Shoot (March 5, 1999) p.1

Dispute over director Paul Hunter leads to L.A. Superior Court trial.
By Robert Goldrich

F.M. Rocks Alleges Its Contract With Helmer Was Breached; HSI Says Pact's
Option Became Invalid.

LOS ANGELES - Director Paul Hunter, an established music video artisan who's
begun diversifying into the spot arena, is at the center of a dispute between
F.M. Rocks, Santa Monica, and bicoastal HSI Productions. The contentious
battle has escalated to Los Angeles Superior Court where a trial was scheduled
to get underway as SHOOT went to press.

For information on F.M. Rocks' lawsuit against HSI, SHOOT accessed and had to
rely primarily on public court records. A SHOOT request to interview Hunter
had been denied. SHOOT touched base briefly with F.M. Rocks' president Craig
Fanning, who expressed confidence over the merits of his case but said he
wouldn't discuss the matter publicly without attorney approval. Fanning said
he'd consult his legal counsel and get back to SHOOT. At press time, SHOOT had
not yet heard from Fanning or his legal representative.

HSI president Stavros Merjos talked to SHOOT about the litigation, largely
reiterating contentions that were delineated in the paper trail on file at
L.A. Superior Court. But in response to specific legal questions, he deferred
to his in-house attorney Randy Winograd who declined comment, saying it would
be inappropriate for him to make any public remarks at this juncture, with a
trial pending. (Outside legal counsel is actually handling the case for HSI.)

Sifting through hundreds of pages of court documents, SHOOT isolated some of
the key claims and counterclaims in the litigation. F.M. Rocks firmly
contended in court records that it had Hunter under contract for music videos
when he departed to join HSI in '97. F.M. Rocks stated that it had a yearlong
contract with Hunter that expired in early January '97, but carried an option
for an additional year that the company could unilaterally exercise. F.M.
Rocks also said that it properly picked up that option, informing Hunter
verbally that their working relationship on music videos was being extended
through January 3, '98.

F.M. Rocks' legal counsel further pointed out in the court filing that Hunter
helmed an additional 11 music videos for the company after that pact's
extension. Then in March '97, according to F.M. Rocks, Hunter
"uncharacteristically began refusing directing jobs" and later that month his
management company contacted the production house and requested a copy of the
director's contract. Shortly thereafter, according to the plaintiff's
time-line, Hunter repudiated his contract with F.M. Rocks and began directing
videos for the defendant, HSI. F.M. Rocks contended that HSI interfered with
F.M. Rocks agreement and induced Hunter to breach that contract in spring of
'97.

HSI's Defense

Responding to the charge, HSI's legal counsel, as reflected in court records,
acknowledged that Hunter's original contract with F.M. Rocks "allowed for the
possibility that the term might be extended for an additional one year." But
HSI attorneys claimed that F.M. Rocks did not meet conditions required to make
that option valid. For one, HSI stated that F.M. Rocks did not exercise the
option prior to the original agreement's expiration date and thus the contract
"expired by its own terms" on January 3, '97. Following that alleged
expiration, Hunter, according to an HSI-filed court document, initiated
contact with more than half a dozen production companies to discuss the
possibility of coming on board to direct music videos and TV commercials.
Hunter and Merjos first met on or about Feb. 21, '97, stated the HSI document
which further related that Hunter decided to enter into a contract with HSI in
April '97. Sometime around May '97, Hunter stopped directing clips for F.M.
Rocks and started working for HSI.

Contending that the agreement between F.M. Rocks and Hunter "was not in
existence after January 3, '97," HSI attorneys stated in court records that
"accordingly HSi could not have interfered with the contract since HSI did not
have contact with Hunter until well after that date."

In a conversation with SHOOT, Merjos added that the option on Hunter was
"never upped" properly by F.M. Rocks. He said that any notification that the
option was being re-upped had to be made in writing, a contention also
articulated by HSI attorneys in company court filings.

However, F.M. Rocks asserted in court records that its oral notice to Hunter
satisfied terms of the agreement and that the option was properly and legally
exercised.

A Question Of Performance

HSI further contended that F.M. Rocks' option for an additional year of
Hunter's services was contingent on professional performance by both parties
to the F.M. Rocks contract, and on a "morals clause" that entitled either
party to terminate in the event of disreputable conduct on either's part.

Part of HSI's defense is that F.M. Rocks allegedly failed to pay vendors in a
timely manner, thus providing justification for Hunter to be excused from
working under the agreement and nullifying F.M. Rocks' right to exercise the
contract option.

F.M. Rocks refuted that argument, contending that the issue of supposedly
untimely payments to vendors (because record labels were not paying F.M. Rocks
on time) is irrelevant. "HSI cannot claim that F.M. Rocks should lose a year
of Hunter's services, and millions of dollars, because of alleged payment
problems that were unrelated to Hunter, and of which Hunter knew long prior to
joining F.M. Rocks in the first place," read an F.M. Rocks court filing. The
document went on to state that because the contract grants F.M. Rocks the
right to exercise an option, the language referring to professional conduct
"necessarily means that F.M. Rocks has the discretion to determine, based upon
Hunter's performance during the initial one-year term, whether or not F.M.
Rocks will extend the agreement." In essence, F.M. Rocks' legal counsel
contended that the contract extension hinged on the performance of Hunter, not
F.M. Rocks, since the company had a unilateral option.

