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Welcome back to The Rainmaker, my private newsletter focused on the legal maneuvering inside Hollywood, Silicon Valley, Washington, and Wall Street.
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The Rainmaker

Happy Monday, I’m Eriq Gardner.

Welcome back to The Rainmaker, my private newsletter focused on the legal maneuvering inside Hollywood, Silicon Valley, Washington, and Wall Street.

For this week’s edition, I chatted with Daniel Petrocelli about his trial defense next month of Penguin Random House’s attempt to acquire Simon & Schuster, his AT&T-Time Warner antitrust saga, and what’s new with Kesha and Chris Cuomo. Also this week: Hollywood’s nastiest producer feud may be going to trial, Elon Musk and Twitter get a Chancery judge, and Rep. Katie Hill’s revenge porn case heads towards bankruptcy.

But first…

Decision of the Week
An otherwise obscure April 2021 ruling suddenly became a critical text for industry insiders this week after the Delaware judge who decided the Snow Phipps Group, LLC v. KCake Acquisition, Inc. case was assigned the dispute between Twitter and Elon Musk.

The KCake decision opens with a Julia Child quote (“A party without a cake is just a meeting”) before Delaware Chancellor Kathaleen McCormick recounts how the beginning of the Covid pandemic caused investors to abandon a deal for a cake decorations company. “The buyers lost their appetite for the deal shortly after signing it,” writes McCormick, who finds that distasteful. “Chalking up a victory for deal certainty, this post-trial decision resolves all issues in favor of the seller and orders the buyers to close on the purchase agreement.”

McCormick’s ruling was already a must-read for the M&A community, of course, but now she’s the very judge overseeing Twitter’s lawsuit against Musk for attempting to walk away from a $44 billion deal. Can the social media giant make Musk go through with the acquisition under a “specific performance” clause? Well, we’ll see, but in the meantime, McCormick has already shown it wouldn’t be unprecedented. She’ll hold a hearing on Tuesday about whether to expedite Twitter’s case.

Zaslav’s Superlawyer on Biden, Cuomo, & Bryan Freedman
Zaslav’s Superlawyer on Biden, Cuomo, & Bryan Freedman
Daniel Petrocelli became an entertainment law celebrity for beating O.J., saving Superman, and clearing the way for Zaz’s media empire. His next slate of cases could determine the future of publishing, and of Hollywood itself.
ERIQ GARDNER ERIQ GARDNER
On August 1, the Department of Justice will begin a trial aimed at blocking the $2.1 billion sale of Simon & Schuster to Penguin Random House. It’s easy to look at this case, as my Puck partner Bill Cohan recently did, and mock how the Biden administration has decided to go to the mattresses to maximize the money paid up front to authors for book publishing rights. I mean, launching an antitrust war over book advances at a time of $5-a-gallon gas—seriously?!

That said, I’d argue that this case is potentially very significant, and maybe just as big as the government’s ongoing pursuits against Big Tech. OK, perhaps not quite as huge as the F.T.C.’s fight to break up Facebook, but nevertheless this case is a very important bid to sharpen regulatory teeth against so-called monopsony—that being any market where a single buyer dominates. Guess who cares about market consolidation of buyers? That would be anyone selling. Particularly, anyone selling labor services. That’s why unions throughout the nation will be following this trial closely. For many years, they’ve argued that the government should scrutinize proposed mergers for their impact on jobs; up until now, many antitrust cops have focused instead on the effect of mergers on consumer prices. In other words, there’s more on the line here than just book advances.

On Friday, the D.O.J. and Random House submitted their pre-trial briefs. Some of it’s under seal, but not everything. Witnesses for the government include bestselling author Stephen King, S&S chief Jonathan Karp, Hachette CEO Michael Pietsch, Macmillan CEO Don Weisberg and many other luminaries in the book business. Besides book executives, the defense plans to call top literary agents like Jennifer Walsh, Andrew Wylie, and Gail Ross plus The Power of Habit author Charles Duhigg. They will appear at a trial overseen by District Court Judge Florence Pan, and arguments will also be made in voluminous post-trial briefs. A decision should follow in autumn.

Additionally, there is a provocative D.O.J. motion to preclude Random House from presenting evidence about how it allows its publishing imprints to bid against each other for the acquisition of books. The Justice Department argues that internal rules treating divisions of a corporation almost as if they were separate companies don’t create any legally-binding pro-competitive commitments. “The substance of Defendants’ argument amounts to ‘don’t worry about allowing us to get market power; we promise not to use it,’” states the government motion. “But competition—not ephemeral corporate promises—ensure that markets deliver competitive prices, better quality and more choices for Americans.”

