The Weinstein Co. has announced it will seek bankruptcy protection after a proposed sale of the business to an investment company fell apart over the weekend. In the fall of 2017 the once lucrative film and television studio began a death spiral after allegations surfaced of serious sexual assault and misconduct on the part of board member, Harvey Weinstein.
How Did This Occur?
Leading to the #MeToo movement, Ronan Farrow’s expose’ in the New Yorker entitled “From Aggressive Overtures to Sexual Assault: Harvey Weinstein’s Accusers Tell Their Stories” outed Mr. Weinstein’s decades long sexual misconduct and led to the company he and his brother founded becoming a pariah in Hollywood. The company was described as “in free-fall” after approximately 30 women came forward with allegations ranging from rape to sexual harassment.
The extent to which the company would be exposed to legal claims by Weinstein’s victims forced the board to seek a sale of the business. Most offers proposed since the company’s downfall sought to purchase merely pieces of the company. However, a group of investors led by Maria Contreras-Sweet offered to purchase the company as a whole and keep the current staff employed.
In doing so, the investor group had to navigate a tricky negotiation with the Attorney General of New York, Eric Schneiderman, after he filed a lawsuit against the studio for violating “state and city laws barring gender discrimination, sexual harassment, sexual abuse and coercion.” Even though it appeared the negotiation with the attorney general had been successful, further sales negotiations with The Weinstein Co. on the sale of the business fell apart over the weekend amongst nasty recriminations.
What Does a Bankruptcy Mean for the Weinstein Co.?
One of the reasons for the filing is that The Weinstein Co. simply ran out of cash to operate its business and service its debt load while waiting for the sales offer to be completed. Two important things will likely occur with the filing of the bankruptcy: All pending claims and lawsuits against the company due to the abhorrent behavior of Harvey Weinstein will be placed on hold, at least temporarily. And the company will likely seek a liquidation of its assets under the supervision of a bankruptcy judge. Natalie Robehmed, in her Forbes magazine article, infers the bankruptcy filing may ultimately result in a higher price being received for the company’s assets than from an outright sale of the business.
The bankruptcy process itself could “stimulate bidding” on the assets, resulting in higher liquidation value. So despite the perception that Harvey Weinstein’s despicable conduct may go unpunished as a result of a bankruptcy filing, the victims may actually be able to recover more if the liquidation of the company’s assets results in a higher return.
If you are considering a filing for bankruptcy relief and wish to consult with a qualified bankruptcy attorney about your options, please contact one of our locations nearest you in Alabama, Mississippi or Tennessee for a free, confidential consultation.
Carla M. Handy is the Managing Partner of the Bond & Botes Law Offices in Gadsden and Anniston, Alabama. She holds a Bachelor of Arts from Auburn University, and a Juris Doctorate from the University of Alabama School of Law. She has been helping families navigate consumer bankruptcy cases since 1994.Read her full bio here.