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Relativity Media Motion to Approve Assumption of Netflix Contracts

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Relativity Media filed with the U.S. Bankruptcy Court a motion for entry of an order approving the assumption of executory contracts with Netflix. The motion explains, “The primary Netflix Agreement is that certain License Agreement for Internet Transmission between Netflix and RML Distribution Domestic, LLC (as successor in interest to Relativity Media, LLC) dated June 1, 2010 (as amended, the ‘Netflix License Agreement’). In addition to permitting Debtors to license films to Netflix that the Debtors have financed or produced, the Netflix License Agreement also permits the Debtors to license ‘Acquisition Titles,’ which are films the Debtors have certain rights to distribute even though the Debtors did not finance or produce them. Thus, the Debtors have entered into a series of distribution agreements with third parties for films produced by those third parties, then licensed those films as Acquisition Titles for distribution under the Netflix License Agreement. The Debtors and the owner of each Acquisition Title then split the license fee the Debtors receive from Netflix for each Acquisition Title.”

The motion continues, “Netflix has sought to deny the Debtors the benefit of their bargain under the Netflix License Agreement at every turn, taking unsupportable legal positions that misconstrue the Netflix License Agreement and impair Relativity’s ability to perform under the contract or survive in the market. In the Debtors’ prior bankruptcy cases, among other things, Netflix objected to assumption of the Netflix Agreements and opposed confirmation of the Debtors plan. Netflix also took the unwarranted position that it could stream films intended for theatrical release before the films were released, which would have eviscerated the Netflix License Agreement and which required litigation in this Court, the District Court and the Second Circuit after confirmation. All these efforts rightfully failed, but not before impairing Relativity’s ability to perform under the agreement by creating and prolonging uncertainty in the market as to Relativity’s rights. Now, Netflix is once again looking to avoid totalling its obligations to the Debtors under the Netflix License Agreement. In a series of letters dated April 4, May 8, May 21 and May 24, 2018, Netflix has claimed without basis that it has incurred tens of millions of dollars of damages as a result of purported breaches of the Netflix License Agreement by the Debtors, and it has asserted rights of setoff (both prepetition and postpetition) resulting from these alleged breaches. As a result, Netflix thus far has withheld licensing fees for Acquisition Titles totalling approximately $1.6 million unambiguously due and owing to the Debtors (a portion of which is owing to the licensors of the Acquisition Titles), thus increasing the Debtors’ borrowing needs under their debtor in possession financing facility….Another $4 million plus is owing in early June 2018. If Netflix chooses to assert these claims in opposing this Motion despite Relativity having pointed out to Netflix in detail why the claims lack any basis, the Debtors will demonstrate that not a single one of the Netflix’s allegations – most of which are factually inaccurate – gives rise to a breach of or damages claim under the Netflix License Agreement. Netflix has no right whatsoever to withhold the approximately $1.6 million in plainly owing licensing fees, or the over $4 million that is due shortly in early June, nor does it have the right to terminate the Netflix License Agreement. Netflix’s baseless claims and withholding of moneys that are due and owing to Relativity adversely affects Relativity and its position in the market, creating uncertainty that makes it difficult for Relativity to obtain films. As such, failure to promptly dispose of Netflix’s claims also would create a substantial risk of inhibiting bidding on the Debtors’ assets in proposed sale in these proceedings. The Debtors will seek to assume and assign the Netflix Agreements to either UltraV Holdings, LLC (the ‘Proposed Purchaser’) or another party who emerges as a purchaser pursuant to sale (the ‘Proposed Sale’).”

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The post Relativity Media Motion to Approve Assumption of Netflix Contracts appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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