• The Hollywood Reporter on LinkedIn
  • Follow THR on Pinterest
JUN
22
2 YEARS

Miramax Co-Owner Ronald Tutor Claims Victories in Bankruptcy Battle

A federal judge issued orders this week to disallow $143 million in claims by Aramid, which has led creditors in the involuntary bankruptcy of Capitol, ThinkFilm and others. Aramid says it will appeal.

Ron Tutor and David Bergstein
Getty Images

Miramax co-owner Ronald Tutor claimed victory this week in his legal battle with Aramid Entertainment Fund and other creditors fighting over the remains of five film companies forced into involuntary bankruptcy last year -- Capitol Films, ThinkFilm, R2D2, CT-1 and Capco.

Federal bankruptcy court Judge Barry Russell has issued five orders (one for each bankrupt company) that disallow unsecured claims by Aramid totaling about $143 million. Many of the orders were tied to a RICO claim that charged Tutor and his former business partner David Bergstein committed fraud and operated a Ponzi scheme to defraud lenders and investors.  

PHOTOS: Crazy Cases! 18 of Hollywood's Outrageous Entertainment Lawsuits

A spokesman for Aramid declined comment but did say it plans to appeal the judge’s rulings and that there are other legal options, including taking complaints to state court either against the companies or Tutor and Bergstein individually. Tutor was part of a group, along with Colony Capital, that bought MIramax from the Walt Disney Co. for about $650 million in July 2010. 

As it stands, the latest rulings leave Aramid with claims only against R2D2 (which was the main holding company when Tutor and Bergstein acquired or created these companies) and ThinkFilm. In total, those claims are believed to represent around $15 million, according to sources.

“Aramid for all practical purposes has lost completely in terms of their overall strategy of trying to recover on claims which were never obligations of the five debtors,” Tutor attorney Jeffrey Garfinkle tells THR in his first interview of the three-year battle. “Needless to say, we are extremely pleased with the judge’s ruling.”

STORY: Judge: Ronald Tutor Can't Escape Lawsuit Against David Bergstein Companies (Exclusive)

Garfinkle cites an agreement Aramid signed in connection with a $3 million payment by Tutor’s Library Asset Acquisition Corp.  to settle claims related to ThinkFilm. At that time, says Garfinkle, Aramid signed an agreement releasing all claims.

Yet Aramid has tried to use the bankruptcy case to get back money it loaned and lost, he argues, but which was never guaranteed. “They had a very Machiavellian approach,” he says, arguing that the plan was to “throw the debtors into bankruptcy in a very coordinated attack and hope and pray they would be able to sweep in special purpose loans not withstanding the release they had signed in June 2009. What they didn’t anticipate was that people would remember the existence of this release.”

Garfinkle says Tutor will file separate civil suits in Los Angeles Superior Court for a breach of the release that Aramid signed in the ThinkFilm settlement. He says he will seek all legal costs and damages.

STORY: Miramax Owner Settles David Bergstein Lawsuit

Aramid’s David Molner has said in the past that while there was an agreement on ThinkFilm, it does not impact their claims on the other companies in bankruptcy. Molner has also pointed out there are about two dozen other creditors in the case who have never signed any kind of release.

Separately, Ronald Durkin, the court-appointed bankruptcy trustee who is overseeing the five now-defunct film companies, has filed a motion to revive his request to consolidate all of the companies under his control so that he can pursue a recovery of assets that may have been lost or hidden. Durkin has charged that Tutor and Bergstein have not been fully truthful about what happened and have backdated legal documents to make it appear Tutor sold his film interests before he actually did so. An earlier consolidation request was denied by Judge Russell, who said Durkin had to make each of his requests for full control of the companies one at a time.

There is also an issue whether Tutor is an “insider” in a legal sense in the bankruptcy case. If so, Tutor might lose the millions in secured and unsecured claims he has against the bankrupt companies. Those claims appear to add up to about $130 million.

Garfinkle argues that whether Tutor is declared an insider in the case won’t affect his claims as the largest creditor in the bankruptcy. “It does not matter,” says Garfinkle. “This has been your presumption and it is a wrong assumption – that insider status would somehow result in a disallowance of a claim. That has never been the law at all.”

Garfinkle contends that because the claims were “non insider claims at their origination” – when Tutor bought the assets through his holding companies – they would not be affected even if he were seen as an insider in a legal sense.

However, that would change, say other sources, if Tutor were to be proven to have committed fraud in the case, an issue Durkin has repeatedly raised.

The trustee has also been trying to take control of Pangaea Media Group, a company once run by Bergstein, which is now out of business. The trustee contends it became a holding company for all of the movie assets, but Garfinkle said that is not the case.

Judge Russell did give the trustee control of Pangaea, but Tutor and Bergstein’s legal team have appealed that decision, making it impossible for the trustee to actually take possession until the appeal is settled.

Tutor’s wholly owned company Zelus LLC also filed a motion this week with the bankruptcy court asking for sanctions against Aramid’s Molner, his company Screen Capital International, his attorneys at Levene Neale Bender Yoo & Brill and others for allegedly making false representations that they had authority from the Salter Group to pursue a claim against Capitol Films Development. They consider the actions by Aramid “so brazen and Machiavellian that immediate judicial scrutiny is warranted, as is the imposition of the severest of sanctions,” according to the court papers.

Aramid had its own victories to point to as a result of the same hearing in federal court on May 8, which led to the orders this week.

On June 12, Judge Russell also issued an order granting a motion for a preliminary injunction that stops another wholly owned Tutor company, Library Asset Acquisition Corp., from selling movies that are part of what is known as the TFC Library. There are said to be more than 800 titles in that library, including Crouching Tiger, Hidden Dragon, The Air I Breathe and Woody Allen's Sweet and Lowdown.

STORY: David Bergstein Ramps Up Legal Assault With $100 Million Suit Targeting Attorneys

Tutor, who heads the large construction company Tutor Perini, told stock market analysts in May that he plans to sell his interests in the film business. Tutor said at the time if he did not sell the film interests, he may have to make additional sales of Tutor Perini stock.

This injunction, however, appears to make at least this portion of his movie holdings something he can’t sell until he bankruptcy case is settled, which could take several more years.

However, Garfinkle downplays the importance of the injunction against the sale of the TFC titles: “It is somewhat relevant but not very relevant. It keeps everything in the status quo. It is not an adjudication.”

The injunction does not affect the movies in the more valuable Intermedia film library, which include some high profile titles such as The Wedding Planner, GI Jane, Point Break and Hurricane.

Several sources say that representatives of Tutor and Bergstein have been actively working to sell the Intermedia library for around $20 million. However, some potential buyers have hesitated, say the sources, because of concerns the Intermedia titles could still be caught up in the legal problems surrounding the involuntary bankruptcy.

Garfinkle says the Intermedia titles are not part of the bankruptcy so he would not comment on them. Garfinkle is adamant, however, that Tutor remains the largest secured creditor in the bankruptcy and as such must be paid in full before any of the unsecured creditors. He says Tutor can block claims by any other creditors until his demands are satisfied.  

“There has been no challenge what so ever to that claim,” says Garfinkle, “which Mr. Tutor acquired during the course of the bankruptcy case through Zelus.”