A Notice to SAG Members About Franchise Pictures Filing for Bankruptcy

On Wednesday, August 19, Franchise Pictures, LLC and 19 related entities filed petitions for protection under Chapter 11 of the federal bankruptcy laws. Franchise has been responsible for production or distribution of about 75 motion pictures, employing hundreds of SAG members.

While the timing of these filings largely relates to judgments entered against Franchise and its principal Elie Samaha in litigation brought by German distributor and investor Intertainment Licensing GMBH, SAG has been anticipating this bankruptcy for some time. In July, SAG, along with the DGA and WGA, retained counsel experienced in entertainment labor and bankruptcy matters to jointly represent their interests in Franchise. Since then, auditors retained by the Guilds have had access to data concerning potential Guild claims for residuals, and Guild counsel has been in contact with Franchise and many of its creditors concerning protection of Guild interests.

While it is far too early to predict outcomes, SAG and the other Guilds expect to play an active role in this case. The tri-Guild approach has been successful in past bankruptcies as the Guilds enjoy the economy of joint counsel and can also speak with a unified voice for common Guild interests concerning payment for past and future residuals. SAG's financial assurances program -- implemented during the signatory process to obtain security agreements, assumption agreements and other protection for member interests -- improves SAG prospects for payment in this matter. However, the bankruptcy process will be lengthy and complicated.

We expect all SAG member claims will ultimately be addressed through this process but ask that you not phone the Guild with individual claims at this time. Also note that any of you holding participation claims or other interests beyond the SAG collective bargaining agreement may wish to retain individual counsel in connection with such non-SAG claims. Finally, we ask that members not call the guild but instead check the SAG website www.sag.org for updates as they become available.