Weinstein Co. Bankruptcy Hits Discovery Snag Ahead of Sale Hearing

Harvey Weinstein 5 - H - 2017

The Weinstein Co.'s bankruptcy proceedings have hit a major snag the day before a sale hearing, as the distributor claims a discovery dispute appears to be an attempt to derail the board's approved asset sale to stalking horse bidder Lantern Capital.

At the center of the dispute is a late bid from Inclusion Media, a New York-based company led by theatrical producer Howard Kagan. The full details of the bid remain unclear, but it included a $25 million settlement fund, plus four percent equity in Inclusion, for victims of Harvey Weinstein's alleged sexual misconduct.

TWC wanted to depose a representative of a group of unsecured creditors who are seemingly backing that late bid ahead of the Tuesday hearing, and is also requesting documents related to its consideration of that offer and Lantern's.

The Official Committee of Unsecured Creditors on Friday filed an emergency motion asking the court to quash TWC's discovery requests. The committee is among several parties that have objected to the sale to Lantern — including Quentin Tarantino, Jennifer Lawrence and Weinstein himself. It argues the requests are harassing and not relevant to its dispute of the sale motion.  

"Among other things, the Debtors seek information and documents (much of which is privileged in nature) concerning communications amongst the Committee, communications with victims/survivors of sexual assault, harassment, and black-listing by former officer and director Harvey Weinstein, and analyses performed by the Committee regarding the Lantern bid, the Inclusion Media Expression of Interest, and the assets and liabilities of the Debtors’ estates," writes attorney Colin Robinson. "The Debtors’ Discovery also specifically requests communications with 'Alleged Victims' as if there is some dichotomy or conflict amongst the interests of victims/survivors and other unsecured creditors."

TWC responded on Monday, saying that while the "concept of a victim fund has obvious benefits for a worthy subset of the unsecured creditors," Inclusion has provided no evidence that it's a serious bidder and, instead, has launched a press campaign aimed at smearing the Lantern sale. (Read the full filing below.)

"Debtors spent substantial time with Inclusion Media and its counsel seeking some assurance that the expression of interest could turn into a qualified bid," writes attorney Russell Silberglied. "No such assurance ever came; instead, Inclusion Media’s purported offer lacked all of the criteria of a real offer and appeared calculated to disrupt the Lantern sale process, rather than to materialize into a legitimate bid."

Silberglied argues the discovery requests are targeted at the committee's evaluation of the Lantern bid and support for the Inclusion letter of interest and are therefore highly relevant.

Independent board member Ivona Smith on Monday filed a declaration in support of TWC's sale motion, explaining that Inclusion's late bid forced the board to decide whether to end the auction as planned or hold it and allow Inclusion to submit a qualified bid. 

"After discussion, including consideration of risks to the Debtors’ estates and Inclusion’s failure to comply with most of the requirements in the Bidding Procedures, the Board determined, in its reasonable business judgment, to cancel the Auction and declare Lantern as the Successful Bidder," says Smith. "[T]he Board determined that entertaining the Inclusion IOI would have introduced significant risks to the Debtors’ estates, including the material risk that the Stalking Horse Bidder would abandon the Stalking Horse Agreement because the Debtors qualified a bid in violation of the Court-approved Bidding Procedures and the Stalking Horse Agreement."

A hearing is currently scheduled for Tuesday morning.