EXCLUSIVE: Hell on Wheels, starring Anson Mount, ran for five seasons on AMC and became one of the network’s biggest hits. Twelve years on the western drama about the construction of the first transcontinental railroad across the U.S., is at the center of a legal dispute between the for-sale eOne and Banijay’s Endemol.
Endemol USA is suing eOne for breach of contract, breach of the implied covenant of good faith and fair dealing and unjust enrichment and is looking for “millions of dollars in back-end compensation.
Tax credits are in the middle of the dispute.
The Banijay-owned producer says that it created and developed the series and sold it to AMC in the U.S. before engaging eOne to produce the series in Canada and entrusted eOne to distribute in certain international territories.
“An inspection of eOne’s books reveals, however, that eOne took advantage of its role, kept for itself tens of millions of dollars in production tax subsidies, and shortchanged Endemol in numerous ways. For many months—starting long before eOne’s parent announced its plans to sell eOne—Endemol has tried to resolve its claims. Endemol turns to this Court to obtain the compensation eOne promised but has refused to pay,” the company said in its lawsuit filed in the Superior Court of the State of California Count of LA Central District.
The timing is not ideal for eOne, which is in the process of being sold. Last month, Deadline revealed that Lionsgate, Legendary, private equity firm CVC Capital Partners and distributor GoDigital Media Group were in talks to acquire a majority stake in the company.
Endemol says Hell on Wheels “fell into eOne’s lap” as it was looking for a Canadian company to physically produce it.
It noted that at the time, Canada and the Province of Alberta were incentivizing the filming of such shows and wanted to score the tax credit.
The two companies agreed eOne would distribute the series in some territories outside of the U.S. and in the U.S. after AMC’s license ended, while Endemol would distribute the series in Europe.
The AMC license fee, the Canadian tax credits, and Endemol’s contribution covered most of the production costs. eOne covered the remaining balance and oversaw production.
In return, Endemol says, eOne agreed to assume AMC’s obligation to pay Endemol 7.5% of the modified adjusted gross receipts” and 20% of the net profits.
This is where the problems began.
Endemol says that as a result of the financial performance of the series, which streamed on Netflix for six years, Endemol is entitled to millions of dollars. After investigating, it claims that eOne had “failed to take into account any of the millions of dollars in tax credits it received from production of the Series in Canada, even though Endemol brought eOne into the Series to secure those credits to reduce the cost of production. Endemol uncovered millions more in underreported revenue and overstated expenses”.
It added, “Although eOne has only recently and begrudgingly paid Endemol a small portion of what it owes for Hell On Wheels, eOne has refused to budge on significant issues, including the production tax credits.”
We’ll see how this lawsuit progresses down the tracks.
Banijay, Endemol and eOne declined to comment.