Why ‘Rust’ Producers May Choose Bankruptcy Next

Internal financial pressures will mount as the Alec Baldwin film lacked a completion guarantee. Producers have retained a top lawyer for an investigation.

Who believes that Rust — the Alec Baldwin movie that suspended production a week ago after the fatal shooting of the film’s cinematographer on a New Mexico set — will eventually be completed and released? The question isn’t the most important one following the accidental tragedy. Yet, it does inform the calculus on what’s to come.

Most observers may not care about the millions of dollars put into this indie film. Very few are considering what it would be like for anyone in the cast and crew to get back on set and finish a Western that was reportedly about halfway through production before the Oct. 21 accident. Instead, most news stories that do point toward the future are speculating about the possibility of criminal charges and the potential for civil lawsuits. Producers for the film have hired Brandon Fox at Jenner & Block to handle an investigation.

Related Stories

“If the facts and evidence and law support charges, then I will initiate prosecution at that time,” Santa Fe District Attorney Mary Carmack-Altwies said at a press conference on Wednesday. “I do not make rash decisions and cannot rush to judgment.”

But the choice to finish or abandon the film could very well play a role on how this all shakes out. All productions begin with several rounds of risk assessment. Investors must look at the prospect of recouping, while even the most optimistic producers take out insurance in case anything goes wrong.

Rust was no exception, and the film insurance policy will likely cover at least part of the tab for the shutdown and probably even the costs for defending and settling negligence claims. (Some insurers exclude gross negligence. That’s a whole other discussion.) But there’s certainly a limit, and that’s why many banks that lend money for film and television production insist upon a completion bond.

Also called a completion guarantee, completion bonds act almost like umbrella insurance policies to fill in any gaps and get the production to the finish line.

Multiple sources tell The Hollywood Reporter that Rust had trouble obtaining a completion bond, which isn’t unusual as premiums can be expensive — and which has become even less unusual amid the pandemic and its attendant production shutdowns.

A rep for Rust did not refute THR’s sources and pointed to a statement that read: “We have halted production on the film for an undetermined period of time and are fully cooperating with all investigations and inquiries.”

But if the film had trouble obtaining a completion bond, the absence of a financial savior also means that those with a stake in the Rust enterprise — those who put up money (the budget was reportedly $7 million to $8 million), those owed money — may eye whatever is left in the bank account plus any meager insurance proceeds and attempt to position themselves for an exit. Especially with civil claims looming, too.

The math might be different if this film had a decent prospect of finishing up and eventually being sold to a distributor. That seems unlikely, even if it’s true that The Crow completed production after the infamous on-set accidental shooting that took the life of star Brandon Lee and did well at the box office. But that 1994 movie was much closer to wrapping production when Lee was killed, had previously generated hype, and only made it to theaters because Harvey Weinstein’s Miramax stepped in as distributor after Paramount Pictures bowed out.

As for Rust, DTO Law counsel Michael Davis says, “If they have no ability to capitalize, rather than deal with 12 different lawsuits, they may want to go into bankruptcy and relinquish control to an independent fiduciary. They’ll still be witnesses and material parties, but there may be some benefits here.”

Chapter 7 liquidation for the production vehicle would not mean a bullet-proof liability shield, as these inexperienced producers could be personally named in any lawsuits, but the move could at least get in front of any mismanagement claims while distinguishing the secured creditors from the unsecured ones. It might even corral the legal focus of the tragedy (that is, once the criminal investigation is complete).

As for larger implications, there’s already been reconsideration of guns on set, but some attorneys are skeptical such a move would prevent the type of negligence that may have been at play here. “I don’t know if I expect when the dust clears there will be systemic changes,” says Andrew Hurwitz, co-chair of the entertainment group at Frankfurt Kurnit.

Hurwitz does, however, think that producers and financiers may take a harder look at the necessity of completion guarantees. “If you were considering not having a bond, you may think twice,” he says, before acknowledging that insurance companies will likewise reassess risk. “Premiums could go up.”

Larger studios will shoulder the expenses, but the indie filmmaking world could be dramatically impacted if nonunion crews and non-comprehensive insurance packages become nonstarters for financiers.