The Weinstein Company logo for web

Regarding:  Spyglass Media Group LLC v. Weinstein (In re The Weinstein Co., Holdings LLC), No. 21-1151, 2022 U.S. Dist. LEXIS 142333, 2022 WL 3226317 (D. Del. Aug. 10, 2022)

Have you ever thought about the effect the “Notwithstanding” Clause in an agreement would have over a specific provision of a contract?

Most people would think that it would negate a specific provision in the contract — but not necessarily so, as indicated by the U.S. District Court for Delaware, which heard an appeal from the bankruptcy court in the Weinstein Co. Holdings bankruptcy case.

“Notwithstanding” in Weinstein Co. Holdings LLC

Here, the debtor Weinstein Co . Holdings produced movies. During the bankruptcy, the debtor movie company sold substantially all of its assets free and clear of all liens, claims, and encumbrances. A senior executive, Robert Weinstein, was claiming a 2% participation interest in a film that turned out to be a hit. The executive eventually filed a motion to enforce his participation interest.

The relevant section in the purchase agreement stated in part:

Section 2.4. Excluded Liabilities. Notwithstanding any provision in this Agreement or any other writing to the contrary . . . Buyer is assuming only the Assumed Liabilities and is not assuming any other Liability of any Seller Party of whatever nature, whether presently in existence or arising hereafter. All such other Liabilities shall be retained by and remain Liabilities of the Seller Parties (all such Liabilities not being assumed being herein referred to as the “Excluded Liabilities”), including, without limitation:
. . .

(b) any amounts due to Affiliates of any Seller Party, including any declared dividends or distributions.

(APA § 2.4(b)) (emphasis added).

The pertinent provision in the order approving the sale provided that:

“The transfer of the Purchased Assets to the Purchaser . . . will vest the Purchaser with all right, title, and interest of the Sellers to the Purchased Assets free and clear of all claims, liens . . . Excluded Liabilities (as defined in the APA . . .) . . ., interests, rights and encumbrances (other than Permitted Liens and Assumed Liabilities) . . .” (Sale Order ¶ AA, AA362-363) (emphasis added);

“Notwithstanding anything set forth herein or in the APA and notwithstanding the inclusion of any Contract or Lease in the Contract Notice or the Assumed Contract Schedule, nothing in this Order or the APA shall be deemed to otherwise alter, modify, extend or enhance the Debtors’ rights, title or interest to or under any Purchased Asset or to grant the Purchaser any rights, title or interest in or under any property (including, for the avoidance of doubt, any property that is identified as a Purchased Asset) that is not property of the Debtors’ estates.” (Id. ¶ LL, AA368) (emphasis added);

“Pursuant to Bankruptcy Code sections 105(a) and 363(f), the Purchased Assets shall be sold free and clear of all Claims (other than Permitted Liens and Assumed Liabilities, each as defined in the APA . . .”. (Id. ¶ 12, AA376) (emphasis added); and

“To the extent there is any inconsistency between the terms of this Order and the terms of the APA, the terms of this Order shall govern.” (Id. ¶ 49, AA394) (emphasis added).

Contract Terms and Parties’ Reliance

The executive relied on the contract provision, which provided that the assets were sold free and clear except for “permitted liens.” Further “permitted liens” was defined to include participation interests. The schedule attached to the Agreement listed the executive as holding participation interests.

The buyer relied on another provision that stated in the preface that “[n]otwithstanding any provision of this Agreement or any other writing to the contrary,” the assets were sold free and clear of amounts due to affiliates of the debtor, which included the executive. In other words, the “notwithstanding” provision meant that the film was sold free of the executive’s participation interest.

The parties agreed that the term “affiliate” included the executive.

District Court Finding

The District Court found that “[t]he Bankruptcy Court correctly concluded that the general provision that stated that [the buyer] was not assuming any liabilities to Affiliates did not take precedence over the specific provisions of the APA (and the Sale Order) that sold the Film to [the buyer] free and clear of all liens, claims, and interests, except [the executive’s] Participation Interest in that Film.” Order, page 10.

Further, the Court noted that it made no sense for the liquidating trust to assume the liability of the participation interest when it was not receiving any portion of the revenue in which the participation interest was based.

It is also worth mentioning that the buyer argued the executive waived its right to raise this issue but, as the court stated, “It is unclear what facts [the buyer] believes should have prompted such an objection when the [asset purchase agreement] clearly lists [the executive’s] Participation Interest as a Permitted Lien.”

Here, the takeaway is that the specific provision will control over the general “notwithstanding” provision as in this case, the purchase agreement clearly provided that the assets were sold free and clear, except for the participation interests.


Avatar of Bill Siegel
William L. (Bill) Siegel is a Shareholder and Section Head of the Cowles and Thompson Bankruptcy and Creditors’ Rights Practice Group as well as a member of the Corporate and Business Practice Group. His experience includes representing individuals and business entities in their corporate and transactional affairs, including drafting and negotiating agreements of all types, and representing individuals and business entities in disputes that may arise in litigation in State and Federal Courts. He also represents debtors, creditors, Trustees, and Committees in bankruptcy matters in Chapter 7 liquidations and Chapter 11 reorganizations. His clients include small and medium-sized businesses, start-up technology companies, and partnerships. He frequently publishes articles and content regarding trends in bankruptcy law, the economy, commercial real estate, and retail-related matters.