Mark Litwak has great excerpt from his book Risky Business on his Entertainment Law Newsletter today dealing with default by distributors. He begins:

Many years ago I represented a filmmaker who entered into an agreement with a small home-video distributor. The company had a decent reputation, and since there were no other offers for this $80,000 movie, a deal was struck. The filmmaker was promised a $40,000 advance for U.S. home video rights. The advance was payable in four installments over the course of a year. After the second installment was received, the distributor was acquired.

The new owners stopped making payments to my client. There was no question that the company owed another $20,000, and that my client had fulfilled all of his contractual obligations. The only excuse offered was that the company was experiencing “financial difficulties.” We suggested small monthly payments to retire the balance due. Payments were promised but never made.

Click on the link to read the rest, but if you are sick of bad indie film news, I’ll let you know that the story has a happy ending. In fact, what Litwak recommends — revoking a distributor’s rights for non-payment — is something that surprisingly few independent film producers and sales reps will ever do. Perhaps the reps worry about continuing to sell films to that same distributor; perhaps financiers don’t want to spend legal fees to recover what are usually small amounts. Occasionally, it happens, though. Several years ago Anthony Kaufman wrote for Filmmaker a piece about another film, Mysterious Skin, placed in a similar position. The Kids are All Right producer Jeff Levy-Hinte took his distributor to court, successfully fought their arguments that he hadn’t properly delivered the film, and won a similar judgement. (Also Bergen Swanson explored the related subject of producer default in the Winter of 2002 in an article entitled “What if Your Producer Goes Bankrupt.” )

For advice on this strategy as well as 14 solid tips on negotiating your distribution deal, visit Litwak’s Entertainment Law Resources newsletter. And to read about Mysterious Skin‘s saga, click on the link.