Weinstein Co., A+E at War Over How Harvey's Misconduct Impacts Deals

Harvey Weinstein Close Up 3 - Getty - H 2018
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Project Runway won't be airing on Lifetime anymore, but that's hardly cooling raw feelings between The Weinstein Co. and Lifetime owner A+E Network. In fact, the developing feud is quickly turning into one of the more consequential legal battles since Harvey Weinstein's sexual misconduct caused his former studio to declare Chapter 11 bankruptcy.

Lantern Entertainment emerged with a successful $310 million bid to acquire assets from TWC at a court-supervised auction. However, the deal hasn't closed yet, and there are still many producers and stars objecting to the assumption of their assets. Late last week brought word that the producer of Hotel Mumbai had struck a settlement to extradite rights to its Armie Hammer terrorist film. On Monday, some big-name entertainers kept up their own push. For example, Brad Pitt is demanding nearly $279,000 for his work on Killing Them Softly, while George Clooney wants $250,000 in connection for production services on August: Osage County. And then there's David O. Russell, the director of Silver Linings Playbook, who says he must be paid a $940,000 cure amount before Lantern can assume a deal for the film. To show a directing services agreement is executory, his lawyers also present the judge with Russell's right of first opportunity to direct a sequel to the Oscar-nominated movie.

A+E is another objector, but in this instance, TWC is fighting back. In fact, the debtor is now claiming to be owed quite a sum of money from the cable network and says it fully intends "to hold A&E accountable for its unexcused pre-termination failure to pay $8.631 million when it was due and owing, including for movies A&E actually aired and simply refused to pay for without justification."

The background to what is now happening dates back to a decade ago when Weinstein and A+E made a deal to bring Project Runway over from Bravo to Lifetime. The relationship ended a few months ago when the Weinstein scandal blew up. As a result, A+E sent a notice of termination. Thereafter, NBCUniversal came along to bring back the fashion reality competition show to Bravo.

But it's gotten complicated.

A+E doesn't just want the Project Runway contract excluded from being acquired by Lantern. If that was all, there would be no controversy as everyone is satisfied that the show is going to Bravo. Instead, A+E wants to get out of a movie agreement it had with TWC.

According to A+E's court papers, the Project Runway deal and the movie deal were executed on the same day — Feb. 7, 2008 — and "it was [parties'] intent to negotiate a package deal with multiple components: Lifetime would license Project Runway, but to do so, it would also have to license the distribution rights to numerous TWC-produced movies."

A+E says this was all put on the public record back in 2008 when Lifetime licensed Project Runway, NBCU sued to stop this, and then Lifetime counterclaimed about the "package deal" that it had obtained. The position of A+E is basically that it deserves to be able to cancel the entire arrangement.

"The issue here is not whether A&E had reasons for wanting to terminate two separate contracts with the Debtors," responds TWC in papers filed Monday. "It is whether it had a legal basis to do so. As shown below, it did not. Rather, A&E made a business decision that it was better off distancing itself from the Debtors and then scoured the contracts for an attempted legal justification."

TWC argues that the agreements can't be read as one single integrated contract — and that the terms of the Project Runway deal can't be imported into the movie agreement.

Why that is important is that as part of the Project Runway contract, TWC represented that it knew of no claim or pending litigation that would adversely affect any of the grants or licenses made in the agreement.

Well, what about sexual misconduct claims against Weinstein? It's an issue that's being raised by A+E why TWC may be in breach. In fact, in court papers, A+E says it would have never have licensed Project Runway for Lifetime "had TWC disclosed that Harvey Weinstein was sexually harassing and assaulting numerous women at the time of contracting."

On Monday, TWC responds that "sexual misconduct claims, even if proved, are not the type that fall into the ambit of the provision" and further, "A&E might not want to associate itself with Weinstein, but the claim against Weinstein or even TWC does not affect the validity of the license in any way."

"A&E therefore focuses not on the validity of a license but its value," continue the debtors' lawyers. "[T]aking A&E’s argument to its fullest extent would essentially make section 3 a financial guaranty of the value of the license, ten years after execution of the license. Such a construction is absurd."

It also appears as though A+E is making another argument why TWC is in breach through the misconduct of Weinstein. The Project Runway contract also stipulated that TWC as producer would discharge all of the obligations of an employer "under all applicable federal, state and local laws."

Pointing to the allegations from the New York Attorney General, among others, A+E states "TWC’s knowledge of, but failure to curb, Harvey Weinstein’s egregious acts of sexual misconduct constitutes a willful abdication of its obligations as an employer."

In response, TWC is trying to make the argument that the contract was really just meant to settle TWC rather A+E being the employer whose job it was to take care of issues like taxes and unemployment compensation.

Finally, A+E is making the case that a section in the Project Runway contract dealing with how the series would conform to practices and standards was breached via Weinstein's conduct.

TWC responds that the contract wasn't meant to govern Weinstein's off-air conduct, but rather was the mechanism by which A+E/Lifetime could edit episodes of the series to maintain uniformity and appearance of shows airing on its network.

There's also a nod to Weinstein's recently surfaced employment agreement.

"Moreover, A&E’s argument that Harvey Weinstein’s employment agreement shows that the Debtors condoned Harvey Weinstein’s deeds is misplaced," states his now bankrupt former studio. "The employment agreement does not provide, in A&E’s words, that 'so long as Harvey Weinstein paid for his misconduct, TWC would take no action against him.' Rather, the paragraph in question from Mr. Weinstein’s employment agreement provides 'you shall, in addition to any consequences set forth herein, be subject to the following.' ... One such consequence was termination. Indeed, the Debtors did terminate Mr. Weinstein. Accordingly, Mr. Weinstein’s employment agreement does not support A&E’s case in any way.”