The streaming service claims that five Relativity films licensed exclusively to Netflix wound up on competing services, including Amazon and Starz, in breach of the exclusivity agreement. Relativity claimed that happened inadvertently.
“Netflix has subsequently learned, Relativity was not being honest or forthright with Netflix in asserting that the exhibition of the five Titles on other SVOD services was ‘as a result of inadvertence,’ and had not been honest or forthright with Netflix for months,” Netflix’s attorney Thomas Patterson wrote (read the filing here). “To the contrary, Relativity had in fact lost its rights to three of the titles through foreclosure.”
The streaming service alleges Relativity sought to conceal the foreclosure to reduce the the chances that Netflix would take action (indeed, Relativity’s own lawyers describe the Netflix agreement as one of the “crown jewels of the estate.”)
The dispute is playing out in bankruptcy court in New York, where Relativity sought protection from creditors as it seeks a sale to UltraV Holdings. Relativity founder Ryan Kavanaugh has struggled to raise the money to produce new films since emerging from bankruptcy for the first time in 2016.
Netflix is asking the court to refund of $9.6 million for the fees Netflix paid for the exclusive distribution rights to three films: The Lazarus Effect, The Woman In Black 2: Angel of Death and Beyond the Lights. It also wants a $2.9 million rebate on two other films, And So It Goes and Hector and the Search for Happiness, that Relativity licensed to Starz, allegedly in violation of its Netflix agreement.
The streaming service also says it’s entitled to collect $5 million for each title Relativity failed to deliver to Netflix — a sum that could add up quickly, since the streaming giant claims its owed eight titles in 2017.
“Relativity could have offered all of the eight 2017 titles (and more) to Netflix but did not, even though Relativity knew that Netflix had the resources to acquire and/or finance each of these film projects,” wrote Patterson in the complaint.