A writers screenplay is optioned for a fee tied to the films budget. That budget is later increased when a big name is brought on to star. Are the writers managers, whore also producers on the movie, obligated to disclose the bump and renegotiate their clients pay?

The answer to that question could be yes, with an appeals court reviving a lawsuit from screenwriter Kurt McLeod against Zero Gravity Management over an alleged conflict of interest when it negotiated his deal for writing Copshop. On Thursday, the 9th U.S. Circuit Court of Appeals reversed dismissal of the suit from a federal judge, who found last year that Zero Gravity founders Eric and Mark Williams dont have to face claims accusing them of prioritizing their payouts for producing the movie at the expense of their client by failing to disclose that the films budget had been substantially raised. The legal battle started in 2022 when McLeod sued Zero Gravity for breach of contract and fiduciary duty, among other claims, related to his compensation for co-writing the screenplay for the 2021 movie starring Gerard Butler. McLeods pay was tied to the films budget (with a cap of $125,000), which he was initially told would be between $3 million to $10 million, according to the complaint filed in California federal court. He later learned that it settled at more than $45 million after Butler came on board.

In Hollywood, managers, unlike agents, arent barred from producing titles in which their clients are involved, but theres obvious conflicts of interest. Consider a case, like McLeods, in which more money paid to the producer-manager out of a films budget can mean less money for the writer-client. In those instances, its the fiduciary duty of the manager to put the clients interest first.

Looser restrictions around the involvement of managers in the production of titles in which their clients are attached are among the reasons why agents are increasingly opting to go into management.

There are two deals at issue in the case. In 2011, Zero Gravity and McLeod reached a two year representation agreement, which gave the Williamses 15 percent of the writers earnings and the right to serve as producers on any film made from his screenplay. McLeod ultimately wrote the script for Copshop under that deal.

After the representation agreement expired in 2013, McLeod said he reached an oral deal for the Williamses to continue serving as his managers. In dismissing the lawsuit, the court rebuffed that assertion, finding that both sides agreed for Zero Gravity alone to be McLeods manager.

In Thursdays ruling, the court pointed to evidence of the Williamses personally agreeing to represent McLeod.

McLeod presented evidence from which a reasonable jury could find that the Williamses were parties to the oral agreement and served as McLeods personal managers under the terms of that agreement, the ruling stated.

The court cited testimony indicating that Mark Williams, best known for executive producing and writing Ozark, discussed his dual role as manager and producer on Copshop, his listing as a manager on the Writers Guild of America website and evidence that he conducted himself in that role for the movie.

The 9th Circuit panel concluded that McLeod couldve obtained additional compensation had he known of the increased budget. The Williamses, for instance, had the option of tapping into their own producer fees, possibly netting McLeod hundreds of thousands of dollars more.

The legal saga includes an arbitration with the Writers Guild of America over writing credits for the film over allegationsthat Mark Williams took undue credit for co-writing the screenplay. The guild concluded that the story by credit should be McLeod and Mark Williams, while the screenplay by credit should be McLeod and Joe Carnahan, Copshops director. McLeod accused Zero Gravity of fabricating documents to credit Mark Williams as an author on the script.

The only part of the lower courts ruling that wasnt reversed related to fraud claims arising out of the chain of title for the film. The appeals court found that theres nothing false or improper about Mark Williams obtaining shared story by credit.

Absent a settlement, McLeods claims for breach of contract, breach of fiduciary duty and breach of the implied covenant of good faith and fair dealing will be considered by a jury.

Devin McRae, a lawyer for McLeod, declined to comment. Zero Gravity didnt immediately respond to requests for comment.