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Producers Accuse Warner Bros. of Hiding ‘Smallville’ Profits in DC Comics

And the legal troubles surrounding Superman just keep coming for Warner Bros. Not only is the company in a never-ending battle over ownership for the character with the family of co-creator Jerry Siegel, but now it faces a new wrinkle in an entirely different lawsuit over royalties from the long-running Smallville TV show: Was DC Comics used as an excuse to shortchange the producers of the show by more than ten million dollars?Warner Bros. has been facing legal action from Smallville creators and executive producers Miles Millar and Alfred Gough, as well as the show’s production company Tollin/Robbins Productions since 2010, accused of both breach of contract as well as breach of good faith and fair dealing in regards to the deals between Warner Bros. TV (Smallville‘s studio) and the WB and CW networks. The initial complaint suggested that the corporate relationships between studio and networks — Time Warner being either one or the sole parent company of each party involved — resulted in “unreasonably low, below-market license fees” for the series’ transmission, which in return may have resulted in “tens of millions of dollars” in lost revenue for the producers of the show.

Now the plaintiffs have added a new allegation of double-dealing on Warners’ part, after discovering that DC Comics — a wholly-owned subsidiary of Time Warner and corporate sibling to Warner Bros. TV — was granted “Third Party Participation” in the gross receipts of the show by Warners in exchange for the rights to the character. According to the new court filing, DC received an estimated 5% of the gross earnings of Smallville across its ten year run, reducing Tollin/Robbins and Millar/Gough’s participation by “at least” $13.4 million, without their knowledge or authorization.

In response, Warners legal counsel claimed that Tollin/Robbins has known of this clause since 2003, referring to correspondence between the companies over the show’s third party participants in which DC was named. However, Tollin/Robbins was able to counter with internal emails between Warners executives a year later that not only suggests that matter was never finalized, but also warns that, should DC remain on the profit participation list for the show, “DC Comics will make over $20mm from Smallville (whole lot more than [Tollin/Robbins]).”

Despite complaint from Warners attorneys, a California judge this week allowed the plaintiffs to move forward with this new claim. The trial is currently set for an October 9, 2012 start date, although it’s possible that the new claim could lead to a delay being announced before then.

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