Throughout the 1980s, Pacific Arts acquired what was at the time the world's largest catalog of non-theatrical video titles, and set up its own independent distribution system. By 1987, former Pacific Arts Video Distribution (a.k.a. Pacific Arts Video Classics) president Robert Fread had quit, who had been at the video arm since the early 1980s, and he would be replaced as president by George Steele, who had been at the home video arm since 1984, and when owner
Michael Nesmith was soliciting bids for a sale portion of the Pacific Arts video arm, which involved lawyers were
Paramount Home Video and
Nelson Entertainment.
PAC/PBS lawsuit In 1990, Pacific Arts secured a contract with
PBS to distribute the PBS video catalog under the
PBS Home Video banner. However, in the early 1990s, Pacific Arts and PBS went through a series of serious disagreements. Lawsuits were filed: by Nesmith and Pacific Arts against PBS for
breach of contract, intentional misrepresentation (fraud), intentional concealment (fraud), negligent misrepresentation, and interference with contract; and by PBS against Nesmith and Pacific Arts for lost royalties. The lawsuits escalated in 1994 and 1995 into major litigation between the parties over these rights and payments. PBS and Nesmith and Pacific Arts vigorously prosecuted these multimillion-dollar counter-suits. The six plaintiffs included PBS, including WGBH in signings, WNET in signings, American Documentaries and Radio Pioneers Film Project (production companies owned by producer
Ken Burns), and the
Children's Television Workshop. They sought approximately $5 million in disputed royalties, advances, guarantees, and license fees for programs and the use of the PBS logo from the defendants Pacific Arts and Nesmith. Due to the cost of the litigation, Pacific Arts was forced to cease distribution operations, and suspended the use of the PBS logo on the Pacific Arts videos. Though Pacific Arts distribution system had ceased operating, the various plaintiffs were counting on capturing a personal financial guarantee Nesmith had made to PBS in the original PBS deal in 1990. The cases went to jury trial in Federal Court in Los Angeles in February 1999. By the end of the trial, the judge and jury were leaning toward Nesmith's (Pacific Arts) counterclaims. Henry Gradstein, lead attorney for Nesmith, contended in a brief that the company's video rights were worth enough for it to have paid off any proper debts to the producers. But, he said, PBS had concocted a "dastardly scheme, which was played out with military precision, to strip Pacific Arts of its assets by inducing Pacific Arts not to file bankruptcy, by lulling it into a sense of security while it organized a mass termination of Pacific Arts' licenses." After three days of deliberation, the nine-person jury unanimously agreed with Gradstein and found PBS liable for breach of contract, intentional misrepresentation (fraud), intentional concealment (fraud), negligent misrepresentation, and interference with contract. The court awarded Pacific Arts $14,625,000 for loss of its rights library, plus $29,250,000 in punitive damages. The jury awarded $3 million to Nesmith personally, including $2 million in punitive damages for a total award to Nesmith and Pacific Arts of $48,875,000. The jury resolved the outstanding license fee issues by ordering Pacific Arts and Nesmith to pay approximately $1.2 million to American Documentaries for
The Civil War, about $230,000 to
WGBH, and $150,000 to
WNET. Following the ruling, Nesmith expressed his personal disappointment with PBS and was quoted by
BBC News as stating "It's like finding your grandmother stealing your stereo. You're happy to get your stereo back, but it's sad to find out your grandmother is a thief." After the judgment against PBS, Nesmith told
Entertainment Weekly, "I may not get back in business at all. If you can't trust PBS, who can you trust?" Six months after the verdict, a settlement was reached with the amount paid to Pacific Arts and Nesmith kept confidential. ==Videoranch and Videoranch3D==