Nu Image

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SHEPPARD, MULLIN, RICHTER & HAMPTON LLP

A Limited Liability Partnership
Including Professional Corporations
MARTIN D. KATZ, Cal. Bar No. 110681
RICHARD W. KOPENHEFER, Cal. Bar. No. 119288
1901 Avenue of the Stars, Suite 1600
Los Angeles, California 90067-6055
Telephone: 310.228.3700
Facsimile: 310.228.3701
mkatz@sheppardmullin.com
rkopenhefer@sheppardmullin.com
Attorneys for Plaintiff
7 NU IMAGE, INC.
8
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
10
NU IMAGE, INC., a California
11 corporation,
12
13
Plaintiff,
v.
14 INTERNATIONAL ALLIANCE OF
THEATRICAL STAGE EMPLOYEES,
15 MOVING PICTURE TECHNICIANS,
ARTISTS AND ALLIED CRAFTS OF
16 THE UNITED STATES, ITS
TERRITORIES AND CANADA, AFL-
Case No.: 2:15-CV-05704

NU IMAGE, INC.S COMPLAINT
FOR:
(1) INTENTIONAL
MISREPRESENTATION;
(2) NEGLIGENT
MISREPRESENTATION; AND
(3) DECLARATORY RELIEF
17 CIO, CLC,
18
Defendant.
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SMRH:439102288.2
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PARTIES
1
2
1.
Plaintiff Nu Image, Inc. (Nu Image) is a California corporation with
3 its principal place of business in Los Angeles, California.

4
2.
Based on information and belief, Defendant International Alliance of
5 Theatrical Stage Employees, Moving Picture Technicians, Artists and Allied Crafts
6 of the United States, Its Territories and Canada, AFL-CIO, CLC (IATSE) is an
7 unincorporated labor organization with its principal place of business in New York,
8 New York.
JURISDICTION AND VENUE
9
10
3.
This Court has jurisdiction over the subject matter of this action
11 pursuant to Section 301(a) of the Labor Management Relations Act (LMRA) [29
12 U.S.C. 185(a)]. This action arises from IATSEs representations to Nu Image that
13 if Nu Image entered into a collective bargaining agreement (CBA) with IATSE,
14 Nu Image would not be obligated to pay Residual Contributions as provided in the
15 Producer-IATSE and MPTAAC Basic Agreement (Basic Agreement). IATSE
16 made these representations with the intention of inducing Nu Image into entering
17 into a CBA, and Nu Image reasonably relied on those representations. Nevertheless,
18 the Motion Picture Industry Health and Pension Plans (Plans) have claimed, and
19 IATSE now claims, that Nu Image breached the CBA that it entered into in 2006 by
20 failing to pay Residual Contributions, which has caused substantial damage to Nu
21 Image.
22
4.
This Court has jurisdiction over IATSE, without regard to the amount
23 in controversy or the citizenship of the parties, pursuant to Section 301(a) of the

24 LMRA [29 U.S.C. 185(a)].
25
5.
Venue is proper in this district pursuant to 28 U.S.C. 1391(b) because
26 a substantial part of the events or omissions giving rise to the claims asserted herein
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1 and, in particular, the misrepresentations committed by IATSE occurred in this

2 district.
SUMMARY
3
4
6.
Nu Image is a full-service independent production company that
5 produces and markets motion pictures domestically and internationally. Nu Image,

6 together with its subsidiary Millennium Films, develops, finances, produces and
7 sells between ten and fifteen motion pictures each year. Nu Image, like most other
8 independent producers, earns revenues on its motion pictures by licensing
9 distribution rights to third parties.
10
7.
Nu Image operated as a non-union independent production company
11 for years. In April 2006, Nu Image and IATSE entered into negotiations for a CBA
12 that would apply to all Nu Image productions.
During these negotiations, top
13 IATSE officials made representations to Nu Image that it would not be obligated to

