Netflix Asks Court To Reject Relativity Media Suit Charging “Trade Libel”

Netflix fired back today at Relativity Media’s $1.5 billion lawsuit charging that the streaming company breached a contract and committed “trade libel” that contributed to the studio’s decision to sell a big stake to Singapore-based YuuZoo.

Netflix asked the California Superior Court in Santa Clara to dismiss the suit: The accusations that Relativity finds disturbing were made as part of a case being heard at the U.S. Bankruptcy Court in New York, the filing says. And that’s “protected speech under the constitutional right to petition the courts.”

Netflix charges that in September “Relativity released its first two films since emerging from bankruptcy” — Masterminds and Disappointments Room — which “both bombed at the box office. Running out of cash, and with no good movie product to release, Relativity went searching for someone to blame. Hence, this lawsuit – a desperate and futile effort by Relativity to avoid responsibility for its own failures.”

The case flows from a Bankruptcy Court dispute over whether a 2010 agreement enabled Netflix to run the two films in June, ahead of their theatrical release. The judge sided with Relativity, giving the studio a shot at theaters before the films run online.

Relativity charged that the releases were hampered by Netflix’s “disparaging” allegations that the studio might be unable to distribute them successfully.

But Netflix says that the studio “has failed to properly plead an essential element of its trade libel cause of action – pecuniary loss – because the Complaint includes only a bare allegation of loss and does not identify particular transactions or relationships that allegedly were interfered with.”

What’s more, Netflix allegations in court — including one saying Relativity’s “business model was flawed” — are “statements of opinion, not fact. They are therefore not actionable.”

YuuZoo recently agreed to buy 33.3% of Relativity’s equity for $50 million — including $27.5 million in cash and $22.5 million in either cash or stock. The deal would give the Singapore-based web company one of the studio’s three board seats and is contingent on its completion of a debt restructuring.

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