Score a victory for Ronald Durkin, the trustee in the involuntary bankruptcy case involving Capitol, ThinkFilm and three other companies that were run by David Bergstein.
On Wednesday, federal Judge Barry Russell granted the trustees motion to take control of Pangea Media Group, a company that Bergstein ran until it shut its doors earlier this year.
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This is the first big victory for the trustee after several setbacks. The judge had earlier this year refused to allow Durkin to consolidate a number of the subsidiaries related to the bankrupt companies, which frustrated the trustee’s efforts to exercise control over them. The judge had said the trustee could return and re-ask for control, but he had to do it one entity at a time.
That is what the trustee has now done.
Winning the motion to take control of Pangea, despite vigorous opposition from Bergstein and his former business partner Ronald Tutor, is now likely to be the first in a series of efforts to control all of the related assets.
The judge said in making his ruling that it was clear Bergstein could not be trusted.
This means Durkin can immediately run Pangea, which he has said he will put into bankruptcy. The judge left it up to Durkin to decide if it would be put into voluntary bankruptcy and whether that would be a Chapter 11 reorganization or a Chapter 7 filing, which would put it out of business completely.
It also means Durkin has the right to all records related to Pangea, including correspondence among attorneys who have represented the company and Bergstein in the matter. Many of those communications have been kept under cover because of attorney-client privilege until now. An attorney for Tutor is said to have the Pangea records, which until now he has refused to turn over to the trustee.
Tutor had said if Bergstein were removed as manager of Pangea, which is now the case, that he would sue for $2.5 million. That apparently relates to the amount of a loan held by a bank relating to the movie Father of Invention. Tutor apparently guaranteed that much of the cost of making and releasing that movie.
The movie, starring Kevin Spacey, was released direct to video in October.
The judge noted that threat and said in court that under bankruptcy law, Tutor would have no right to file such a suit now that he has issued a formal order placing Pangea under Durkin’s control.
This does not affect the judge’s earlier ruling by which Aramid Entertainment Fund and other creditors are preparing their own plan for how to reorganize these businesses. That proposal is still due by Jan. 2.
What this does do is strengthen Durkin’s position as the trustee and allow him to move forward on tracking down millions in missing assets.
