A new venture designed to cash in on the power of celebrity, with backing from several Hollywood heavyweights, launched this week. Behind the scenes, however, an ugly legal battle over the creation of the company is picking up steam.
StarGreetz Inc., a Los Angeles company that enables customers to hire celebrities to send people custom messages and videos via Facebook, Twitter and other social-networking sites, is being sued by StarClipz, another start-up whose founders claim their idea was stolen. StarGreetz says the suit has no merit.
Headed by Chief Executive Eric Frankel, a former president of Warner Bros., StarGreetz calls itself a "pioneering new content provider of customized, user-personalized, star-powered video messages for online and mobile platforms."
Its backers, according to StarGreetz, include some of Hollywood's most prominent figures, including former Walt Disney Studios Chairmen Dick Cook and Joe Roth, and influential entertainment law partners Skip Brittenham and Ken Ziffren. The company's advisory board includes CW President Mark Pedowitz; Sandy Grushow, a former chairman of News Corp.'s Fox TV Entertainment Group; and Nancy Tellem, a former president of CBS.
StarClipz and its founders, industry veterans Mark Lieber and Adam Newman, filed a lawsuit this year in U.S. District Court claiming that Frankel took their idea and business plan. Lieber and Newman not only accuse Frankel of swiping their idea and trying to cut them out of the operation but also of being motivated in part by "Lieber and Newman's status as a same-sex couple," their suit said.
Also listed as defendants in the suit are former 20th Century Fox executive Lucy Hood and former Warner Bros. executive Linda Abrams. Hood referred a call seeking comment to Frankel, and Abrams did not return a call. Neither is listed among the investors or advisory board members that StarGreetz named in its release announcing the company. Hood and Abrams are no longer involved in StarGreetz, according to someone familiar with the operations of the company.
Lieber, a former executive with CBS, Saban and Polygram, and Newman, a onetime TV producer whose credits include the Showtime series "Queer as Folk," founded Rethink Entertainment and Media and pitched Frankel on StarClipz in early 2008.
Initially the idea was to use old movie clips and other media to create electronic greeting cards. Upon recognition that such a venture could lead to copyright disputes and be very costly, Newman "further refined their idea and determined that they could instead hire celebrities" to deliver personal messages that people would purchase to send to friends and family.
Frankel, the suit said, liked the idea and the venture was christened StarClipz, with Frankel, Lieber, Newman and Abrams each owning 25%.
In September 2008, Lieber and Newman claim, Frankel told them at a meeting at the L'Ermitage Hotel in Beverly Hills that it would be better if the pair shared a 33% stake while he and Abrams took 33% apiece. That was rejected by Lieber and Newman. In December, according to the suit, Frankel told Lieber that he and Newman were not needed anymore, but could remain as employees with an annual salary of $150,000 and 1% of the company.
The plan to "steal the business" was "in motion," Lieber and Newman said.
After that, Frankel and his team offered settlements that Lieber and Newman said were unacceptable and no separation agreement was ever reached, according to the StarClipz suit.
A lawyer for Frankel, Karen Johnson-McKewan, a partner in the San Francisco law firm Orrick, Herrington & Sutcliffe, countered that Lieber and Newman "walked away from the company a couple of years ago, confirmed it in writing, and asked Eric Frankel and the other principals simply not to use some footage the two of them had shot."
She added that the duo "resurfaced earlier this year, apparently because they saw the chance to make some money from StarGreetz, which had moved ahead without them."