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Lieberfarb's Firing Outlined in Filing

24 May, 2005 By: Erik Gruenwedel

Warren Lieberfarb

Widely heralded as “Father of the DVD,” former Warner Home Video (WHV) president Warren Lieberfarb's sudden firing Dec. 11, 2002 by Warner Bros. chairman and CEO Barry Meyer left much of the home entertainment industry in the dark as to a motive and/or related details — until now.

In WHV's petition filed last week in Los Angeles Superior Court to create a claim in the State of California regarding Lieberfarb's ongoing $30 million wrongful termination case against the studio, details emerged of how the 28-year Warner senior executive was unceremoniously fired in the lobby of the Four Seasons Hotel in New York and allegedly locked out of his office nine days later.

Lieberfarb is seeking full payment of a five-year 2000 employment contract with WHV with monetary damages that include $4.3 million in unpaid salary, bonuses and consulting fees; $450,000 for an office and secretary through 2008; $375,000 in unfulfilled financial advisory services; $150,000 for a promised private screening room; a $45,000 car allowance; $36,700 in executive medical coverage; and a $25 million DVD cash bonus.

WHV, which paid Lieberfarb more than $10 million in severance, separately filed a counter claim to determine how much “money should be offset” from the executive's consultancy work and other “claimed damages.”

In the American Arbitration Association case and outlined in the superior court petition, Lieberfarb alleged he was pressured during contract negotiations into accepting AOL Time Warner stock options in lieu of a “special one-time cash bonus” of more than $25 million; passed over for promotion to head the studio's licensing unit (led at that time by Ed Bleier, recently elected as a Blockbuster Inc. board member); and denied the opportunity to create a home entertainment group at Warner Bros., among other claims.

Lieberfarb said he was promised by Warner Bros. executives (if he took the stock options) to be made “a very wealthy man with a once-in-a-lifetime reward.”

The former executive alleged he envisioned the DVD format as a mainstay to home entertainment's future growth and helped orchestrate a coalition of hardware manufacturers, IT companies and the studios to create the format. The suit claims Lieberfarb's pioneering efforts with DVD helped WHV grow revenue from $73 million in 1982 to $4 billion in 2002.

The suit said Lieberfarb's negotiations with Toshiba Corp. that pooled the two companies' DVD-related technology patents should realize Warner Bros. upwards of $500 million in revenue by 2007.

The suit claimed Lieberfarb's 250,000 shares of AOL Time Warner stock (in lieu of a cash bonus) valued at the time at $56 per share and part of the employment contract were rendered worthless in 2002 when the stock fell to $8.06 per share following a sharp decline in AOL's perceived value and its restatement of about $477 million in revenue and earnings.

A lawyer representing Lieberfarb called WHV's superior court petition “potentially unnecessary” and said the studio underestimated subpoena provisions of the Federal Arbitration Act that he said allow for third-party discovery in other states and overseas. Warner said it needs the State Superior Court jurisdiction in order to dispose witnesses in New York, the District of Columbia and overseas.

“We have subpoenaed people who were out of state and nobody objected,” Lieberfarb's attorney said. “I think some [legal] associate [representing WHV] decided he needed to do it because somebody might object [in the future].”

A final hearing in the arbitration case is scheduled for November.

Lawyers representing WHV were not available for comment.

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