Rhythm & Hues Bankruptcy: $1 Million Settlement for Fired Workers

The VFX firm filed for bankruptcy in February.
Courtesy of 20th Century Fox
"Life of Pi"

A California bankruptcy judge has given preliminary approval to a $1 million settlement made with fired workers of Rhythm & Hues, the Academy Award-winning VFX firm that did the special effects for Life of Pi, among many other films.

Earlier this year, the company filed for Chapter 11 bankruptcy protection and terminated 238 employees. Before the company was sold to an affiliate of Prana Studios for $1.2 million in cash and the assumption of liabilities, a class-action lawsuit was filed by Anthony Barcelo, one of the employees terminated, alleging violations of the Worker Adjustment and Retraining Act. Specifically, the plaintiffs claimed not being given the requisite 60 days of written notice before termination. A second legal action against the bankrupt company was also filed that aimed for earned unpaid wages under California labor laws, including for 30 days beyond a fired employee's termination.

Last month, a joint motion was filed in bankruptcy court that sought approval for a $1 million settlement for wages and benefits left outstanding. According to the terms of the settlement, after $10,000 payments are made to the two class representatives, the $980,000 balance, minus one-third attorney fees and other court costs, will be divided among the fired workers who choose not to opt out. It'll happen on a pro rata basis based on compensation records kept by Rhythm & Hues. A class notice will likely be issued soon.

After a hearing last week, a judge gave preliminary approval and set a hearing for final approval on Dec. 13.

The deal came after a mediation process in the summer.

Without a settlement, had the case gone forward and plaintiffs prevailed, the maximum that they might have collected would have been $3.6 million, according to court documents. The plaintiffs also had insisted that they be given priority status, potentially impacting claims made by the VFX firm's other creditors.

The R&H estate has about $6 million on hand, largely from the money it got from Prana as well as $4.2 million from the sale of real estate.