How One Letter Has Divided Hollywood : Movies: Nearly everybody in the entertainment industry has an opinion in the screenwriter vs. talent agency flap. There is no middle ground.

Screenwriter Joe Eszterhas has finished cleaning up the damage at his San Rafael home after this month’s 7.1 Northern California earthquake. But more than 500 miles to the south, aftershocks are still shaking Hollywood over the letter--the one Eszterhas sent to Michael Ovitz Oct. 3, accusing the Creative Artists Agency president of threatening Eszterhas’ career after he told Ovitz he was leaving the agency.

Eszterhas’ four-page letter, to a man considered one of the most powerful in Hollywood, has nearly everyone in the entertainment industry talking. Almost all have an opinion and there doesn’t seem to be much of a middle ground. Allies of CAA have rallied to the agency’s defense, and critics--claiming they are afraid to make any public allegations themselves--insist that Eszterhas’ experience is but one of many cases in which the agency has abused power.

Opinions on the actions of the million-dollar-a-script screenwriter are equally split. Depending on the industry circles you move in, Eszterhas is either: 1) A hero who has displayed more courage than anyone else in town; 2) A kamikaze sitting on the runway, or 3) A rebel without a cause.

“I wasn’t there, but clearly if what he says in his letter is true, it’s a terrible thing,” said TV writer-producer Steve Bochco (“Hill Street Blues,” “L.A. Law”), who sent Eszterhas a note of support after the incident. “I always applaud any writer who stands up for his or her artist’s rights.”

Michael Eisner, chief executive of the Walt Disney Co. and a close friend of Ovitz, said he is skeptical about the accusations in Eszterhas’ letter. “I can only speculate that the spirit of the meeting was honestly misinterpreted by Joe,” Eisner said. “That letter was almost as theatrical as one of his scripts. I think that, at worse, Mike Ovitz tried to convince him to stay and used good salesmanship. It’s just not his style to take that kind of tactic. We’ve had a number of big fights and he’s never threatened me.”

Last Thursday, after nearly two weeks of intense negotiations with CAA, the Writers Guild of America, West released a statement about the incident, saying that the guild views with “grave concern threats of interference with a writer’s career opportunities.” CAA, which faced the threat of possible arbitration over the issue, agreed to the document.

The guild’s statement is important, according to entertainment attorneys, because it will strengthen the hand of any writer or other artist who makes similar allegations against CAA in future court or arbitration proceedings. In the guild statement, CAA acknowledged that these kinds of threats--and any attempt to carry them out--would seriously violate the agency’s contract with guild members. CAA also made public assurances that its agents would not engage in that kind of conduct.

The agency did not admit to Eszterhas’ allegations in the statement, but guild negotiators wouldn’t permit the agency to deny them either. Earlier, CAA had issued its own denial of Eszterhas’ version of events after the contents of the letter became public. The guild statement also includes a pointed warning to other agencies that they could lose their right to represent guild members if they engage in similar conduct.

Eszterhas provoked all this rumbling when he sat down at his typewriter on Oct. 3 and wrote a letter to Ovitz, accusing the CAA president of threatening to sue him and to damage his relationships with two important Hollywood figures, attorney Barry Hirsch and producer Irwin Winkler (“Rocky,” “Raging Bull”). The letter purportedly reconstructs portions of conversations Eszterhas had with Ovitz and CAA agent Rand Holston in late September after the writer told Ovitz he was leaving the agency to join one of his oldest friends, Guy McElwaine at rival International Creative Management.

According to Eszterhas’ letter, Holston warned the screenwriter that Ovitz would go out of his way to damage his reputation with studio executives and that CAA would withhold its stars and directors from his projects. “Mike’s going to put you into the . . . ground,” Holston is quoted as saying in the Eszterhas letter.

Both Holston and Ovitz have declined comment on the letter, and Ovitz refused to be interviewed for this story. But when the contents of the letter became public two weeks ago, the agency issued its statement denying Eszterhas’ version of events, and released a letter from Ovitz to Eszterhas in which the CAA president said his “recollection of our conversation bore no relationship to your recollection. . . .”

“I want to make it eminently clear that in no way will I, Rand or anyone else in this agency, stand in the way of your pursuing your career. So please, erase from your mind any of your erroneous anxieties or thoughts you may have to the contrary.”

Originally, only five people in town had copies of the Eszterhas letter: Ovitz, Holston, Hirsch, Winkler and McElwaine. But within two weeks, copies were zipping through fax machines throughout Hollywood. Two weeks ago, portions of the letter appeared in The Times and the Herald Examiner. By now, few people in Hollywood will admit that they don’t have a copy of the infamous letter.

