Modern VideoFilm Founder Details Ouster in $100 Million Lawsuit

Moshe Barkat says a lender called default despite promises not to do so — and hired consultants who didn't understand the post-production business.
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On Monday, Moshe Barkat lashed back at the lenders who took control of the post-production company he founded with a $100 million lawsuit that accuses Medley Capital Corporation, Deloitte and Charles Sweet of ruining Modern VideoFilm.

Modern VideoFilm, which entered into a preliminary agreement to be sold to Point.360 two weeks ago, has been in operation since 1979 and done work for Avatar, Modern Family, Star Trek, Game Of Thrones, The Walking Dead and Slumdog Millionaire. Most recently, the company has served as an important middleman in getting content for big studios up on digital distributors like Apple, Netflix, Hulu and Amazon.

According to Barkat's complaint in Los Angeles Superior Court, his firing came after two years of difficulty with a lender who put up $50 million for Modern VideoFilm's expansion.

Barkat says he chose Medley despite financial covenants in loan documents that had minimum revenue requirements and growth benchmarks that if not met, would trigger a default. Barkat says he expressed concern about these terms given the cyclical nature of his company and was told by two Medley employees, Brian Dohmen and Richard Craybas, not to worry about it.

"Medley said that if 'Events of Default' occurred, Medley would work with Barkat/MVF and be flexible and support Barkat and the MVF business," states the complaint.

Despite such alleged assurances, a default soon happened, and "Medley began to exhibit control over MVH," continues the lawsuit.

A deferred compensation payment to an executive who was bringing in 80 percent of the television post-production work wasn't paid, says Barkat. The company's offices were moved. And millions of dollars in cuts were allegedly forced by a firm that had taken control of the company's board of directors.

Ultimately, last September, Barkat was fired.

Barkat says his ouster came after he devised a plan that would restore the company to profitability — a plan that included reviving an "obstructed" deal worth more than $100 million with Technicolor putting MVF in charge of its content management operations.

The defendants are said to have not wanted "Barkat to be in a position to scrutinize their conduct in running the company" and so they searched for "cause" to terminate him under an employment agreement that ran until 2018. Barkat says the termination notice cited "willful misconduct and/or insubordination," plus "excessive compensation," which he claims was "phony and pretextual" and without the requisite 10 day notice to cure.

Barkat says that after he left, HBO took its lucrative work on Game of Thrones elsewhere, Tyler Perry Studios moved its post-production work in-house, and "due to the mismanagement and wrongful acts of Medley, Deloitte and Sweet, MVF's revenues are down significantly, and virtually all of the value of the company has been destroyed."

Represented by Louis "Skip" Miller, Barkat is suing for breach of his employment contract, intentional interference, breach of fiduciary duties, unfair competition and defamation. Here's the full complaint.

A Medley spokesperson responds, "We believe these claims are meritless and intend to defend them vigorously.”

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