An independent arbitrator’s Interim Award has rejected claims including breach of contract and copyright infringement leveled last year against Voice Media Inc. and Trade News NV (parent companies, in turn, of Cybererotica) by New Destiny Media Group, parent of Homegrown Video.Additional allegations that Trade News owes New Destiny more than $6 million in revenue share and interest under an arrangement between the two companies to promote HomegrownVideo.com have yet to be settled.
The presiding arbitrator, retired judge Richard C. Neal, ordered an audit to determine the status of the funds. The parties to the arbitration will split the fee equally.
The interim ruling "stands for the proposition that you have to await an arbitration hearing on the merits before jumping to a conclusion," Trade News attorney Ira Rothken tells AVNOnline.com. He also said Trade News and its chief, Ron Levi, were pleased by the arbitrator’s finding.
Dave Olsen, attorney for New Destiny, didn't see it quite the same way.
"The way I read it, we're just getting started," he says. "There's going to be a full-blown audit, and we disagree with the ruling on the infringement and the shaving, the underpayment."
New Destiny charged that Voice Media assigned a contract to promote HomegrownVideo.com to its successor, Trade News, without New Destiny's consent. The arbitrator rejected that claim. Neal cited a letter from New Destiny chief Spike Goldberg, dated April 2000, saying the letter "specifically consented" to "exploitation of the Homegrown Video website by an entity other than Voice.”
"The letter explicitly states that New [Destiny] has no objection to collaborating with Mr. Levi . . . through a 'new entity,'" Neal wrote in the Interim Award.
Neal also held that New Destiny agreed to Trade News’ role in "exploiting" the Homegrown website when New Destiny joined the Trade News affiliate program and "commenced receiving payments from Trade for Homegrown customers that New directed to Trade." Nor did New Destiny prove that Trade News shaved revenues from the Homegrown promotion, Neal wrote.
He added that both sides repudiated the deal when New Destiny sought and won an injunction barring Trade News from continuing to promote HomegrownVideo.com until New Destiny’s allegations could be heard.
The remaining question, Neal wrote in his ruling, is whether an audit will show that Trade News continued to receive but didn't share revenues from promoting HomegrownVideo.com after the injunction was approved.
"The final award, in this case, when it issues, will include a declaration that the Web Agreement [to promote and split revenues from HomegrownVideo.com] imposes no further, prospective obligations on either party," Neal wrote. "It also may include a permanent injunction forbidding Voice and Trade from all future use or exploitation of the Homegrown Video site."
Rothken said the ruling amounts to a permanent ruling except for the audit involving leftover revenues that may be owed New Destiny. "[Neal] has tentatively found [New Destiny didn’t prove] their case, but at the request of Trade News the arbitrator will allow for an independent auditor to come in," Rothken said. "We are very optimistic that the independent auditor will verify [our] original thoughts, that every single payment that should be made was made."
"The ruling is a very mixed bag for everybody," Olsen said, while calling Trade News’ celebration of the ruling premature. "The judge ruled the agreement will be found over and done with once the proceedings are done," he said, "but it's a mixed bag, and until the audit occurs and there's a final decision on how much money is owed, if any, then it's a very premature celebration."
A hearing by teleconference to discuss appointment of the auditor and schedule the audit is set for July 12.
View a copy of the decision" \n target="_new">here.