The letter seems to have tapped into an underlying resentment toward CAA. As one entertainment attorney who asked for anonymity put it: “It doesn’t matter if (Eszterhas’ allegations) are true, Hollywood was ready to believe that they were true.”

In the days following news stories about the letter, more than half a dozen anonymous callers phoned The Times, complaining they had received similar treatment at the hands of CAA. But one Hollywood fact of life hasn’t changed with Eszterhas’ letter: The agency’s critics, claiming they fear retaliation, still refuse to attach their names to allegations. As one angry CAA agent noted, “At least Joe had the guts to put his name on it.”

Director Sydney Pollack, one of CAA’s most important clients, said the reaction that Eszterhas’ letter provoked reflects industry resentment about the agency’s enormous success. “Anytime anybody gets really powerful in this business, they immediately become a target, unless they’re Jesus Christ, unless they’re professionally benevolent all the time,” Pollack said.

The 44-year-old writer who started this furor has had his own share of controversy in another professional arena. As a reporter for the Cleveland Plain Dealer, Eszterhas wrote a story that became the target of an invasion of privacy lawsuit. The paper lost after the suit went to the U.S. Supreme Court.

In the 1968 feature story, Eszterhas wrote about the aftermath of an Ohio River bridge collapse. Six months after the accident, Eszterhas wrote a follow-up story that included descriptions about the life of one of the families. In reporting the story, Eszterhas went to the family’s home and interviewed the children, whose father was killed in the accident. The mother was not home during the entire interview. But, in his story for the newspaper’s Sunday magazine, Eszterhas included her in the family scene.

When the family sued, the Plain Dealer conceded that Eszterhas had not interviewed the mother, even though he described the woman’s expression and wrote in his story, “She says that after (the bridge collapse) happened the people in the town offered to help them out with money and they refused to take it.” In 1974, the Supreme Court upheld a $60,000 judgment that a lower court jury had awarded the family.

Eszterhas declined to discuss the details of the case, but said that at the time the suit was filed he was in job arbitration with the Plain Dealer “and they never even asked me to give a deposition, they never subpoenaed me . . . I was never asked to tell my side of the story.” His attorney at the time, Gerald Messerman, also said the paper distanced itself from Eszterhas. “Joe was not involved in that lawsuit at all,” he said. Editors at the Cleveland Plain Dealer could not be reached for comment.

Eszterhas’ arbitration was more celebrated than the trial. It began when he was fired from the Plain Dealer in 1971 after he wrote an article in the Evergreen Review, an avant-garde magazine. In an essay about how the media treats human suffering as a commodity, Eszterhas criticized the Plain Dealer. (Eszterhas also reserved some criticism for himself: He had helped a photographer friend sell the first photos of the My Lai Massacre in Vietnam.)

An arbitrator upheld the dismissal, noting that “it is difficult to understand just how Eszterhas could co-exist with the Plain Dealer personnel in management, after so thoroughly demeaning them in Evergreen.” However, the decision dismissed the newspaper’s contentions about inaccuracies in the article as “petty” and the arbitrator noted that if he were a publisher, he “would want to hire Joe Eszterhas.”

Eszterhas, the son of a Hungarian novelist, was a “controversial reporter,” recalled Messerman. “He wrote stuff that got noticed. He wrote exciting stories.” While at the Plain Dealer, Eszterhas won awards from the Cleveland Press Club and the Ohio Associated Press, among others.

After leaving Cleveland, Eszterhas joined the staff of Rolling Stone magazine in San Francisco where editor and publisher Jann S. Wenner recalled him as “one of my star reporters.” Eszterhas’ forte during his five years there was investigative reporting. His stories there included a series on the tactics of narcotics enforcement officers. “He was accurate and meticulous, with a great ear for language,” Wenner said.

Success as a Hollywood screenwriter came relatively quickly to Eszterhas. In 1975, he began writing screenplays. By 1978, Norman Jewison was directing and Sylvester Stallone was starring in his film “F.I.S.T.” He co-wrote “Flashdance,” which became a big hit in 1983 and two years later, wrote “Jagged Edge.” His other screen credits include “Hearts of Fire,” “Big Shots,” “Betrayed,” “Checking Out” and the upcoming “Music Box,” starring Jessica Lange. He now commands $1.25 million for a screenplay.

Anticipating the reaction to reports about his Ohio story and the subsequent Supreme Court ruling, Eszterhas said: “I’m not going to dwell on what did or did not happen 18 years ago. I’m a screenwriter. I write fiction. But I’m going to trust the people who do business in this town to draw their own conclusions about my veracity (on the Ovitz letter).

