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Disney Wins Skirmish in Suit Against Blockbuster

24 Jul, 2003 By: Kurt Indvik

A federal court judge has ruled that Buena Vista Home Entertainment can enforce a “liquidated damages” formula in the now defunct revenue-sharing plan between Buena Vista and Blockbuster Video that is the core of a legal dispute between the companies, that could result in Blockbuster having to pay Buena Vista millions in damages.

That formula, which Blockbuster argued was illegal, allows Buena Vista to place a value on any tape lost by taking the standard wholesale price of the video at the time of the contract less upfront fees. The companies ended their agreement in October 2001.

“The undisputed evidence shows that, at the formation of the revenue-sharing agreement, the standard wholesale distribution price of each video was $65, that such price was a reasonable estimate of the damages to plaintiff if any video was lost, stolen or not reasonably accounted for,” Judge Cormac J. Carney wrote in a tentative ruling.

Blockbuster can still dispute that figure in arguments before any determination of damages is finalized, should the judge eventually rule in Buena Vista's favor.

Buena Vista claimed in its suit that Blockbuster, in managing the revenue-sharing deal struck in 1997, improperly dedicated promotional and operational credits, failed to account for “hundreds of thousands” of “missing” videos that were not available for rental on shelves, and sold off 200,000 previously-viewed videocassettes earlier and in far greater numbers that the deal allowed. Buena Vista is seeking as much as $120 million in damages.

“We have a court dispute with Blockbuster growing out of our revenue-sharing contract, now expired, and while that contract was beneficial to both parties, there are aspects of it about which Blockbuster still owes BVHE quite a bit of money,” said a Buena Vista spokeswoman. “We are quite gratified that in its initial rulings, the court has already understood and validated a major part of our claim.”

Blockbuster contends Disney's claims “are without merit.”

“The effect of [the] ruling was to remove one of Blockbuster's defenses in the lawsuit filed against our company by Buena Vista regarding a revenue-sharing agreement between the two parties," Blockbuster spokesman Randy Hargrove said. "The ruling comes at an early stage in the proceedings and we look forward to having a full airing of the case on its merits at trial.”

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