Carl Icahn’s lawsuit against Lions Gate Entertainment is dismissed
Lions Gate Entertainment Corp. scored a significant legal victory Wednesday as a New York State Supreme Court judge dismissed a lawsuit brought against the company by its largest shareholder, 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 film and television studio.
Also named as defendants in the suit were the company’s board of directors and investors Mark Rachesky and John Kornitzer.
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, bought $105.7 million worth of debt last summer from Kornitzer and then converted it to 16.2 million shares of stock. The move increased Rachesky’s stake in Lions Gate to 29% from just under 20% and reduced Icahn’s stake to 32.8% from 38%.
Icahn has blamed that move for the failure of his effort to elect a slate of directors to the board of Lions Gate, whose management he has repeatedly criticized.
In dismissing the dissident investor’s claim, New York State Supreme Court Justice O. Peter Sherwood attributed his decision largely to Lions Gate’s victory in a similar suit last year in British Columbia, where the studio is legally based. “Unavoidably, the court is drawn to the findings of the [British Columbia] court, findings that cannot be relitigated here,” he wrote.
Icahn is appealing the British Columbia decision; 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 but allowed the studio’s claims related to an alleged deal Icahn 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 respond to a request for comment.
