Happy Monday, I’m Eriq Gardner.

Welcome back to The Rainmaker, a private email about money, power, fame, and, most of all, the law.

In this week’s edition, big news about a remarkable court case that delves into sex addiction and explores the collapse of Netflix’s House of Cards in the wake of the Kevin Spacey scandal—including what producers really knew and the Netflix deal that allowed the show to return for that underwhelming sixth season.

But first…

• Disney on Defense: The Walt Disney Co., usually the aggressor in copyright enforcement cases, will be a defendant at a potentially mind-blowing trial on Oct. 27. The showdown revolves around a Disney vendor’s use of infringing software to generate realistic computer-generated characters in the 2017 live-action remake of Beauty and the Beast. Jurors will be tasked with deciding whether Disney is “contributorily and vicariously” liable, and if so, what percentage of the movie’s profits is attributable to infringement.

  That leads to provocative questions, including: How does Disney supervise the creation of visual effects? What really is the reason that moviegoers buy tickets? And just how profitable was the hit film, which raked in an impressive $1.26 billion globally? The vendor also has pending cases concerning other blockbuster movies, so the verdict could help value those, too.

• A De Niro drinking problem: Speaking of upcoming trials, Robert De Niro’s battle with ex-assistant Graham Chase Robinson—which centers on a widely misunderstood feud featuring De Niro’s girlfriend and a battle over stolen frequent flier points—heads to a jury on Oct. 30. Robinson lost a retaliation claim and was unsuccessful in getting an appeals court to intervene, but she’s still pursuing a rather remarkable gender discrimination claim as De Niro fights for what she allegedly misappropriated from him (the travel points, among other things). In a hearing scheduled for Friday, Robinson’s team is asking for permission to tell the jury about the actor’s history of alcohol abuse, pointing to (currently redacted) admissions in a deposition as well as a family intervention. According to an Oct. 9 filing, De Niro testified that he’s been in rehab for alcoholism. Her lawyers say this bears on his memory of events.

• The Tucker defense: OpenAI, the owner of ChatGPT, has just asked a court to throw out a first-of-its-kind defamation lawsuit brought by Mark Walters, a Georgia radio host who says that when his buddy asked the chatbot for a summary of an unrelated legal case, it falsely responded that Walters was being accused of embezzlement. Now, OpenAI has basically responded with what I’ll call the “Tucker Carlson defense”: that nobody would really believe what ChatGPT says. “By its very nature, AI-generated content is probabilistic and not always factual,” company lawyers write in a dismissal motion. They argue that “there is near universal consensus that responsible use of AI includes fact-checking prompted outputs before using or sharing them.” Here’s the rest of the brief, which also gets into the issue of whether the ChatGPT response was published, given that only Walters and his friend saw it.

• Forward this email, maybe get sued: I thought that someone was pulling my leg when they told me about this, but NBCUniversal has been sued by the publisher of an obscure California newsletter because some NBCU employees regularly forwarded the private email to those not authorized to get it. Here’s the copyright complaint filed on Oct. 10.

Spacey’s time at The Meadows is now a key detail in a legal dispute that, until now, has been unfolding in virtual obscurity. Media Rights Capital, the producer of House of Cards, is suing two of its insurers, Lloyd’s of London and Fireman’s Fund, to recover as much as $50 million in financial losses MRC suffered when it was forced to suspend and rewrite its sixth and final season and Netflix scrapped three planned spin-off series.

Remarkably, MRC’s claim hinges on the argument that Spacey’s sex addiction qualifies as a sickness that should have triggered insurance coverage. Alas, the policies in question lack a clear definition of “sickness,” which has resulted in an extraordinary debate in Los Angeles Superior Court about whether it was Spacey’s alleged sex addiction itself that led to MRC’s losses, or whether it was the public scandal generated by his misconduct.

Even more explosive is the counterargument made by Lloyd’s of London: that Spacey’s sex addiction should be considered a preexisting condition not covered by the policy. The insurers have also filed counterclaims that the insurance policy is void due to alleged misrepresentations made by House of Cards producers during the application process. Lawyers for both sides are now investigating what exactly was known about Spacey, when the information first came to light, and who really knew about it.

In fact, during shooting of the show’s inaugural season in 2012, MRC hired an investigator after then-executive producer John Melfi reported witnessing Spacey touching a young man and putting his arm around another young actor. Following the investigator’s confirmation of wrongdoing, Spacey underwent sexual harassment training.

When the public scandal hit five years later, several House of Cards crewmembers came forward to anonymously report further inappropriate behavior on set. MRC initiated a fresh investigation, dispatching its chief operating officer Scott Tenley and workplace investigator Michael Robbins to the Baltimore-based production. There, they interviewed more than three dozen individuals, including several staffers who gave sworn statements about sexual harassment. Spacey himself was interviewed twice, albeit after a significant delay, and he refused to meet with MRC’s physicians and release medical records. In the meantime, the actor was suspended, and while he checked himself into The Meadows, his attorney Todd Rubenstein privately conveyed that Spacey was still available to perform acting services.

