RKA Film Financing sued Mnuchin in New York in February, alleging that he helped the struggling film company cheat the lender out of $80 million. RKA was essentially wiped out when Relativity declared bankruptcy in 2015. The financier has alleged that OneWest Bank — where Mnuchin served as chairman and CEO — emerged unscathed, recouping $50 million from Relativity shortly before the bankruptcy filing.
The lawsuit alleges that Mnuchin enjoyed a close personal relationship with Relativity CEO Ryan Kavanaugh, and was intimately aware of the company’s finances.
But in his ruling on Tuesday, Judge Charles Ramos found that Mnuchin had no relationship or fiduciary duty to RKA, and therefore cannot be held liable for fraud.
“RKA has yet to identify a specific factual misrepresentation made by Mnuchin to RKA,” Ramos wrote. “Mere knowledge (or awareness) of Relativity’s finances is inconclusive to establish fraud absent evidence of any representation made by Mnuchin to RKA.”
Mnuchin joined the Relativity board in October 2014, several months after RKA extended its two loans for prints and advertising. RKA alleges that loan proceeds were improperly used for regular operations, and that Mnuchin was aware of that. Mnuchin left the board in May 2015. The next day, OneWest recouped its $50 million from Relativity, according to RKA’s suit.
Ramos, however, ruled that the allegations regarding the sweeping of Relativity funds to OneWest are “without merit and irrelevant to whether Mnuchin can be held liable for fraud.”
Mnuchin’s attorneys have said that RKA’s claims are frivolous, and asked the judge to impose sanctions against the company. Ramos rejected that request.
Ramos rejected RKA’s initial suit against Mnuchin in January, but allowed the financier to file an amended complaint.