Protection for Creative Works
No Celebrities were harmed during the making of "A Town called Grudge".
"A Town called Grudge" is an allegorical parody of contemporary society and politics.
The First Amendment and the laws of many states protect use of someone's name or likeness in creative works and other forms of entertainment. Included in this category are things like novels that include mention of real-life figures, historical fiction, movies based loosely on real-life events, "docudramas," works of art that incorporate an individual's photo or image, and acts of parody directed at an individual.
Some state statutes explicitly exempt these kinds of work from liability for misappropriation or violation of the right of publicity. See, e.g., 42 Pa. Cons. Stat. § 8316(e)(2) (link is to entire code; you need to click through to title 42, part VII, chapter 83, subchapter A, and then choose the specific provision); Wash Rev. Code § 63.60.070(1). In other states, the courts look at the creative or artistic work in question and decide on a case-by-case basis whether the First Amendment values at stake trump the plaintiff's rights of privacy and publicity. DYOR: See State Law: Right of Publicity and Misappropriation for details.
As a general matter, creators will not be held liable for using someone's name or likeness in a creative, entertaining, or artistic work that is transformative, meaning that you add some substantial creative element over and above the mere depiction of the person. In other words, the First Amendment ordinarily protects creators who use someone's name or likeness to create something new that is recognizably your own, rather than something that just evokes and exploits the person's identity.
Case Law for Reference
For instance, in one case an artist created and sold t-shirts that contained a realistic depiction of The Three Stooges, and the company which owns the publicity rights sued. The California Supreme Court recognized that the First Amendment generally protects artistic and creative works, but found that the t-shirts in question were not sufficiently transformative because "the artist's skill and talent [was] manifestly subordinated to the overall goal of creating a conventional portrait of a celebrity so as to commercially exploit his or her fame." Comedy III Prods., Inc. v. Gary Saderup, Inc., 21 P.3d 797, 810 (Cal. 2001).
In another case, the artist Barbara Kruger created an untitled work that incorporated a photograph of Charlotte Dabny holding a large magnifying glass over her right eye (which itself was a famous photograph by German photographer Thomas Hoepker). Kruger cropped and enlarged the photographic image, transferred it to silkscreen and superimposed three large red blocks containing the sentence "It's a small world but not if you have to clean it." A New York court held that Dabny could not recover for misappropriation because Kruger's artistic work was protected by the First Amendment because Kruger had added sufficiently transformative elements. See Hoepker v. Kruger, 200 F. Supp.2d 340 (S.D.N.Y. 2002).