The $5 million settlement of Woody Allen's publicity rights lawsuit against American Apparel, Inc. represents a resounding –- and unusually public -– defeat for the clothing company, which had argued there was “no concrete support” for damages between $5.68 million and $8.66 million.

The parties announced the settlement agreement May 18 as the case was going to trial, with American Apparel claiming that its insurance company had forced it to come to terms with Allen, who alleged its billboard advertising campaign featuring a still photo of him from the film “Annie Hall" was a “blatant misappropriation” of his image.

But only two weeks earlier, American Apparel had attacked Allen's claim for at least $5.68 million in damages. “Plaintiff has provided expert opinions which report that Plaintiff has been damaged in an amount between $5.68 million and $8.66 million,” the company said in a pretrial memorandum. “Plaintiff has offered no concrete support for this alleged damage.”

“To the contrary,” it continued, “this range vastly exceeds [emphasis added] both the fees Plaintiff has been paid to do commercial endorsements in the past and bona fide offers Mr. Allen has received to endorse products.”

The memo also emphasized that Allen's damages only “relate to images displayed on three billboards and a few banners for less than a week.”

In that context, the $5 million is nothing if not a windfall for Allen. Not only that, the settlement agreement was made public -– which is highly unusual in a celebrity litigation and strongly suggests American Apparel had realized that its aggressive pretrial strategy was not going to translate into a successful trial defense.

“Threats and press leaks by American Apparel designed to smear me did not work, and a scheme to call a long list of witnesses who had absolutely nothing to do with the case was also disallowed by the court,” Allen said in a statement.

Those witnesses included Allen's wife Soon-Yi Previn and her mother, actress Mia Farrow, who is his former companion. “I suspect this dose of legal reality led to their 11th-hour settlement,” he added.

American Apparel is nothing if not publicity-conscious. Last year, it reached a confidential settlement of a sexual harassment suit filed against CEO Dov Charney by a former employee which would have allowed Charney to tell the media that an arbitrator had ruled in his favor –- while concealing from the public that he had agreed to pay Mary Nelson $1.3 million.

The arbitration proceeding was a sham and the settlement unraveled after Nelson's attorney did not show up for it.

Charney issued a typically grandiose statement about the settlement of Allen's case, saying the billboard was a commentary on media sensationalism about his own allegedly scandalous sexual behavior. “My intention was to call upon people to see beyond media and lawsuit-inspired scandal, and to consider people for their true value and for their contribution to society,” he said.

American Apparel, though, chose not to test whether a jury would view the billboard as protected speech under the First Amendment or an attempt to sell clothing. According to Allen, the trial judge made it “clear that the court considered their phony First Amendment ranting and claims of parody sheer nonsense.”

A revised version of the defense's pretrial memo does not include the plaintiff's experts' range of damages. The defense removed the numbers from public view after Allen's lawyers said they were confidential under the terms of a protective order.

By Matthew Heller
5/19/09