The court is essentially being asked to address whether the solution to a dominant buyer in the market should be structural. Or whether a company’s historical policies, plus pledges to behave, may be a factor. Judge Pan will likely rule on the motion at the final pretrial conference next week.

Random House opposes the motion, telling the judge that it will show that editors at the company’s different brands have long competed against each other for authors. The company also has economic experts lined up who would testify about the profit-maximizing impact of allowing intra-firm competition. Random House adds: “The government cites no case—not one—holding that a merging party’s post-merger policy commitment is not relevant to the court’s analysis of post-merger competitive conditions. To the contrary, many decisions have considered and given weight to such commitments.”

Petrocelli Time
The attorney representing Random House, of course, is Daniel Petrocelli, who I’ve known personally ever since I started writing about legal affairs. The 68-year-old attorney has had a storied career. He broke into mainstream awareness by representing Fred Goldman in the successful civil case against O.J. Simpson. Since then, he’s represented a wide range of high-profile figures including Jeffrey Skilling and Donald Trump, though it is his entertainment clientele that has provided the backbone of his practice. He’s been the fighter who saved Superman for Warner Bros. and Winnie the Pooh for Disney. (The latter case had him up against Bert Fields, an entertainment law legend who remains active at 93.) Throughout it all, Petrocelli cultivates a reputation as someone who can turn around a losing situation.

Although I speak semi-regularly with him, the last time I saw Petrocelli face-to-face was the pre-pandemic antitrust trial over the AT&T-Time Warner merger, which the government attempted to block. Petrocelli won that case—although history might have a different verdict given how AT&T quickly spun off WarnerMedia—and continues to play a prominent role for its progeny, Warner Bros. Discovery, under the auspices of David Zaslav. Among other matters, he represents the Warners movie division in an important case with Village Roadshow, which co-financed The Matrix and dozens of other big movies, and is handling WBD’s battle against Chris Cuomo over CNN’s termination of the former 9 p.m. host.

I expect to see Petrocelli again when he comes to D.C. for the Simon & Schuster trial. In the meantime, I got him on the phone to discuss what’s ahead for him. Here’s an edited transcript…

Eriq Gardner: How do you expect this Simon & Schuster antitrust trial to be different from the AT&T-Time Warner case?

Daniel Petrocelli: These merger cases are very stimulating both intellectually and forensically. This case is a horizontal merger case. AT&T was a vertical merger case. In that sense, they’re different, but in most respects, it’s not all that different because you are describing a vision for a transaction and how it will affect the competitive landscape looking out into the future. The types of witnesses who testify are similar. You are calling a competitor’s executives, company executives and economists and industry experts. There are a lot of common aspects to how they are litigated and extensive post-trial admission. In this case, we have a trial estimated to last three weeks, which is about half the time of the AT&T trial, so it will move at a brisk pace. Of course, we are very confident about our chances of success.

Do you have a favorite place to stay in D.C.?

St. Regis because it’s right across the street from O’Melveny’s office there.

Another trial ahead for you is the Dr. Luke defamation case against Kesha. Hard to believe they’ve now been in court for almost a decade ever since she wanted out of a record and publishing deal and alleged being raped by him. This coming trial has a dynamic that’s similar to the recent Johnny Depp case. Plaintiff claiming defamation over an allegation of long-running abuse.

I think I’m one of the few people who didn’t watch a single second of the Depp trial. By the way, the same was true for the O.J. Simpson criminal trial. I didn’t watch a second of that except for when they announced the verdict. I was so busy with my practice.

OK, I understand, but from what you’ve read, I’m wondering if there are any lessons you’d draw from the Depp trial that might be applied to the Kesha defense.

I don’t believe there is any particular secret sauce to trying these cases. I believe—maybe I’m old school—that every trial comes down to the facts of the case, and juries typically get it right. I don’t have any reason to believe that won’t happen in the Kesha case. It’s just a matter of making sure you do your best to have facts come out clear and not muddled. In many cases that could easily happen. Obviously, we’re going to have two witnesses with very different versions of events, and it will become a credibility contest in large part. In addition, corroborating evidence will be presented that will aid the jury in deciding who is lying and who is telling the truth. I don’t want to get into specifics, but just like any trial, it’s a matter of preparation and execution in the courtroom.

