Viacom Is Sued by Paramount on Movie Pact

Paramount Pictures sued television giant Viacom International Inc. Thursday for allegedly breaching the contract under which Viacom received exclusive use of some Paramount films for Viacom’s Showtime cable channel.

The action, claiming $88.2 million in damages, startled some industry observers because it revealed a conflict between parties who last week were described by Wall Street analysts and in press reports as talking about a potential merger. Those reports pictured Viacom discussing the sale of some or all of its assets to Paramount’s parent, Gulf & Western Inc. Neither company had commented on the reports.

The complaint, filed in Los Angeles Superior Court, closely followed the filing Tuesday of an unrelated antitrust suit that portrayed Showtime as a victim of a powerful, larger competitor. In that suit, Viacom charged that Time Inc., owner of Home Box Office, refused to air competing cable services such as Showtime on Time’s vast cable system.

A spokeswoman at Viacom’s New York headquarters said the company had not seen the Paramount suit and had no comment.

Paramount’s suit also named as a defendant National Amusements Inc., through which movie theater entrepreneur Sumner N. Redstone controls Viacom. Although Redstone was not listed as a defendant, Paramount’s suit alleged that he helped devise a plan to avoid liability for certain guaranteed payments to Paramount under a contract giving Showtime exclusive rights to its movies.

The lawsuit stated that it made the five-year arrangement with Viacom’s former owners in December, 1983. Showtime had the subsequent exclusive use of such major hits as “Beverly Hills Cop,” “ ‘Crocodile’ Dundee,” “Top Gun,” “Terms of Endearment,” “Flashdance” and “Fatal Attraction,” according to the suit.

As an inducement to allow exclusive use of its films, Paramount said it received a guarantee from Showtime that it would receive a substantial sum as a minimum toward license fees and exclusivity premiums that it was due.

However, the suit said, Paramount’s payments depended heavily on Showtime increasing its subscriber base, which did not occur. As a result, license fees it paid Paramount fell significantly.

Redstone caused Viacom to take on heavy debt to finance his purchase of the company in June, 1987, the suit said. Paramount alleged that Redstone, National Amusements and Viacom “engaged in a campaign to avoid or limit the payment of legitimate debt” to Paramount in order to lessen the debt of Viacom and Showtime.

The suit also contended that Redstone and his companies tried to get Paramount to make five fewer pictures available to Showtime in the fifth year of their contract as a means of reducing what Showtime owed Paramount.

It alleged that Redstone and his companies directed Showtime “to reject and refuse” to pay for the last five pictures made available by Paramount. “This action was solely to avoid Showtime’s . . . liability to Paramount,” the suit alleged.