Ryan Kavanaugh vs. The New Yorker

12:00 AM PST 10/02/2012 by Kim Masters , Matthew Belloni

The Relativity CEO declares war over a story suggesting he's lost control of his company to Ron Burkle.

The battle for Ryan Kavanaugh's reputation is on. In the wake of an explosive article in the Oct. 8 issue of The New Yorker that portrays the Relativity Media CEO as having forfeited control of his studio to investor Ron Burkle, Relativity is vowing a major lawsuit against the magazine. The New Yorker, meanwhile, is standing by the story. The conflict could set up a legal battle that would fascinate many in Hollywood who would pay money from their own pockets to witness the spectacle of buttoned-up lawyers from the venerable magazine's owner Conde Nast taking the deposition of the controversy-dogged Kavanaugh. (Of course, such litigation usually is resolved, one way or another, before the good stuff becomes public.) The article by Connie Bruck, author of Master of the Game, about legendary Warner Bros. boss Steve Ross, suggests that Kavanaugh, 37, is adept at "structuring deals where investors have done poorly while he and Relativity prospered." But the story implies that Burkle, while recognizing that investing in the movie business often is done for reasons other than financial gain, has gotten the upper hand with Kavanaugh. The billionaire supermarket mogul, 59, has acquired a majority stake in Relativity, and Bruck reports that in exchange for his most recent investment of "a couple of hundred millions of dollars," he received essentially 100 percent of Relativity as collateral. In an Oct. 1 letter to New Yorker editor David Remnick and Bruck, Kavanaugh lawyer Carol Genis wrote that the article is a "false and malicious" attack "loaded with numerous statements of fact which are false and defamatory." In an interview with THR, Genis says the Relativity lawsuit (not yet filed as of press time) will demand hundreds of millions of dollars in damages for defamation. "The New Yorker went so far as to publish an unsubstantiated and unverified rumor that was expressly denied by the individuals involved," says Chicago-based Genis. That rumor, which drops the theory that Burkle might fire Kavanaugh and replace him with Harvey Weinstein after merging Relativity and The Weinstein Co., prompted Burkle to send Kavanaugh a reassuring e-mail Oct. 1 that likely did little to calm Kavanaugh's anger. "A long time ago, a friend told me articles like this are a successful person's tax," wrote Burkle in the e-mail, a copy of which was obtained by THR. "It's just part of life at our level."

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