A few years ago, you told me that a very hot aspect of your practice, particularly in arbitration, involved affiliate transactions—like when a studio licenses a show to a sister company’s distribution arm. Is that still so, or have some of the issues that creators have with streaming cooled just a bit?

It is still a very active issue in our representation of our studio clients, but I will say that as new deals [for new TV shows and movies] are put into place, and these issues [of how to properly account for profits] are being addressed up front, we will start to see a leveling off of claims. Mainly, right now, we are seeing challenges to affiliate transactions in legacy deals that go back many decades. The other phenomenon is that as some rulings come in arbitration, and some settlements are occurring too, I think participants on both sides [of the dispute] are getting more confidence in the benchmarks for how to resolve these issues. We are not only talking about fair pricing on affiliate transactions but also about changes in distribution models with new and different windowing.

Speaking of arbitration, I keep getting asked about the status of Chris Cuomo’s in the wake of his CNN firing.

Yeah, it’s slow. We’re just kind of getting the pieces put together in the arbitration process in the CNN-Cuomo case. It takes time to get an arbitrator appointed, to get a schedule in place, to start the process of discovery. That’s just started to get going.

A couple months ago, I wrote a piece about how Chris Cuomo’s claim that CNN failed to instruct its employees not to disparage him echoed a very similar claim that Michael Jackson’s heirs made against HBO over a documentary. Both these cases were Bryan Freedman v. Daniel Petrocelli, which I thought was ironic.

It figures you’d notice. The Michael Jackson case really has been inactive a bit. It’ll get worked out one way or another.

Another matchup we’re seeing repeatedly is you vs. Marc Toberoff on the issue of copyright termination. It feels like this topic has really exploded of late. Those antitrust cases have you looking towards the future, but these ones—the Avengers cases or the Top Gun case—have you litigating something that happened 35 years ago, if not longer.

Exactly right. I just finished a jury trial where we were litigating things in the 1800s. It was an insurance coverage case involving environmental contamination from how homes were heated back then. The copyright termination cases don’t go back so far but they do present challenges in presenting evidence when many of the witnesses are deceased. Copyright termination is a hot topic these days as termination windows for older properties are opening up. We were involved 10 years ago or so in a number of cases. And then there was a quiet period. There’s now an uptick again. Most of them get worked out. Studios typically have a first right of exclusive negotiation with the author and heirs, and generally speaking, a deal is often made. The ones you see are the times when a deal is not struck.

Are you surprised that the Goldman family is still in court with O.J. Simpson?

No, I’m not. From day one, they told me they wanted justice for Ron Goldman and they were going to pursue Simpson until the end of time. They are never going to forget their deceased son. I don’t know if there is any realistic expectation of recovering actual money but it was never about money. I don’t think Fred Goldman is just going to sit by and forget what’s happened. He wants to proceed against Simpson as a reminder of what he did in the memory of his son.

Give me one case you’re not involved in that you’re watching.

I can’t think of any. I’m so wrapped up in my own work, I don’t follow other cases. I can’t keep up with my own work.

OK, but you do keep up with the New York Yankees, right?

That’s something I do follow. I record every game, and late at night, I fast forward through the game. I keep myself from finding out the score because I can’t watch if I know the outcome. This looks like the year for them.

Is this the best Yankees team you have ever watched?

No, the 1998 team is the best.

The rumor going around is that your son is a baseball phenom.

Whoa, you did your homework. Yeah, I don’t want to say phenom, but yeah he’s a pitcher at Notre Dame High School and he’s working hard.

You’re now in your late 60s. Sorry, I got to ask: How long do you intend to keep practicing?

I don’t want to compare myself to Bert Fields but whatever his record is, I’m going to try like hell to beat it.

On the Docket…
  • More on the antitrust front: Just before President Biden made a controversial trip to Saudi Arabia, word leaked that the Justice Department was investigating the PGA Tour over threats to players who were signing up for the Saudi-backed LIV Golf circuit.
  • The D.C. Circuit Court of Appeals has struck down an F.C.C. rule that required that broadcasters verify whether the sponsors of programming were foreign or not.
  • The Ninth Circuit Court of Appeals has given Starz a green light to pursue MGM for licensing Bill & Ted’s Excellent Adventure to Amazon Prime Video during a period when Starz was supposed to have exclusive rights to the movie. MGM argued the suit came too late, but the Ninth Circuit splits with another federal appellate circuit by holding that, under the still good discovery rule, damages can be sought for infringing acts beyond the three years prior to lawsuit filing.
  • The company behind Bang Energy drinks can’t beat claims that they are vicariously liable for the copyright-infringing music that TikTok influencers picked to promote the product in videos.
  • The former agent for Los Angeles Dodgers star Freddy Freeman is suing a radio host for suggesting in a tweet that the ballplayer never learned of a final offer from the Atlanta Braves. Here’s the complaint.
Disney Gets Dragged Into the ‘Eleanor’ Fight
A couple of months ago, I detailed the unusual, decades-old, still-raging legal dispute over “Eleanor,” a muscle car from the heist flick, Gone in 60 Seconds. A pending lawsuit between the film director’s widow and a Ford executive’s heirs raised the issue of the copyrightability of Eleanor and whether real-life automobiles could misappropriate a movie character.

