Digital Dose Wednesday- Digital Giant Netflix SLAPPing Down $1.5 Billion Lawsuit?

Since the start of the year Netflix and Relativity Media has struggled over legal issues regarding a 2010 agreement, which enabled Netflix to stream two of Relativity’s films, Masterminds and The Disappointment Room, in June. The deal between Netflix and Relativity was that Netflix would receive up to 12 films a year, however, due to Relativity’s bankruptcy filings, Netflix feared that Relativity couldn’t deliver under their contractual agreement and to release the films in theatre prior to the streaming date in June but regardless Netflix stood by the streaming date even though it was ahead of the new theatrical release date. In a New York federal Bankruptcy Court the judge in the dispute sided with Relativity to give the films a chance in theaters before the films are to be streamed online and rejected Netflix’s “bad faith” maneuver to escape a licensing deal that is worth millions. However, Netflix has confirmed that they are simply following “the letter of the contract” and still intends to release on the agreed upon “start date.” Netflix has also decided to ignore the bankruptcy judge’s earlier ruling since the judge does not even have jurisdiction to rule over the contract, as there are arbitration clauses in the contract superseding the judge’s authority.

Due to the release date disagreement, Relativity alleges that Netflix has spread false statements to press outlet, producers and talent agencies and due to Netflix’s “misrepresentation of the License Agreement” in the previous case, it has caused “investors to question Relativity’s ability to make money” which is ultimately why Relativity had to stop “making films and cease all fundraising efforts.”

This has lead to Relativity filing a complaint in Santa Clara Superior Court alleging that Netflix breached the contract and committed “trade libel” by suggesting that the films should be released on the streaming service before they opened in theaters. However, Netflix’s stance is that their opponents have pretty much “failed” at a proper plead because to successfully show that “trade libel” has occurred an “essential element” of pecuniary loss must be found and Netflix’s view is that because Relativity’s “Complaint includes only a bare allegation of loss and does not identify particular transactions or relationships that allegedly were interfered with” their claim should fail. Relativity’s founder, Ryan Kavanaugh, maintains that his company has suffered damages “in excess of $1.5 billion.”

Netflix has fired back and a spokesperson views the lawsuit as “baseless and ironic.” This statement may be clarified by the fact that during the hearings in the Bankruptcy court the company argued that it was Relativity that violated the contract by failing to provide the minimum number of films and for failing to release movies in theaters on time and therefore nothing Netflix has done lead to its financial failings.

However, it is important to note that a Singapore-based web company, YuuZoo, has recently agreed to pay upfront $50 million in cold hard cash to acquire Relativity. Relativity has used this acquisition to suggest that due to Netflix’s disloyalty and their attempt to undercut the studio has ultimately forced the company to be put up for sale.

Now it seems like Netflix is looking to end the $1.5 billion lawsuits Relativity Media filed three weeks ago. Netflix has submitted court papers demanding Relativity’s lawsuit be stricken under California’s anti-SLAPP law (to strike a case for being malicious or frivolous). In this case Netflix does not seem to be threatened by Relativity’s allegations and concludes that since “relativity cannot show that the (financial failing) statements are false” and that since even the bankruptcy court found that they couldn’t release the required number of films on time it is, therefore, fact and not libel. Furthermore, since all the prior contract claims were already disputed in bankruptcy court Netflix’s correspondence is covered by privilege and therefore cannot be re-interpreted.

Credit: Jessica Wong

 

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