Paramount Settles Big Film Slate Lawsuit (Exclusive)
An asset management company accused Paramount of cheating profit participants on its 1990s blockbusters. In response, Paramount blamed JPMorgan for making a secret deal to get out of "risk-free" loans.
Paramount Pictures has put an end to a three-year-old lawsuit worth more than $100 million and allegations of a JPMorgan-led financial conspiracy.
In 2010, Content Partners, an asset management company specializing in acquiring cash flows arising from intellectual property, filed the big lawsuit. The plaintiff, whose investors included Mark Cuban and Todd Wagner, accused Paramount of cheating profit participants on 25 films, including The Truman Show, Face/Off and Runaway Bride. During the litigation, the attorney for Content Partners said he had uncovered more than $100 million in unreported money.
According to the plaintiff's complaint, "Paramount sought to finance and exploit major motion pictures at minimal financial risk to itself, while at the same time deriving millions in misappropriated sums in addition to intangible benefits including valuable publicity."
Earlier this week, the parties filed papers to dismiss the dispute with prejudice. The Hollywood Reporter has confirmed that the parties have settled. Terms aren't yet known.
The big issue in the case was the calculation of "crossing" amounts, which pertains to the money of net receipts after Paramount had recouped its direct costs for the pictures.
The dispute was scheduled to go to trial this past summer before Paramount, represented by attorney Richard Kendall, lodged a bombshell cross-complaint.
In filed papers, Paramount pointed much of the blame for what happened on JPMorgan, the Wall Street financial giant.
JPMorgan had arranged insurance-backed financing for most of Paramount's films in the late 1990s. A special-purpose company was set up that entered into a credit agreement with JPMorgan. That company would receive a share of receipts from Paramount's films, which it would assign to JPMorgan as security for the loans. The bank used insurance policies to cover any shortfall from the loan amounts and the money paid out by Paramount.
But Paramount said that things had not gone as expected for JPMorgan.
"Like many Wall Street schemes, JPMorgan's attempt to craft 'risk-free' loans to finance motion picture production proved too good to be true," it said. "Before the ink was dry on the Fifth RPA, JPMorgan came to the realization that the insurers might not make good on their policies."
JPMorgan allegedly attempted to interest Paramount in a "buyout" of revenue participation agreements, and when that didn't work out, allegedly came to a secret agreement with Content Partners.
"JPMorgan and Content Partners knew that, under the express terms of the Revenue Participation Agreements, their transaction could not be consummated without Paramount's consent," read a counterclaim. "But they also recognized that Paramount would never consent to an assignment of rights under the Revenue Participation Agreements to a 'scavenger' that was intent on pursuing baseless claims and bad faith litigation against Paramount. … JPMorgan and Content Partners therefore retreated from their prior (and accurate) characterization of the intended transaction as a transfer of JPMorgan's interests in the Revenue Participation Agreements and set out to devise an artifice by which Content Partners could effectively acquire those interests without Paramount becoming aware of and taking steps to block that unauthorized assignment."
In response to the counterclaims, attorney Marty Singer, who represented Content Partners, threatened malicious prosecution and said it was "the most absurd thing I've ever seen."
In September, a judge ruled that the counterclaims would only be sufficient and not barred by the statute of limitations if JPMorgan was joined as a cross-defendant as an alleged co-conspirator. The judge gave Paramount 20 days to amend the cross-complaint. Since then, papers in the case have been filed under seal. A summary judgment hearing was scheduled for next week. But with a settlement, the dispute is now over.