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Part of Lions Gate suit against Carl Icahn dismissed

March 23, 2011 |  6:42 pm

There was a mixed verdict in the latest round of the seemingly never-ending legal battle between Lions Gate Entertainment and its largest shareholder, Carl Icahn.

A federal judge in New York on Wednesday dismissed part of a lawsuit filed by the Santa Monica-based film and television studio against the dissident investor last October, but declined to throw out the entire complaint, a Lions Gate spokesman confirmed. Icahn, who owns 32.8% of the stock, is a longtime critic of the company's management.

The judge set aside Lions Gate's claims that Icahn misled the company's shareholders -- whose stock he was attempting to buy in several tender offers last year -- because he did not disclose that he was simultaneously acquiring debt in MGM. Lions Gate repeatedly tried to merge with MGM last year. Icahn initially opposed the move, but ended up supporting it in the fall. However, MGM ended up filing for bankruptcy and since has emerged as a reorganized company under new management.

However, the judge ordered both sides to proceed with a pretrial conference over Lions Gate's claims that Icahn failed to disclose an agreement to give investor Mark Cuban "special consideration" for selling his 5.4% stake in the studio to Icahn.

Icahn is currently appealing decisions in two lawsuits he filed against Lions Gate last year in New York and in Vancouver, where the company is legally domiciled. Both suits sought to unwind a controversial debt-for-equity transaction last summer that increased the stake of Mark Rachesky, the company's second-largest shareholder and supporter of management, and diluted Icahn's shares.

The billionaire investor lost his efforts to win preliminary injunctions against Rachesky.

Icahn could not be reached for comment.

The decision in the New York case was first reported by Reuters.

-- Ben Fritz