14 pay Residual Contributions to the Plans. Without these representations, Nu Image
15 would not have entered into the CBA with IATSE. However, these representations
16 were false and they were made to induce Nu Image to enter into the CBA.
17
8.
Relying on IATSEs representations, Nu Image did not pay Residual
18 Contributions to the Plans. Then, in May 2013, the Plans sued Nu Image to collect
19 delinquent Residual Contributions under the CBA. Due to federal labor law,
20 which prohibits an employer from asserting fraud in the inducement as a defense in
21 actions brought by employee welfare or pension benefit plans, Nu Image had limited
22 defenses to the claims brought by the Plans. Accordingly, Nu Image settled with the
23 Plans and is now suing IATSE in this action to recover the amounts it paid to the
24 Plans, as well as for other damages resulting from their misrepresentations, and for
25 declaratory relief.
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-2SMRH:439102288.2
GENERAL ALLEGATIONS
Background On IATSE
9.
IATSE is a labor organization that represents a large portion of motion
4 picture production crew members in the United States.
Generally, when an
5 employer agrees to enter into a CBA with IATSE, the employer agrees to be bound
6 by the terms of the Basic Agreement, which is the standard agreement negotiated by
7 IATSE and major motion picture production studios.
However, independent
8 producers, such as Nu Image, were not involved in these negotiations. As a result,

9 the Basic Agreement was not drafted with the business model of independent
10 producers in mind.
10.
11
When an employer agrees to a CBA with IATSE, the employer also
12 signs the Trust Acceptance Agreement and Agreement of Consent (Trust

13 Agreements), which purport to bind the employer to the terms of the Declarations
14 of Trust governing the Plans.
11.
15
Certain of the provisions of the Basic Agreement purport to require that
16 an employer remit contributions to the Plans. Included in these contributions are

17 Residual Contributions, which derive from revenues that a producer earns from
18 the exploitation of its motion pictures in secondary markets, such as free
19 television, cassettes, DVDs or pay television.1
12.
20
The Directors of the Plans (Directors) oversee the management and
21 administration of the Plans. If the Directors believe that an employer has failed to
22 make proper contributions, the Directors have authority to file a lawsuit to recover
23 unpaid contributions.
24
25
1
The Residual Contribution provisions in the 2006 Basic Agreement are set
forth in Article XIX (Post 60 Theatrical Motion Pictures) and Article XXVIII
27 (Supplemental Markets).
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1
2
Nu Image And IATSEs Relationship Between 1995 And 2006

13.
Prior to 2006, Nu Image and IATSE had not agreed to an overall CBA
3 that would govern Nu Images productions (an Overall CBA).
As a result,
4 between 1995 and 2006, IATSE organized campaigns designed to persuade Nu

5 Image into signing a CBA with IATSE. These campaigns involved picketing Nu
6 Image productions, harassing Nu Image employees and threatening Nu Image
7 executives with violence if Nu Image did not sign a CBA with IATSE.
8
14.
Although Nu Image refused to enter into an Overall CBA, IATSEs
9 campaigns sometimes forced Nu Image to modify its productions and agree to a

10 CBA on a per-motion picture basis (Single-Production CBAs). IATSE and Nu
11 Image entered into these Single-Production CBAs for various productions over the
12 course of a decade.
13
15.
The Single-Production CBAs purported to incorporate the terms of the
14 Basic Agreement and related Trust Agreements, and accordingly, the Basic
15 Agreements Residual Contribution provisions.
16
16.
However, Nu Image never paid Residual Contributions in connection
17 with the Single-Production CBAs. It was Nu Images understanding when it entered

18 into Single-Production CBAs that independent producers were not required to and
19 did not typically pay Residual Contributions to the Plans. Accordingly, Nu Image
20 did not pay Residual Contributions in connection with Single-Production CBAs and
21 IATSE and the Plans did not request the payment of Residual Contributions in
22 connection therewith.
23
The 2006 CBA Negotiations And Nu Images Reliance
24
On The Representations By IATSE
25
17.
In 2006, Nu Image grew tired of IATSEs campaigns interfering with
26 its motion picture productions. Accordingly, Nu Image decided that it would be

27 prudent to enter into negotiations with IATSE for an Overall CBA.
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18.
Even though Nu Image was willing to enter negotiations with IATSE,
2 Nu Image made it abundantly clear that it would not agree to an Overall CBA if it
3 were required to remit Residual Contribution payments to the Plans. On at least two
4 occasions, IATSE assured Nu Image that it would not have to make such
5 contributions.
The events surrounding the representations made by IATSE are
6 described in more detail below.

