After a judge last week denied a motion to dismiss, a lawsuit is tentatively scheduled to play out in LA Superior Court on August 8 that pits former William Morris literary agent Dave Phillips against William Sherak, president of the 3D conversion house StereoD. Phillips alleges in court papers that after inviting Sherak to be his 50/50 partner on emerging 3D technology that Phillips had been retained to shop in Hollywood, Sherak betrayed him. By the time 18 months worth of meetings culminated in the deal that led to the formation of StereoD, Sherak emerged with a 32% stake in that company and signed a 3-Year $14 million deal to run it after Deluxe acquired StereoD in May. Phillips was offered $30,000 to sign a release and go away.
Sherak, the son of Motion Picture Academy of Arts and Sciences president Tom Sherak, is accused of breaching an oral agreement and his fiduciary responsibility to Phillips. At issue is whether the technology Phillips plugged Sherak into (it originated with Kerner, an offshoot of George Lucas’ Industrial Light and Magic) led to the deals that formed StereoD and should be counted in the 50/50 3D deal split Phillips said he and Sherak agreed to in an oral (not written) contract. Phillips claims in his complaint that Sherak often assured him their position would be protected because of his father’s industry clout, but that he eventually became evasive after Phillips was offered the $30,000. Stereo D has quickly become a major player in 3D conversions of films that include Captain America, Avatar, Jackass 3-D, and Thor.
Phillips claims that he brought Sherak into the 3D mix because they were longtime friends and he knew Sherak’s father would use his clout to put them in rooms with the Hollywood heavyweights needed for deals that would enrich the duo with finder fees. According to Phillips’ complaint, the elder Sherak orchestrated meetings with the likes of Ron Perelman, Deluxe’s Cyril Drabinsky, Legendary’s Thomas Tull and Lightstorm’s Jon Landau. The elder Sherak also arranged for Fox to provide a print of The Rocky Horror Picture Show to be converted into 3D for demos.
Along the way, the younger Sherak arranged meetings with Christopher Mallick, the financier of Middle Men, a film Sherak produced. These meetings evolved into a focus on 2D to 3D conversion technology called VDX that wasn’t owned by Kerner, but rather a Japanese inventor named Kuniaki Izumi. The filing indicates Phillips and Sherak were involved in bringing Izumi in from Japan to meet Mallick, who shortly after dropped his Kerner pursuit. He struck a deal with Izumi that paid the inventor $1 million for technology that became the core of Stereo D. Mallick gave equal ownership stakes in StereoD to himself, Sherak and Middle Men star Giovanni Ribisi. Phillips was not included.
Sherak’s Loeb & Loeb attorney Michael Anderson told Deadline that this scenario painted in Phillips’ complaint isn’t accurate. “First, Dave Phillips didn’t bring William Sherak into this business,” Anderson said. “He was brought in by Christopher Mallick, the entrepreneur who started StereoD and who asked William to run the company because of his experience and know-how. Dave Phillips had no role in that, no role in funding and creating StereoD, and no role in acquiring the technology from Kuniaki. Dave Phillips was a commissioned sales agent for a company called Kerner. Kerner was involved in potentially attempting to acquire the VDX technology. But Kerner dropped out of the equation and at that time, so did Mr. Phillips. He’s a guy who is frustrated his company lost out on the transaction and he has been hanging on to the idea there was an oral partnership. [with Sherak] There is no oral partnership agreement.”
Sherak’s lawyers made those arguments in an attempt to have the case tossed, but the judge ruled that Phillips deserved a trial for punitive damages because “[the plaintiff] provides evidence that William Sherak permitted Phillips to invest substantial time and energy in developing the 3D property, only to repudiate the arrangement after Phillips had substantially consummated the deal, and when it became clear that there was substantial gain to be realized. The evidence sets forth evidence of hard work for no remuneration and a child to support. Malice, oppression or fraud are ordinarily matters for the trier of fact. Here, there is enough to show that a triable issue of material fact exists regarding the Plaintiff’s entitlement to punitive damages.”
Tom Sherak declined comment.