ITV Studios filed a new lawsuit Friday in L.A. County Superior Court, claiming the duo has been engaging in self-dealing and fraud in breach of their contract. The Gurneys founded the reality TV production company that in 2012 was purchased by ITV for $40 million.
According to the suit, when the Gurneys sold a majority interest in Gurney Productions to ITV they promised not to compete with the company as long as they were still employees. Their operating agreement gives ITV the right to buy out the Gurney’s retained membership interests — the price for which is based, in part, on the average EBITDA for the company.
According to the complaint, the Gurneys breached their deal by launching Snake River Productions, a company allegedly created to artificially inflate ITV’s net profits and drive up the price they would be paid for their remaining interest in the company.
The Gurneys sold ITV's international distribution rights for Discovery's Northern Territory to Snake River for $3.6 million, without the knowledge or consent of the other managers on the board, according to the complaint, and deliberately failed to disclose that they were the owners of the company.
"At first blush it might seem as if a transaction that generated over $3.6 million for the Company would be in the best interests of the Company and its Members," states the complaint. "But as a result of this self-dealing, the Gurneys obtained a distribution in October 2016 on behalf of themselves and their company, Little Win, of approximately $1.4 million."
ITV claims that move, along with misappropriating funds and poaching employees, "unlawfully positioned" the Gurneys to receive a "substantially enhanced" buyout. ITV is seeking punitive damages, plus at least $850,000 in repayment of expenses and an injunction to recover all ITV assets and any works created by ITV employees while illegally working for Snake River or the Gurneys. (Read the full complaint below.)
ITV on Monday tapped 5x5 Media co-founder Craig Armstrong to serve as interim CEO of Gurney Productions. ITV America COO Chris Valentini also will help oversee Gurney Productions alongside Armstrong. Armstrong will continue to oversee unscripted producers 5x5, where it remains business as usual.
The Robertson family, which has a financial stake in Duck Dynasty, was notified Monday of the investigation. The news comes as the veteran and controversial unscripted series is heading into its final season at A&E.
Armstrong told staff in a Monday memo that the Gurneys were placed on a "short, temporary leave of absence," and he would be sitting down with some employees and legal counsel to answer questions.