Producer Hal Luftig suffered a setback in his court battle against a wealthy investor over millions of dollars from the musical Kinky Boots, a conflict the U.S. Supreme Court may play a role in resolving.
Luftig said that Nevada investor Warren Trepp jumpstarted the producer’s career — and then tried to destroy it. Trepp said that after decades of patronage, he was the one who was betrayed.
In March, a federal court judge rejected a reorganization plan proposed by Luftig’s production company, Hal Luftig Company (or HLC). It declared bankruptcy in December 2022, after an arbitrator held both the producer and his company responsible for failing to fully pay income that Trepp was due from Kinky Boots, Luftig’s 2013 Tony Award-winning hit. Trepp was awarded $2.9 million, on top of $2.7 million the investor had already earned from the show. Luftig said that neither he nor his company has $2.9 million.
Under the now-rejected reorganization plan filed in U.S. Bankruptcy Court, HLC projected it would pay Trepp $1.1 million over five years. That’s just 37 percent of what the arbitrator, New York entertainment lawyer Bob Donnelly, determined that the investor is owed.
On March 28, Hal Luftig Co. appealed the ruling in another effort to get its reorganization plan approved. “Any delay…will only continue to deter potential investors in current and future [HLC] projects,” Sheryl P. Giugliano, an HLC bankruptcy lawyer, wrote in a court filing. “Delay could also potentially force Mr. Luftig to file his own personal bankruptcy case,” Giugliano wrote, adding in that scenario, Trepp would earn less.
Dating back to 2019, the litigation is a cautionary tale about the unraveling of a business relationship that encompassed dozens of shows. Trepp was a major investor in Thoroughly Modern Millie, the 2002 Luftig-produced musical that launched the career of Sutton Foster. More recently, Luftig was a lead producer of Here Lies Love, a $22 million flop early this season; as well as Plaza Suite, a hit Neil Simon revival starring Sarah Jessica Parker and Matthew Broderick. Trepp wasn’t involved in either production.
The producer is currently working on the Jason Robert Brown and Taylor Mac musical Midnight in the Garden of Good and Evil, scheduled to premiere at Chicago’s Goodman Theatre this summer. Luftig declined to comment for this story, but provided a detailed statement to Broadway Journal last summer. He said that he always conducted his business relationships “with the greatest integrity.”
Trepp earned a fortune as the head high-yield bond trader under Michael Milken at the now-defunct investment bank Drexel Burnham Lambert. In the final years of their relationship, Trepp paid Luftig $210,000 annually to “provide his full time, exclusive services” to identify theater investment and producing opportunities. In exchange, Trepp was entitled to all their royalties, producer fees and net profits until Trepp recouped $285,000 a year from the partnership. Trepp was in line for 60 to 75 percent on their next $175,000 of income. After that, Trepp was due 55 percent of their income and Luftig was entitled to 45 percent.
Trepp told Broadway Journal the relationship was largely unprofitable for him until Luftig and Daryl Roth, Kinky Boots‘ lead producers, opened the musical on Broadway in April 2013. (Roth isn’t involved in the dispute.) Trepp had invested $335,000 in the show’s development but cashed out before opening night. In October 2014, a year after Kinky Boots had recouped its capitalization and become Luftig’s first long-running blockbuster, the producer terminated his deal with Trepp.
Trepp said he believes that Luftig, who was working in an off-Broadway box office when they met, owes the investor his career. Likewise, in a 2011 email to Trepp’s wife, Jālé Trepp, Luftig wrote that he “would never have fulfilled my dream of working in the theater had it not been for the two of you.”
The men disagree about the circumstances behind the breakup. Luftig wrote in his statement to Broadway Journal that he pulled the plug after Trepp gradually soured on theatrical investing. Trepp countered that he had decreased his investing because of the projects Luftig offered. “I would’ve invested $1 million in The Elephant Man,” the 2014 hit revival starring Bradley Cooper, Trepp said in an interview last week. “He never gave me the opportunity.”
Luftig himself invested in that show and was billed as a co-producer. Trepp alleged that Luftig violated their contract by not presenting The Elephant Man to him; an arbitrator ruled that Trepp waited too long to file his claim.
