CHATSWORTH, Calif. — Normally, the party in a lawsuit that receives a check is the winner, while the party that writes the check is the loser ... but in the case of Erik Everhard Entertainment vs. World Wide Red Light District, RLD Distribution and David Joseph, both sides are claiming victory ... and to the outside observer, the attorneys for each side make compelling cases for their positions.
For instance, it's uncontested that on Tuesday, the jury in the two-week-long trial awarded Everhard $141,000 for breach of contract by World Wide and RLD Distribution, and for "conversion" – that is, failure to return inventory and/or master disks/tapes to Everhard after the contract was terminated – by RLD Distribution, with Joseph, a principal in both companies, having been dismissed from the suit halfway through the trial, at roughly the same time that RLD Distribution was added as a defendant.
However, that's about where any agreement between the parties ends. Sean Macias, Everhard's attorney (and one of the big winners in the Evil Angel/Jules Jordan piracy case), claims that World Wide Red Light District and its successor corporation RLD Distribution owe Everhard $474,000 – reduced from an earlier claim of nearly $650,000 when Red Light provided receipts and invoices shortly before trial.
Red Light's lead counsel Larry Isenberg, on the other hand, disputes that figure, claiming that the company's own account books show that Everhard is owed a mere $52,000, which is roughly the amount Macias says Red Light offered Everhard just before trial began – and even that figure is contested! Isenberg responds that his client offered Everhard over $100,000 several months earlier, which offer, Isenberg says, was rejected.
So who won?
"They offered us $50,000 the day before the trial," Macias told AVN, "and we got three times that amount in our win, so I think the jury spoke. It wasn't exactly what we wanted them to say, but it's our win and it's great that Erik was able to stand up for his rights and not to be bullied."
"I saw the result as being a favorable result for Red Light District, because we prevailed on 12 of the 15 claims that had been asserted by the plaintiff in the case," Isenberg countered. "We defeated any claim for punitive damages which plaintiff wanted in this case, and the plaintiff initially was seeking $639,000; that went down to about $475,000 by the time of trial."
The lawsuit stems from an oral contract between World Wide and Everhard, where Everhard agreed to allow World Wide to replicate and distribute 23 of his movies, with Everhard receiving 70% of the net profits and World Wide 30%, at a minimum wholesale price of $8 per unit.
But how much was actually owed?
"The amount that our records showed due and owing was $52,000 and change," said Isenberg, "so those are the numbers, and again, the jury rejected the analysis of their expert accountant Mr. Sills and basically did some of their own math and gave them an additional $89,000. I don't know where that came from, but I'm fairly certain it did not come from the analysis done by Mr. Sills, because the numbers he was putting out were dramatically higher than the $89,000. So I'm not sure how the jury did its math and its analysis but ultimately that's what they came up with. And as I said, the costs, between the experts' fees and the attorneys' fees and other costs of bringing this to trial for the plaintiff more than eats up that additional $89,000."
Au contraire, says Macias.
"This is where it gets so crazy," Macias explained. "We asked them for all the documents. It was a two-tier process. We went in there, we did a physical inventory, August 6, 2006, two days after the lawsuit was filed. With that, we asked them where everything was located, and we discovered that there were 14,000 missing units. Even their own inventory documents showed that there were negative numbers in their inventory; what should have been there and what was there was negative, and what should have been there was positive on something else. We said, okay, we would like to do an audit, and they said okay, and we said we want back-up on everything over $3000, and we want to take a look at all payments to Erik Everhard Entertainment and we want to take a look at the replication. During this audit, we found out that they were overcharging us a dollar for a single disk and $1.75 for a double, which was not part of the original oral contract. And when pushed on it, they said, 'Well, that was because of packaging and storage.' Well, as you know, these disks came already packaged, and then they said, 'Well, it's for printing.' We said, 'Well, you're already billing us for printing.' Then we discovered that David Joseph would write huge amounts of checks to [replicator] Cam and to [art house] Vance Photo and get these huge discounts. Like he would write a check for $100,000 and get work valued at $150,000 or $125,000. So there you would expect the benefits to trickle down. None of that was done."
