May 27, 2016

L.A.Studio Cosmic Toast Shuts Down Without Paying Artists: A Comic Brew Survey

Cosmic Toast Studios, the Sherman Oaks, California-based animation house behind such efforts as Nickelodeon's animated TV movie Lalaloopsy Girls: Welcome to L.A. L.A. Prep School and Disney's Maker Studios web series Pugatory and Powerhouse, has shuttered operations, while still owing back pay totaling in the tens of thousands of dollars to its full-time staff as well as freelance animators and visual effects artists dating back to summer of 2015, an investigation by Cartoon Brew has found.

Seven of those employees owed wages - both staff and freelancers, all of whom spoke on condition of anonymity - have told Cartoon Brew that they have gone months without pay, despite assurances from the studio that their money will be forthcoming. One employee described the situation as “heartbreaking.”

In a series of emails dating from last December, Cosmic Toast CEO Debra Pierson assured the staff that checks would be forthcoming, and that studio owner Alan Anderson was “secur[ing] funding” but those funds never arrived in full. An email sent on Christmas Eve 2015 explained that funds had yet to clear but checks would need to be “reissue[d] Monday…” No checks ever appeared, and subsequent emails dated January 2, 2016, January 5, January 6, and January 7 tried to reassure the staff that their wages were coming.

An email from Alan Anderson on January 26 promised the staff that one check should arrive “tomorrow” - but follow-up emails from staff members on January 27 and 28 make clear that once again payment failed to arrive. The staff has since been laid off, and Anderson not answered repeated attempts by animators to receive what they are owed.

One animator, who worked as a freelancer for Cosmic Toast for several months in the fall of 2015, said sixty-hour work weeks were typical on Pugatory. (Pugatory producer Maker Studios is a subsidiary of the Walt Disney Company.) After being promised wages at a rate of $1,300 a week, the animator has yet to see any form of payment. Another animator told Cartoon Brew that they worked for two months on Pugatory, finishing in November 2015, and had never received any payment. Yet another said they were not paid “for three of the five months” of employment at Cosmic Toast.

Not only have paychecks failed to arrive as promised, but IRS tax information provided to the freelancers has been incomplete and inaccurate. One animator told Cartoon Brew that the W-2 form Cosmic Toast provided included numbers for only one pay period. As a result of these inconsistencies, many of the animators fear repercussions from the IRS and are wary of filing inaccurate information. They have not been able to get accurate information due to the studio's continuing failure to provide it.

The trouble appears to have begun when, in February 2015, Cosmic Studios was bought by Imbee Inc., a Walnut Creek, California-based company that operates the youth-oriented social media platform Fanlala.com. Unbeknownst to the staff at the time, Imbee's CEO, Alan Anderson, was no stranger to controversy: in 2000, Anderson was fired for cause as chairman and CEO of the now-defunct software company Quintus, and in 2002, the Securities and Exchange Commission, the federal agency charged with enforcing federal securities laws, filed a complaint in federal court alleging that Anderson filed false financial statements, fabricated sales transactions, forged documents, and falsely inflated revenue reports when he ran Quintus. The SEC obtained a permanent injunction against Anderson in the case.

In 2010, Anderson, purchased tween social networking website Imbee after its founder died. The following year, Imbee and Fanlala.com merged to create a youth-oriented online destination that soon set its sights on animation.

Shortly after Cosmic Toast's takeover by Imbee, trouble started to appear. A payday scheduled for a Friday would get pushed to the following Monday, then pushed again to Wednesday, before finally a check would appear. Because many of the freelancers were fresh from art school, or were otherwise inexperienced, they took little note of these early signs of trouble. Further, many commercial studios pay freelancers on net-30 or net-60 schedules; therefore, artists who are accustomed to not receiving a paycheck for up to two months after starting a job may have not had any reason to doubt Cosmic Toast's ability to pay its employees.

The studio was working on several projects, and hopes blossomed for feature projects and more. In spring 2015, the studio even moved from its cramped Burbank location into a bigger facility a few miles away on Ventura Boulevard in Sherman Oaks – a fateful day, as it turned out, for on the same day as the move, the company announced that its chief financial officer and accountant had left the company.

By late spring 2015, itemized paystubs stopped accompanying paychecks, and that summer, checks started to fall further and further behind. CEO Pierson directed staff inquiries to her boss, studio owner Anderson, and Anderson offered only words, and few of those at that.

When an employee discovered Anderson's past history of fraud and brought it to Pierson's attention, Pierson reportedly broke into tears. Pierson resigned from Cosmic Toast and is now general manager of Kid Genius, the children's channel on Comcast's Xfinity On Demand service.

Some of those owed wages are currently exploring their legal options. Alongside claims for breach of contract, the California Labor Code provides employees certain protections, including unpaid wages after termination, untimely payment of wages, and non-compliant wage statements. Unfortunately, freelancers are not afforded the same protections - indeed, many of the freelancers failed to get their employment agreements with the studio in writing, which will make any legal action even more challenging.

Nonetheless, a contract does not need to be in writing to be enforceable. Additionally, as labor attorney Romina Keshishyan of Glendale, California-based Lawyers for Justice explained to Cartoon Brew, even if a freelance artist was hired as an independent contractor, a court might still recognize that artist as a studio employee if the studio treated the artist in the same manner as an employee and “controlled the manner and direction of [the]…workload.” Courts recognize that some employers will try to disguise their employees as independent contractors precisely because the law offers fewer protections for them.

Cartoon Brew reached out to Alan Anderson to discuss the allegations. He declined to comment for the story.

Cosmic Toast's website was taken down in March; a copy of it is available on Archive.org.