A Los Angeles Superior Court judge has overturned an arbitrator’s $128 million punitive damages award that was issued against Fox Entertainment over a profit participation scheme involving its long-running television series “Bones,” while leaving a $50 million non-punitive damages award in place. The broadcaster successfully argued before court that the arbitrator exceeded the scope of his power when he awarded punitive damages because such damages were barred by the parties’ arbitration agreement. The plaintiffs have since announced they plan to appeal the court’s order.
This decision is the latest in a saga stretching back to 2015, when the show’s creator, stars, and top producer sued Fox for allegedly underreporting the finances of “Bones” and cheating them out of millions of dollars. According to the plaintiffs, Fox used so-called “Hollywood accounting” to artificially deflate the profits of the show and allow Fox to avoid paying them despite the show’s success.
In 2016, the plaintiffs’ lawsuits were consolidated and sent to mandatory arbitration in accordance with various contracts signed by the plaintiffs. The show continued running until concluding its 12-season run in 2017. In February 2019, an arbitrator awarded the plaintiffs $50 million in actual damages, interest, fees, and costs. He also added $128 million in punitive damages after finding Fox executives lied, cheated, and committed fraud at the expense of the show’s stars and producers.
One example of Fox’s purported fraud involves a streaming deal the company reached with Hulu. When the deal was approved, Fox reportedly owned about 30 percent of the company and had the potential to exercise considerable control over Hulu. According to the arbitrator, Fox gave Hulu a sweetheart deal that resulted in Hulu being allowed to stream recently-aired “Bones” episodes for little to no compensation in return. In addition, the arbitrator found that the same Fox executive signed and represented both Fox and Hulu regarding the associated agreement. Due to such conduct, the arbitrator ruled the releases that were signed by the plaintiffs were void.
Should the arbitrator’s award be reinstated on appeal, it would be the second-largest damages award in entertainment industry history following a $319 million jury verdict that was issued against Disney Corporation, which officially purchased Fox Entertainment in 2019.