In a countersuit filed in U.S. District Court in Los Angeles on Monday (August 1), Discovery Communications is alleging that LMNO Productions execs exploited their long-standing relationship with the company by devising “a scheme designed to systematically and repeatedly overcharge and defraud Discovery.”
The filing, which was shared with realscreen, is a response to the US$7 million lawsuit LMNO filed in June accusing Discovery of copyright infringement, breach of contract and attempting to “steal” such titles as TLC’s The Little Couple (pictured) by creating unauthorized derivative works.
After news broke of LMNO filing its suit against Discovery, the global media company confirmed it had terminated certain of its contracts with the prodco, including those for The Little Couple and 7 Little Johnstons for TLC; and Unusual Suspects, Killer Confessions, Hollywood & Crime and Speaking for the Dead for ID.
Discovery’s countersuit claims that LMNO kept two sets of books and overstated production budgets in order to get the company to foot the entire bill for both fully commissioned programs and copros for which the two parties agreed to split costs and rights.
In the filing, Discovery says, “These false budgets went far beyond ‘padding,’ or generous but good-faith estimates of actual costs, and instead routinely and intentionally overstated the actual costs of production by more than 30%.”
LMNO is also suing its former accountant, alleging extortion, embezzlement and attempting to ruin the producer’s relationship with Discovery by presenting the company with doctored books.
In its lawsuit, LMNO maintains it is the creator, registered owner and author of The Little Couple. Discovery claims in its answer to LMNO’s complaint that it is the “registered owner.”
On June 30, FBI agents raided LMNO’s office in Encino, California, to execute a sealed search warrant as part of a criminal investigation.
Discovery’s countersuit goes on to state that late last year, the company received a call on its ethics hotline from a whistleblower who worked for LMNO. In response, Discovery sought to audit LMNO’s books and records but the company allegedly “stonewalled, delayed and frustrated” the efforts, according to the suit.
While this was going on, the filing states, the FBI reached out to Discovery in March seeking information regarding “an ongoing federal criminal investigation into the LMNO defendants’ business practices.” Discovery says it is fully cooperating with authorities in that investigation.
In response to the countersuit, LMNO issued the following statement on Tuesday (August 2):
“LMNO is and remains the victim of a crime. As a result of the breaches and offenses against us, we chose to defend our company, our copyrights and intellectual property, and our decades-long reputation of excellence and honesty, knowing this meant confronting a powerful, global media company with near-limitless resources. To that end, Discovery has crafted a narrative that seeks to disparage us to the entire industry and which we vehemently deny.
“In our commitment to fighting the wrongs perpetrated against us, LMNO is fighting for the integrity of our business as well as for the production community. Throughout this course, LMNO also continues to assist the authorities in their ongoing investigation. Meanwhile, our doors remain open and we are in full production and active development on series and projects for a variety of networks.”