Lights, camera, lawsuit: Legal battle between Toronto's largest studios could hurt industry
November 4, 2011
11:06 PM EDT
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Cinespace Studios, founded by Nick, Larry and Steve Mirkopoulos a quarter-century ago, is one of the original film studio firms in Toronto. It used the time-honoured model of converting old factories and warehouses into sound stages.
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For several years, Cinespace has complained that the city unfairly subsidized a rival, which in 2008 opened a purpose-built film studio complex in the port lands, now called Pinewood Toronto Studios. The city-owned Toronto Economic Development Company (TEDCO) owns 20% of Pinewood. A consortium of private investors owns the remaining 80%.
And so Cinespace filed suit this year against TEDCO and the city in the Superior Court of Justice, alleging that a 2009 city council resolution, bylaw 411, which made the Toronto Economic Development Corp. a 20% owner in Pinewood, was illegal.
“It is the position of Cinespace that TEDCO and/or the City of Toronto has bonused [Pinewood] improperly, acted in bad faith, unfairly and in a discriminatory manner in enacting Bylaw 411, making it illegal and void,” Cinespace wrote in a statement of claim.
Cinespace relied to make its case on help from one of its fiercest competitors: Peter Lukas, the 80-year-old, cantankerous founder and owner of Toronto’s other film studio complex, Showline Studios, on Lake Shore Boulevard East, which he opened in 1990.
Mr. Lukas wears a wrinkled tweed jacket and a battered Stetson, which he boasts is bulletproof. Posters in the Showline foyer trumpet stars who have worked there: John Cusack, Vin Diesel, Bruce Willis, Michelle Pfeifer and Jackie Chan. Five years ago, Mr. Lukas asked TEDCO to tell him the details of its deals with Pinewood. TEDCO refused, and Mr. Lukas fought the case to the Ontario Court of Appeal, which sided with him; he finally got the documents at the end of 2009.
“I spent $130,000 of my own money getting the documents,” said Mr. Lukas, sitting in his windowless, binder-crammed office, after he poured me a cup of coffee. “Cinespace and Showline are competitors, but we work together in terrorizing the politicians.”
Mr. Lukas shared the documents that he pried out of TEDCO with Cinespace. Cinespace then filed them in court as part of its legal claim. These documents reveal details of TEDCO’s leases with Pinewood. For some reason, though, Volume 3 of Cinespace’s application record, which includes the lease documents, is missing from the legal file in the courthouse; I relied for this story on extra copies that Cinespace showed me.
A Letter of Intent dated Feb. 26, 2009 outlines two key ways Toronto financially supports Pinewood:
• TEDCO is obligated to loan Pinewood $9-million, interest-free for five years, with no requirements to pay down the principal during those five years;
• TEDCO is obligated to defer the minimum ground rent payable by Pinewood under the ground lease by 50% for the first five years after closing.
Secrecy is paramount, the document adds: “Rose, Filmport, TEDCO and the New Investors each agrees that it will not … make any press release or public announcement concerning the existence of this letter of intent … except to the extent compelled by law.”
There are some documents that the city continues to withhold; Jim Mirkopoulos of Cinespace, in his court affidavit, refers to a confidential attachment to a city staff report adopted by council on April 6, 2009, by which, Mr. Mirkopoulos says, the city loaned $6.7-million to TEDCO, which TEDCO used to buy a 20% share in the studio.
After TEDCO’s investment in Pinewood, the Government of Ontario this year found Pinewood eligible for a provincial loan, and Infrastructure Ontario loaned Pinewood $34.5-million, another cash infusion that has enraged Cinespace and Showline.
The other day when I spoke to Paul Bronfman, the chairman of Pinewood Toronto, he said he has a great relationship with the owners of Cinespace. And he added: “If they want to apply for an Infrastructure Ontario loan, tell them to get in line.” Pinewood did not comment on the Cinespace lawsuit.
In the spring, TEDCO’s lawyers asked the courts to “strike out and dismiss the Cinespace application.”
In June Mr. Justice Michael Penny dismissed TEDCO’s motion to throw out the lawsuit, and ordered TEDCO to pay Cinespace $12,500 in legal costs. Then in August, Judge Penny sided with the defendants, ordering Cinespace to rewrite its affidavit. While declining comment on the case, John Birch at Cassells Brock, a lawyer for Pinewood, did provide me a copy of the hand-written ruling.
“It is clear that Cinespace fundamentally objects to public funds being used to allegedly benefit and afford competitive advantages to private commercial enterprises to the alleged detriment of other local studios (aka Cinespace),” the judge wrote. “However, the challenge to the bylaw… should not be used as a platform to launch the policy grievances held by Cinespace’s owners over municipal involvement in the film industry for the last 16 years.”
Cinespace says it is now reworking its affidavit.
Mr. Lukas, meanwhile, worries that subsidies to Pinewood will push his studio and Cinespace out of business. “You are tilting the playing field, and if you tilt it a little more, the normal studio operators are going to slide off the board,” he said.
Cinespace, separately, has sued TEDCO for $10-million for evicting Cinespace in 2007 from Marine Terminal 28, south of Queens Quay Boulevard East (the studio used to film the movie Chicago), now site of the Corus Entertainment building. That case remains before the courts.
In the meantime Cinespace has purchased the former Consumers Glass factory on Kipling Avenue in Etobicoke, where the company is busy building studios, even as it frets about subsidies to Pinewood.
The other day I visited Cinespace studios on Booth Street in Leslieville, formerly a factory that cleaned uniforms. The parking lot held fewer than half a dozen cars. I met with Jim Mirkopoulos and his uncle, Nick Mirkopoulos. Nick, a founder of Cinespace, has moved on, and now owns a film studio in Chicago.
“People say, ‘Why go to Chicago? There is so much corruption there,’ ” laughs Mr. Mirkopoulos, his words thick with the accent of his native Greece. “And I say, ‘Yes, but at least in Chicago some of the politicians are in jail.’ ”
