Trial Set In $100 Million Fraud Suit Over Ownership Of LA Post House Modern VideoFilm


EXCLUSIVE: The legal battle over the dissolution of what had once been one of Hollywoods leading post-production houses is headed for trial. Bankruptcies, changing technologies and runaway postproduction have taken a major toll on LA-based post facilities in recent years, but Moshe Barkat, founder of Modern VideoFilm, alleges that he lost his company to fraud. A judge today dismissed a motion for summary judgment, and a trial of his claims now is set for June 12 in Los Angeles Superior Court.

Once an industry leader, Modern VideoFilm provided postproduction and distribution services to the film and TV industry for more than 33 years, working on many high-profile film and TV shows including Avatar, Modern Family, Game of Thrones, The Walking Dead, Sons of Anarchy, House of Cards, Falling Skies, How I Met Your Mother, The Grand Budapest Hotel, There Will Be Blood and Slumdog Millionaire.

But Barkat lost control of the company in 2014 to Medley Capital, a billion-dollar investment fund that had loaned the company $50 million in 2012. When the company allegedly defaulted on the loan, Medley brought in in the Deloitte Corporate Restructuring Group to manage it. Barkat was ousted and Scott Avila, a principal of Deloitte CRG, was named the new CEO. The company was sold in May 2015 to LA-based post-production house Point.360, which filed for bankruptcy protection last year but has restructured its debt and is still in business.

Barkat filed a $100 million fraud and breach of fiduciary duty lawsuit against Medley in August 2016, but Medley sought to have the suit dismissed. Superior Court Judge Daniel Murphy, however, has denied Medleys motions for summary judgment and ruled that there are enough triable issues to proceed to trial (read the ruling here).

Medley maintained that Barkat had released it from all legal claims, but Barkat asserted that the release was signed under fraudulent pretenses. In his ruling denying Medleys motion for summary judgment, Murphy wrote that Barkat “has presented evidence that Avila was an agent of Medley when these releases were signed, that Avila had a conflict of interest, and that Avila was acting adverse to the interest of Modern VideoFilm.” As such, he wrote, Barkat “has demonstrated a triable issue of material fact as to whether these releases are enforceable as a result of Avilas conflict of interest.”

The judge also ruled that Barkat has “presented evidence” to support his claim that the releases he signed had been “induced by fraud,” and that the purpose of the amendments containing the releases were intended to “wrestle control” of the company from him. Barkat, the judge ruled, also has presented evidence that Medley talked him into signing a forbearance agreement – the terms between a lender and a borrower – “with promises to allow him to keep control of MVF; that defendants did not disclose that they had already decided to take over MVF and fire Barkat, (and) that defendants represented to Barkat that they would not take over MVF if he signed the release.”

“Given that the motion for summary judgment was denied as to all causes of action,” the judge ruled, Barkat “sufficiently evidences a triable issue of material fact to the underlying causes of action upon which (his) claim for declaratory relief may lie.”

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