A new lawsuit has been filed against Chicken Soup for the Soul Entertainment, the parent company of Redbox and other brands, accusing its former CEO, Bill Rouhana, and other executives of gross mismanagement. The lawsuit was filed by George L. Miller, the trustee for Chicken Soup for the Soul Entertainment’s bankruptcy case from 2024, as reported in the Lowpass newsletter.
The lawsuit says that “Prior to seeking bankruptcy protection in June 2024, the Debtors were victim of mismanagement and pillaging by insiders on a scale rarely seen with public companies.”
While the company was losing money annually from 2018 though the bankruptcy, the lawsuit claims that ex-CEO Bill Rouhana “treated
the Debtors as his personal piggybank throughout, while neglecting the most basic corporate duties.” Rouhana also owned the majority of the Company’s voting stock and the lawsuit says that he paid himself 10% of net revenues every quarter, with millions more going to other shareholders, while the company was failing.
The filing also criticizes the merger of Redbox with Chicken Soup for the Soul Entertainment in 2022, which it claims was poorly executed, with no proper assessment of Redbox’s declining viability. Redbox, which was already struggling due to the shift from renting DVDs to streaming, continued to lose revenue post-merger. The lawsuit highlights how financial decisions, like continuing to pay dividends and fees while ignoring basic operational needs, led to the company’s collapse.
Miller is seeking to recover tens of millions of dollars from Rouhana and others, claiming a breach of fiduciary duties. The legal battle has added to a series of lawsuits against the company, including one from eleven former employees in July 2024, accusing the leadership of financial negligence. That lawsuit asked for up to $1 billion in damages.
The defendants have until next week to respond to the lawsuit.