NY Court Rules Film Securities Suit Against Paramount Lacks Viable Claim

Granting Paramount's motion to dismiss for failure to state a claim, U.S. District Judge Thomas P. Griesa noted, among other things, that “the actual decline in Paramount's use of international pre-sales was insufficient to find in any of Paramount's statements a material misstatement or the omission of a material fact, as required to state a claim under the federal securities laws. According to the amended complaint, 25% of the cost of films comparable to the Melrose Slate films and released by Paramount between 1998 and 2003 was financed by international pre-sales, as opposed to 12.5% of the cost of the Melrose Slate films. This does amount to a reduction. However, it is difficult to say that Paramount was no longer engaging in the practice on an 'opportunistic' or 'selective basis,' which is all the PPM claims.”

The Allianz plaintiffs also challenged PPM language regarding Paramount's use of risk-mitigation strategies. But Judge Griesa found: “By telling investors that Paramount 'aims to achieve consistent film slate profitability,' 'opportunistically enter[s] into output agreements and territory sales,' 'emphasiz[es] cost mitigation programs,' and employs 'a culture of fiscal caution,' the PPM did not represent that Paramount would enter into any particular type of transaction with respect to the Melrose Slate of pictures or would otherwise work to mitigate plaintiffs' risk.”