Texas movie fans might be interested in learning that Relativity Media has filed a lawsuit against Netflix alleging that Netflix engaged in a smear campaign and breached its contract with the media company. A Netflix spokesperson called the lawsuit ironic and baseless.
According to court documents, Relativity claims that Netflix acted in bad faith, causing it to lose $1.5 billion. It claims that Netflix relied on Relativity to become a streaming powerhouse and then later attempted to dissolve a lucrative output deal. The lawsuit also alleges that Netflix misrepresented the deal it had with Relativity to the public, thus smearing the company.
The plaintiff claims that Netflix was a fledgling company in 2010 that relied on DVD rentals by mail. It further claims that the two forged a licensing agreement under which Netflix could stream Relativity movies. Under the contract's terms, Netflix would pay Relativity a minimum of $3.7 million per movie that Netflix obtained from Relativity which could swell to almost $20 million depending on how successful a movie's theatrical release was. Relativity Media recently emerged from Chapter 11 bankruptcy and is currently for sale. Netflix tried to dissolve the agreement following the company's Chapter 11 filing in July 2015. The court denied the request. Netflix has paid between $100 and $300 million to Relativity Media under the contract, including $3.7 million for a movie that only earned $2.4 million at the box office.
An alleged breach of contract may result in costly and protracted litigation. In many cases, however, the attorneys for the parties may be able to reach an accord through negotiations.
Source: The Wrap, "Relativity slaps Netflix with $1.5 Billion lawsuit for 'smear campaign,' contract breach (exclusive)," Matt Donnelly, Oct. 18, 2016.