Contributing Author: Megan O’Neill
The Harvey Weinstein sexual misconduct case needs no introduction. Due to the systematic sexual harassment and assault numerous victims allege Weinstein engaged in, the case garnered national attention and unleashed the #MeToo movement. Now, after years of legal wrangling and a famously failed settlement, Weinstein and his legal team are seeking to reshape the course of so-called justice with a new strategy. They seek to fold the proposed settlement into ongoing Chapter 11 bankruptcy proceedings, thereby removing the district court who blocked the original settlement from the equation.
When U.S. District Judge Alvin K. Hellerstein rejected the proposed settlement (PDF) on July 14th, he took issue with the financial fairness of the deal and questioned whether the case was even suitable to class treatment. The court’s decision (PDF), while lauded by many and headline-grabbing in part due to the language used, has opened the door to new legal maneuvering. Weinstein and The Weinstein Company’s team of lawyers have devised a new route to settlement through the bankruptcy courts. By removing Judge Hellerstein from the mix and instead placing the revised plan in the hands of Judge Mary F. Walrath of the bankruptcy court, the legal team presumably hopes to achieve a more favorable outcome. The new strategy would see the sexual misconduct claims “placed into a single class in a chapter 11 plan of liquidation and administered in much the same way that many other mass tort cases are handled in bankruptcy cases — without the need for a certified class in a class action lawsuit,” according to the filing (PDF).
Unsurprisingly given the number of parties and disparate interests at play, not everyone agrees with this new strategy. Two of the women suing Weinstein are seeking to convert the Chapter 11 bankruptcy to a Chapter 7, forcing a liquidation of the assets of The Weinstein Company and its affiliates. Characterizing the rejection of the settlement a “major setback,” their motion (PDF) claims that Chapter 7 liquidation would allow a trustee to handle these cases “more efficiently and effectively.” “The debtors sold substantially all of their assets over two years ago,” the motion points out. “There is not any possibility of a true reorganization. There is only liquidation, and that is accomplished with far less cost in Chapter 7.” The movants also criticize the Chapter 11 plan for proposing to use insurance proceeds to pay uninsured claims and for allocating more “net” funds to Weinstein Co.’s former representatives (which the women characterize as “ultra-affluent” and “largely responsible”) than to the alleged victims and survivors of Weinstein’s sexual abuse. A Chapter 7 proceeding, the two women argue, would likely also result in a trustee prosecuting civil claims against Weinstein and other Weinstein Co. representatives, where such claims have not been pursued in the Chapter 11 proceeding.
Critics of the $25 million settlement, including many of the victims, have long held the proposed settlement’s terms and conditions were unfair, especially for cases involving sexual assault. New York Attorney General Letitia James and her office have been lambasted for recommending the settlement and accused of seeking headlines over actual justice. James’ office has said it will be reviewing Judge Hellerstein’s decision to “determine next steps.”
Attorneys Douglas H. Wigdor and Kevin Mintzer, who represent multiple women with claims against Weinstein, issued a statement to CNN in response to the Weinstein filing, calling on the New York Attorney General to denounce it: “It appears that Harvey and Robert Weinstein, their insurers and corporate enablers are so desperate to secure the deal that Judge Hellerstein immediately rejected as ‘obnoxious’ that they are now going to ask the bankruptcy court to approve what Judge Hellerstein would not…”
Weinstein’s legal team have not yet made any statements about their new plan, but Imran Ansari, Weinstein’s civil attorney, stated last month Weinstein “remains intently focused in defending himself on all remaining legal matters, including the appeal of his criminal conviction, civil lawsuits and the charges filed against him in LA.”
Given the degree of complexity and number of moving parts, many more difficult legal battles may lie ahead. As the victims continue to fight for a slice of a pie that seems to shrink more and more every month, it remains to be seen if anyone will consider the result just.
Megan O’Neill, Founding Partner of DTO Law, regularly defends Fortune 500 companies in consumer class actions alleging unfair competition, false advertising, products liability and other claims. She also has significant experience litigating intellectual property claims, including suits alleging theft of trade secrets and trademark and copyright infringement, as well as cases alleging breaches of contract and fraud.