HSI's Merjos disagreed, contending to SHOOT that F.M. Rocks' performance - or
alleged lack thereof - is relevant to the case. Merjos said that F.M. Rocks
was "negligent in their contract to begin with. They weren't handling
production well, crews weren't getting paid. As a result, he [Hunter] wasn't
able to get the crew people he wanted."

Director's POV

In a Dec. '97 deposition, Hunter contended that FM Rocks was not performing in
a professional manner. "It was starting to get to a point where people - my
clients, the labels that I was working for, were telling me that they didn't
want to work directly - didn't want to do any production through F.M. Rocks."
When asked for examples, Hunter could only provide one during his deposition:
Rap artist Scan "Puffy" Combs of Bad Boy Entertainment.

However, the Combs example was also cited by F.M. Rocks' legal counsel as
corroboration that Hunter realized he was working under a valid year-long
contract extension. F.M. Rocks related that in Feb. '97 (after it allegedly
exercised the option on Hunter's contract), Combs told Hunter that he wanted
him to direct his next video, "Hypnotize" - but Combs didn't want F.M. Rocks
to produce the clip. According to an F.M. Rocks' court filing, "Hunter, rather
than producing the video with another company and apparently knowing that he
was still under contract, insisted that Combs use F.M. Rocks."

HSI contended, though, that any F.M. Rocks-produced work directed by Hunter
after Jan. 3, '97, should not be construed as acceptance that the contract
option had been validly exercised. "Hunter did not direct [additional video
work] after expiration pursuant to any exercise of the option but rather only
on an at-will basis," read a court document filed by HSI attorneys.

Meanwhile, the rumor mill on this case has started to build in recent weeks,
with wildly fluctuating amounts being bandied about as to how much F.M. Rocks
is supposedly seeking in monetary damages. Speculation was that F.M. Rocks was
claiming as much as $5 million.

According to a court document, F.M. Rocks estimated that it "lost in excess of
$2 million as a result of the defendant's conduct." That estimate was
calculated by multiplying the average budget for Hunter's videos as of May '97
by the expected number of clips he would have directed for F.M. Rocks during
the remainder of the alleged contract extension. The estimate also included an
amount for income that would have been derived through the "trickle-down"
concept as well as "the increased prestige that F.M. Rocks would have enjoyed
as a result of having Hunter on its roster of directors." Finally, the
estimate also took into account "an amount for fees that would likely have
been realized through directors referred to F.M. Rocks by Hunter."

The alluded-to "trickle down" concept was defined by F.M. Rocks' legal counsel
as work intended for Hunter possibly being diverted to other company
directors. The plaintiff contended that if Hunter had stayed, "then record
labels may have asked for Paul Hunter to direct a video - and if he were not
available, then another F.M. Rocks director may have gotten the job."

Wheels In Motion

With the L.A. Superior Court trial in the offing, legal jockeying for what is
and isn't admissible was well underway. For example, HSI's legal team had
filed several motions in limine (Latin for "beginning"), requesting that
presiding Judge Irving Feffer rule that certain areas be off limits in that
they were not germane to the case. These included a defendant motion that F.M.
Rocks be "precluded from introducing evidence, argument or otherwise referring
to alleged instances of solicitation by HSI of music video directors other
than Paul Hunter."

Another HSI motion in limine also asked the judge to preclude any plaintiff
attempt to present, raise or introduce during trial any evidence of or
reference to an indemnity agreement between HSI and Hunter. When asked by
SHOOT about the indemnity - an issue which entails whether or not HSI had
agreed to indemnify Hunter against any legal liabilities - Merjos said he
generally wasn't in a position to answer questions regarding legal motions and
detailed aspects of the case. He referred SHOOT to HSI's aforementioned
in-house lawyer Winograd who declined comment.

A veteran legal expert not involved in this case but requesting anonymity
noted that in a business where disputes have been known to arise between or
even among production companies over directors, it's rare that such
disagreements end up having to be resolved in a court trial. "Negotiation,
compromise and settlement between the affected parties normally preclude any
extensive and costly litigation," he observed. "The feelings have to run
pretty deep to get to this point."

Apparently, one of the few points, if not the only point upon which plaintiff
and defendant can agree is that Hunter is a valued talent. He first
established himself in music videos at F.M. Rocks. And Merjos noted that that
the director has recently transitioned successfully into spots, citing several
shoots, most notably an HSI-produced Coca-Cola job for Edge Creative, Santa
Monica.

In addition to the L.A. Superior Court case, Hunter and F.M. Rocks have filed
actions against each other before the American Arbitration Association. At
press time, SHOOT could not ascertain the status of those arbitration
proceedings.