Hollywood Unions Fire Salvo Over Sale of Weinstein Company Assets

• DGA, WGA and SAG-AFTRA assert senior lien claim on all Weinstein Co. properties
• Suit seeks to ensure junior position Union Bank not paid before guild liens satisfied

Entertainment unions claim they should get priority for their liens on the film and TV rights being sold in the Weinstein Company bankruptcy.

The Directors Guild of America, Writers Guild of America West, and Screen Actors Guild-American Federation of Television and Radio Artists filed a complaint against MUFG Union Bank June 4 in the U.S. Bankruptcy Court for the District of Delaware.

The action begins a contest over who is entitled to how much from the $437 million sale of the film and television programming assets held by the production company that filed Chapter 11 after the sexual harassment scandal broke around co-founder Harvey Weinstein.

While the sale to Lantern Capital, a Dallas private equity firm, hasn’t been finalized and further hearings are planned, proceeds after accounting for assumed debt should total $310 million.

The court-approved sale agreement provides that about $175 million will go to Union Bank and its affiliate, according to the complaint. A reserve of $8 million is supposed to be earmarked for the guilds’ secured claims for residuals.

But the DGA, WGA and SAG-AFTRA say the amount is insufficient and that the order improperly states that their security is limited to the domestic use of the films and TV programming.

The unions don’t yet know what they are properly owed. They haven’t conducted a full accounting, which would require the cooperation of the Weinstein Company. They say they sampled a fixed time period from July 2008 to December 2012 and determined that at least $12 million is owed for that period.

In their complaint, the guilds assert that their liens are senior to Union Bank’s, that the bank’s security extends only to domestic use of the subject titles, and that the guilds’ lien rights attach to the worldwide distribution rights of the titles.

They seek a judgment establishing their senior liens and ensuring that Union Bank won’t be paid until their liens are satisfied in full. They also want to make sure that the bank isn’t secured in an amount greater than the actual value of the domestic use rights of the titles.

The amounts of guild claims are to be liquidated in binding arbitration under collective bargaining agreements, the complaint says.

Bush Gottlieb, Glendale, Calif., filed the complaint on behalf of the guilds. Union Bank is represented in the bankruptcy case by Irell & Manella LLP, Newport Beach, Calif.

The case is Directors Guild of America, Inc. v. MUFG Union Bank, N.A. (In re Weinstein Company Holdings LLC), Bankr. D. Del., 18-50487, Complaint 6/4/18.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bloomberglaw.com

To contact the editor responsible for this story: Jay Horowitz at jhorowitz@bloomberglaw.com