on video sales and/or rentals to compensate copyright holders for reuse. Morrow’s ruling mirrors her 2007 finding against the Writers Guild of America and the Directors Guild of America, which sought to keep similar cases in federal court on grounds that federal labor law preempts state law.

Osmond’s attorney Neville Johnson told Daily Variety that without Morrow’s ruling, it would have been more difficult to prove that SAG has acted improperly.

“Federal labor laws are much more favorable to unions, where effectively only a duty of fair representation would be allowed, which can be a very tough case as unions are allowed much discretion,” he added. “Our case is much easier to prove in state court with traditional state claims.”

SAG, the WGA and the DGA began tapping into the foreign funds in the early 1990s on behalf of both members and non-members who had a stake in films and TV programs. Attorneys for the guilds have asserted that previously copyright holders — studios and producers — got all the funds before the guilds negotiated agreements with foreign collection societies for portions of it.

Osmond has contended that SAG overstepped its authority to make those agreements and had never disclosed them until he and Jack Klugman threatened to file suit last year. His suit also stated that the class action could cover more than 30,000 actors.

SAG addressed the issue for the first time last year when announcing it had collected $8 million of the funds for its members but distributed less than 3% of that amount. It disclosed recently in its SAG Actor magazine that it’s paid out $800,000, is charging a 10% administrative fee and expects to pay “millions” more as it streamlines and enhances the distribution process over the coming months.

Attorneys for SAG contended in arguments to Morrow that the guild’s fee-collection agreement says the guild is entitled to receive 50% of the performers’ share; that it can deduct up to 15% of that share as an administrative fee; and that it can use all those funds for “institutional or social purposes.”

But Morrow found that the agreement “clearly limited Osmond’s right to receive all foreign levies collected on his behalf” and the agreement has “clear and unmistakable language” circumscribing Osmond’s rights.

The jurist also noted — as she had in her 2007 ruling — that the SAG agreement doesn’t create the performers’ share of the foreign levies. “Rather, the contract acknowledges that performers have an ownership right to a portion of the foreign levies,” she added.

The other suits on foreign levies issue were filed in 2005 against the WGA by William Richert (“The Man in the Iron Mask”) and in 2006 against the DGA by William Webb (“Delta Fever”). According to Johnson, the WGA suit was certified earlier this year as a class-action; as for the DGA, the parties have agreed on terms for a settlement that’s not yet approved by the court.

WGA member Eric Hughes (“White Nights”), who has monitored the issue extensively at his screenrights.net site, said attorneys for SAG have mischaracterized how the guild has handled the issue — specifically by asserting that SAG secured approval from members of an agreement with the companies to collect the funds and that the agreement arose as a way of settling a labor dispute.

“It took 17 years to disclose the existence of these monies and SAG still won’t disclose the AMPTP agreement and Rule 17 but told a federal judge the members approved both,” Hughes said. “There is no record of the labor dispute the unions claim because the companies were never collecting these monies.”

The foreign levies for U.S. creatives began to flow after the American agreement in 1989 to sign terms of the Berne Convention, which establishes the right of authorship for the individuals who create works of art.

“SAG and the other unions cannot authorize themselves to barter rights that U.S. citizens have under the Berne Convention,” Hughes said.

Contact Dave McNary at dave.mcnary@variety.com