Chicken Soup for the Soul Entertainment Employees Seek Billion-Dollar Reckoning

A group of former employees of the bankrupt Chicken Soup for the Soul Entertainment (CSSE) have filed a lawsuit alleging that the company and its ex-CEO Bill Rouhana engaged in a "greed at shocking levels" scheme, defrauding workers out of their hard-earned compensation and benefits. The lawsuit, seeking up to billion in damages, comes after CSSE's tumultuous financial journey that ultimately led to its Chapter 11 bankruptcy filing and the abrupt termination of around 1,000 workers with no severance or back pay.

Uncovering the Bitter Aftermath of CSSE's Downfall

Allegations of Fraud and Mismanagement

The lawsuit, filed by 11 former CSSE employees, paints a disturbing picture of the company's alleged misconduct. According to the plaintiffs, CSSE and its leadership, including Rouhana and his wife Amy Newmark, who served on the company's board, "engaged in a scheme to defraud employees not only out of their hard-earned compensation and siphon such money away for their own personal benefit, but also deducted wages from employees' pay checks for medical and dental premiums while allowing these policies to lapse and ultimately get canceled." This, the suit claims, resulted in employees unknowingly incurring millions in unreimbursed medical expenses.The plaintiffs further allege that the defendants "engaged in an elaborate 'Ponzi Scheme,' setting up multiple business entities under the umbrella of the until-now warm-hearted brand Chicken Soup for the Soul." This complex web of entities, the lawsuit suggests, was used to manipulate the books and deprive employees of their rightful benefits and compensation.

The Downward Spiral of CSSE and Redbox

CSSE's troubles can be traced back to its ambitious acquisition of the struggling Redbox business in 2022. The million stock purchase and assumption of 5 million in debt proved to be the company's downfall, as the physical media market continued to decline, and Redbox was further impacted by the dual strikes of 2023, which starved it of film titles.With Redbox's debt proving unworkable due to disputes with various lenders, CSSE fell behind on payments to retailers and studio suppliers. This ultimately led to the company's Chapter 11 bankruptcy filing, which was later converted to a Chapter 7 proceeding, resulting in the termination of around 1,000 workers with no severance or back pay – a stunning and abrupt end to an entertainment company.

The Plaintiffs' Pursuit of Justice

The lawsuit, filed by Michael Alder and Lani Levine of the AlderLaw firm, seeks to hold CSSE, Rouhana, and Newmark accountable for their alleged actions. The plaintiffs, including Brian Skajem, Lisa Papatzimas, Erin Tuttle, and several others, are seeking up to billion in damages.The case will need to be certified as a class-action before other former CSSE employees can join the lawsuit and become eligible for potential relief. The court's filing system has been affected by software outages, but the complaint has been provided to Deadline by AlderLaw and filed with the Los Angeles Superior Court.As the legal battle unfolds, the former CSSE employees are seeking to uncover the truth behind the company's downfall and hold its leadership accountable for the alleged mistreatment of its workforce. The outcome of this lawsuit could have far-reaching implications for the entertainment industry and serve as a cautionary tale about the consequences of corporate greed and mismanagement.