Trepp, who never saw Kinky Boots on Broadway or elsewhere, said he was diagnosed with cancer in 2014 and wasn’t paying attention to how popular it was on Broadway. “I’m getting radiation and chemotherapy and he wants to terminate the agreement,” Trepp said. “That was his motivation, to screw me out of the 55 percent of the West End and other productions outside the United States.”
Again, Luftig denies doing anything improper. In his statement, Luftig wrote: “Because [Trepp’s] FCP Entertainment was no longer paying my salary and expenses after 2015, my attorney’s interpretation was that Trepp’s entitlement was limited to revenues from the shows already open before 2015. Those were the Broadway company and its planned U.S. tour. The other productions were no secret — plans for them were widely described in the press. Because Trepp never disagreed with my 2014 and 2015 proposal on how we should divide things fairly, it appeared he had no objection.”
In February 2015, Luftig wrote to Trepp that their ongoing relationship relates to “existing projects…almost entirely of Broadway and U.S. touring companies of Kinky Boots.”
Trepp said Luftig’s emails weren’t a formal proposal. “The contract is the contract,” Trepp told Broadway Journal. “If he had said that he wasn’t paying me for Europe or anything else, I would’ve sued him that day.”
The arbitrator agreed with Trepp that he was entitled to his contracted cut of Kinky Boots proceeds in the U.S. and abroad. (Luftig appealed the award, in addition to his recent appeal related to the bankruptcy.) The arbitrator denied Trepp’s other claims, including that Luftig failed to secure adequate production credits for the investor or shortchanged him on income from Thoroughly Modern Millie.
Luftig has expressed disappointment that Trepp “didn’t just pick up the phone or ask for an accounting” to settle any disagreements. Yet according to Luftig’s own account in court papers, in 2019, the producer cut off direct contact with the Trepps after receiving emails that Luftig regarded as abusive and condescending. (‘Warren is having trouble understanding who you believed worked for whom,” Jālé Trepp had written to Luftig.) Soon after, Warren Trepp filed his initial lawsuit, alleging that he suffered more than $10 million in damages.
The HLC reorganization plan includes the proviso that the producer be personally shielded from future liability. This is called a “non-consensual third-party release” and it’s a hot topic in the law. (“Non-consensual” because Trepp didn’t consent to the release; “third party” because Luftig himself didn’t declare bankruptcy.) Trepp’s lawyers wrote that Luftig tried “to exploit and manipulate the bankruptcy process to avoid liability under the Judgment without having to seek individual bankruptcy protection.”
A U.S. Appeals Court decision in the bankruptcy of opioid manufacturer Purdue Pharma laid out criteria for when a non-consensual third-party release is permitted. In the Purdue case, its owners, the Sackler family, would be granted immunity in exchange for paying up to $6 billion to settle thousands of lawsuits.
In last month’s rejection of the HLC reorganization proposal, U.S. District Court Judge Denise Cote cited the Purdue decision that a third-party release “is proper only in rare cases.” Judge Cote argued that “there is nothing unique about this small business bankruptcy that would set it apart from many others in which the debtor entity [HLC] is closely connected to a non-bankrupt principal [Hal Luftig]. There is a great danger that ordering nonconsensual releases of liability to such principals would undermine the carefully balanced structure of the Bankruptcy Code.” Cote referred the case back to U.S. Bankruptcy Court.
In December 2023, the U.S. Supreme Court heard arguments about the Purdue Pharma bankruptcy. A decision by the Supreme Court “will resolve a contentious, long-standing split” among the courts about non-consensual releases, wrote U.S. Bankruptcy Judge John P. Mastando III, who’s overseeing the HLC bankruptcy. The Supreme Court could clarify when non-consensual releases are proper or prohibit them altogether.
In her decision, Judge Cote disagreed with Judge Mastando that the HLC reorganization is the best way for Trepp to recover money. “Whether Luftig has the funds today to pay his debts does not speak to his ability in the future to do so,” Judge Cote wrote.
Giugliano, the HLC bankruptcy lawyer, accused Trepp of “being motivated only by vengeance and not economics,” because she said the investor would do better under the proposed reorganization than in a Luftig individual bankruptcy. John Mueller, a lawyer for Trepp’s company, FCP Entertainment, responded that there are other ways for FCP to get paid than through a hypothetical personal bankruptcy. “Even if Luftig did file for bankruptcy, [Trepp’s] FCP would welcome this as it would grant them the ability to examine Luftig’s finances more closely than they are able to currently.”
