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DIRECTORS GUILD OF AM. v. GARRISON PROD.

March 30, 1990

DIRECTORS GUILD OF AMERICA, INC., PETITIONER,
v.
GARRISON PRODUCTIONS, INC., MORTON L. GINSBERG, AND MLG PROPERTIES, INC., RESPONDENTS.



The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.

FINDINGS OF FACT, CONCLUSIONS OF LAW AND DECISION

This proceeding is brought pursuant to Section 9 of the United States Arbitration Act of 1925 as amended (the "Arbitration Act"), 9 U.S.C. § 9, and Section 301(a) of the Labor Management Relations Act of 1947, as amended ("LMRA"), 29 U.S.C. § 185(a), by petitioner Directors Guild of America, Inc. ("DGA"), a labor organization, to confirm a labor arbitrator's award enforcing the provisions of a collective bargaining agreement against respondent Garrison Productions, Inc. ("Productions"), a motion picture production company. Productions failed to defend this action and on January 12, 1990, the Court signed a default judgment submitted by the petitioner against Productions. The remainder of this case, then, involves DGA's attempt to pierce the corporate veil of Productions to recover from respondents Morton L. Ginsberg ("Ginsberg") and MLG Properties Inc. ("MLG").

Jurisdiction lies pursuant to Section 301(a) of the LMRA, 29 U.S.C. § 185(a) and 28 U.S.C. § 1331. Venue is proper in this district pursuant to Section 9 of the Arbitration Act, 9 U.S.C. § 9 and Section 301(a) of the LMRA, 29 U.S.C. § 185(a).

The action was tried before this Court without a jury from July 5, 1989 through July 7, 1989. Proposed findings of fact and conclusions of law were submitted by the parties on January 2, 1990. This opinion constitutes the Court's findings of fact and conclusions of law.

I. FACTS

DGA is an incorporated labor organization within the meaning of Section 301(a) of the LMRA. Its members are motion picture and television directors and related personnel. DGA maintains an office at 110 West 57th Street, New York City.

Productions is a New Jersey corporation which, at times relevant hereto, maintained its business in Guttenberg, New Jersey. It was incorporated in early September 1985 by Sandye Garrison and her attorney, Charles Chehebar. Its business purpose was to acquire and produce motion pictures. On September 19, 1985, shortly after the formation of Productions, a shareholders' agreement was entered into by the founding shareholders. That agreement reflects that the principal investor, Ginsberg, acquired 50% of the stock in return for providing $140,000 of Productions' initial capitalization of $141,000. Garrison invested $500 and Louis R. and Eileen M. Capone invested $500.*fn1 The shareholders' agreement provides that $50,000 of Ginsberg's contribution was to be held in escrow pending acquisition of the rights to produce a movie entitled "Single Room".

The Shareholders' Agreement sets forth a division of functions as follows:

  Functions. Morton L. Ginsberg will be the principal
  investor in the Company and will advise it in all
  financial matters. Sandye Garrison will administer
  and execute all production projects undertaken by
  the Company, which functions will involve the
  preparation of a budget for each production, the
  negotiation of co-production agreements, casting
  the production and negotiation of all contracts
  pertaining thereto. Louis R. Capone will direct the
  sale and marketing of all projects and arrange for
  the music for all productions and will also
  negotiate and acquire rights to original musical
  scores and other related properties. Eileen M.
  Capone will be principally in charge of developing
  and obtaining properties for feature films.

Ginsberg, an attorney, is the sole owner of respondent MLG, Inc., a New York corporation used by Ginsberg to transact real estate business. Before he became involved in Productions, Ginsberg had no experience or skill in film production. Ginsberg was approached by Garrison, who needed financing in the form of "seed capital" from investors to acquire the rights to and thereafter to produce "Single Room." Garrison represented to Ginsberg that "Single Room" would attract a cast of well known movie stars and that the cast would in turn attract additional capital through a pre-sale of "Single Room" to a major studio.

In addition to interesting Ginsberg in "Single Room," Garrison also induced Ginsberg to advance additional moneys to Productions for the acquisition and production of a second film, "Hawken." From October 1985 to mid-1986, Ginsberg contributed approximately $1.8 million to Productions for the production and distribution of "Hawken." In the spring of 1986 final editing of "Hawken" had still not been completed. At that point Productions conveyed all its rights in "Hawken" to Ginsberg. No proof was adduced showing that there was consideration for this transfer.

In the meantime, Productions was attempting to gain the rights to, and thereafter produce, "Single Room," a German stage play by Johannes Reben. In March 1985 a German director, Wolfgang Panzer, who had been associated with European productions of "Single Room," obtained with Felix Bloch Erben the exclusive rights to an English language version of the play. In March of 1986, Garrison, on behalf of Productions, entered into a contract with Pantom Productions, S.A. ("Pantom"), a company controlled by Panzer, under which Panzer was to direct an English language production of "Single Room." The contract called for arbitration of all disputes under the rules and regulations of DGA. In June 1986 Productions entered into a contract with Pantom which provided that an assignment of all rights in "Single Room" would be received from Panzer and Erben upon receipt of payment in full of 250,000 Deutsche Marks. Pursuant to this contract, Productions paid $20,000 as an initial payment and agreed to pay Panzer for Erben a final payment of about $120,000 ten days before it started shooting "Single Room."

At about the same time, in June of 1986, the Capones resigned from and relinquished their 25% stock interest in Productions. In connection with this agreement, the Capones received a promise to pay $25,000 secured by a confession of judgment in that amount from Productions, from Garrison individually, from MLG and from Ginsberg personally.*fn2 After this buy-out of the Capones, Ginsberg was the holder of 75 percent of Productions' stock.*fn3

Productions, as producer of "Single Room", signed the DGA Basic Agreement on July 26, 1986 (Pt. Ex. 9). The Basic Agreement obligated Productions to pay the salaries of DGA members and to make contributions to certain DGA pension and health and welfare plans.*fn4

On September 2, 1986, after an arbitration hearing requested by DGA, the arbitrator, Walter Gellhorn, Esq., ordered Productions to post an escrow deposit of $50,000 pursuant to the DGA Basic Agreement to secure the salaries and health and welfare benefits of DGA members employed by Productions to produce "Single Room." The $50,000 received by DGA for security was paid directly by MLG. MLG posted this deposit (on behalf of Productions) on September 4, 1986. Thereafter, in September 1986, Productions began active film production of "Single Room" with funds advanced by MLG. In September 1986 Panzer started filming "Single Room." After approximately one week Garrison and William C. Gerrity, Unit Production Manager, decided a new cinematographer should be hired. Ginsberg was so advised and approved the additional budgetary expenditure.

On September 24, 1986, after approximately one-third of the scenes had been filmed, Panzer refused to proceed further with the filming of "Single Room." Respondents claim that a number of disputes had arisen with Panzer. No testimony was offered to support this general charge. Accordingly, the Court finds the principal reasons for his refusal were (1) that Productions' post-dated September 17, 1986 check to Pantom Productions in the sum of $124,100 in final payment for the rights to "Single Room" (received on September 11, 1986, some days after it was due) had failed to clear due to insufficient funds, and (2) that Productions had failed to pay two installments of Panzer's salary. After September 24, 1986, the film-making ...


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