Icahn suit against Lions Gate in New York dismissed
That's one lawsuit down, two to go.
Lions Gate Entertainment scored a significant legal victory Wednesday as a New York State Supreme Court judge dismissed a lawsuit brought against the company by dissident investor Carl Icahn.
Icahn filed suit last year over a controversial debt-for-equity swap that diluted his holdings and made it more difficult for him to seize control of the Santa Monica-based film and television studio.
In addition to Lions Gate, the suit named the company's board of directors and investors Mark Rachesky and John Kornitzer as defendants.
The complaint alleged that Lions Gate breached a contract with Icahn and interfered with his contractual rights and business relationships when Rachesky, the company's second biggest investor after Icahn, last summer bought $105.7 million worth of the company's debt from Kornitzer and then converted it to 16.2 million shares of stock. The move reduced Lions Gate's debt, but also increased Rachesky's stake in Lions Gate to 29% from just under 20% and reduced Icahn from 38% to 32.8%.
Billionaire corporate raider Icahn has blamed that move for the failure of his effort to elect a slate of directors to the board of the company, whose management he has repeatedly criticized.
In dismissing the claim, New York State Supreme Court Justice O. Peter Sherwood largely attributed his decision to Lions Gate's victory in a similar suit in British Columbia, where the studio is legally domiciled. "Unavoidably, the court is drawn to the findings of the [British Columbia] court, findings that cannot be relitigated here," he wrote.
Icahn is currently appealing the decision in British Columbia, in which oral arguments were heard last week. In addition, Lions Gate is suing Icahn in New York for his alleged failure to disclose key information to shareholders last year amid several tender offers he made to buy stock. A judge last week dismissed part of Lions Gate's suit related to his ownership of Metro-Goldwyn-Mayer debt, but allowed the studio's claims related to an alleged deal he made with fellow shareholder Mark Cuban to continue.
In a statement, a Lions Gate spokesman said, "We are pleased that the New York Supreme Court has joined with the British Columbia Supreme Court in dismissing Mr. Icahn's complaint and affirming the validity of our July 20, 2010, deleveraging transaction." Icahn did not immediately respond to a request for comment.
-- Ben Fritz