Stanley Brooks Unexpectedly Files for 'Private' Bankruptcy
Just as he said he would, producer Stanley Brooks is liquidating his companies after AFTRA did not accept his settlement offer for outstanding residuals on the 2008 Logo TV series Sordid Lives -- but not in the way the guilds and his creditors anticipated.
Instead of going into federal court to file for bankruptcy protection, Brooks' companies, including his Once Upon a Time Films, have made an Assignment for the Benefit of Creditors, which is a kind of private bankruptcy in which a person called an "assignee" is appointed to take charge and distribute whatever proceeds are available to the outstanding creditors.
In a letter to impacted members from AFTRA about what Once Upon a Time Films and a related company, Simon Cinema Ltd., have done, representative Steve Sidawi told the actors that the guild does not believe Brooks acted in good faith when he offered to pay $500,000 to settle about $1.5 million in outstanding residuals.
Sidawi wrote that after repeated attempts between Oct. 8, when the offer was made, and Oct. 11, when it was withdrawn, the guild was unable to get details about the proposed settlement.
"It became apparent," Sidawi wrote, "they were not serious about making a good faith effort to achieve a fair settlement."
Kenneth Suddleson, an attorney for Brooks, challenged the AFTRA comments that his client did not act in good faith. "That is totally false," said Suddleson, who insisted the guilds did have complete information about the offer and source of funds.
"The offer was put together in good faith," said Suddleson, "and to say otherwise is completely untrue."
Suddleson criticized the guilds for waiting until the last second before each deadline to respond, each time saying they needed more time. He said Brooks chose to do an Assignment because it is a simpler, faster process. "The hope is it will produce more money for creditors," Suddleson said.
The assignee chosen for this case by Brooks' side is Robert Cohen of the firm Alternative Bankruptcy Concepts of Buena Park, Calif.
There are some significant differences in an assignment, which is allowed under California law, compared with going bankrupt in the usual manner.
"It is a state court alternative to a federal bankruptcy," said Roland Tellis, a commercial litigator with Baron & Budd of Los Angeles, which has no involvement with this case. "This is a process that gives (the company being liquidated) less expense, more privacy and more control."
It also means the assignee can restrict or eliminate the ability of creditors to collect. Cohen set a date of April 6, 2011, for creditors to file claims. He said that he hopes to distribute whatever money there is within two months after that. Cohen also gets his fee out of the assets, which is $20,000 for each of the two companies and 10% of the assets distributed.
The WGA and DGA also did not accept Brooks' Oct. 11 offer to settle money that their member, writer-director Del Shores, is owed. Since then, the DGA went to court and had its claim of $71,360.78 certified in unpaid residuals, plus late fees of $25,799.79, which continue to mount. The WGA went to court in May on behalf of Shores and had his debt of about $165,000 certified after the guild won an arbitration hearing in November 2009.
AFTRA has a date in L.A. Superior Court on Friday to certify its $1.5 million claim.
In federal court, a certified debt would have priority over other debts. In an assignment, that is not the case unless it is a secured claim.