A judge has ruled that Aramid Entertainment's lawsuit against Relativity Media, Fortress Investment Group and others -- the lawsuit Aramid described as concerning "one of the greatest heist stories ever told in the movie business" -- can continue.
In the suit filed last February, Aramid -- a Cayman Islands hedge fund -- claimed it lost at least $44 million in connection with a slate film financing agreement with Sony Pictures Entertainment. Aramid claimed Fortress used confidential information to make the deal with Sony, which virtually destroyed the hedge fund’s investment.
Aramid in 2008 had invested $22 million in notes designated as Class B shares in what is known as the Beverly Blvd slate, a deal put together by Relativity Media, which provides as much as half the cost of movies made by Sony. The agreement was set up to finance as many as 45 movies over five years. Citigroup loaned $525 million as part of the deal.
Fortress, a New York-based hedge fund, did confidential due diligence on Aramid, saying it was considering acquiring some of their assets.
Instead, the suit alleges, they used information they gained to buy the Citigroup stake for 50 cents on the dollar and then made a deal with Sony to cap the payments to some other investors. That left nothing to pay out to Aramid, the only other investor in the class B shares.
In the latest court ruling, a judge said Aramid had sufficiently shown there may have been fraud by concealing from them what was going on. The judge also said the amendments to the Beverly deal made after Fortress got involved did result in Beverly giving up some rights to proceeds from movies financed under the deal, which had a negative impact on Aramid.
However, the judge did rule in favor of Relativity and Fortress on charges in the suit that the defendants “aided and abetted in the fraudulent transfer.”
The rulings mean the bulk of the suit will now go forward.
A spokesman for Relativity Media said the truth is that much of the case has been dismissed already. Here is a statement from Relativity:
"The claims filed by Aramid Entertainment Fund Limited against Relativity Media, LLC have been dismissed at the initial pleading stage, except for a single remaining count, which will be disposed of on summary judgment. Upon Relativity's filing of its motion to dismiss, Aramid voluntarily abandoned two of its claims, conceding that they were meritless. Yesterday, the Superior Court dismissed another of Aramid's claims against Relativity, leaving just one remaining count, hanging by a thread, to be eliminated on summary judgment. The litigation centers on a dispute between Aramid and Fortress Investment Group LLC concerning a transaction to which Relativity was not a party. Consistent with its long and storied litigation history, Aramid has abused the judicial process by dragging Relativity into its dispute with Fortress in a cheap attempt to attract media attention. Such tawdry tactics smack of desperation and will continue to fail in court. "
A spokesman for Fortress said they would not comment on pending litigation.