Richards Butler faces $1.8m lawsuit after films fail to get off the ground

HOLLYWOOD: failure of film with major Tinseltown stars leads to action against top City firm

City firm Richards Butler is being sued for up to $1.8 million (1.1 million) plus costs for alleged negligence over a dispute relating to Hollywood film flops.

In 1999, the firm allegedly acted on behalf of various reinsurance companies backing a US film production company - George Litto Pictures (Litto) - in a film-financing package worth more than $150 million.

One of these reinsurers was allegedly General Star International Indemnity.

Litto was originally going to make five films.

The first was called 'The Crew', starring Richard Dreyfus and Burt Reynolds.

It was described as a 'comic Goodfellas' about ageing mobsters avoiding eviction from a Miami Beach home.

It failed to make a big impact at the box office, and the next film - to star John Travolta - and the other three films were not made under the original financing agreement.

General Star is being pursued for $1.8 million in the US as a result of The Crew's failure at the box office.

The reinsurer is seeking indemnity from Richards Butler, alleging that the firm was negligent and/or in breach of contract, and failed to ensure its attention was drawn to onerous clauses in the producers' agreement and to alterations in the underlying financial backing for the project.

The pleadings claim that Richards Butler failed to alert General Star to issues addressed in a letter sent to the firm by another prospective insurer, through its City lawyers, Barlow Lyde & Gilbert.

That letter allegedly raised concerns about the transaction and the underlying documentation which allegedly dissuaded that insurer from entering the deal.

Ironically, Barlows is now acting for General Star in the litigation.

The pleadings also claim that Richards Butler owed a fiducary duty to reinsurers while giving advice to the film venture's reinsurance brokers, and that this raised a conflict of interest.

The brokers, co-defendants with Richards Butler in the current proceedings, failed in the High Court last month in their attempt to have the case heard in New York rather than London.

A Richards Butler spokesman said: 'The claims that are being made against us are being denied and vigorously defended.'

Jeremy Fleming