There are many tales of horror emanating from The Weinstein Co. This one is about Polaroid, one of the movies bedeviled by the downfall of Harvey Weinstein’s studio. The Lars Klevburg thriller was almost salvaged with a $3.3 million deal with Netflix, but these days, “almost” amounts to nothing but a legal headache.
As is well known by now, Spyglass Media (formerly Lantern Entertainment) put up $289 million to acquire much of The Weinstein Co.’s assets out of bankruptcy. What followed has been persistent wrangling over what Spyglass actually acquired. See, for example, the ongoing drama from actors, directors and producers who insist they need to be taken care of financially before rights to a film like Silver Linings Playbook gets assigned.
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As for Polaroid, First Republic Bank alleges that Spyglass never properly acquired title to the movie about a high school loner who discovers the dark secrets tied to a vintage camera. The bank put up about $5 million in financing for the flick, was owed money and thus held a security interest. While a Delaware bankruptcy court authorized the sale of Weinstein assets free and clear of liens, claims, encumbrances and other interests, First Republic points out that the “Polaroid Loan and Security Agreement” was on the list of excluded assets.
Nevertheless, this doesn’t end the story.
According to Spyglass, it attempted to negotiate a deal with the bank over Polaroid. The parties couldn’t come to an agreement, but Spyglass says that while negotiations took place, it began efforts to market and distribute the picture, allegedly with First Republic’s full knowledge.
In September 2018, according to court documents, Spyglass entered final negotiations with Netflix, and by the following month, Spyglass came close to a $3.3 million streaming deal for Polaroid. The parties were so confident about it happening that word of the tentative Netflix deal was put out publicly.
First Republic entered the picture.
Spyglass says at the bank’s request, it screened the film to the bank’s employees. Spyglass adds that the bank encouraged efforts to come to a distribution deal and never demanded it relinquish possession of the movie and its prints.
But at the end of October, First Republic sent out a cease and desist letter demanding that sales and distribution efforts be stopped. First Republic objected to Spyglass/Lantern holding itself out as owning Polaroid collateral.
Spyglass says this came out of nowhere and that it stopped Netflix negotiations. The upstart movie company also says it then sent the bank the movie’s physical materials.
According to First Republic, “[T]hey provided the collateral in a disorganized fashion and without documentation to confirm that all such collateral has been returned. Hard drives containing some digital elements of the Film and loose power cords were thrown haphazardly into a box…”
Now that the Netflix deal has collapsed, and First Republic finds itself unable to reach an agreement to sell distribution rights to Polaroid, the bank is blaming Spyglass for a multi-million dollar loss. The bank accuses Spyglass of interfering with its property by taking possession of the film, preventing access and destroying the movie’s value. Conversion and interference with a contractual relationship are among the claims being pursued in Los Angeles Superior Court.
On Wednesday, Spyglass filed counterclaims of fraud, negligent misrepresentation and equitable indemnity.
“Indeed if Lantern had known that the Bank was opposed to Lantern’s Polaroid-related activities, it would never have expended the time, money and resources it did, which were for the Bank’s benefit, as well,” states a cross-complaint, adding, “As a result of the Bank’s misrepresentations, Spyglass has incurred and will incur damages related to marketing Polaroid, negotiating distribution licenses and defending itself against the Bank’s suit. The Bank must be held accountable and Spyglass must be made whole.”
First Republic is represented by a Paul Hastings team led by Nick Morgan, while Spyglass is being handled by Robert Schwartz at Quinn Emanuel.
