Weinstein Co. Faces Potential Liability for Harvey's Conduct

The company is now exposed to potential investor and victim lawsuits as its new leaders decide whether to liquidate or attempt to salvage the business.

As allegations of sexual assault and rape mount against Harvey Weinstein, the company he leaves behind finds itself under siege despite claims by the board — which includes his brother, Bob Weinstein — it had no knowledge of any misconduct.

The question of what did they know and when did they know it is expected to take on increasing importance in the coming days as Bob Weinstein and COO David Glasser attempt to salvage the company. In a new New York Times report published on Wednesday, attorney David Boies, who represented Harvey Weinstein in his 2015 contract negotiation, said the Weinstein Co. board was aware at the time of three or four settlements to women. In the Times report, Lance Maerov, the board member who handled the contract negotiation, said that he had been told of settlements but assumed they were to cover up consensual affairs and that while he was concerned about whether Harvey's behavior had posed any legal liability for the company, he was ensured that no company money was used in the settlements and no further settlements were pending.

A spokesman for the board did not immediately respond to requests for comment, but in an earlier statement released Tuesday, the board, which now consists of just four members, said that the allegations against Weinstein "come as an utter surprise to the board. Any suggestion that the board had knowledge of this conduct is false." The Times' original Oct. 5 story, citing two unnamed sources, had claimed there were "at least eight settlements with women" as of last week.

The board is endeavoring to distance itself from Harvey Weinstein and likely will change the name of the company he founded with his brother, Bob, in 2005. (A source says more than a dozen possible new names are being considered after TWC execs met with branding consultants this week.) But experts on corporate law say TWC could be subject to potential investor lawsuits, as well as claims by potential harassment victims.

"It would be very difficult to overcome a scandal like this. Ask anyone who was the face of the company, and it's Harvey Weinstein," says Columbia School of Law professor Eric Talley, an expert in corporate governance and finance. "You would be crazy if you weren't seriously talking about liquidating and selling the company's assets."

Indeed, that option is on the table, say sources. But the sentiment among the company's leaders, and their 35 or so employees, is said to be strongly leaning toward attempting to keep the company going, in part to show that it can outlast Harvey and his personal behavior. "If we quit, he wins in a way," one TWC staffer tells THR.

The board fired Weinstein on Oct. 8, and many of its business partners have distanced themselves from the company. Disney said Wednesday it would terminate Weinstein's involvement in a planned Artemis Fowl film adaptation. Amazon Studios said it is reviewing its options regarding two expensive and high-profile Weinstein Co. television series that are in the works, The Romanoffs, from Mad Men creator Matthew Weiner, and an untitled drama from David O. Russell starring Robert De Niro and Julianne Moore.

TWC could delay the Nov. 24 release of The Current War, starring Benedict Cumberbatch — who has joined the list of stars speaking out against Harvey. The biographical drama was originally positioned to be Weinstein's big Oscar play this awards season, but a move to 2018 would knock it out of contention.

On Tuesday, separate stories in the Times and The New Yorker detailed new, more damaging claims of alleged assault. Later that evening, the company issued an emphatic statement saying the board is "committed to assisting with our full energies in all criminal or other investigations of these alleged acts, while pursuing justice for the victims and a full and independent investigation of our own."

Talley says the statement is a clear attempt to ward off potential liability. "If, in fact, the company had no idea what was going on, it might be able to survive liability claims," he says. "But that's a big 'if.'"

Attorney Aaron Bloom, who specializes in entertainment and business litigation, says TWC is in a difficult position.

"Essentially, Title VII of the Civil Rights Act of 1964 makes it easier to hold an employer or a company to account for the actions of an employee," Bloom says. But a 2013 Supreme Court decision, which hinged on the definition of "supervisor," set limits on the kind of people whose actions give rise to liability for the company. In essence, the definition of "supervisor" was limited to only people who have the ability to hire and fire.

"If [Weinstein] falls under the definition of supervisor, then it doesn't matter whether the company knew or didn't know [about his conduct]," Bloom continues. "If Harvey does not fall within the category of supervisor, the company would have as a defense whether or not it knew or should have known about these alleged activities."