Filmwest Productions v. Arizona Department of Commerce

An unusual case in Arizona involving denial of tax incentives for a movie picture production company. The Arizona Department of Commerce, in violation of Arizona law, denied our client the tax incentives they were entitled to even though our client met all the legal requirements and that the incentives were mandatory. A bench verdict for our clients. Lead attorney was associate Karen R. Frostrom.

Defendant Insurance: Unknown at this time

Date, Time and Place of Incident (s): University of California San Diego, 2004

Facts and Background:
Film West Productions operates out of Old Tucson Studios in Tucson, Arizona, producing motion pictures for public entertainment. A significant part of Film West’s Arizona studio’s attraction is the new tax incentive program offered by the state of Arizona. Both Arizona and New Mexico have recently begun to attract film production business by offering incentive programs to projects. Unfortunately, it has become apparent of late that Arizona staff members are not implementing Arizona’s program in a business-friendly way, resulting in projects moving to New Mexico. This is one such example. Here, the Department of Commerce rejected a tax incentive application even though the application contained all of the legal requirements and even though, according to law, if these requirements are met, the Department’s obligation to accept the application is mandatory.

In November 2006, Film West submitted an Initial Application for Pre-Approval for a Motion Picture Production Company related to the Dolan’s Cadillac project. The Department of Commerce acknowledged receipt of that application. All of the questions were answered and the application was signed under penalty of perjury. On page 3 of the application, Film West noted that one of the questions was improperly phrased. It asked whether Film West had “exclusive rights” to the motion picture. This is a question that could never be answered yes because motion picture rights are always held by multiple entities. As a result, Film West answered “no.” During the next month, the parties discussed how the film development rights would be held. The potential for a wholly-owned L.L.C. was discussed and discarded. The relationships between the book author, the script owner, and the film producer, Film West, were discussed in great detail. There was never a question but that Film West, as the film producer, was the only entity that could apply for the tax incentive. In fact, no other party applied for this project.

Eventually, Film West believed that all questions were answered. Unbeknownst to Film West, however, Commerce had chosen to disbelieve the information it was given about the holding of exclusive developmental rights. Without warning, Commerce notified Film West that it was deeming the application withdrawn because it was dissatisfied with the information provided. Film West made numerous attempts to resolve the matter informally but Commerce simply became entrenched and revised history by classifying Film West as the bad guy.

Plaintiff's Contentions, Allegations:
Filmwest alleged that Commerce's rejection of its application was inappropriate and in violation of Arizona law.

Defense:
Commerce alleged that it was entitled to reject the application because it believed that the ownership of the exclusive developmental rights was unknown.

Verdict or Award:
RESOLUTION (bench verdict): Judge Abramsohn ruled that the Department of Commerce inappropriately denied Filmwest's application for tax incentives by improperly deeming it incomplete when it in fact contained all information required by law.

Length of Trial: 4 Hours

Attorney for client: Vincent J. Bartolotta, Jr., Karen R. Frostrom, Aran Wong

Attorney for defendant:
Brian Luse, Arizona Attorney General's Office, 1275 West Washington, Phoenix, AZ 85007-2997, (602) 542-5025

Individual Defendants: Arizona Department of Commerce

Thorsnes Bartolotta McGuire
2550 Fifth Ave., 11th Floor, San Diego, CA 92103, 619-236-9363