Disappointing Box Office No Fraud, Appeals Court Rules

Investors who were disappointed that films they funded performed poorly at the box office cannot sue for fraud, the Second Circuit Court of Appeals found this week. A group of investors sued Paramount Pictures in 2008, asking for up to $24 million in damages after they invested $40 million toward the making of “Mission: Impossible III,” “Mean Girls,” and “The Manchurian Candidate,” among others. Those movies, released between 2004 and 2006, did not meet box office expectations, and Munich Re, Marathon Structured Finance Fund LP, and Newstar Financial Inc.—among other investors—claimed the movie studio misrepresented its use of risk-mitigation techniques. Paramount counsel Richard Kendall said the ruling “finally puts the plaintiffs’ meritless claims to rest.”