Relativity Bankruptcy: Feud With Studio's Chief Restructuring Officer Resurfaces

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Ryan Kavanaugh

Even as the company looks to emerge from bankruptcy with Kevin Spacey and Dana Brunetti heading its film operations, its creditors committee plans to object to claims for payment from FTI Consulting, the firm that oversaw the restructuring.

Although the Relativity Media bankruptcy proceeding appears to be heading toward a resolution, an ongoing feud has yet to be resolved between Ryan Kavanaugh and Brian Kushner of FTI Consulting, who served as chief restructuring officer at Relativity during the bankruptcy.

The saga took a dramatic turn on Wednesday with the announcement that Kavanaugh, Relativity chairman and CEO, had recruited Kevin Spacey and Dana Brunetti to run Relativity Studios. But even as Hollywood digested that unexpected development, Relativity returned to a bit of old, unresolved business, announcing that the Official Committee of Unsecured Creditors plans to file a motion as early as Friday objecting to FTI’s claims for payment, citing, among other things, an investigation by a special committee of Relativity’s board of directors and the fact that the unsecured creditors committee has not had an opportunity to conduct its own inquiry.

Last month, Kushner submitted a declaration to the bankrupcty court in which he described “almost instantaneous animosity between Mr. Kavanaugh and FTI generally and me specifically.” FTI sought $4.8 million in payment for the two months it spent working on the bankruptcy.

Relativity is now charging that FTI “executed several business decisions without obtaining appropriate advice and consent from Relativity’s board of directors, including passing on an offer for the sale of the company’s fashion division and various employment decisions, among other matters.” It said that FTI’s request for payment is an “unnecessary distraction,” and that all parties should remain “focused on … confirmation” of Relativity’s plan of reorganization.

“From the very beginning of Relativity’s reorganization, the Committee has been a strong supporter of Relativity’s efforts to reorganize, watching our back to ensure that no party could be successful in pursuing actions that would threaten the company, and I am deeply grateful for their ongoing support,” Kavanaugh said in a statement accompanying the announcement of the planned motion. “We look forward to continuing to work with the Committee to emerge from Chapter 11 on a timely basis and not allowing any party to utilize the bankruptcy process to leverage the company for their own benefit.”

The committee recently stated its support for Relativity’s plan of reorganization and recommended that all unsecured creditors vote to accept the plan. Creditors still have to vote on whether or not to accept the reorganization plan, and the judge then also needs to approve it. A court hearing to consider confirmation of the plan is scheduled for Feb. 1.