Ryan Kavanaugh’s Relativity and RKA Escalate Legal Drama With 2 New Lawsuits Over P&A Funds

Vendor calls studio head a “con man,” company hits back with accusations of an “underhanded scheme”

Last Updated: July 24, 2015 @ 1:37 PM

The legal drama for Ryan Kavanaugh’s embattled Relativity Media and RKA Film Financing escalated Friday with a pair of new lawsuits filed by each party in New York state court.

RKA is doubling down on claims that Kavanaugh misappropriated funds reserved for promoting Relativity’s film slate, while Kavanaugh maintains the company is attempting to extort him and rattle other potential investors that would rescue his mini-major from collapse. RKA seeks $90 million in damages, while Relativity’s counter wants $200 million.

“This case is about a con man — Ryan Kavanaugh — who through dishonesty and deceit operated a scheme to defraud investors and convert and misappropriate their funds,” RKA wrote in a complaint obtained by TheWrap, adding Kavanaugh and others at Relativity “induced their victims to invest hundreds of millions of dollars to prop up a failing entertainment company.”

In response, Relativity said RKA’s motion was “conveniently timed to try to interfere with a transaction highly beneficial to Relativity.” The company also claims Kavanaugh is being extorted for the ten-percent stake he owns in RKA, and called the claims “patently false.”

“RKA has been engaged in an underhanded scheme to extract money from Kavanaugh, the company and its lenders all of whom have refused to submit to RKA’s outrageous demands,” a rep for Relativity said in a statement.

Among Relativity’s viable options for its financial crisis is filing for Chapter 11 bankruptcy, TheWrap reported Monday.

Though an individual close to the company said “it is not in the company’s interest or our lender’s interest to file for bankruptcy,” Chapter 11 protection could be appealing as it would allow Relativity to reorganize its finances in an orderly fashion through the courts and would halt the need to pay current vendors.

These insiders say the studio will need to resolve the current crisis by the end of July, just 10 days away, and that new wrinkles change the company’s financial situation on a daily basis.

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