Rod Lurie had every reason to believe that his film, "Nothing But the Truth" was going to be a hit. 

The film -- a thriller about a political journalist (Kate Beckinsale) jailed for revealing the name of a covert CIA agent -- had performed well at a slew of prominent film festivals. Beckinsale's performance was getting Oscar buzz. And Roger Ebert called the writer-director's work "truly inspired."

Then, in December, just after the film was nearing its release date, its producer and distributor, the Yari Film Group, was forced to place its releasing division into Chapter 11 after four creditors took action against the company.  
 

"The Yari team are good and smart people who got caught in the perfect storm of the economy," said Lurie, who directed, wrote and produced "Nothing But the Truth" and was a producer on another of Yari’s films "What Doesn't Kill You," starring Ethan Hawke and Mark Ruffalo. "But it was like a drive-by shooting. Everything's going great -- and then we're on the ground, bullet-ridden."
 

Both films were given a week-long award qualification release but have yet to find new theatrical distribution. A handful of other films -- including a romantic comedy with Uma Thurman and Colin Firth called "The Accidental Husband" and Brett Simon's "Assassination of a High School President" starring Bruce Willis and Mischa Barton -- also have been left orphaned, to the point that fans are reaching out to other studios on their behalf. (See accompanying story on Yari’s orphaned films. [4])

 

The current economic climate has only made indie films’ road to theaters more bumpy. Now, many in the industry are trying to figure out if Yari's predicament is a bellwether of more trouble for small film companies. 
 

And Yari certainly isn't the only one facing problems. Peace Arch Entertainment Group, which picked up Jean-Claude Van Damme’s comedy attempt at a comeback, "JCVD," announced in December it would be forced to slash 23 jobs. First Look Releasing also recently let a handful of staffers go, and is facing a couple of expensive lawsuits by sales agents and producers.
 

"It’s a tough climate, and it's so hard to get companies to finance films in the first place," said Bruna Papandrea, who recently launched her own production company after working for Groundswell Productions and executive producing "Milk." "I don't necessarily think Yari's case is symptomatic of what's happening across the industry -- but these companies face a lot of big obstacles. There's a lot of pressure to make movies for cheaper than ever, and without the distributors putting up a fair amount of P&A, it's very hard to compete in the marketplace."
 

Headed up by Hollywood financier and CEO Bob Yari, a former real-estate tycoon, the company was launched in 2002 and began releasing films four years later, starting with the February 2006 drama  "Winter Passing," which starred Zooey Deschanel and Ed Harris. They also produced "The Hoax," with Richard Gere, and "The Matador," with Pierce Brosnan, among others -- but their biggest successes were with Paul Haggis' 2005 Oscar-winner "Crash" and "The Illusionist" with Edward Norton, which took in $87 million worldwide. No one at the company was available for comment on this story.

 

Lurie saw Yari as the perfect place for his films. "It was a home for people's love projects," Lurie said. "[On 'What Doesn't Kill You,'] we had a budget of around $10 million and a first-time director, Brian Goodman. So it was a leap of faith, and Bob was willing to do that."
 

The film performed well at the Toronto Film Festival last fall and was slated to be released during the first quarter of 2009. But signs of financial trouble at the company were already emerging.
 

"At this point, they were a little cash strapped -- it was all hands on deck," recalled Lurie. "We were at the point where in some cases Yari was flying us out -- and in others we'd fly ourselves. They were doing the best they could, and we were trying to be accommodating in the hotels we stayed at. We’d we'd take Jet Blue instead of first-class American to do interviews."
 

In mid-December, Yari's releasing division was forced into bankruptcy protection after it lost legal battles with four creditors over disputed debts. As a result, substantial layoffs began, and releasing activities were suspended. 
 

At the time, the company said the production arms of the company were distinct entities which would remain unaffected.
 

After months of pushed-back release dates, the stranded films on Yari's slate had to begin seeking other avenues for distribution and marketing. As expected, the studios weren’t welcoming them with open arms.
 

"We’re not just a small Sundance film, and these people have their slates set,” said Jennifer Todd, whose production company Team Todd worked on "The Accidental Husband." "These days, marketing is so expensive, and [studios] have to figure out what their budget is. But I feel like the movie plays to a wide audience and there's still a strong distribution prospect for it."
 

To make matters more complicated, Sony Pictures Home Entertainment controls the DVD rights for both “Husband” and “Assassination.” Without the DVD rights, some say it's unlikely a studio would want to invest in prints and advertising -- thus throwing the films into the bins alongside lesser-quality straight-to-DVD releases.

 

And if Yari isn't able to restructure its debt quickly, the films the company is currently producing -- including "The Governess" with Jennifer Lopez and Joe Carnahan's "Killing Pablo" -- could end up in the same predicament.

 

But bankruptcy attorney Henry David said it's important for a company in Yari's situation to continue working towards releasing films to recoup the profit it needs to repay its debts. "Even in a Chapter 11 reorganization, the releasing arm of the company can buy goods, put them on the shelf and sell them," said David, who is a partner at Snell & Wilmer. "In fact, you should be doing that, unless it's an unprofitable line."

 

Several people who had been working with the company said the signs of trouble had long been clear at Yari, and that Yari’s trouble were not necessarily indicative of bigger problems in the indie industry.
 

"There were certainly release dates that weren't met at Yari and bounced around," said one source who refused to be named. "In 2008, you would have been nuts to sell your film to Yari Film Group."
 

Dawn Hudson, the executive director of Film Independent, said she believes the business model for independent film is still viable, even in this climate. "Yes, there are companies that go under, and yes, there are ins and outs of the independent film business. There are people who get into it who are not well-capitalized," Hudson said. “But independent filmmakers are the most resilient group of people in the world. It's always going to be a roll of the dice."

 

Lurie was less optimistic. "I think there is going to be an overabundance of caution in the independent film world," he said. "I don't think you're going to see people investing in it quite as much -- and I really have a fear that this is going to zap the ability of creative people to be creative in the future."
 

As the fate of some of the films on Yari's slate hangs in the balance, some fans are taking the opportunity to rally behind the unseen pictures.
 

On SlashFilm [5], editor Peter Sciretta posted an article urging fans to speak up for "Assassination of a High School President," which was hailed as a John Hughes-esque dark high school comedy at last year’s Sundance festival. He said a number of readers have been reaching out to studios to try to get the film into theaters.
 

The efforts please one of the film's writers, Kevin Jakubowski, but he’s trying to

keep it in perspective. “If the business doesn't allow it to have a theatrical release, that's a disappointment,” he said. “I mean, it's a Bruce Willis/Mischa Barton movie, and it might go to DVD. That's definitely depressing. But it's a sign of the times."