The Weinstein Company’s decision to file for bankruptcy on Monday means dozens of Harvey Weinstein’s accusers may never see a dime from the embattled indie studio, multiple legal experts told The Wrap.
Entering a deal with Lantern Capital as stalking horse bidder under Section 363 of the U.S. Bankruptcy Code means that the 80-plus women who have accused Weinstein of misconduct would get in line behind banks and other creditors looking to get paid from the remaining assets of the company — assuming that they won any monetary settlement in a lawsuit.
They will likely have to settle for far less than the $90 million victims fund that TWC would-be saviors Maria Contreras-Sweet and Ron Burkle had proposed under an aborted $500 million deal to buy the company that fell apart earlier this month.
“The problem with civil rights claims is that the accusers don’t have priority beyond the guy that delivers the water bottles to the office,” Steve Gubner, Managing Partner of Brutzkus Gubner, told TheWrap.
“[The accusers] now stand in the same shoes as any other unsecured creditor. The difference before Sunday, of course, is that the Weinstein Company had value.”
In addition, Jack Tracy, legal analyst for DebtWire, said that TWC’s three-member board will “likely continue to run the sale process in bankruptcy. That gives buyers a court order protecting them from liability. With that power, it lessens the leverage any accuser might have. It also protects a buyer from getting pursued by the [attorney general].
“It’s a quirk of bankruptcy,” he said.
Last month, New York Attorney General Eric Schneiderman effectively scuttled the expected sale of much of the studio to a group led b Contreras-Sweet and Burkle when he filed a civil rights lawsuit; Contreras-Sweet and Burkle had announced plans to set up a victims fund worth up to $90 million, according to Sneiderman.
His suit claimed the company and its leadership were complicit in Weinstein’s widespread alleged sexual misconduct and did not adequately protect the staff.
Schneiderman also said there was no evidence in proposed sale documents that guaranteed a fund to compensate victims, which TheWrap previously reported was worth $50 million. In a statement days after a high-stakes meeting with Contreras-Sweet and Burkle that seemed to put the sale back on track, Schneiderman mentioned that the proposed victims fund was worth $90 million.
“Our office will continue to fight for victims’ best interests throughout the bankruptcy proceedings, and engage with all parties, including The Weinstein Company and Lantern, in an ongoing effort to advance the principles we set forward when we filed our complaint: ensuring that victims are compensated, employees are protected moving forward, and perpetrators and enablers of abuse are not unjustly enriched,” Schneiderman said in a statement Monday.
But it’s unclear how that so-called “justice” would manifest in the free-for-all of bankruptcy. It’s unclear if the bankruptcy process will yield a value for the company that’s as high as the $500 million Contreras-Sweet and Burkle were willing to pay.
While the experts TheWrap spoke with could not comment on the value of the company today, Tracy likened any bankruptcy process to a melting ice cube — “you need to get it done as fast as possible,” he said.
“We are very disappointed that the Weinstein Company will file for bankruptcy. Our firm represents many women who allege that they were victims of Harvey Weinstein while he was employed by the Weinstein Company,” said attorney Gloria Allred in a statement last month.
“We had confidence that fund would have been created if the company had been sold,” Allred added.
The most significant claim against the company and Harvey Weinstein is a class-action lawsuit that was filed last December by six women with an open invitation for more to join nationwide. The suit named board members as well as indie film company Miramax, also founded by Harvey and Bob Weinstein.
The class action suit seeks compensatory and punitive damages, as well as damages for pain and suffering.