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DEC
26
11 MOS

David Bergstein Wins Key Legal Victory in Involuntary Bankruptcy Case

However, the Dec. 12 ruling is being appealed, which means the district court will likely have the ultimate say on whether legal cases brought by Screen Capital International and the bankruptcy court trustee can proceed.

David Bergstein
Michael Buckner/Getty Imagess
David Bergstein

Embattled financier David Bergstein won a legal victory when federal bankruptcy court Judge Barry Russell dismissed the last in a series of lawsuits brought by Screen Capital International Corp. acting on behalf of the bankruptcy trustee. It was one of eight cases that personally named Bergstein and his former partner in the movie business, Ronald Tutor, as defendants.

This latest ruling, which came Dec. 12, is significant because it may mark the collapse of a plan by SCIC and the Aramid Entertainment Fund to act on behalf of the court-appointed trustee, Ronald Durkin, to find assets and unlock any value left in the bankrupt entities, including Capitol Films, ThinkFilm and others on behalf of creditors.

SCIC and Aramid, led by hedge fund manager David Molner, had made a deal with the trustee to take over the search for lost assets. The trustee, after nearly three years of fruitless efforts as he faced new legal entanglements at every turn, had made the deal that kept the cases alive.

Bergstein's attorney Alex Weingarten says the entire effort by SCIC and the trustee was "a waste of time and money."

SCIC not only filed cases against Bergstein and Tutor but also threw out a wide net in other suits where it wanted to try and find money that belonged to the bankrupt companies.

"It filed countless cases against [Bergstein's] wife, his mother, his friends and business partners," says Weingarten. "All have been dismissed."

The SCIC plan, says Weingarten, "consisted of nothing more than filing a bunch of lawsuits against Bergstein, Tutor and some selected third parties with ties to them. Those have now all been dismissed -- with prejudice."

With prejudice means SCIC can't refile new versions of the same civil complaints in Russell's court.

However, the ultimate decision on this will likely rest with the appeals courts, where a number of cases that started with Judge Russell are now expected to be decided by Judge Philip Gutierrez, who has previously reviewed a number of related matters.

The fate of the litigation likely will hinge on Gutierrez's review of Russell's rulings.

In this case, in which Bergstein and Tutor were charged with breach of fiduciary duty and other things, Russell ruled Dec. 12 in large part on an unrelated matter -- whether a release Molner signed on behalf of Aramid in return for about $4 million paid by Tutor back in 2009 to settle a movie bridge loan means that his other company, SCIC, can't act with the trustee to file claims to recover lost or missing assets, including hundreds of movies.

SCIC's attorney, David Neale, sees hope because he believes the appeals court will see that Russell changed course during the litigation, starting with saying the release did not matter to giving it a very broad interpretation.

SCIC is also appealing a ruling by Russell that there was no reason for him to step down from these cases after a recorded phone conversation suggested Bergstein intended to tamper with the judge. Bergstein has said he made the statements at the time, knowing they were false, only as a way to test the person he was speaking with. That appeal is also likely to be decided by Gutierrez.