7
19.
On April 19, 2006, Nu Image executives Avi Lerner (CEO), Trevor
8 Short (CFO) and John Thompson (Head of Production) met with IATSEs Matthew
9 Loeb and Michael Miller, Jr., at Solleys Deli in Sherman Oaks, California. At that
10 time, Loeb was an IATSE Vice President and soon-to-be Director of the Plans, and
11 Miller was an IATSE Vice President and Director of the Plans. Loeb later became
12 IATSEs International President.
13
20.
At the April 19, 2006 meeting, Short (Trevor) and Lerner explained
14 that Nu Images business model made it virtually impossible to pay Residual

15 Contributions and, at the same time, operate profitably. Short (Trevor) and Lerner
16 sought confirmation from Loeb and Miller that the Residual Contribution provisions
17 of the Basic Agreement would not apply to Nu Image. Short (Trevor) and Lerner
18 also made it clear that without this confirmation, Nu Image would not agree to an
19 Overall CBA.
20
21.
Loeb stated at the April 19, 2006 meeting that:
(a) the Residual
21 Contribution provisions of the Basic Agreement were not applied to independent

22 producers; and (b) as a result, IATSE and the Plans had not previously sought
23 residual contributions from Nu Image in connection with the Single-Production
24 CBAs. Loeb then represented that neither IATSE nor the Plans would seek Residual
25 Contributions in the future under the Overall CBA, just as they had not sought those
26 contributions in the past from Nu Image in connection with the Single-Production
27 CBAs or from other independent producers.
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22.
At the April 19, 2006 meeting, Miller also stated that Nu Image would
2 not be liable for Residual Contributions under the Overall CBA. Nor did Miller
3 object to or contradict Loebs representations at this meeting.
23.
Neither Loeb nor Miller stated that they lacked authority to make these
5 representations on behalf of IATSE and the Plans. Indeed, to the contrary, their
6 presence at the meeting led Nu Image to reasonably believe that Loeb and Miller
7 had authority to make the representations described above.
24.
Shortly after the Solleys meeting, IATSE and Nu Image met again to
9 discuss the Overall CBA, again in Sherman Oaks, California. At this meeting,
10 Lerner and Short (Trevor) met with IATSEs International President and Director of
11 the Plans, Thomas Short. Short (Thomas) confirmed to Short (Trevor) and Lerner
12 that Nu Image would not be asked to pay Residual Contributions under the Overall
13 CBA. As Loeb had stated at the Solleys Deli meeting, Short (Thomas) referenced
14 the Single-Production CBAs with Nu Image and noted that Nu Image had not paid
15 and did not have to pay Residual Contributions. Short (Thomas) further represented
16 that, like other independent producers, Nu Image would not have to pay Residual
17 Contributions in the future in connection with the Overall CBA.
25.
18
IATSE made the representations described above knowing they were
19 false or in reckless disregard for the truth.
26.
20
In May 2006, in reliance on IATSEs representations that it would not
21 have to pay Residual Contributions in the future, Nu Image agreed to enter into an
22 Overall CBA, which purports to incorporate the Basic Agreements Residual
23 Contribution provisions.2
In addition, Nu Image subsequently made significant
24
2
Nu Image also entered into a written guarantee agreement with IATSE

pursuant to which Nu Image agreed that if it made a motion picture using one of its
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controlled, single-purpose entities (which Nu Image almost always used), then Nu
27 Image would cause the controlled entity to sign the then current Basic Agreement.
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1 business decisions based on the representations made by IATSE, including making

