×

US judge tosses Paramount movie financing fraud case after trial

Paramount Pictures won the dismissal Thursday of a lawsuit by investors in a slate of mid-2000s movies including "Mean Girls" who said the studio concealed a risky business strategy in obtaining $40 million in financing.

Following trial proceedings that began Oct. 21, U.S. District Judge Katherine Forrest in Manhattan ruled that the evidence failed to support the investors' claims and dismissed the case, a Paramount spokesman said.

Read MoreFTC sues dating site for bogus profiles

The ruling came after the investors, including a unit of Allianz, finished submitting evidence of Paramount's liability in the non-jury trial in the case, which had been pending since 2008.

"We are gratified by the decision," said Robert Lawson, a Paramount spokesman.

zimmytws | iStock / 360 | Getty Images

The investors had been seeking $16 million to $24 million in damages from Paramount, which is owned by Viacom, said James Janowitz, a lawyer for the investors.

Asked about the possibility of an appeal, Janowitz said: "We're certainly considering our options."

The dispute centered on around $40 million of the $231 million that Paramount raised through a private placement for a slate of 25 films that included "Mean Girls," "The Manchurian Candidate" and "Mission Impossible 3."

Read MoreWhirlpool wins first trial over 'moldy' washers

Released from 2004 to 2006, the films as a group performed poorly at the box office, both sides agreed.

Institutional investors sued in 2008, saying the studio misrepresented its planned use of certain risk-mitigation techniques.

The investors said Paramount failed to disclose that it had reduced its plans to sell international distribution rights, favoring instead increased self-distribution.

The distribution decision meant there was less revenue to offset losses when the movies failed to deliver financially, according to the lawsuit.

The plaintiffs included Allianz Risk Transfer, Marathon Structured Finance Fund, Newstar Financial and Munich Re Capital Markets.

Read MoreFTC sues Gerber over baby formula ad health claims

They were junior investors in Melrose Investors, a special-purpose vehicle that in turn invested in the film slate.

At trial, Paramount's lawyer, Richard Kendall, called the investors' theory an "after-the-fact concoction." The studio made no promises about its use of so-called pre-sales, he said.

The case is Allianz Risk Transfer, Inc. et al v. Paramount Pictures Corporation, U.S. District Court, Southern District of New York, No. 08-10420.