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Relativity Bankruptcy: Evian, Disney, Producers Among Dozens Unleashing Legal Onslaught as Sale Approaches

With deadline for bids on Ryan Kavanaugh’s studio due on Sept. 25, companies are jostling for payment and relief from existing contracts

As bankrupt Relativity Media inches closer to a sale of its film and TV assets, a slew of legal filings have the company’s partners, creditors and vendors coming out of the woodwork with requests for payment, objections to sale terms and allegations of fraud.

There have been a slew of filings from parties that have done with business with Ryan Kavanaugh‘s 11-year-old studio, including many objecting to the speed at which its assets will be sold. It’s likely that the studio will go to a group of senior lenders in a stalking-horse bid for $250 million unless another bidder emerges by Sept. 25.

Experts in bankruptcy law say that this sort of pile-on of filings is par for the course as parties who are owed money or have any business dealings leave a marker for future consideration when the proceeds from the auction are finally disbursed.

“These bankruptcy cases are a matter of negotiation,” Robbin L. Itkin, business and entertainment restructuring partner at law firm Liner LLC, told TheWrap. “People do this for leverage in those negotiations.”

For example, Walt Disney Pictures filed a cure letter in New York State Bankruptcy Court on Friday, seeking to hold Relativity accountable for guild fees on “Earth to Echo,” a film they acquired in 2013.

Guild payments — compensating creative unions like the Screen Actor’s, Writers and Directors guilds — is one issue that’s plagued the company from the start of the Chapter 11 process. While some creditors had objected to prioritizing guild payments, U.S. Bankruptcy Judge Michael Wiles has maintained them given the necessity to maintain guild relationships for ongoing Relativity productions like the new CBS drama “Limitless.”

This week, film production outfits like IM Global and financiers like Macquarie Investments refreshed objections to the sale speed, claiming that competitors have not had enough time to perform due diligence on the company’s value and potentially raise the bidding price. Without further bids, an individual familiar with the timeline said, the sale could close as early as October 20.

The line of creditors angling to get paid is extensive, and even includes the parent company of Evian water, Danone, which issued a filing on Thursday seeking $4.5 million and alleging that Relativity failed to deliver on promises to align the brand with celebrities (Gigi Hadid and designer Alexander Wang, among others).

In the most incendiary new filing, veteran “Fast and Furious” producer Neal Moritz alleged that Kavanaugh deceptively pumped up the company’s stability and value earlier this year when it negotiated a distribution deal for an upcoming Gerard Butler thriller called “Hunter Killer.”

“Had we known that Relativity Media, or any of its affiliates that are involved with the ‘Hunter Killer project’ were not, in fact, a viable production and distribution company, we would have never … agreed to the terms of the production agreement. In short, we were misled,” Moritz’s Original Film said in its filing Thursday. (The film had been slated to go into production in July, but that has been now delayed.)

A spokesperson for Relativity told TheWrap “the allegations by Mr. Moritz are baseless and patently false. Relativity Media entered the ‘Hunter Killer’ agreement in good faith, and has detailed its efforts to refinance its balance sheet in its court filings.”

Relativity has not seen such an openly aggressive detractor in this bankruptcy process aside from RKA Film Financing — a P&A lender who hurled similar allegations of fraud against Kavanaugh in July.