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An arbitrator has ordered Fox to pay $179 million to profit participants in the long-running drama series "Bones," finding that top executives lowballed revenue from the show and gave false testimony.
In his ruling, arbitrator Peter Lichtman blasted several Fox executives by name, including Dana Walden, Gary Newman and Peter Rice, saying they gave "false testimony in an attempt to conceal their wrongful acts." Lichtman held that Fox engaged in "intentional acts of fraud and malice," and showed a "cavalier attitude" toward the company's wrongdoing.
The case is the latest in a long line of self-dealing lawsuits in which profit participants assert that networks did not pay market rates to license shows because they were produced by a corporate sibling, in this case 20th Century Fox Television.
Lichtman awarded a whopping $128 million in punitive damages, finding the high amount "necessary to punish Fox for its reprehensible conduct and deter it from future wrongful conduct."
In a statement, 21st Century Fox strongly denied the allegations leveled against its executives by Lichtman and said it would appeal the decision.
"The ruling by this private arbitrator is categorically wrong on the merits and exceeded his arbitration powers," the company said. "Fox will not allow this flagrant injustice, riddled with errors and gratuitous character attacks, to stand and will vigorously challenge the ruling in a court of law."
Rice and Walden are set to take on senior roles at Disney upon the consummation of the merger with Fox. In a statement in response to the ruling, Disney CEO Bob Iger said he still has "complete confidence" in the executives.
"Peter Rice and Dana Walden are highly respected leaders in this industry, and we have complete confidence in their character and integrity," Iger said. "Disney had no involvement in the arbitration, and we understand the decision is being challenged and will leave it to the courts to decide the matter."
If it is upheld, the damages award would rank among the largest judgments in favor of profit participants in Hollywood history. In 2012, Disney lost an appeal of a $319 million award to the producers of "Who Wants to Be a Millionaire."
"Bones" aired on Fox from 2005 through 2017. The stars of the show, Emily Deschanel and David Boreanaz, sued Fox in 2015. They were joined by Kathy Reichs, the author of the novels on which the show was based, and Barry Josephson, the executive producer. The plaintiffs alleged that the 20th Century Fox TV studio agreed to below-market rates in licensing the show to Fox and later to Hulu for reruns. The participants maintain they were cheated out of tens of millions of dollars in profit participation because of those lowball deals.
Fox moved to handle the case through private arbitration.
In his ruling, Lichtman also accuses Fox of handing a generous production deal to former Fox executive Peter Liguori shortly before the arbitration hearing in order to secure his favorable testimony.
"If one juxtaposes the First Look Agreement with Mr. Liguori's testimony at the hearing... it seems coincidental that Mr. Liguori disappears for 9 years (from Fox's radar) and then magically reappears with a First Look Agreement 7 months before he is to testify in these proceedings with a deal in hand that most producers in Hollywood have strived to have their entire entertainment career," Lichtman wrote.
Sources close to FX described the claim as "outrageous" and false.
Liguori headed Fox at the time the series debuted in 2005. In 2009, he wrote a memo that may have outlined Fox's efforts to avoid self-dealing liability as Fox considered giving "Bones" a three-season renewal in 2009. Quotations from what is described as the "Legal Action Plan" memo are heavily redacted in the arbitration filing. Liguori left his post as chairman of Fox Broadcasting in 2009, amid a shakeup in the TV division.
Lichtman also held that Fox executives were deceptive in testifying about the process of determining a license fee for "Bones."
"The testimony of both Mr. Newman and Ms. Walden regarding 'marketplace information' is not only troubling but extremely disconcerting," the arbitrator states. "The more these individuals testified the more incredulous their testimony appeared."
Lichtman issued the ruling on Feb. 4. Attorneys for the profit participants filed a petition Wednesday to confirm the award.
Boreanaz released a statement, saying "I loved working on Bones with such an incredible cast and crew - and I will not allow this legal process to sour those wonderful memories. But as you look at the ruling, it's clear that what we were saying all along was true: we were owed additional compensation for our work. Now I can only hope that Fox is made to settle its obligations to us without further delay."
Deschanel also issued a statement: "We are so proud of the hard work we did on Bones for 12 seasons and only ever wanted Fox to live up to its promises and contractual obligations. I am grateful that such a well-respected arbitrator reviewed the facts so thoroughly before ruling the way he did. I look forward to the legal system continuing to hold Fox accountable so that we can all move forward."