2 motion pictures that were governed by the Overall CBA. Nu Images reliance on
3 IATSEs representations was entirely reasonable, especially given: (1) Nu Image
4 was told the Residual Contribution provisions did not apply to independent
5 producers; (2) the parties had worked together for over a decade during which Nu
6 Image never paid a Residual Contribution, and neither IATSE nor the Plans asked it
7 to do so; and (3) the representations concerning Residual Contributions described
8 above were made by top IATSE officials.
9
27.
Consistent with the foregoing and in reliance thereon, between 2006
10 and 2009, Nu Image did not pay any Residual Contributions. Further, during that
11 time frame, neither IATSE nor the Plans took the position that Nu Image was
12 obligated to remit Residual Contributions to the Plans.
13
Nu Image Is Damaged By
14
The Misrepresentations Made By IATSE
15
28.
As described more fully below, as a direct result of IATSEs
16 misrepresentations, Nu Image has suffered massive damages.

17
29.
On or about May 13, 2013, the Directors sued Nu Image on behalf of
18 the Plans for breach of the Overall CBA, asserting that, among other things, Nu
19 Image violated ERISA Section 515, 29 U.S.C. 1145, by failing to make Residual
20 Contributions to the Plans. In the lawsuit, the Directors claimed that Nu Image
21 owed the Plans Residual Contributions for the period May 1, 2006 through
22 December 31, 2010.
23
30.
On September 26, 2013, Nu Image asked IATSE to inform the
24 Directors that Nu Image was not required to pay Residual Contributions under the
25 Overall CBA and that the Plans demand for such payments was erroneous. On
26 October 2, 2013, IATSE denied that any oral representations had been made and
27 refused to correct the Plans misunderstanding of the basis on which Nu Image
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1 signed the Overall CBA.
Accordingly, the Plans continued with the lawsuit
2 described above.
3
31.
On or around February 4, 2015, the Directors and Nu Image entered
4 into a confidential settlement agreement regarding the May 13, 2013 lawsuit.
5
32.
Nu Image incurred significant amounts of money to defend against and
6 settle the lawsuit brought by the Directors on behalf of the Plans.

7
33.
The Directors also filed a second lawsuit against Nu Image, alleging
8 essentially the same claims as those asserted in the first lawsuit but for the time
9 period January 1, 2011 through December 31, 2014.
The second lawsuit was
10 dismissed pending the Plans further audit of Nu Image. Accordingly, as a direct

11 result of IATSEs misrepresentations, Nu Image also faces claims by the Directors
12 for allegedly delinquent Residual Contributions for later time periods.
13
34.
The amount of damages suffered by Nu Image will be proven at the
14 time of trial, but Nu Image estimates that its damages will total in excess of five
15 million dollars.
16
CLAIMS FOR RELIEF
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FIRST CLAIM FOR RELIEF
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(Intentional Misrepresentation)
19
35.
Nu Image expressly incorporates the allegations set forth above in
20 Paragraphs 1-34.
21
36.
As more fully described above in Paragraphs 3 and 1924, IATSE
22 represented to Nu Image that: (a) the Residual Contribution provisions of the Basic
23 Agreement are not applied to independent producers; and (b) the Residual
24 Contribution provisions of the Basic Agreement would not apply to Nu Image if Nu
25 Image entered into an Overall CBA with IATSE.
26
37.
IATSEs representations were false when they were made.
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38.
IATSE either knew its representations were false when they were made
2 or it made them in reckless disregard for the truth.

