Paramount Affirms Big Win Over Suing 'Mean Girls' Investors

An appeals court won't overturn a trial judge's conclusion that the studio made no misrepresentation on a slate of 25 films.

Paramount Pictures is again the winner in a long-running legal dispute with Wall Street investors who alleged being the victim of fraud. On Monday, the 2nd Circuit Court of Appeals affirmed the studio's victory at a trial in October 2014.

Allianz Risk Transfer and other financial firms brought the lawsuit in 2008 with claims of not seeing any return on the $40 million they put up for the "Melrose 1" slate of 25 films released between April 2004 and March 2006, including Mean Girls, Elizabethtown, Collateral and The Manchurian Candidate.

The investors alleged that Paramount had abandoned international "presale" agreements in favor of self-distributing pictures in foreign markets. They went to trial with the theory that Paramount had once hyped risk-mitigation practices, and therefore misrepresented the investment.

In the middle of a trial where Paramount pointed to its "unpredictable business," a judge delivered her findings and ruled that Paramount had disclosed its business practices to highly sophisticated businessmen.

The case then continued a seventh year with an appeal by Allianz, but the investors fare no better on higher review.

In an opinion today (read here), the appeals court notes that while it is true that Paramount entered into fewer territorial sales on those 25 films compared to its history, the studio had always relied on a "mix of co-financing strategies" and "the rate at which Paramount entered into these transactions varied widely from year to year."

Further, the financial literature seen by the investors noted that Paramount would pursue territorial sales "opportunistically" and "selectively," which is what the judges say happened.

"The district court's finding that Paramount did not change its business strategy with respect to territorial sales following the Melrose transaction is not clearly erroneous," states the opinion. "Accordingly, Appellants failed to establish the factual premise of their claims, and the district court correctly dismissed the complaint."

Although this opinion might rest one part of the dispute, Paramount is still looking to get even with these investors with an ongoing lawsuit alleging they breached a covenant not to sue in the waiver provisions of their investment subscription agreement. The studio wants to be reimbursed about $8 million for the amount of legal fees it has spent on the dispute.

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