Head of the Class Creators Sue CAA Over Profits

‘Head of the Class’ Creators Sue CAA Over Profits

Published: July 11, 2011

By Tim Molloy

The creators of the hit sitcom “Head of the Class” sued CAA on Monday, accusing the agency of making its own side deals that cut into their profits from the two-decade-old show.

The suit takes aim at deals in which agencies receive a “package fee,” instead of the customary 10 percent commission, in exchange for packaging multiple elements of a show. It says the series, which has been syndicated worldwide, has earned more than $200 million in revenue.

Douglas Johnson, one of the attorneys who filed the suit on behalf of show creators Michael Elias and Richard Eustis, said CAA made deals with Warner Bros. Television that granted CAA better terms than their clients received and made the agency an extra $9 million. The suit accuses the agency of fraud, breach of fiduciary duty and breach of contract, among other allegations.

“They should have gotten the clients the best deal, but instead they got themselves the best deal,” Johnson told TheWrap.

CAA responded in a statement: “We deny the allegations and intend to defend the action vigorously.”

Read the Lawsuit

The lawsuit describes the earliest days of CAA, when agents’ wives served as secretaries and card tables sufficed as furniture.

It says that when Michael Ovitz, Ron Meyer, Bill Haber, Rowland Perkins and Mike Rosenfeld left the William Morris Agency to start Creative Artists Agency in 1975, Ovitz persuaded his friend Eustis to come with him. Eustis later persuaded his writing partner, Elias, to become a CAA client as well.

The suit contends that CAA negotiated a 1984 overall deal for Eustis and Elias that entitled them to “net profits” for the high school sitcom, which ran on ABC from 1986 to 1991. CAA negotiated itself a $3.2 million package fee, but the suit contends that it also received an additional $9 million in a side deal.

The plaintiffs allege that CAA was paid the $9 million out of “distribution” costs paid out ahead of net profits.

“These guys helped create this agency and this is how they were repaid,” Johnson said.

The suit contends that CAA should have disclosed the side deal to its clients. It also says that Eustis did not learn of the side deal until 2010, when “CAA (perhaps accidentally) sent… CAA’s own profit participation statements issued by the WB.”

CAA dropped Eustis and Elias as clients in 1995, around the time Ovitz left CAA, the lawsuit said.

Pamela Chelin contributed to this report.