Of course, Netflix wouldn’t have it. When word leaked to the media that workers on the show had made accusations against Spacey, Ted Sarandos, then the company’s content chief, got personally involved, emailing colleagues that there would be “NO scenario in which Kevin Spacey will appear in any version of a final season of the show, should one go forward.”

With the streamer threatening to cancel the series, intense negotiations erupted over what to do. Losing $250,000 a day with House of Cards suddenly on hiatus, MRC contemplated a lawsuit against Netflix—a consideration complicated by the fact that the companies had just started working together on Ozark. They avoided litigation with a new deal in which the sixth and final season of House of Cards was trimmed from 13 episodes to 8 episodes—and without Spacey. The agreement resulted in reduced total licensing fees to MRC, but allowed Netflix to release the final season—reoriented around Robin Wright’s character—in time for the midterm elections, which, for some reason, was important to the streamer.

But there was more: While MRC got an $18 million advance for production costs, the company also agreed to indemnify Netflix against any claims that Spacey might make, and it agreed to give Netflix half of whatever money it recovered in legal actions against Spacey and the insurers—a figure that could amount to nearly $40 million, or more, for Netflix if MRC is successful.

Eight months later, after retaining their own psychological expert, the insurers rejected the claim. Their rationale was that MRC had failed to substantiate that Spacey suffered from a genuine ailment and was totally unable to perform. Or, put more bluntly, that “sex addiction” is a bogus diagnosis and that, obviously, it never stopped the Oscar-winning actor from, well, acting.

Over the next two and a half years, there was little progress on this front. Instead, MRC’s lawyers, led by Michael Kump, pivoted to beating Spacey in a separate arbitration (and defending his counterclaim, which hinged on the contention that producers owed him millions under a “pay or play” deal). In October 2020, an arbitrator ruled in favor of MRC—and Netflix, which had a 50 percent stake in the outcome—by concluding that Spacey had indeed breached his obligations to provide acting services in a professional manner and consistent with the company’s sexual harassment policies. A Los Angeles judge upheld the $31 million arbitration award, though Spacey has filed an appeal.

Meanwhile, in April 2022, MRC moved to overcome the rejection of its insurance claim—this time with a more hardball tactic. Before getting a response from the insurers on a bid for reconsideration of the earlier rejection, the company sued, noting that Lloyd’s of London had previously touted how it had taken on risks associated with Bruce Springsteen’s voice, David Beckham’s legs, and Keith Richards’ hands, implying that exotic risks were the insurer’s bread and butter. As such, the producer asserted there’s no sound reason for failing to cover an illness that had caused Spacey to seek treatment and not perform—even if it’s not a typical insurance claim.

The case has since escalated significantly. The insurers not only insinuate that Spacey’s alleged sex addiction isn’t a legitimate sickness and the proximate cause of MRC’s losses, they also nod to assurances the producer gave about Spacey’s good health during the process for obtaining insurance coverage. Lloyd’s and Fireman’s allege that MRC essentially misrepresented what it knew about Spacey’s issues, pointing to the producer’s silence about the 2012 investigation on the House of Cards set. The insurers are also actively hunting for more information on what Netflix and Matt DelPiano, Spacey’s former agent at CAA, might have known or communicated regarding the actor’s sexual predilections. (Netflix has put up tremendous resistance to discovery demands.)

MRC has now added a claim against the insurers for not using its contractual authority to obtain Spacey’s medical records and compel him to appear for a psychological evaluation. As punishment for failing to fully investigate its insurance claim, the producer is aiming for punitive damages, which, if allowed, might come on top of the tens of millions in direct compensation for losses.

Nevertheless, Epstein appears receptive if MRC can furnish more precise details on how Spacey’s condition rendered him incapable of performing. One illustration of the judge’s open-mindedness comes from how he responded to the insurers pointing out that MRC had previously asserted that Spacey’s breach of contract, not sex addiction, caused the studio’s losses. To the argument that MRC was being inconsistent, Epstein wrote: “Many regard alcoholism or drug abuse as a disease. But such a condition can lead to the inability to perform. The inability to perform might well be viewed as a breach of contract even though it is a direct result of the illness. Under those circumstances, the artist might be suspended for failing to appear on set or for being unable to perform, but that inability is the direct result of the illness.”

Perhaps as the case continues to unfold, there might be some discussion about how Hollywood producers and their insurers have historically dealt with more widely recognized addictions. In the meantime, MRC has amended its court papers to emphasize Spacey’s time at the Meadows and highlight the precise specialties of the physicians there. If this case is allowed to progress, a trial is scheduled for next June.