Netflix Moves to Kill Relativity's $1.5 Billion Lawsuit

Relativity_For_Sale_Comp - P 2016

Netflix is moving rather quickly to put an end to the $1.5 billion lawsuit filed three weeks ago by Ryan Kavanaugh's Relativity Media. On Monday, the streaming giant filed a motion to strike Relativity's complaint and took some vindication in the film studio's troubles since emerging from Chapter 11 bankruptcy.

The two sides have been engaged in a legal war since the beginning of the year. Netflix initially opposed Relativity's restructuring and later insisted it had the right to stream Masterminds, a comedy starring Zach Galifianakis, and The Disappointments Room, a horror film that features Kate Beckinsale, ahead of their theatrical release.  A bankruptcy judge rejected Netflix's "bad faith" gambit to escape a licensing deal worth hundreds of millions of dollars. In mid-October, Relativity went on the offensive with a complaint against Netflix in Santa Clara Superior Court alleging breach of contract and trade libel. 

According to Relativity, Netflix wasn't loyal and the attempt to undercut the studio forced Relativity to be put up for sale. A big stake in Relativity was recently sold to Singapore web giant YuuZoo.

"Although the Bankruptcy Court ultimately permitted Relativity to assume the 2010 agreement, Netflix’s objections proved prescient: post-bankruptcy Relativity would flounder," states Netflix in court papers demanding Relativity's lawsuit be stricken under California's anti-SLAPP law.

Relativity asserts that Netflix has spread false statements to press outlets, producers and talent agencies.

Netflix responds that the statements disparaging Relativity's ability to theatrically release films emanate from the bankruptcy proceedings and are thus privileged in furtherance of its right to petition under the First Amendment.

"It does not matter whether they were made with malice or not," adds Netflix.

Under California law, if a judge accepts that the objectionable statements fall within the ambit of the SLAPP law, it's the plaintiff's duty to demonstrate a probability of prevailing before the case moves any further.

Netflix argues that Relativity's libel claim falls short for two other reasons besides statements being non-specified and privileged.

"First, Relativity has failed to properly plead an essential element of its trade libel cause of action – pecuniary loss – because the Complaint includes only a bare allegation of loss and does not identify particular transactions or relationships that allegedly were interfered with," states Netflix's court papers.

"Second, Relativity cannot show that the statements are false," continues Netflix. "Relativity’s inability to theatrically release the required number of films was demonstrated in the bankruptcy court; it is now a simple matter of historical fact. The other statements – that Relativity’s 'business model was flawed,' and that Relativity would be unable to implement its Plan – cannot be proven true or false because they are statements of opinion, not fact. They are therefore not actionable."

As for Relativity's contract claims, Netflix's attorney Stephen Mick writes the parties fought each other over interpretation of the licensing deal, and the dispute was already litigated in bankruptcy court. As such, Netflix argues all of this — including correspondence in connection with the bankruptcy matters — are covered by privilege as well.