"The second thing we fought over was, there was cash payments," Macias continued. "As David Joseph called it, 'I gave [Erik Everhard] bricks of cash' – that's a real nice way to call it – '$25,000 at an El Pollo Loco; $15,000 in the hallway on a Saturday' – and there were no receipts. We denied that we got any of those bricks of cash. And the third thing was, there were supposed to be wire transfers that were counted against my client. There were checks written to cash, and they were cashed either by the bookkeeper or [former Red Light partner] Dion Giarrusso, and then they were allegedly wired by Western Union, so you would expect a Western Union receipt. There was none of that."
"Then we had the coup de grace, which I love the best, was David Joseph on the stand testifying, when I asked him, 'Did you get anything else besides cash or checks for the goods sold for Erik Everhard Entertainment?' Answer: 'Yes.' 'What was it?' 'Well, I got cars.' 'Oh, you did?' 'Yes, I did.' 'What type of cars?' 'I got a Cadillac Escalade.' And I said, 'Well, how would you book that?' And he's like, 'Well, this would be for multiple directors.' So I said, 'So, what? Would you give a steering wheel to Erik Everhard and a tire to Mike John?' The jury got the idea. But the problem with that is that we're in Chatsworth and they [the jury] thought $140,000 was a lot of money, and we got them on all counts on the breach of contract and the conversion by Dion Giarusso of the theft in 2003."
(Giarrusso, once a partner with half-brother David Joseph in World Wide Red Light District, was accused in late 2003 of certain improprieties related to the business, and the two parted company, with Joseph retaining control of Red Light.)
Of course, that's not how Isenberg sees it.
"We produced to the other side reams of receipts and invoices and checks, etc. – back-up support, basically – and they finally went down from $639,000 to I guess $475,000," Isenberg recounted, "so that difference, they ultimately acknowledged that we provided support for, but they still went into this trial and argued to the jury during closing that they were entitled to $475,000 more and we, meaning Red Light District, argued to the jury that we only owed $52,000. So what ended up happening is, the plaintiff received $89,000 more than everybody agreed upon, basically, and the way I saw it was a resounding defeat for Mr. Everhard or his company because they could have basically gotten that through a voluntary settlement months ago, and I'm sure it cost them quite a bit of money to bring this case to trial."
And what of the "bricks of cash," as Macias characterized it?
"We paid the plaintiff some cash, sure," Isenberg agreed. "There were company records produced at trial to show that these transactions occurred: Banking records, wire transfer records, journal entries on the company's accounting software that tracked each and every payment."
And the SUV?
"I would not say that that's an accurate analysis of what happened," Isenberg disputed. "There was apparently one instance where we received a vehicle as part of the transaction, but I want to make it very clear that the vehicle was sold for its fair market value, and the proceeds of that sale credited to the various accounts to which payments were due."
One remaining bone of contention is the master tapes and disks used to create saleable product. Macias claims that although his client had an agreement with World Wide not to sell any Everhard product after the day Everhard filed suit, January 4, 2006, that Everhard was not made aware that RLD Distribution had been incorporated and opened for business four days earlier, and Macias argued to the jury that RLD, as World Wide's successor, sold Everhard product for nearly nine months after the date of the agreement.
"Finally, we had to go in there and do a destruction of all of the movies," Macias summarized. "And on top of that, they didn't return any of the masters or DLTs or the VHS. We still don't have them, and they said they destroyed them, but we just don't believe them. There was an entry on their books for a remaster of one of the movies, and you know how this business goes: Why would you remaster something if you're not selling it? That's what I told the jury: 'I'm from Indiana. I don't put my gloves on and my hat on if I don't walk outside.'"
Isenberg flatly denies that claim.
"My understanding is, those [masters] were all returned long ago," he told AVN. "If Red Light has in its possession any of those, I don't see any reason why they would not give them back, but I don't believe Red Light has any such things at this point."
Macias doesn't deny that Everhard could recreate the masters from the source material still in his possession, but he considers it bad faith on RLD's part not to have returned them.
But like so many issues in this suit, the question of whether or not masters were returned remains open ... and with both sides claiming victory here, it's doubtful that a judge and jury will ever have an opportunity to try to sort that out.
And that, as they say, is what makes horse races.
