Harry Shearer Files $125 Million 'Spinal Tap' Fraud Suit, Copyright Termination

The Hollywood Reporter

Harry Shearer has launched a $125 million fraud and contract-breach lawsuit against Vivendi and StudioCanal over the 1984 rockumentary classic This Is Spinal Tap. The complaint, filed Monday in California federal court, is packed with enough nuggets to instantly make this a must-watch "Hollywood accounting" case. Through the lawsuit, Shearer also reveals he is attempting to claw back rights to the film and its continually popular soundtrack.

Shearer, perhaps best known for the 23 characters he voices on The Simpsons, co-created the semi-fake band Spinal Tap in the 1970s with Christopher Guest and Michael McKean. The film, directed by Rob Reiner and featuring Shearer as bassist Derek Smalls, was produced and released by Embassy Pictures. After a series of transactions, rights to Spinal Tap landed in the hands of Vivendi, the French conglomerate that once had the ambitious goal of becoming one of the largest studios in the industry.

Despite the film's legacy and Spinal Tap's enduring success as an actual band able to sell out arenas, Shearer's company Century of Progress Productions alleges that the four lead creatives have received just $81 in merchandising income and $98 in musical sales income in the past three decades from the franchise.

According to the complaint, the original 1982 production agreement called for Shearer, McKean, Guest and Reiner to get 40 percent of net receipts. In Hollywood, though, calculating contingent profit participation often triggers disputes that go up to 11. This one certainly did.

This lawsuit raises two accounting issues, in particular, that draw attention. For starters, Vivendi is accused of "cross-collateralizing unsuccessful films bundled with TIST [This Is Spinal Tap] in their accounting," a practice sometimes known as straight-lining. Vivendi also is charged with not doing an honest job managing the flow of payments through its subsidiaries. At a time when vertically integrated companies in entertainment continue to raise legal issues, the complaint speaks to how the soundtrack music rights are owned by Vivendi subsidiary Universal Music Group, said to have an obligation to pay Vivendi subsidiary Canal.

"The accounting between the Vivendi subsidiaries is not at arm's-length, is anti-competitive, and deprives the TIST creators of a fair reward for their services," states the complaint.

With other accounting improprieties alleged, such as undocumented marketing expenses and improper deductions, Shearer's lawsuit references the Copyright Act's termination provisions, which allow authors to cancel grants and regain rights after 35 years.

"Particularly given that Vivendi has offset fraudulent accounting for revenues from music copyrights against equally dubious revenue streams for film and merchandising rights also controlled by Vivendi subsidiaries, Shearer is concurrently filing notices of copyright termination for publishing and recording rights in Spinal Tap songs he co-wrote and co-recorded, as well as in the film itself," states the complaint.

That means that Vivendi would potentially lose rights to This Is Spinal Tap in 2019. Copyright termination has been a big subject in the music industry, but is only beginning to impact the film business.

The lawsuit (read here in full) hardly stops there, also putting blame on co-defendant Ron Halpern at Canal for management of the exploitation of Spinal Tap. Shearer says his manager received assurances from Halpern that everything was OK, but now accuses him of deception.

Shearer's company says that in 2013, in anticipation of the film's 30th anniversary, it commissioned a study of accounting statements and revenue streams that "first discovered that Vivendi had engaged in a pattern of anti-competitive and unfair business practices, had abandoned enforcement of valuable TIST rights, and had willfully concealed and manipulated years of accountings to retain monies due and owing to Plaintiff."

The lawsuit discusses everything from how the defendants allegedly let others, including one brewing company, register "Spinal Tap" at the Trademark Office without opposition.

Shearer, though, implies he's been stopped from reprising his famous character.

According to the complaint, "Despite Defendants' abandonment of any trademarks rights related to This Is Spinal Tap, including in and to the mark SPINAL TAP, Defendants have sought selectively to claim rights to the marks against Plaintiff and other co-creators of the SPINAL TAP band, and have sought to prevent Plaintiff from performing or selling merchandise in association with the marks SPINAL TAP or DERRICK SMALLS unless Defendants grant a license and receive payment for such use."

The plaintiff is repped by Peter Haviland at Ballard Spahr and demands $125 million in compensatory and punitive damages. Vivendi has yet to respond.