Relativity Hit With $44M Breach of Contract Suit By Aramid

Suit says the studio oversaw “one of the greatest heist stories ever told in the movie business”

(Updated: 8:47 p.m. PST)

Aramid Entertainment has slapped Relativity Media and Fortress Investment Group with a $44 million law suit, alleging breach of contract and fraud. 

Aramid invested $22 million in "Beverly," a film financing fund that Relativity started.

Cribbing language most commonly associated with a caper film, the suit claims that the studio and the private equity firm participated in "…one of the greatest heist stories ever told in the movie business."

The 48-page lawsuit, filed in Los Angeles Superior Court on Wednesday, claims that Relativity and Fortress committed misdeeds, and "the effect of these acts was to reduce the value of Aramid's investment from approximately $44 million to zero."

Also read: Relativity President Steve Bertram Weighs Leaving After 1 Year (Exclusive)

Spokesmen for Relativity and Fortress Investments did not immediately respond to requests for comment. An attorney for Aramid declined to comment. 

The suit alleges Relativity and its CEO Ryan Kavanaugh took exorbitant producing fees and constructed elaborate and fraudulent financing structures to hide the fact that they did not have funding for their slate and lost money on the movies they'd financed.  

Read the full complaint here

 "What Relativity hid from the public until recently is that, with one exception, its previous deals had performed so poorly that equity investors in each deal lost substantially their entire investment and many lenders involved in the deals suffered impairment," the lawsuit says.

An individual close to Relativity characterized the suit as a publicity seeking effort designed to force a settlement. As evidence, the individual noted that the suit was sent out to media before anyone at the studio was served or notified. 

In the case of Fortress Investment Group, Aramid alleges that the private equity firm floated the possibility of investing in the financier in March 2010, in order to access confidential financial information that would put it at a competitive advantage. Fortress allegedly used that information to invest in Beverly itself. 

The lawsuit says that in the fall of 2011, Beverly had co-financed 18 motion pictures distributed by Sony,  and that Aramid had been led to believe that the fund had the capacity to co-finance at least 5 to 10 additional films.

Yet, Relativity continued to be battered by the departures of key executives and the costly and money-losing acquisitions of Rogue Pictures and Overture Films. 

Aramid claims that Fortress took advantage of Relativity's financial difficulties to pressure it  to end the Beverly slate early, depriving the financier of millions of dollars. In return for terminating the investments early, Relativity allegedly received a $14.5 million cash payment. 

Aramid Entertainment is run by David Molner, who has spent the better part of two years in a fierce legal battle with film financier David Bergstein. Molner has charged Bergstein with orchestrating an elaborate Ponzi scheme that defrauded investors of millions of dollars.