Relativity to Seek $1 Billion From Netflix Over ‘Bad Faith’ in Contract Challenges

“It shouldn’t be difficult for us to quickly and efficiently conclude an action against them,” studio rep tells TheWrap

Last Updated: June 1, 2016 @ 1:17 PM

Relativity Studios is not satisfied with its recent win over Netflix in New York State Bankruptcy Court — it wants in excess of a billion dollars in damages for years of “bad faith” in executing an output deal with the streaming giant.

After another squashed attempt by Netflix to dissolve the lucrative deal with a reorganizing Relativity on Friday, Ryan Kavanaugh‘s studio is closely interpreting what was floated by U.S. Bankruptcy Court Judge Michael Wiles — that Netflix is hoping to stop paying millions to license Relativity titles like Gugu Mbatha-Raw‘s “Beyond the Lights,” instead of carrying out the contract in good faith.

“This is a black and white cut and dry matter. The honorable Judge Wiles found without a doubt that Netflix is acting in bad faith. As they have done for years they [have] tried to use their leverage and size to force us to change our longstanding contract and rights,” a Relativity spokesperson told TheWrap in a statement.

“A contract which was a primary driver in their business growing from a $5 billion company to a $15 billion company five years ago. It is rare to have a bad faith finding by a judge in this manner. It shouldn’t be difficult for us to quickly and efficiently conclude an action against them for in excess of a billion dollars, given the punitive damages bad faith carries and given that the judge found they specifically acted in bad faith and they have no effective appeal. While they may be a large company it is our belief the amount they will owe us in damages will be multiples of their annual earnings,” the statement concluded.

Netflix had no comment when contacted by TheWrap.

While hearing testimony last week, Judge Wiles was skeptical of Netflix’s position, telling those attorneys, “It is suggested to me that you are collaterally estopped from taking the position you are taking and bringing it in bad faith.”

That position was that Relativity’s long bankruptcy process had delayed its delivery for streaming, leaving Reed Hastings’ ubiquitous subscriber service hungry for content. Attorneys for Netflix demanded movies like Kate Beckinsale‘s “The Disappointments Room” and Kristen Wiig‘s “Masterminds” ahead of their theatrical release to fulfill the contract.

Attorneys for Relativity argued that a streaming premiere before “Masterminds” and “Disappointments Room” hit theaters would be fatal to their box office performance and ultimately diminish the “lifetime” earnings potential of both films, each estimated at $200 million, according to court transcripts of testimony. “Masterminds” is set to open in theaters on September 30, 2016, while “Disappointments Room” has a release date of November 18, 2016.