Modern VideoFilm Founder Sues Medley Capital, Deloitte for $100 Million

Modern VideoFilm founder Moshe Barkat has filed a lawsuit against Capital Corp., claiming that it took control of the post-production company, breached his contract, and fired him, and then retained Deloitte Corporate Restructuring Group, which ran the operation “into the ground.”

The company’s content management system converted and filed stories in multiple formats for clients, which included HBO’s “Game of Thrones” and movies like “Avatar” and “Life of Pi.” Barkat founded the company in 1979, but was ousted as CEO last year. Deloitte installed corporate restructuring executives to run day-to-day operations.

In the lawsuit filed on Monday in Los Angeles Superior Court, Barkat contends that in 2012, he sought to pay off MVF’s debt and find a lender to support its expansion. He came to an agreement with Medley Capital for a $50 million loan, but Medley quickly claimed “events of default,” even though he had not missed a payment.

After that, the lawsuit claims, Medley began to exert a heavy hand over the operation of the company, ordering millions of dollars in cuts. In 2013, Technicolor proposed a venture to combine their content management divisions, with a potential value of more than $100 million, but the deal fell apart as Medley demanded equity in MVF and sought new deal terms as conditions for it closing.

Medley then took over MVF’s board and control of Barkat’s stock voting rights, and removed him as an officer. Then, Medley insisted that MVF retain Deloitte, with its executives taking control and the firm getting paid $50,000 a week. Charles Sweet was installed as the sole board member, and was “an agent of Medley beholden to Medley.”

Barkat claims that Medley, Deloitte and Sweet “engaged in a witch hunt to come up with reasons” to fire him, and he was eventually terminated, with one of the reasons given that he approached lenders with a plan for restoring the company to profitability without permission. He contends that he had an employment agreement through 2018, but that their reasons for “insubordination” were “ridiculous.”

Barkat’s lawsuit also names Sweet as a defendant.

His lawsuit claims, among other things, breach of employment contract, breach of fiduciary duty, unfair competition, and defamation. It contends that MVF has lost business from “Games of Thrones” and Tyler Perry Studios after he was ousted.

A spokeswoman for Medley said, in a statement, We believe these claims are meritless and intend to defend them vigorously.”

 

Skip Miller of Miller Barondess represents Barkat in the lawsuit. A spokesman for Deloitte did not immediately respond to a request  for comment.

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