Jaffe, Forced Out of Paramount, Sues

As often occurs in corporate soap operas, Stanley Jaffe has moved from the boardroom to the courtroom. The former president and chief operating officer of Paramount Communications on Thursday filed a lawsuit charging that he was deprived of $20 million in stock options and other benefits guaranteed under his employment contract when Viacom Inc. acquired the company.

The New York state court case accuses Paramount, Viacom and its chairman, Sumner Redstone, of misleading Jaffe about his status and “wrongfully” frustrating his attempts to exercise stock options in a bid to “rob him” of benefits.

Viacom denied any wrongdoing in a statement Thursday, saying: “We believe our handling of Mr. Jaffe’s agreement is entirely proper and we are complying with all provisions of his contract. We believe his claims are without merit and we are confident that we will prevail.”

Jaffe, 53, was forced out of his job in February, after Viacom won the $10-billion bidding war for Paramount. At the time, published reports valued his exit package at about $60 million, but on Thursday, sources said his contract puts the amount closer to $35 million. That includes his annual salary and benefits of about $3.5 million through 1997, plus the stock options.

In the 14-page lawsuit, Jaffe says he first learned that his job was in jeopardy by reading “media reports.” Subsequent efforts to discuss his status with senior Viacom executives were rebuffed, according to the suit. Jaffe says that his duties were “materially reduced” by mid-February, and that he was excluded from meetings of the company. Former Paramount Chairman Martin S. Davis finally gave him formal notice he had been fired on Feb. 28, the suit says.

At issue in the case are 466,668 shares of Paramount stock that Jaffe says he had the right to exercise at $42.125 a share under his employment agreement. The lawsuit says Jaffe was “ready, willing and able” to exercise those options, but that Paramount refused to make the stock available, thereby depriving him of the chance to cash in at as much as $107 a share by the March 1 deadline that was established for Paramount shareholders to tender to Viacom.

Sources say Jaffe and his attorney unsuccessfully tried to resolve the issue before the suit was filed. One source hinted that other Paramount employees may bring similar claims, but Viacom’s stance appears to be that Jaffe’s case is unique because he was seeking favored treatment.

Jaffe was named Paramount’s president and chief operating officer in 1991. He got high marks in some quarters for building the company’s Madison Square Garden-based sports franchises--the New York Rangers and New York Knicks--but was criticized over the company’s lackluster earnings, and had a reputation for imperiousness and a fierce temper.

Jaffe is seeking $20 million in compensatory damages, plus unspecified punitive damages.

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After selling the rights to a still-unpublished novel for an unprecedented $3.75 million last year, best-selling author John Grisham may be poised to set another Hollywood record.

Sources say the bidding is heating up over “A Time to Kill,” Grisham’s first and most personal novel. Warner Bros., Paramount Pictures and producer Jon Peters are among those said to be in the running. While Grisham’s agent, Marti Blumenthal, and attorney, Keith Fleer, declined comment, one Hollywood source puts the asking price at close to $5 million.

Grisham’s legal thrillers have translated well to the screen so far, which is the main reason for Hollywood’s intense interest. “The Firm,” purchased for $600,000 in 1991, grossed $158.3 million at the domestic box office for Paramount. And “The Pelican Brief” which Warner Bros. bought for $1.3 million, took in $100.7 million domestically. Warner bought the rights to “The Client,” which it plans to release this summer, for $2.5 million.

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With United International Pictures facing an uncertain future in Europe, MGM is denying persistent rumors that it plans to exit the overseas distribution company.

Sources have suggested that MGM might pull out as a way to relieve political pressure on UIP, which has been accused of dominating European theaters. The withdrawal could also save money for MGM, the weakest partner in the company.

Besides MGM, UIP distributes movies overseas for Paramount Pictures and Universal Pictures. Sources say that MGM’s agreement allows it to leave UIP with one year’s notice. Universal and Paramount are contractually committed to the distribution company through the year 2005.

MGM was able to negotiate the early exit clause because it was having financial problems when the partners renewed their UIP commitment in 1990, sources say. UIP controls roughly 18% of the European theatrical market. It’s considered a convenient target for EU commissioners seeking to bolster Europe’s film industry because it’s the only distributor jointly operated by three Hollywood studios.

Representatives from the studios testified before the Monopolies and Mergers Commission in London last week, but any ruling is months away. At issue is whether an antitrust waiver for the distributor should be extended.