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Spyglass Media Group, the entertainment outfit set up in the wake of the downfall of The Weinstein Co., appears headed to trial to defend itself against Ron Burkle, whose investment firm is still smarting from being cut out of a $289 million acquisition three years ago. On Tuesday, a Los Angeles judge gave a green light in a summary judgment ruling for Burkle’s Yucaipa Cos. to proceed on contract claims, if not fraud.
Back in 2017, sexual misconduct accusations against Harvey Weinstein sent his eponymous film and television company into a tailspin. Burkle had heavy interest in acquiring TWC, but he couldn’t pull it off thanks to an escalating legal situation that involved charges from the New York Attorney General and the possibility of an injunction on any sale. Instead, TWC filed for bankruptcy, and its primary assets were acquired by Lantern Capital. The Dallas-based private equity firm then spun out Spyglass, which took over a library of 200 films including Paddington, Silver Linings Playbook and various Quentin Tarantino films, made strategic investment deals with Warner Bros. and Lionsgate, and is currently co-producing reboots of Scream and Hellraiser.
Yucaipa, though, asserts that is contractually entitled to a finder’s fee (two percent of the transaction, about $6 million), an opportunity to invest up to $50 million and other considerations, thanks to how Burkle’s firm shared confidential information about TWC with Lantern. That exchange of secrets happened when Lantern was considering backing Burkle’s play.
On a summary judgment motion, Lantern argued that a non-disclosure agreement during the early, pre-bankruptcy period was the only conclusive agreement between the parties, and that if the deal was then rewritten to contemplate Lantern leading an acquisition of TWC assets, that modification of the NDA needed to be in writing.
L.A. Superior Court Judge Steven Kleifield rejects summary judgment here.
“Once the bankruptcy occurred it was clear that the ‘transaction’ that was the subject of the NDA would not occur,” he writes. “A proposed purchase of the TWC assets by Lantern in the bankruptcy would be a different ‘transaction,’ which would require Lantern to obtain permission to use the confidential information for that purpose. Accordingly, the parties entered into a new agreement, not a modification of the old one.”
Burkle moves forward on the claim that Lantern owes something from the Spyglass dealmaking, but the judge isn’t allowing Yucaipa to proceed on claims of fraud nor claims of unfair competition and unjust enrichment. That’s because allegations that the Dallas investors illicitly and deceitfully obtained confidential information for its own advantage is preempted by the California Uniform Trade Secrets Act, Kleifield concludes.
Finally, if there’s no settlement and this case does make it to trial, the newer Spyglass entity will be a co-defendant.
To the argument that it’s only Lantern that should face claims, the judge rules that there’s a triable issue whether Lantern and Spyglass should be treated as a single enterprise. According to the ruling, Yucaipa has presented sufficient evidence of “a commingling of funds or assets of the entities and the use of the same officers and employees. Additionally, Defendants concede that Spyglass was formed on March 12, 2018, to purchase TWC’s assets.”
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