LMNO Entertainment has gone back on the offensive against Discovery Communications, accusing the giant media company of engaging in an “elaborate shell game” to make it look like LMNO had engaged in deceptive business practices.
Late last night, LMNO asked a federal judge in Los Angeles to dismiss Discovery’s countersuit, filed August 1, which accused LMNO of keeping two separate sets of books and scheming to “systematically and repeatedly overcharge and defraud Discovery” by submitting fraudulent production budgets on numerous reality shows the company had produced for its networks.
The two companies, which had been doing business together for more than a decade, had a very public falling out in June amid allegations of fraud, embezzlement and betrayal — followed by an FBI raid on LMNO’s offices in Encino.
Accusing Discovery of engaging in “bullying tactics,” LMNO’s latest motion scoffed at the idea that it could have deceived the network for so long. “Discovery is one of the largest, most powerful, and most sophisticated media and entertainment companies in the world,” the motion states (read it here). “It negotiates with production companies to buy hundreds of programs each year for its 13 domestic television networks. It knows better than anyone what programs cost to produce, and harshly negotiates its payments to producers to keep its own costs low.”
LMNO claims that Discovery is trying “to sell the story that it was simply bamboozled by LMNO for more than 15 years — that LMNO somehow fooled Discovery into overpaying for dozens of programs by 30% or more. This is nonsense.
“With all of the bargaining power of a multibillion-dollar public company, Discovery negotiated the absolute lowest price that it could get for the programs that it wanted,” the motion for dismissal continues. “If it had been able to get a lower price elsewhere, Discovery would have jumped at the chance. Instead, it returned time and time again to LMNO for the simple reason that LMNO was able to deliver quality programming at a bargain price. Through its claims, Discovery is attempting to do to LMNO what it has done to others throughout the industry over the past 18 months: seize upon a moment of opportunity, and twist it to steal the rights to shows that belong to others. This is wrong, and LMNO will stand up to this bullying tactic.”
LMNO said that Discovery’s fraud claims are “particularly noxious” because it says Discovery has offered no proof that its production budgets were fraudulent; that it had provided Discovery with a proposed budget for each show prior to the beginning of each season; and that, in any event, a budget “is not a representation about an existing fact — it is an authorization document in which parties negotiate about what will be spent in the future.”
The motion claims that Discovery failed to identify any “specific representation of an existing fact that it claims was false” and instead “loosely points to the entirety of a lengthy budget and says ‘something in there’ was ‘false, misleading, artificially inflated, and materially inaccurate.’ That is an insufficient pleading as a matter of law.”
After being alerted by a whistle-blower, Discovery conducted an audit and then canceled its long-running deal with LMNO, taking control of six shows it was producing. LMNO claims that the “whistle-blower” was in fact the company’s former accountant, who it has sued for embezzlement and falsifying the company’s books in an attempt to “irreparably damage LMNO’s reputation and business.”
On Thursday, Discovery filed a writ of possession asking the court to force LMNO to turn over all the footage of Season 2 of 7 Little Johnstons, a reality show that Discovery claims is being “held hostage” by LMNO.
In its answer (read it here), LMNO claims that Discovery has no legal right to the footage because Discovery “failed to sign the negotiated contract for this season of the show and failed and refused to pay the agreed-upon price for these episodes.”
Discovery, however, says that by refusing to turn the footage over to its rightful owner and copyright holder, LMNO is trying to “extract a ransom.