Bergstein Place Into Rare Involuntary Bankruptcy

Three companies run by David Bergstein, that will cost the entrepreneur millions he had spent creating film libraries, have been placed by a federal judge into involuntary bankruptcy, as reported by the Hollywood Reporter on February 9, 2011.

The decision, made by Judge Barry Russell, was granted without discussion or a trial.  Russell stated that his pronouncement was based on Bergstein's "willful failure to comply" with court orders that previously required he produce information that related to his case.

Russell said, "I'm satisfied the debtors are never going to comply."

The three entities now placed under involuntary bankruptcy include R2D2, CT-1 Holdings and Capco.  Bergstein's two other companies, ThinkFilm and Capitol Film, were also forced into bankruptcy in October 2010.

Ronald Durkin, the trustee that was already appointed by the judge to administer the previous bankruptcy, will now manage all five.  Leonard Gumport, the trustee's counsel, said that Durkin would maximize the value of all of the assets.  The trustee, with the court's approval, will also pay the cost of his investigation and efforts.

There will be items sold from the 1,300 titles held in the library of ThinkFilm and Franchise Films.

Bergstein, not present in the courtroom, could appeal the decision.

David Neale, an attorney representing Bergstein's creditors, most notably the Screen Actors Guild (SAG) and the Director's Guild of America (DGA), vehemently argued on behalf of the creditors.  Neale accused Bergstein of failure to obey court records, "data dumping" and lying to creditors.

Neale went on to claim that Bergstein's list of creditors included three - that had sworn affidavits stating that they were not creditors. 

The number of creditors determines how many claims must be proven before requirements of an involuntary bankruptcy can be satisfied.

Joseph Eisenberg, an attorney for the debtors, said that he had no response to the evidence of false information.  At this the judge noted that Bergstein's former lawyers had been sanctioned for their failure to comply with the court orders to hand over all related documents. 

A third party had been paying Bergstein's legal bills, and, per Neale, can no longer afford to fight for him.  The judge agreed with Neale that fining Bergstein further would be of no use.

The name of the third party is under seal by the court.  Neale believes that it was Ron Tutor as he also was the lead investor in the purchase of Miramax from Disney in December.  Tutor, who runs a large construction company, paid $663 million for Miramax.

David Molner, of the Aramid Entertainment Fund and Screen Capital International, said of the court's decision to place the additional three holdings under involuntary bankruptcy, "This happened because they used deceit and a host of tactics to forestall the process - and they lost."

Per the judge only one-tenth of one percent of bankruptcy cases are involuntary.  Of those, only very few are successful for the creditors.

Durkin has also discovered that Bergstein failed to pay the IRS for both personal and corporate income taxes for the last three years.

Considering a personal or business bankruptcy filing?  Contact a bankruptcy attorney first to learn how to proceed.