A clause in Harvey Weinstein‘s contract with his now-former company is leading attorneys to believe the organization may be vulnerable to potential lawsuits if the board knew about their co-founder’s alleged behavior.
As reported last week, Harvey’s employment contract with The Weinstein Company (TWC) had provisions that arranged for him to pay the company if they had to pay settlements or legal judgments for behavior that violated their code of conduct. If the company knew about allegations that Weinstein sexually harassed or assaulted women at the time the contract was drafted, attorney say, they could be held liable to their shareholders.
“Who else on the board knew about these things and when did they know about them?” attorney Francis G.X. Pileggi asked Delaware Business Court Insider, citing a case that holds companies liable for corporate harm if they failed to act to correct a systemic problem that they knew about.
Professor Lawrence Hamermesh, who teaches corporate law at Widener University Delaware Law School, agreeds with that assessment, saying, “It would make it fairly easy to allege that … somebody of authority in the company was aware of the problem.”
Of course, both men acknowledge this all depends on how the contract is interpreted. As LawNewz columnist Elura Nanos pointed out, Weinstein’s contract shouldn’t necessarily be read to mean that the Board was allowing him to engage in sexual misconduct, which is how TMZ interpreted the document. A spokesperson for TWC has disputed that interpretation.
Hamermesh also hesitated to agree with TMZ‘s reading of the clause, and pointed out that even if it was accurate, the nature of TWC’s organization would make it unlikely for shareholders to be kept in the dark. TWC is a tightly held company, where shareholders are more involved in corporate decisions. “It’s not likely to be one of these cases where people are looking at the board, asking, ‘Where were you?'” Hamermesh said.
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