David Bergstein Sues, Demanding Millions of Dollars From Miramax Sale
UPDATED: The embattled film executive claims he was promised 5 percent of the deal, plus a transaction fee and consulting contract.
David Bergstein is suing Colony Capital, its executive Richard Nanula and Filmyard Holdings, the entity crated to acquire Miramax Films.
The embattled film executive claims in a lawsuit filed Monday in Los Angeles Superior Court that he and a U.K. entity he owns, Exodus Film Co., are owed tens of millions of dollars in fees and other payments related to the $675 million acquisition of Miramax in December 2010 from the Walt Disney Co.
The suit is for breach of contract, fraud, unjust enrichment and other claims.
According to the suit, Filmyard paid Bergstein a closing fee of $6.1 million but “subsequently reneged on all further amounts and interests obligated to Bergstein" and his company.
Bergstein says in the suit he was promised “a non-dilutable 5 percent of the equity in the transaction, a 1 percent transaction fee and a substantial consulting agreement.”
The suit says Bergstein, under pressure from Colony executives Nanula and Thomas Barrack, agreed to reduce his equity by one-third to 3.33 percent of Miramax but never agreed to any other changes.
That means Bergstein is claiming he is still owed about $20 million in equity and $6.1 million in a deferred transaction fee, a payment triggered when Miramax refinanced. He also says he should be paid the consulting fee, lawyers fees and other damages.
The suit says the Miramax investors lied to Bergstein in order to close the deal, which Bergstein had initiated and structured. Then “as soon as the ink was dry on the operative documents,” the suit continues, Nanula (newly named as chairman of Miramax) and Colony’s attorney Josh Grode “began hounding Bergstein to reduce his interest in Miramax.”
The suit says Bergstein intends to add Grode as a party to the legal action in the future. It also alleges that Grode withheld information from Bergstein and Tutor that he was involved with another company, GHL & Co., an investment bank that participated in the financing of Miramax. The suit alleges that GHL and Grode made more than $15 million in fees, aside from Grode’s legal fees.
The suit charges that “Grode never disclosed his relationship with GHL to Exodus” or to “any other investor in the Miramax deal, other than Colony, as required by California Rule of Professional Responsibility.”
Before the deal closed, the suit says, Bergstein had negotiated a $250 million financing from Comerica, which allowed the investors to make the tentative deal with Disney in July 2010. However, Nanula and Colony later replaced Comerica as primary lender at the urging of Grode with GHL.
As the deal neared its closing, according to the suit, Colony said that instead of investing $100 million as it had promised, it wanted to have its client Qatar Holdings -- a subsidiary of the Qatar government -- invest “to compensate the Qataris for prior failed investments that Colony had sold” them. As part of that, the suit says, Colony wanted the Qataris to be given “a preferred interest,” but that would only be possible if they eliminated the equity promised to Bergstein.
The suit also says Tutor was originally Bergstein’s partner in Exodus and that Exodus was to be the vehicle to make the acquisition. At the request of Colony, however, Tutor dropped out of Exodus, which then was owned only by a corporation owned by Bergstein. And instead of Exodus being the buyer, the investors created Filmyard Holdings to do the deal.
Bergstein’s suit claims that the investor group that bought Miramax “lied to Filmyard’s lender and Colony investors by telling them that Bergstein would have no interest in Filmyard.”
The suit says they also “knowingly” lied to Bergstein about his compensation to close the deal and get the business off the ground.
The effective price of the Miramax deal, says the suit, was “approximately $590 million because of cash that had built up with Miramax prior to the closing. Filmyard borrowed $400 million to finance the closing but was able to reduce that debt through collections made within the first year of approximately $100 million. Within approximately one year of the closing, the acquisition was refinanced after an appraisal of Miramax for $825 million -- a more than $400 million increase in equity value in just a year and in the middle of the Great Recession.”
After the refinancing, says the suit, Filmyard had enough money to repay all the investors but instead paid Qatar all of the proceeds, except for money used to pay additional fees to Grode and Colony.
According to the suit, even as Tutor and Colony were claiming Bergstein was not part of the new Miramax, he continued to work behind the scenes. The suit says he created a “unique business plan, educated the prospective employees of Miramax and initiated the major deals for exploitation of digital and streaming rights for Miramax's extensive library (with partners such as Netflix and Echo Bridge).
After he was paid a $6.1 million “closing fee,” Bergstein says he was not paid another $6.1 million deferred “transaction fee” and was not given shares representing 3.33 percent of the company, as he had been promised.
The suit says that Mike Lang, who was CEO of Miramax, was recently “fired” even though the company’s equity had doubled. The suit suggests that is because “the increase in equity was due solely to the fact that Bergstein had recognized the hidden value in this asset and created a unique plan to allow it to be realized.”
Bergstein says he repeatedly tried to contact Nanula and Grode but was ignored, or when they responded, he was told he had to reduce or give up his promised compensation. “When the cold shoulder was insufficient,“ says the suit, Nanula and Colony “escalated their efforts with threats, telling Bergstein to keep quiet or he would get nothing whatsoever and asserting that no one would believe Bergstein because of negative press he had received regarding unrelated matters and that they would bury Bergstein under yet more accusations if he continued to seek what he was owed.”
At another meeting in midsummer 2011, says the suit, “Nanula threatened Bergstein that if he continued to pursue his documented rights, Nanula would ensure Bergstein would 'never see a penny.' Nanula and Grode allegedly stated that Bergstein had been disgraced in the press and that they were prepared to pile on with more allegations in an effort to destroy Bergstein’s credibility.”
The Hollywood Reporter has reached out to the defendants for comment and will update with a response.
The suit was filed by Alex Weingarten, Ethan Brown and Jeffrey Logan of L.A.'s Weingarten Brown firm.
Sundance: On the Scene
- The Fantastic Four Movie Seems Really Good All of a Sudden
- Vacation’s Chevy Chase and Beverly D’Angelo to Reunite for a Pilot With a Very Silly Name
- Frozen Duo Writing a Song for Neil Patrick Harris to Sing at the Oscars
- Sundance: Watch Robert Redford and Nick Nolte Get Ready to Hike in A Walk in the Woods
- Behati Prinsloo, Karlie Kloss & the Angels Star in Victoria's Secret Super Bowl 2015 Commercial - Watch Now!
- Mandy Moore Hinted at the Ryan Adams Split Before News Broke
- Tom Cruise Allegedly Wiretapped Nicole Kidman's Phone & More Revelations From Scientology Doc 'Going Clear'
- Former Hollywood Executive Cindra Ladd Accuses Bill Cosby of Rape in Powerful Essay