“Look,” he added, “I’m one of the highest-paid (Hollywood) writers. I’ve never been in psychiatric care. I’m not stupid. Why in the world would I get into a fight with the most powerful guy in town unless I had no choice?”

Two of Eszterhas’ associates, who saw him shortly after the Ovitz meeting and the Holston dinner encounter, said the letter reflected what Eszterhas had told them at the time. “When Joe came down to the car (after his meeting with Ovitz), he was pale as a ghost, visibly shaken,” said producer Ben Myron (“Checking Out”), who had driven Eszterhas to the CAA building. “Virtually everything that he wrote in the letter he told me word for word.”

ICM’s McElwaine, who spoke with Eszterhas three times over the course of that day, also said Eszterhas related the same comments to him that later appeared in the letter. In addition, McElwaine pointed out that Eszterhas felt concerned enough to stay at CAA after the meetings with Ovitz and Holston. It wasn’t until 11 days later, McElwaine said, that the writer changed his mind and decided to leave. And once that decision was made, Eszterhas decided to sell a more expensive house he had bought because of concern about the alleged threats, McElwaine said.

In an Oct. 18 letter obtained by The Times, Eszterhas instructed his Los Angeles attorney to see that the new house was put up for sale. “I simply don’t want to put my family into a situation where Ovitz’s anger can cause us any further financial difficulty than I already anticipate,” he wrote.

The Eszterhas incident isn’t the first time that CAA has been accused of hardball tactics. Last year, Ovitz fired a friend and colleague of two young agents who left CAA to form a competing firm, InterTalent. Ovitz later told The Times that he wished InterTalent well but added, “What I regretted was the way they went about leaving. I don’t believe it was done with any sort of honesty or decency.” He declined to discuss the firing of Tom Strickler, who later joined InterTalent.

In 1985 and 1986, an attorney for Ovitz and some of his clients--including Dan Aykroyd and Bill Murray--threatened to sue a producer if he depicted any of them in the film project called “Wired.” Later, the producer said that Ovitz had called him urging him to not produce “Wired,” which chronicled the life and drug overdose death of former CAA client John Belushi. Last spring, a small production company set to release “Wired” dropped the film; notes of conversations between one of the producers and an executive of the production firm point to pressure from CAA as the reason. CAA denied exerting any pressure.

CAA represents a large proportion of the industry’s biggest box-office stars, including Dustin Hoffman, Barbra Streisand, Tom Cruise, Robert Redford, Paul Newman, Gene Hackman, Sally Field and Bill Murray--prompting critics to assert that CAA can harm careers by persuading clients not to participate in certain projects.

Pollack called this assertion “a fantasy.” “Mike Ovitz does not control his stars,” Pollack said. “He does not control Robert Redford or Dustin Hoffman or Barbra Streisand. That’s nonsense. Can he influence them? Sure, but only up to a point.”

Pollack added, “I won’t believe that Ovitz and CAA are the ogres that people would like to believe. ‘I’m also not naive. He doesn’t run a philanthropic organization. Mike Ovitz did not get to be where he is by winning popularity contests.”

So far, Eszterhas’ letter doesn’t seem to have hurt his career. After portions of the letter appeared in the press, Disney studio chief Jeffrey Katzenberg called Eszterhas’ new agent, ICM’s McElwaine, to talk about a film project that Disney had been eager to do with the screenwriter for months. Columbia President Dawn Steel, who is close with Ovitz but also has been friends with Eszterhas since the pair worked on “Flashdance” together, called McElwaine to talk about his new script, “Beat the Eagle,” which her studio is producing and CAA client Sidney Poitier is expected to direct.

Producer Ray Stark, known in industry circles as an ally of Ovitz, called McElwaine with an offer to help buy the new house for Eszterhas. Stark was stunned when news of the offer got around town and immediately released a statement downplaying the conversation with McElwaine.

“Why would I want to take sides in a matter like this?” he asked. “Mike is a good friend, and Eszterhas is a writer I respect. I heard about the letters and the possibility that Eszterhas might lose his house. Since I always wanted to work with Eszterhas, I called Guy McElwaine and offered Eszterhas an interest-free loan if Guy would put me on top of Eszterhas’ list for his next writing job.”

In his statement, Stark also denied reports that Ovitz had called Stark to berate him for the offer, he said. “Mike Ovitz did not call me regarding the Eszterhas matter. The only call I did receive from Mike was one regarding my deal with Kevin Costner (a CAA client).”

As the quake he touched off continues to rumble through Hollywood, Eszterhas is refusing to say much about his letter. Two weeks ago, he released a statement saying he did not intend for his letter to be disseminated throughout the industry and leaked to the press. Now he is saying only this: “I’ve got screenplays I want to write, and I want to get on with my life.”