UPDATE: Paramount Responds To Melrose II Fund Lawsuit Over Profits From ‘Transformers’ And Other Films

By | Tuesday November 29, 2011 @ 4:58pm PST
Mike Fleming

UPDATE: Paramount has responded to the Melrose II lawsuit. “Paramount has complied with its obligations to Melrose 2 and has been forthcoming in the audit process.  We are disappointed that these sophisticated investors would choose to file a lawsuit filled with hyperbole that ignores the true facts rather than seeing that process through to completion.  The Melrose 2 investors have already received almost 90% of their investment back under the financing agreement, and a number of the films in which they participate (such as the successful Transformers 3) remain in the earliest stages of their earning potential.

“While we intend to vigorously defend this lawsuit, the differences between the parties’ positions are relatively modest in amount and we are confident they can be resolved in the ordinary course.” Virginia Lam, spokesperson for Paramount Pictures.

EARLIER, 3:47 PM:

See the full complaint here.

LOS ANGELES, November 29, 2011 – Kirkland & Ellis LLP is representing Melrose Investors 2 LP (Melrose 2) in a breach of contract case in which Melrose 2 seeks to recover profits related to its nearly $375 million investment in 29 films produced by Paramount Pictures Corporation and DW Studios L.L.C., formerly known as Dreamworks Studios (Defendants).

The 29 films, which include such hits as Mission Impossible 3, Charlotte’s Web, Dreamgirls, Flags of Our Fathers, Blades of Glory, Jackass 2 and all three Transformers films, among others, have grossed close to $7 billion to date.

“The investor group was hoping to avoid being the third co-financing vehicle to have filed suit against Paramount and DW Studios LLC, but despite our ongoing efforts to settle our differences, Paramount has refused to cooperate,” a spokesperson for the investor group stated.

The complaint alleges:

· In 2006, Defendants entered into an agreement with Melrose 2 through which Melrose 2 would own up to a 25% copyright interest in up to 30 films that Defendants produced. To acquire this ownership interest, Melrose 2 agreed to fund a pro rata amount of the production costs.

· Melrose 2 met its obligations and has to date, provided nearly $375 million to Defendants to produce 29 films.

· In the five years since the agreement was signed, Melrose 2 has not received any profits from their nearly $375 million investment.

· Defendants have repeatedly hindered Melrose 2’s audits, engaged in obstructionist tactics, overstated losses and understated the revenues received in connection with the exploitation of the Melrose 2-funded films.

Read More »

Comments 27

HARD TIMES: How Europe’s Financial Crisis Is Affecting Each Country’s Film Industry

By | Thursday November 18, 2010 @ 3:58am PST



It’s not just the UK movie business that is suffering from draconian budget cuts because of the global financial crisis. Europe has an enormous hangover, too. And other European film industries are also suffering as EU governments scramble to reduce their debt … Read More »

Comments (10)

Jeff Sagansky Launches $250M Studio Fund

EXCLUSIVE: Few showbiz execs have held as many top jobs as Jeff Sagansky. Now the former CBS and Sony Pictures and Paxson and RHI exec is back in the movie biz in a big way. Institutional investors are backing Hemisphere Media Capital, the new venture from Winchester Capital Management founders Jean-Luc De Fanti and Sagansky. Japanese distributors Toho-Towa and Kadokawa Pictures and Singapore-based producer/talent manager RGM Media are also on board. Hemisphere is in talks with a number of studios and plans to announce its first investments shortly. The Hemisphere Motion Picture Partners fund expects to invest more than $400 million in 8-10 movies over 4 years. Read More »

Comments (18)