Tuesday, June 28, 2005
Corporate Litigation in the News
Via yesterday's NYT, we learned a bit more about the lawsuit brought by Peter Jackson (of Lord of the Rings fame) against New Line Entertainment (of Time Warner fame). The suit's gist is that New Line, by selling certain distribution and licensing rights to TW sister companies instead of selling on the open market, engaged in self-dealing that lowered the gross movie revenue that Jackson was to share in. Jackson apparently seeks around $100M in damages. (For law geeks out there, a well-regarded California boutique, Alschuler Grossman Stein & Kahan, represents the Hobbits, while Sauron (er, the Studio) is represented by O'Melveny & Myers.)
As the Times noted, this would be a really interesting case to see resolved on the merits (either on the papers or before a factfinder) because it really strikes at the heart of the synergistic rationale that was said to generate lots of entertainment corp. mergers in the late 1990s. If TW (or Sony, etc.) can't self-deal, then it would seem to make quite a bit less sense to stick all of those disparate corporate entities under the same banner.
I checked the docket. New Line filed an answer on June 3. It was pretty surprising that New Line didn't move to dismiss (must have been a well drafted complaint!). They parties are now in discovery. Undoubtedly the case will settle.
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» The LOTR suit from Ideoblog
Dave Hoffman says that Peter Jackson’s suit against New Line for underselling LOTR rights to parent TW really strikes at the heart of the synergistic rationale that was said to generate lots of entertainment corp. mergers in the late 1990s. [Read More]
Tracked on Jun 28, 2005 1:46:03 PM
They can self-deal. Jackson just wants the accounting for the self-deal to be fair. The size of a self-deal is essentially arbitrary as the master corporate ledger is unchanged. New Line used this to artificially lower the profitability of the movie and raise the profitability of the other corporate subsidiaries. My understanding is that Jackson is objecting to this artificial transfer of profit away from the movie entity. Of course, I don't know what accounting practices are used to properly isolate a movie's profitability from the corporate profits.
Posted by: ac | Jun 28, 2005 1:28:21 PM
Not trying to stab you (or Christine Hurt) in the heart or anything. I'm on your side! I love what I do, but I find the satisfaction in putting bureaucrats or international economic regimes under the microscope, not in identifying with an particular set of regulators or regulateds. Maybe you're driven by a hatred of a SEC and a love of widow and orphan stockholders or what have you ... but I don't think you'd have to be to be a happy business (or regulatory) law scholar.
Posted by: david | Jun 28, 2005 12:02:29 PM