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Four Disputed Films Yanked From Relativity Media Auction

Among the assets that will not be on the table in Thursday’s auction of Relativity Media will be four films whose ownership has been hotly contested since the studio allegedly squandered money it was loaned to release the pics.

Lawyers for the bankrupt entertainment company said in a filing Wednesday afternoon that the Oct. 1 auction of the company will not include “The Disappointments Room,” “Masterminds,” “Kidnap” and “Before I Wake” (previously “Somnia.”) The sale of those films “will be adjourned to a date yet to be determined,” says a motion from the company’s lawyers.

The action puts off until another day resolution of a dispute with one of Relativity’s most aggressive critics, RKA Film Financing. That may be seen by Relativity as a way of  clearing aside a potential hurdle to this week’s auction and a Monday hearing in the U.S. Bankruptcy Court in New York that will presumably confirm a new owner for the company.

The fate of the films and any money they generate has been hotly contested since RKA filed a lawsuit in New York state court accusing Relativity CEO Ryan Kavanaugh of fraud for allegedly misdirecting tens of millions of P&A funds to his company’s general operating expenses. Kavanaugh vehemently denied the charges and said New York-based RKA was trying to take advantage of Relativity’s precarious financial position.

RKA has said it is owed a total of $85 million and that its only hope of recovering any of the money is to free the films from Relativity, find a new distributor and get them to market as soon as possible. “Masterminds” is a comedy starring Kristin Wiig and Zach Galifianakis. “Kidnap” is a thriller starring Halle Barry, while “The Disappointments Room” and “Before I Wake” are horror movies, the former starring Kate Beckinsale and the latter Kate Bosworth.

The fate of the movies remains uncertain, though Relativity lawyers said in their filing that they moved for the later action on the four films after consulting with not only RKA but also subsidiaries of Elliott Associates, a major Relativity investor, and with the official committee that represents dozens of unsecured creditors.

Lawyers for Relativity also moved Wednesday to postpone the bankruptcy court’s consideration of nearly 60 other contentious issues until after the Oct. 5 hearing at which Judge Michael Wiles is scheduled to confirm a buyer for the studio. Among the objections that would be heard Oct. 14, instead of Oct. 5, would be those filed by IM Global, producer Neal Moritz and producers of Relativity’s hit MTV program, “Catfish: The TV Show.”

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