Gregg Araki’s Mysterious Skin is enmeshed in a court battle that has lead to the film’s new DVD edition.

BY ANTHONY KAUFMAN

Film distribution companies have been known to drop movies (see Picturehouse and Factotum; October Films and Happiness). But few filmmakers have dropped their distributors — until now. The producers of Gregg Araki’s Mysterious Skin, the L.A. filmmaker’s sharp and poignant feature about the ramifications of sexual abuse, filed a lawsuit against distributors Tartan Films USA and TLA Entertainment Group in November 2005. Several accusations and court proceedings later, Mysterious Skin is now coming to a Netflix queue near you, in a new “authorized” version designed by Araki himself and distributed by Strand Releasing.

This unusual scenario came as a result of a contentious dispute between the film’s producers and its original distributors, an ongoing litigious battle about money, power and delivery requirements. From Mysterious Skin producer Jeffrey Levy-Hinte’s point of view, it’s “a story about a filmmaker having the wherewithal to take on a distributor despite the profound power balance” that characterizes relationships between independent filmmakers and distributors.

Mysterious Skin was jointly acquired after its 2004 Toronto festival premiere by Tartan USA, a subsidiary of Hamish McAlpine’s U.K. distributor Tartan Films, and the company’s domestic video distributor, TLA Releasing. The contract was signed on Dec. 1, 2004, with Tartan/TLA agreeing to pay an advance minimum guarantee of $250,000 for U.S. rights “upon delivery,” or, as Levy-Hinte quotes from the contract, no later than the film’s “initial release in the territory.”

Released on May 6 by Tartan, Mysterious Skin received exuberant critical acclaim (“A gorgeous, heartbreaking and utterly convincing work of art” — the New York Times) and gross ticket receipts amounting to over $713,000. The video release date was set for Oct. 25.

But shortly after the film’s theatrical opening, producers and distributors began to bang heads. “By the time of the release, they had paid us $50,000 of the $250,000,” says Levy-Hinte. “We were asking politely, and then forcibly, for the money. They coughed up two more payments, paying a total of $175,000 by July.” On July 19 attorney Paul Brennan at Sloss Law Office, representing Mysterious Films, informed the distribution companies that they were in breach of contract, demanding payment in full. “Then they started making noises that we had not fully delivered,” says Levy-Hinte.

Delivery requirements can often be cause for distributors to abandon a movie before it’s been released (see Filmmaker’s winter 2006 Industry Beat column “How ‘Delivery Issues’ Led to Strangers With Candy and Factotum Getting Dropped by Their U.S. Distributors”). But few situations have arisen with delivery issues preventing distributors from paying up after a film’s opening.

With $75,000 still unpaid to the filmmakers by September, Levy-Hinte was “very upset,” he says, and ordered his lawyers to give Tartan/TLA a notice of termination of contract. (The distribution agreement between the parties included a termination clause allowing either side to terminate the agreement if a material breach remained uncured, says Levy-Hinte.) If the funds weren’t paid within 10 days, he threatened, their licensing agreement would be null and void. The companies didn’t pay, so on Sept. 19, as far as Levy-Hinte was concerned, Mysterious Skin no longer had a U.S. distributor.

“Then they realized this was serious,” says Levy-Hinte. “There were calls, letters; there were a couple of offers to settle if they paid us half of the amount. But frankly I didn’t want any of it. I felt like, You’re not going to distribute the film.” Three weeks later, on Oct. 11, Tartan/TLA finally paid the remaining $75,000, but not before Levy-Hinte’s attorneys had already determined the companies had no rights to the film.

On Oct. 14, Mysterious Films filed a complaint in U.S. District Court accusing Tartan/TLA of never acknowledging the contract’s termination and continuing to “engage in distribution activities, despite the fact that they no longer have a license to do so and in so doing, have engaged in copyright infringement.”

In a U.S. District Court in Los Angeles on Nov. 4, the two parties went to court. Tartan/TLA lawyers argued that they “rightfully delayed payment of the final $75,000,” according to court documents, “because Plaintiff [Mysterious Films] had failed to complete delivery of all materials,” citing, in particular, a lab access letter, as well as music licenses and an R-rated version of the video (the latter two of which are technically excluded from the delivery requirements).

In a record of the court proceedings, Judge A. Howard Matz shot down Tartan/TLA arguments. “I don’t understand and I don’t think the defendants have come close to establishing why the claim ‘failure to get the lab access letters’ entitles them to hold payment,” he said. The judge also called the R-rated version “largely a smokescreen.” “No retail chain actually required it,” he said. “The material has been distributed without it. How that can constitute a material breach escapes me.”

The court issued a preliminary injunction against Tartan/TLA from manufacturing, distributing or selling further copies of their DVD and requested any proceeds from existing DVDs be paid into an escrow account, pending resolution of the lawsuit. As of press time, the case will either settle out of court, go to a summary judgment (where a judge can rule on the matter definitively) or go to a jury trial later this year.

Reached for comment, Tartan USA’s MJ Peckos said, “We’re in litigation, and our position is that the producers breached the agreement by failing to fulfill their obligations. We are confident that when the facts are presented in court we will prevail.”

For all his troubles to retrieve $75,000 and terminate Tartan/TLA’s contract, Levy-Hinte estimates he’s spent up to $200,000 in attorney’s fees. In order for the injunction to be put into effect, he put up a bond of $250,000, and, additionally, the final $75,000 paid by Tartan/TLA went into an escrow account to be released once the case is settled as well.

Was it worth it?

“It’s important, because it speaks to how difficult it is for an independent producer to actually [challenge a distributor],” he says. “Most likely, what Tartan/TLA was banking on is that they’d kick us in the gut on one side, and then we’d roll over and they’d kick us on the other side and keep stomping us until they got their way.

“The importance of this lawsuit is that we can’t allow distributors to get away with this, because it happens all too often with these red herring delivery issues. They say, ‘I don’t want to pay you. What are you going to do, sue me?’ And fortunately we were in a position to do that, and we had a termination clause which was ironclad.”

In the middle of all the legal wrangling, Levy-Hinte managed to license the film to Strand Releasing, which has put together a new DVD that includes deleted scenes and audition tapes of the two lead actors. Strand Releasing’s Marcus Hu, who said he “had a kick working with Gregg on the DVD,” produced the new authorized disc by simply giving “[Araki] total control over everything, including the packaging and menu design.” But with 50,000 units of the TLA version already circulating around Amazon, Blockbusters and Netflix, Hu also admits a big payoff is unlikely at this point. “Obviously our willingness to do this was based on our long relationship with Gregg,” he says. “But over the term of the license period, I’m sure it’ll end up recouping.”

Araki himself has tried to stay away from the dispute. Contacted during a day off from shooting his next feature, Smiley Face, he says he’s just happy that a new “authorized version” of the Mysterious Skin DVD is out in the marketplace. “I think this lawsuit is unfortunate, and I wish it didn’t come to this,” he says. “But I’ve already moved on with my life.”