This just in… a federal appeals court judge yesterday overturned the decision of the lower court in the lawsuit that ultimately led to Big Idea Productions’ bankruptcy. If you’ve read the online account of the fall of Big Idea Productions, you know about this case. In summary, in 2002 Lyrick Studios sued Big Idea, claiming Big Idea had breached its distribution agreement with Lyrick by moving its business to WEA (Warner Music). Big Idea argued that, first, since Lyrick and Big Idea had not yet come to terms or signed a contract, the two parties were working together “at will” and either could walk away at any time. Secondly, even if one could argue that the two parties working together for 2 years implied a binding agreement, the latest draft of the agreement under negotiation had a clause allowing Big Idea to walk away if Lyrick was sold to another company, which is exactly what happened in 2002 when Lyrick founder Dick Leach sold his company to Hit Entertainment, a large publicly-traded British firm. So we at Big Idea felt we had two compelling arguments for our decision to move our distribution rights to another distributor.
Lyrick’s new owners, of course, disagreed, and the matter went to federal court in Dallas, TX in Spring of 2003. Lyrick’s lawyers argued that there was a binding relationship, and that Big Idea, while having the right to withhold consent to a sale of the company, had “unreasonably withheld” that consent. Big Idea’s lawyers couldn’t believe their ears when the jury in Dallas agreed with Lyrick's arguments. The judge entered an $11 million judgment against Big Idea Productions that day, sealing the company’s fate. Bankruptcy filings soon followed and the assets of the company were sold in a bankruptcy auction to Classic Media of New York.
Well, what do you know. Big Idea’s creditors, unhappy that half of the proceeds from the asset sale would go to Lyrick Studios, appealed the decision, asking an appeals court judge to look into the case. And as of yesterday morning, August 9, 2005, the appeals court agreed with Big Idea. There was no binding agreement between Lyrick and Big Idea as of the time of the lawsuit. Either company could have walked away at any point. Big Idea did, in fact, have the right to move its distribution to another company. Lyrick’s complaint, the appeals court determined, was bogus.
So what changes? Well, Hit/Lyrick doesn’t get a penny of the proceeds from the sale of Big Idea. That’s great news, because it means all the creditors – from freelance writers to local print shops – that were owed money when Big Idea was forced by the lawsuit to declare bankruptcy will get most of their money back. It was a bad day for Hit/Lyrick, who not only lost that case, but will now most likely lose the $12 million lawsuit they recently brought against WEA for, they claim, “inducing Big Idea to break it’s agreement with Lyrick Studios.” Once a federal court has concluded there was no agreement between the two companies, it’s pretty hard to argue that case with much success.
What it doesn’t do, of course, is turn back the clock. Big Idea Productions still went bankrupt, and the assets were still sold. No money will flow back to Lisa and I, or any of the other shareholders of Big Idea Productions. But, after all the stories in the press and all the rumors, to have a judge acknowledge that we did, in fact, act with integrity in our business dealings with Lyrick feels pretty darn good.