This month, U.S. District Court Judge Mark Scarsi held back on a summary judgment determination because he wanted to hear first from Disney’s Hollywood Pictures, which produced the Nic Cage sequel. As the judge writes in a recently unsealed order (read here), resolving this case may impair Disney’s ability to protect any potential copyright interest it retains in the Eleanor car character. A grant of merchandise rights to the widow doesn’t necessarily mean Disney ever gave up character rights.

Does Disney care about Eleanor? Back in 2007, the entertainment giant acknowledged the dispute and stated in a press release, “This lawsuit has nothing to do with us.”

Fifteen years later, a judge has expressly declined to rule without the presence of Disney and has decided that perhaps the pleadings in the case should be revised so that Disney becomes either a defendant or an involuntary plaintiff.

Naked Bankruptcy
About a year ago, a Los Angeles Superior Court judge turned heads by dismissing a revenge porn claim that former Democratic congresswoman Katie Hill pursued against the Daily Mail for publishing nude photos of her. Given the First Amendment, the outcome wasn’t particularly surprising except for one element: The publication sought dismissal under California’s anti-SLAPP statute, which meant that the trial judge had to decide whether Hill’s claims furthered the tabloid’s free speech in connection with an issue of public interest. Having decided the answer was yes, and that Hill couldn’t show a probability of prevailing, the judge ordered Hill to pay the Daily Mail’s legal fees, which amounted to about $273,000.

Hill says she’s incurred substantial financial loss related to the fight that her naked body wasn’t in the public interest. She hopes to discharge her debt through a bankruptcy filing.

Hollywood’s Nastiest Trial
Since 2019, John Middleton Jr. and Roy Lee have been in court over the disintegration of their partnership. Middleton is the rich son of tobacco magnate and Philadelphia Phillies owner John S. Middleton. Lee is the veteran producer of It, The Departed and The Lego Movie. With allegations of prostitution, substance abuse and spying, this has been called “Hollywood’s nastiest producer feud.”

According to court papers, Middleton alleges he provided Lee with about $7 million of benefits including use of his Malibu home, courtside tickets to Los Angeles Lakers games, frequent use of private jets, chartered yachts in Cannes, and frequent trips to Hawaii, Las Vegas, and film festivals around the world. Middleton says he was supposed to come out of this arrangement with film credits while Lee contends his former partner really just wanted a glamorous Hollywood lifestyle to rub shoulders with famous movie stars.

This past week, a judge rejected Lee’s motion for summary adjudication. See the decision here. That sets up a trial, which is currently scheduled to begin on Aug. 15.

However, Middleton’s attorneys at Lavely & Singer are now begging off of the case. They say their client has breached a fee agreement. (Separately, the powerhouse public relations firm Sitrick And Company filed suit against Middleton for alleged non-payment.) Additionally, one of Middleton’s current lawyers is asking the judge for a 30-day trial continuance because of Covid symptoms. Currently, the trial is still on for next month, but that could obviously change.

FOUR STORIES WE’RE TALKING ABOUT
The Trials of Brittney Griner
The Trials of Brittney Griner
The W.N.B.A. superstar’s Russian imprisonment has made her a geopolitical pawn.
JULIA IOFFE
Schultz's Biden Diagnosis
Schultz’s Biden Diagnosis
The president’s ex-campaign manager candidly assesses his former boss.
TARA PALMERI
The Netflix-Microsoft Union
The Netflix-Microsoft Union
Jon and Peter discuss the Netflix-Microsoft deal and the NFL’s tech suitors.
PETER HAMBY
Casey's HBO Payday
Casey’s HBO Payday
Re-signing Casey Bloys was a goal of Zaz’s first 100 days.
MATTHEW BELLONI
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