More money, more problems. Chicken Soup for the Soul Entertainment got more than they bargained for when they bought Redbox, and the acquisition of the flailing streaming and rental brand might not have been completely aboveboard.
A lawsuit filed by an “advisory and consulting services professional in the media industry” in a New York US District Court is seeking damages that, though unspecified, Variety reports are in the range of “several million dollars.”
Per his complaint, consultant Keith Knee says he was approached by CSSE CEO Bill Rouhana in 2020 “to provide consulting services to CSSE in connection with a strategic business transaction” between the latter’s company and Redbox.
Knee, it’s said “worked directly with Rouhana and Galen Smith, Redbox’s CEO,” and “sent Rouhana an overview of the potential transaction with Redbox” that was allegedly sent “almost verbatim” to the DVD kiosk company.
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The complaint then alleges Knee was told that Rouhana “did not want to pay a retainer for Knee’s services, but instead proposed a fee payable upon the success of the transaction.” Knee signed an NDA and claims he “ran all due diligence between Redbox and CSSE until August 2020.”
It’s added, “Per Rouhana’s instructions and understanding that his work would not go uncompensated, Knee analyzed and provided strategic advice to CSSE concerning the integration of Redbox’s lines of business to complement CSSE’s overall business strategy by providing operational and financial scale, increasing cash flow, and enhancing CSSE’s corporate rate of return.”
Communication between Rouhana and Knee concerning Redbox and remuneration continued into 2021, says the filed suit. “Based on Rouhana’s representations, Plaintiff Knee continued to make himself available to CSSE on the Redbox Project, forgoing other business opportunities.”
In October of 2021, Redbox tried to go public and perform a merger with a special purpose acquisition company or SPAC, The move didn’t go as planned and they slashed their workforce by ten percent in the face of “a steep drop-off in business and reported mounting losses.”
This crisis supposedly benefited Rouhana and CSSE who would be able to “purchase the distressed Redbox at a significantly lower price after the SPAC predictably failed to produce the results Redbox anticipated.” Knee’s compensation was supposed to be unaffected.
“Rouhana reassured Knee that Knee would be compensated for his work should a merger occur with the reorganized Redbox even after the SPAC/IPO,” per the latter’s complaint. Come 2022, CSSE was still promising Knee compensation as talks with Redbox resumed “at a substantially lower price for essentially the same assets.”
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The deal closed in August of that year at a value of $370M, which was slightly lower than the original by a reported $5M.
Around the same time, Knee and his attorney “sent an intent to sue and demand letter to CSSE,” seeking “at least several million dollars” that the company didn’t respond to. “CSSE has continued to ignore ongoing requests by Knee and his counsel to discuss the compensation owed to him,” says the complaint.
Chicken Soup for the Soul Entertainment is embroiled in several other lawsuits with investors and filmmakers under contract suing for millions in unpaid fees and income. Most plaintiffs shared Knee’s experiences of big talk and broken promises – while CSSE declined to comment when reached.