3
39.
IATSE intended that Nu Image rely on its misrepresentations.
40.
Nu Image reasonably relied on IATSEs misrepresentations by, among
5 other things, agreeing to the Overall CBA and producing motion pictures under the
6 Overall CBA. If Nu Image had known it would have to pay Residual Contributions,
7 it would not have agreed to the Overall CBA or it would have produced these
8 motion pictures in locations outside the reach of the Overall CBA.
9
41.
As a direct and proximate result of IATSEs misrepresentations and Nu
10 Images reasonable reliance thereon, Nu Image has been damaged as alleged in

11 Paragraphs 2834. The precise amount of such damages will be proven at the time
12 of trial.
13
42.
IATSEs conduct, as alleged herein, was done intentionally, willfully,
14 maliciously, unconscionably and with wanton disregard for the rights of Nu Image,
15 and was engaged in for the purpose of benefitting IATSE and injuring Nu Image,
16 which has subjected Nu Image to cruel and unjust hardship, and was performed with
17 such malice so as to justify an award of exemplary or punitive damages in an
18 amount according to proof at trial.
19
SECOND CLAIM FOR RELIEF
20
(Negligent Misrepresentation)
21
43.
22 Paragraphs 1-34.
23
44.
To the extent that IATSEs representations as alleged in this Complaint,
24 and specifically above in Paragraphs 3 and 1924, were not made intentionally to
25 deceive Nu Image, then IATSE had no reasonable grounds for believing that its
26 representations were true when made.
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45.
IATSE intended that Nu Image would rely on its misrepresentations.
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46.
Nu Image reasonably relied on IATSEs misrepresentations by, among
2 other things, agreeing to the Overall CBA and producing motion pictures under the
3 Overall CBA. If Nu Image had known it would have to pay Residual Contributions,
4 it would not have agreed to the Overall CBA or it would have produced these
5 motion pictures in locations outside the reach of the Overall CBA.
6
47.
As a direct and proximate result of IATSEs misrepresentations and Nu
7 Images reasonable reliance thereon, Nu Image has been damaged as alleged in

8 Paragraphs 2834. The precise amount of such damages will be proven at the time
9 of trial.
10
THIRD CLAIM FOR RELIEF
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(Declaratory Relief)
12
48.
13 Paragraphs 1-34.
14
49.
There exists an actual controversy between Nu Image, on the one hand,
15 and IATSE, on the other hand, relating to the intended application of the Residual
16 Contribution provisions of the Basic Agreement and IATSEs obligation to
17 indemnify or otherwise compensate Nu Image for any exposure it has to the Plans
18 arising from the non-payment of Residual Contributions. Specifically, Nu Image
19 contends that the Residual Contribution provisions in the Basic Agreement do not
20 apply to Nu Image and that IATSE is obligated to indemnify or otherwise
21 compensate Nu Image for any liability it incurs in the future to the Plans arising
22 from the non-payment of Residual Contributions and for the cost of defending
23 against any further lawsuit brought by the Plans seeking Residual Contributions.
24 IATSE contends that the Residual Contributions apply to Nu Image and that it has
25 no such obligation.
26
50.
Accordingly, Nu Image requests a judicial determination that Nu
27 Images contentions, as set forth above, are correct, and that IATSE is obligated to
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1 indemnify or otherwise compensate Nu Image for any liability it incurs in the future
2 to the Plans arising from the non-payment of Residual Contributions and for the cost
3 of defending against any further lawsuit brought by the Plans seeking Residual
4 Contributions.
5
WHEREFORE, Nu Image prays for judgment against IATSE as follows:
On The First Claim For Relief:
(a)
For compensatory damages according to proof at trial;
(b)
For exemplary or punitive damages according to proof at trial;
(c)
For reformation of the Overall CBA to expressly provide that the
10 Residual Contribution provisions of the Basic Agreement do not apply to Nu Image.

11
On The Second Claim For Relief:
12
(a)
For compensatory damages according to proof at trial;
13
(b)
For reformation of the Overall CBA to expressly provide that the
14 Residual Contribution provisions of the Basic Agreement do not apply to Nu Image.

