Relativity Bankruptcy: 'Hunter Killer' Producers Reach Deal

Ryan Kavanaugh Cover Splash Without Text - H 2015

In recent weeks, the Chapter 11 bankruptcy of Relativity Media has hardly become kumbaya, but there's been some stability as the studio's biggest financial backers have put down their poison pens and largely gotten on board for a sale of the television division and the return of control of other assets to a group headed by chief executive Ryan Kavanaugh.

However, with the debtor still due to submit a plan of reorganization, Neal Moritz and other executive producers of the forthcoming action film Hunter Killer raised some new drama before coming to an agreement (See update below).

In a letter to the judge on Tuesday, the producers argued they "urgently need to depose Kavanaugh to take discovery which will prove that Relativity is categorically incapable of reorganizing under Chapter 11 and emerging as a viable production house."

The issue first was brought to the court's attention last week when Moritz's group filed an objection to Relativity's motion to extend the time in which to file a Chapter 11 reorganization plan. Moritz's group said they would be "trapped in the purgatory between assumption and rejection until May 2016 at the earliest" of their contract for the film if the court were to approve an extension. The delay, they added, would cause lead actor Gerard Butler to leave the production, which in turn would "diminish the value of the project to the point where production financing to produce the picture ... will evaporate."

On Tuesday, attorneys for Relativity responded by characterizing this objection as "a misguided attempt to precipitate the rejection of the Hunter Killer Parties' executory contracts with the Debtors."

The team behind Hunter Killer isn't letting up and demands a Kavanaugh deposition because they say it will show "beyond a shadow of a doubt" that an extension will close the door on their "once-in-a-lifetime opportunity" to make this film.

What's more, the objectors allege that Kavanaugh's deposition testimony would "confirm that, in the wake of several key departures, Relativity no longer has the leadership or personnel necessary to execute a project on the scale contemplated by the Hunter Killer film project" and would "reveal the the duplicitous and fraudulent gambit he has employed (and continues to employ) to trick investors and counter-parties to executory contracts ... alike to buy into his sham operation."

The hot rhetoric is accompanied by the suggestion that Relativity "would be better served by a liquidation."

Before departing Relativity as its president, Tucker Tooley was set to be an executive producer on the film. On Tuesday, Relativity announced that Andrew Levin was being brought on as Relativity's new president and chief legal officer.

According to an exhibit to the letter to the judge, Relativity is objecting to Kavanaugh's deposition because the Mortiz group served a notice without conferring with them, didn't give them reasonable notice and failed to identify the contested matter in their notice.

UPDATE 11/11, 12:10 p.m. EST:

On Wednesday, Relativity sent a letter to the judge in response.

"Put to one side for now that this is a pretextual objection made for the transparent purpose of smuggling in false, defamatory statements about Relativity and its CEO in order to coerce the Debtors to relinquish their approximately $7 million investment in the film," states Relativity's attorney. "The Hunter Killers’ assertion is also simply not true ... So, notwithstanding what the Hunter Killers say, there is no reason to hold the entire estate hostage to the Hunter Killers’ objection to extending the exclusivity periods here, especially where, with the exception of one creditor who filed a me-too objection after it saw the Hunter Killlers’, all of Debtors’ other creditors consent to an extension of the exclusivity period."

Relativity wants the judge to overrule the objection as being a theory unsupported by any evidence. The judge is also told it would serve as a "distracting sideshow" at a time-sensitive moment where Kavanaugh is attempting to reorganize the Relativity business. 

UPDATE 11/12, 3 p.m. EST:

The dispute has apparently been resolved with an announcement of a partnership to make the film. Besides Relativity and Mortiz's original film, the other co-partner will be Millennium Films. “I’m very happy that we have resolved the misunderstanding between the parties,” said Moritz in a statement. “I especially want to thank Ryan Kavanaugh for finding a solution that brings Hunter Killer back to life. I’m looking forward to working with him and everyone at Relativity Studios to make a great film, and I am sorry we had a miscommunication.”