Image Credit: Richard Drew / AP
The Weinstein Company has just made huge progress in its pursuit of legal action against its former co-chairmen Harvey and Bob Weinstein and other former company officers and directors.
After the many allegations of sexual misconduct against disgraced film mogul, Harvey Weinstein, and his subsequent arrest, The Weinstein Company (“TWC”) reorganized, which included firing Harvey, and the eventual departure of his brother, Bob, from the company. TWC subsequently imploded, filing for Chapter 11 bankruptcy in the United States Bankruptcy Court in Delaware in March of 2018. As part of the bankruptcy filing, TWC released anyone “who suffered or witnessed any form of sexual misconduct by Harvey Weinstein” from their nondisclosure agreements.
While the release from NDAs appeared to be a showing of good faith on behalf of the company, the bankruptcy filing initially complicated lawsuits filed against the company, including those filed by women contending that TWC facilitated Weinstein’s misconduct. Any expected payouts in these lawsuits would only come after those paid to TWC’s secured creditors, making it harder for these women to recover damages.
Less evident to the public is what has been going on in the background of the extensive legal turmoil surrounding Weinstein’s misconduct. For close to a year, the insurers providing TWC’s directors and officers coverage have been in talks with New York’s Attorney General and the Committee of Unsecured Creditors, a group primarily consisting of Harvey Weinstein’s alleged victims. The number reached during these talks amounts to $44 million, which would resolve most of the civil suits. However, TWC itself has not yet accepted this settlement, wishing to pursue its own claims against Harvey and Bob Weinstein.
In pursuit of TWC’s goal of legal action against the former co-chairmen, TWC is asking the bankruptcy court for permission to hire special litigators in connection with these potential claims against TWC directors and officers. New York’s Attorney General and the Committee of Unsecured Creditors are in opposition. The AG cites the extensive mediation efforts that have ensued, stating that the parties are days away from a resolution. The AG also argues that allowing TWC to hire this firm would undermine its progress as well as further deplete financial resources. This is a sound argument because the firm wanted to take on the case on a contingency basis of twenty-five to forty percent, depending on how long it takes to resolve the dispute. This would mean that the firm would take anywhere from twenty-five to forty percent of the recovery in any lawsuit against TWC’s former officers and directors.
Yesterday, October 15, 2019, the firm at issue announced in court that it will be revising its retention agreement from a contingency basis to a flat fee of $400,000. The Committee of Unsecured Creditors as well as the U.S. Bankruptcy Trustee appear to be on board with this arrangement. As such, it seems likely that TWC will be able to move forward with its lawsuits against Harvey and Bob Weinstein in addition to certain former officers and directors.