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Relativity Lender’s $110 Million Lawsuit Dismissed

A judge dismissed a $110 million lawsuit on Thursday from a lender who claimed it was duped into pumping money into Relativity Media while it was heading toward bankruptcy.

RKA Film Financing filed suit in 2015, alleging that Relativity CEO Ryan Kavanaugh was a “con man” who had run his company like a Ponzi scheme. The suit claimed that Kavanaugh, as well as his officers and directors, had misappropriated money that was intended solely for P&A expenses, and used it instead to fund the company’s general operations.

In his ruling, New York Supreme Court Judge Charles E. Ramos found that RKA had failed to state its fraud claims with sufficient specificity. In particular, Ramos wrote that RKA had not identified anyone to whom fraudulent claims had been made.

Ramos also tossed a claim for negligent misrepresentation, finding that RKA and Relativity were both sophisticated parties with an arm’s-length relationship.

“Arm’s length transactions are ‘not of a confidential or fiduciary nature,’ and therefore do not create a duty for one party to impart correct information on another,” the judge wrote.

In a statement, a Relativity spokesman said the case had “absolutely no merit whatsoever.”

“It is very comforting to see the legal system work in a fair and equitable manner,” the spokesman said. “This is a perfect example of how media hype can spin molehills into mountains. … The press has had a field day with this lawsuit, and wrote lengthy and harsh articles which implied that Ryan Kavanaugh was somehow involved in the various nasty and vicious claims asserted by RKA. The press spun what amounted to nothing more than false words filed in the form of a complaint — something any person can do for a small court fee — into false claims that have no merit.”

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