Napoleon Pictures Ltd. v. Fox Searchlight Pictures CA2/2

FACTS

Napoleon Pictures Limited (Napoleon) premiered its film Napoleon Dynamite (the Film) at the 2004 Sundance Film Festival. The Film was produced by 24-year-old Jeremy Romney Coon, with an initial $404,000 from his family. Numerous film distributors expressed interest; it was the most sought-after film at Sundance. Napoleon hired John Sloss to negotiate a distribution agreement for the Film. Sloss, an experienced entertainment lawyer who has sold 400 independent films, wanted Fox Searchlight Pictures, Inc. (Fox), to distribute the Film. He immediately began to negotiate terms with a friend, Fox vice-president Joseph De Marco, with whom Sloss had arranged at least 10 movie distribution deals. Sloss profits from the Film’s distribution through his “advisory company,” which receives 10 percent of all revenue arising from commercial exploitation of the Film. Sloss and De Marco made a handshake deal on January 18, 2004, one day after the Film premiered. A “Term Sheet” was signed two days later. Fox paid Napoleon an acquisition price of $4.75 million, with a 50 percent gross profits participation rate. The acquisition price was high, compared to what Fox paid for other films between…