A Delaware judge Tuesday denied a motion by some victims of jailed former mogul Harvey Weinstein to convert Weinstein Co.’s bankruptcy proceeding from Chapter 11 to Chapter 7, allowing the long process to move forward. Chapter 7 can dispense with classes of creditors – of which abuse victims are one in this case — and allow individuals to pursue claims separately.
The attorney representing nine victims argued at a hearing this morning that the Chapter 11 plan so far encompasses much too large a group of abuse claimants — possibly in the thousands — with too wide a range of claims from rape to workplace intimidation. That would dilute recovery of the $17 million allocated for sexual misconduct for those who had suffered the most. It would also deprive them of an ability to bring their case to a jury.
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The lawyer for creditors, flanked by a representative of the New York U.S. District Attorney’s office, said Chapter 11 was appropriate — and Judge Mary Walrath of U.S. Bankruptcy Court agreed. Both noted that the Chapter 11 proposal allows women to opt out of the settlement and pursue their claims against Weinstein in court.
The judge also noted that victims who objected could raise the issue at confirmation and vote against the plan.
The Weinstein Company Holdings and 54 affiliated companies — the debtors — filed petitions in March of 2018 with the United States Bankruptcy Court for the District of Delaware seeking relief under Chapter 11. The case is complicated and highly charged as it involves sexual abuse victims as well as traditional creditors like businesses that are owned money.
In June, U.S. District Judge Alvin K. Hellerstein of the Southern District of New York, rejected a proposed class action settlement to establish a nearly $19 million compensation fund for the former producer’s victims, ruling that the women’s interactions with Weinstein were too different for them to be lumped in one class.
Attorneys for victims arguing against Chapter 11 referenced that ruling. But the judge Tuesday said there are “substantial differences” from that case and classification under the bankruptcy code, which specifically allows for groupings of creditors. It’s up to all creditors to vote on whether they consider “this group of creditors” viable, she said.
The group of victims’ attorney had argued that the Chapter 11 class pits claimants against each other — because those who suffered less at Weinstein’s hands are likely to vote in favor of the current plan and outnumber those who suffered more serious harm.
Sandra Pullman, senior counsel in the office of Attorney General Leticia James, which isn’t a party to the bankruptcy case, spoke against converting the case from its current Chapter 11 status. Her office had put together the class action settlement that was rejected by Judge Hellerstein.
“The men who represented the objection [attorneys Douglas Wigdor and Kevin Mintzer, who represent some victims] have repeatedly disparaged my boss in court and in the press,” Pullman said, adding that the NY AG’s office “has worked tirelessly for the greatest recovery” possible for Weinstein victims.”
Weinstein is currently jailed at maximum security Wende Correctional Facility near Buffalo serving a 23-year sentence his conviction earlier this year in New York on various sex crimes. He also faces seven criminal a counts involving five victims in Los Angeles.
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