Creditor Claims Against David Bergstein Companies Dismissed

The entities are seeking a sale of 500 movies caught up in a bankruptcy court battle, including "The Whole Ten Yards" and "Twin Falls Idaho," but lead creditor David Molner has filed a motion to block the sale.
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David Bergstein

Federal bankruptcy court Judge Barry Russell dismissed the remaining claims on March 5 against R2D2 and other movie companies, including ThinkFilm, that were controlled by David Bergstein and Ronald Tutor, which had been brought by Screen Capital International, run by David Molner, acting for creditors and on behalf of the court-appointed trustee overseeing the bankrupt movie companies.

Russell ruled that a 2009 waiver related to payment of $2.9 million to satisfy a ThinkFilm loan by the Aramid Entertainment Fund, where Molner is also a manager, meant that SCI had no right to bring claims in the involuntary bankruptcy (which has been going on since March 2010). In rulings in 2012 and early 2013, Russell had said despite the waiver, SCI could act on behalf of creditors, but he changed his position last June.

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As a result of the ruling that SCI can’t act for the creditors, Russell also ruled on an “administrative claim” that SCI’s lawyers have no standing in the case, so they should not be paid about $3 million for work done by their lawyers.

The one thing the judge and both sides did agree on was that all of this will ultimately be put in the hands of the district court, which acts as the first place to file an appeal in a bankruptcy case.

Russell had opened the March 5 hearing by musing whether he should rule that day or wait for the results of an inevitable appeal to the district court.

Alex Weingarten, an attorney for Bergstein, successfully argued that Russell should make a ruling. “I’m not aware of any authority,” Weingarten told the judge, “that says that you should defer from action because one day an Appellate Court might disagree with you.”

“As a practical basis,” David Neale, an attorney for SCI, told the judge, “any ruling that the Court makes today is not going to achieve the objective stated by Mr. Weingarten, which is basically to put an end to these cases somehow. It’s not going to do that.”

“No doubt there will be another appeal,” said the judge in making his ruling against SCI. “Again, that’s not -- that’s never stopped me from ruling. That’s what I do for a living. But I do think you’re right on the facts as I see them. I will sustain the objection to the claim, and then it flows from that as far as the administrative claim.”

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If this latest decision is appealed, it will likely go before 9th district court Judge Philip Gutierrez, who is already hearing several related appeals. One appeal is from Russell’s ruling last June that the 2009 waiver bars SCI from acting on behalf of creditors.

Another appeal is related to a motion by SCI asking Russell to step down from the case in light of a recording of a Bergstein phone conversation that was made public last year.

On March 5, SCI also filed another appeal to Judge Gutierrez after Russell on Feb. 24 dissolved a preliminary injunction that stopped a company owned by Tutor from selling about 500 movies that were once part of the bankrupt companies.

SCI claims the movies were fraudulently transferred in an effort to keep them from creditors. The list of movies includes Half Nelson, Twin Falls Idaho, Sweet and Lowdown, Laws of Attraction and The Whole Ten Yards.

Russell gave SCI until March 27 to appeal that ruling, which it has now done.