15
On The Third Claim For Relief:
16
(a)
For a judicial determination that the Residual Contribution provisions
17 in the Basic Agreement do not apply to Nu Image and that IATSE is obligated to
18 indemnify or otherwise compensate Nu Image for any liability it incurs in the future
19 to the Plans arising from the non-payment of Residual Contributions and for the cost
20 of defending against any further lawsuit brought by the Plans seeking Residual
21 Contributions.
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On All Claims For Relief:
(a)
For the costs incurred in this lawsuit;
(b)
For such other and further relief as this Court deems just and proper.
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5 Dated: July 28, 2015
SHEPPARD, MULLIN, RICHTER & HAMPTON
LLP
By
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/s/ Martin D. Katz

MARTIN D. KATZ
RICHARD W. KOPENHEFER
Attorneys for Plaintiff
NU IMAGE, INC.
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SHEPPARD, MULLIN, RICHTER & HAMPTON LLP

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

NU IMAGE, INC., a California

THEATRICAL STAGE EMPLOYEES,

15 MOVING PICTURE TECHNICIANS,

ARTISTS AND ALLIED CRAFTS OF

16 THE UNITED STATES, ITS

TERRITORIES AND CANADA, AFL-

Case No.: 2:15-CV-05704

NU IMAGE, INC.S COMPLAINT

Plaintiff Nu Image, Inc. (Nu Image) is a California corporation with

3 its principal place of business in Los Angeles, California.

Based on information and belief, Defendant International Alliance of

JURISDICTION AND VENUE

23 in controversy or the citizenship of the parties, pursuant to Section 301(a) of the

Venue is proper in this district pursuant to 28 U.S.C. 1391(b) because

NU IMAGE, INC.S COMPLAINT

1 and, in particular, the misrepresentations committed by IATSE occurred in this

Nu Image is a full-service independent production company that

5 produces and markets motion pictures domestically and internationally. Nu Image,

Nu Image operated as a non-union independent production company

During these negotiations, top

13 IATSE officials made representations to Nu Image that it would not be obligated to

Relying on IATSEs representations, Nu Image did not pay Residual

NU IMAGE, INC.S COMPLAINT

IATSE is a labor organization that represents a large portion of motion

4 picture production crew members in the United States.

8 producers, such as Nu Image, were not involved in these negotiations. As a result,

When an employer agrees to a CBA with IATSE, the employer also

12 signs the Trust Acceptance Agreement and Agreement of Consent (Trust

Certain of the provisions of the Basic Agreement purport to require that

16 an employer remit contributions to the Plans. Included in these contributions are

The Directors of the Plans (Directors) oversee the management and

NU IMAGE, INC.S COMPLAINT

Nu Image And IATSEs Relationship Between 1995 And 2006

3 that would govern Nu Images productions (an Overall CBA).

4 between 1995 and 2006, IATSE organized campaigns designed to persuade Nu

Although Nu Image refused to enter into an Overall CBA, IATSEs

9 campaigns sometimes forced Nu Image to modify its productions and agree to a

The Single-Production CBAs purported to incorporate the terms of the

However, Nu Image never paid Residual Contributions in connection

17 with the Single-Production CBAs. It was Nu Images understanding when it entered

The 2006 CBA Negotiations And Nu Images Reliance

On The Representations By IATSE

In 2006, Nu Image grew tired of IATSEs campaigns interfering with

26 its motion picture productions. Accordingly, Nu Image decided that it would be

NU IMAGE, INC.S COMPLAINT

Even though Nu Image was willing to enter negotiations with IATSE,

The events surrounding the representations made by IATSE are

6 described in more detail below.

On April 19, 2006, Nu Image executives Avi Lerner (CEO), Trevor

14 that Nu Images business model made it virtually impossible to pay Residual

Loeb stated at the April 19, 2006 meeting that:

(a) the Residual

21 Contribution provisions of the Basic Agreement were not applied to independent

NU IMAGE, INC.S COMPLAINT

IATSE made the representations described above knowing they were

19 false or in reckless disregard for the truth.

In May 2006, in reliance on IATSEs representations that it would not

In addition, Nu Image subsequently made significant

Nu Image also entered into a written guarantee agreement with IATSE