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The story of a film producer who finds himself in a range of financial difficulties after poor performance at the box office is not unique to Los Angeles, but Hollywood probably gives this region more examples of this tale than most cities. One producer’s story, recently covered by the Los Angeles Times, describes just how difficult the entertainment business usually is, how easy it can be to lose money, and how many ways the personal bankruptcy process can become involved in the process. Bankruptcy can be helpful to the parties involved in these types of situations, but just like the movie business, it can also get very complicated.

The debtor in this case has what the Los Angeles Times calls a “showbiz pedigree.” His uncle was a well-known Hollywood producer, and his father-in-law was part of the production company that bought Miramax from Disney in 2010. He had some successes in the early- to mid-2000’s, such as the 2005 film Lord of War starring Nicolas Cage and Ethan Hawke. By 2008, however, he had amassed several “flops,” as well as films that were never released in theaters. His production company, which he formed with a former executive of the William Morris Agency, folded that year.

In early 2009, the debtor filed for Chapter 7 bankruptcy protection. In re Eberts, No. 2:09-bk-12534, petition (Bankr. C.D. Cal., Feb. 5, 2009). His Schedule F, the list of creditors with unsecured nonpriority claims, identified more than $7.7 million in debts. These included loans for both personal and business purposes, and personal guarantys of business loans. He received a discharge of debt from the court on March 15, 2013, although that was far from the end of the legal issues.

An aspiring filmmaker from Illinois sued the debtor in April 2011 for fraud, conversion, and other claims. The plaintiff wanted to make a movie of a book he had written about his family, including his son’s recovery from brain cancer. He claimed that the debtor told him, at a meeting in Beverly Hills in 2009, that he would need money in order to produce the film. The plaintiff allegedly gave the debtor about $615,000 of his own money, but the film was never made.

A court awarded the plaintiff over $650,000 in compensatory damages and $500,000 in punitive damages. Elliott v. Eberts, No. 1:11-cv-01163, order (C.D. Ill., May 21, 2012). The debtor was later charged with wire fraud and money laundering. United States v. Eberts, No. 1:13-cr-10070, indictment (C.D. Ill., Jun. 19, 2013). He pleaded guilty in March 2015, and is awaiting sentencing.

The bankruptcy case itself involved numerous complicated questions regarding security interests, community property under California law, exemptions under the Bankruptcy Code, and nondischargeability. Six adversary proceedings were filed, all of which went to the U.S. district court at some point. See In re Eberts, Nos. 2:11-cv-08827, 2:12-cv-07222, 2:12-cv-08464, 2:14-cv-00791, 2:15-cv-00703, 2:15-cv-00706 (C.D. Cal.)

One district court ruling rejected an argument by two companies that provided financing for a film produced by the debtor that their claims were nondischargeable under 11 U.S.C. §§ 523(a)(4) or (a)(6). In re Eberts, 2:11-cv-08827, civil minutes (C.D. Cal., March 27, 2013). An appeal of that ruling by the companies is currently pending in the Ninth Circuit.

Since 1997, Devin Sawdayi has represented individuals and families in Los Angeles in Chapter 7 and Chapter 13 personal bankruptcy cases. We work closely with our clients to help them rebuild their finances with dignity and respect. To schedule a free and confidential consultation with a knowledgeable and skilled advocate, please contact us today online or at (310) 475-939.

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