Surprise settlement in Grace case

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The two creators of Will & Grace have reached an out-of-court settlement with NBC Studios in their highly publicized profit participation trial.

The surprising settlement Friday followed a roller-coaster day Thursday, which began with an unpublicized $48.5 million verdict in favor of Max Mutchnick and David Kohan and went through a motion for mistrial, a juror dismissal, and tossing of the verdict.

The day ended with the two parties huddled in the office of former Walt Disney Co. general counsel Lou Meisinger, who served as the mediator on the case.

After an all-night negotiation, they emerged with an agreement Friday morning, minutes before Los Angeles Superior Court Judge Warren Ettinger was to announce his decision to either grant the motion and declare a mistrial or send the case back to the jury with an alternate juror taking the place of removed foreman Dean Hartwell.

After Ettinger was told of the settlement, he dismissed the case. Terms of the settlement were not released.

If Thursday seemed much like a suspenseful episode of a courtroom drama with its surprising twists and turns, Friday resembled an installment of Deal or No Deal. With the case over, jury members shared information on the verdict, giving each side a chance to see how good a deal they made with the last-minute settlement.

As Ettinger hinted Thursday, the verdict had gone for Mutchnick, Kohan, and their agent Scott Schwartz, who filed the suit in 2003, claiming that NBC Studios failed to negotiate a fair licensing fee for the show with sister network NBC, costing them about $65 million in lost revenue.

Several jurors confirmed Friday that that they had awarded $48.5 million to Mutchnick, Kohan, and Schwartz in compensatory damages.

Moreover, the jury found that the evidence of fraud was sufficient to move to the punitive damages phase, where NBC would have been potentially required to pay much more.

"We're very satisfied with the settlement," said Ronald Nessim, Kohan and Mutchnick's attorney. "Despite the fact that the judge excluded our most powerful evidence, the jury found fraud by clear and convincing evidence."

Jurors interviewed Friday said they based their decision largely on testimony from a trio of witnesses for the Grace writer-producers: entertainment auditor Elaine Douglas and Kohan and Mutchnick's attorneys on the deal with the studio, Bob Getman and Jim Jackoway.

The jurors' favorable opinion of Getman and Jackoway was crucial because a key part of NBC Studios' defense was claiming that the two refused the invitation to participate in the license renegotiations between the studio and NBC.

"We believed their testimony," juror Brian Hewett said. "NBC did not live up to its obligations, (and) we believe we made the right decision."

The jury determined the size of the monetary award based primarily on numbers provided by Douglas in her testimony, Hewett said.

As for Hartwell--who was removed from the jury for not disclosing that he operates a Web site that includes writings critical of big corporations, including NBC and its parent, General Electric--he didn't taint the jury's decision, other jurors said.

"He didn't influence anyone in any matter," juror Rick Gonzales said. "He was really passive."

Added Hewett: "Dean was very quiet and reserved. He did not control any of the deliberations."

NBC Studios lead attorney Henry Shields was not so sure.

"With juror misconduct like this, the case law demanded that a mistrial be declared," he said. "The best-case scenario was that the jury would have had to begin deliberations anew. You can never tell what kind of influence the jury foreperson has. You just don't know."

Despite the fact that the verdict was never entered, the Grace case is the first in which a jury has determined that a studio committed fraud in licensing a show to a sibling network. Most previous cases involving profit participants--including Steven Bochco, David Duchovny, and Home Improvement producer Wind Dancer Prods., who sued vertically integrated companies for failing to negotiate fair license fees at arm's length--were settled before the case went to trial. NBC had won a previous case over the series Profiler.

"Every day there was a new surprise in this case," said Nessim, who handles mostly white-collar criminal cases rather than entertainment. "It was a three-year battle, and everything was a fight."

Reaching a settlement after there is a verdict in a trial is also very rare. Also in a rare move, the settlement in the Grace case came after both sides agreed that Ettinger should open the sealed envelope containing the verdict form and review it, grappling with NBC Studios' last-minute mistrial motion based on Hartwell's alleged misconduct. A verdict in favor of NBC Studios would have made the motion irrelevant. Ettinger's decision to proceed with the motion was an indication that the verdict might have gone for Kohan and Mutchnick. That, in turn, might have influenced NBC's decision to go for a settlement.

"This is one of the most unusual cases I've been involved in," Shields said. "How the case developed--with the opposing sides filing two or three motions for a mistrial early on, and then the issue of juror misconduct--I've never experienced that, and I haven't heard any war stories about this happening."

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