You thought the drama surrounding It Ends With Us was buried when a zero-dollar settlement made headlines last month. It wasn't.
Hollywood feuds rarely wrap up with a clean Hollywood ending. Despite signing a confidential agreement in May 2026 to avoid a massive federal trial, attorneys for Blake Lively and Justin Baldoni marched right back into a Manhattan courtroom on Monday. The actors weren't there, but their legal teams spent over an hour trading blows before U.S. District Judge Lewis J. Liman.
This isn't a minor detail. It's a high-stakes battle over tens of millions of dollars in legal fees and punitive damages. The central issue? A bitter fight over a specialized California statute designed to protect victims of sexual harassment from retaliatory lawsuits.
If you think a settlement means the end of a lawsuit, you don't understand how vindictive celebrity litigation actually works.
The Loophole Keeping the Feud Alive
Lively's legal team, led by attorney Michael Gottlieb, isn't letting Baldoni off the hook. They're demanding that Baldoni pay her massive legal bills along with tripled compensatory damages and heavy punitive penalties.
How can they do this after settling the core lawsuit? It all comes down to a failed countersuit from last year.
When Lively initially sued Baldoni, he hit back with a roaring $400 million defamation and extortion countersuit. He claimed Lively and her husband, Deadpool star Ryan Reynolds, conspired to hijack the movie's premiere and destroy his reputation. Judge Liman completely threw out Baldoni's countersuit last summer.
Now, Lively is capitalizing on that dismissal. Her lawyers argue that she is the "prevailing defendant" against that failed countersuit. Under California's anti-retaliation codes, anyone who files an unsuccessful defamation suit against someone reporting sexual harassment can face mandatory, severe financial penalties.
Gottlieb told the judge that Baldoni’s countersuit was exactly the kind of litigation the law aims to stop. It's meant to prevent powerful figures from using the court system to silence survivors through protracted, budget-draining legal wars.
The Defense Calls It an End Run
Baldoni’s camp sees things differently. His defense lawyer, Ellyn Garofalo, accused Lively's team of trying to orchestrate an "end run" around the canceled trial.
According to Garofalo, Lively walked away from the settlement without Baldoni or his production company, Wayfarer Studios, paying a single cent of the $300 million in damages she initially demanded. Reopening the case now to litigate legal fees would essentially force an alternative trial. Garofalo noted that it would mean reopening discovery, hiring new experts, and conducting endless depositions.
The defense strategy is clear. They believe Lively settled because her case was crumbling, and now she is trying to win back her legal expenses through a statutory backdoor.
How the Court Destroyed Both Sides' Leverage
To understand why this post-settlement explosion happened, look at how the case devolved before the scheduled May 18 trial date. Neither side entered the settlement talks from a position of absolute strength. Judge Liman had already gutted the most dramatic claims from both parties.
- Baldoni's $400 Million Loss: The judge dismissed Baldoni’s defamation and extortion claims last summer, ruling that Lively's public statements were legally protected.
- Lively's Harassment Claims Dismissed: In a massive blow to Lively in April, the judge tossed 10 out of her 13 claims. Crucially, he ruled she couldn't pursue sexual harassment charges under federal employment law because she was classified as an independent contractor on set, not a standard employee.
- The Damaging Expert Reports: Before settling, Lively's team presented an expert report claiming she lost up to $230 million in potential earnings, alleging the drama ruined her hair care line launch and cost her a $35 million payday for a movie sequel. Baldoni's team mocked these as "pie-in-the-sky" numbers.
With only a narrow retaliation claim heading to a jury, both sides faced immense reputational risk if their private communications became public evidence. Text messages and behind-the-scenes emails from the set of It Ends With Us would have been picked apart by the media. They settled to keep those records hidden, but the bitterness didn't vanish with the signatures.
What Happens Next
Judge Liman didn't issue an immediate ruling after Monday's heated arguments. He reserved his decision, leaving the entertainment industry waiting to see if he will grant Lively's motion for fees or shut down the dispute for good.
If the judge rules in Lively's favor, it sets a massive precedent for how Hollywood handles cross-complaints in harassment disputes. It means settling the main dispute won't shield an accuser's opponent from paying astronomical legal fees if their initial legal retaliation failed. If the judge denies it, Baldoni walks away clean, without losing a dollar from his pockets.
Don't expect a quiet resolution. Even if the court battle ends, the public relations war between these two camps is locked in for the long haul.
If you are negotiating a settlement in a high-conflict dispute, ensure your release clauses explicitly cover all post-judgment motions, statutory fee shifts, and pending sanctions. Failing to lock down those specific terms means you might sign a peace treaty only to find yourself right back in the courtroom a month later.
