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Paramount sued by investor group that co-financed nearly 30 films, including 'Transformers'

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In a lawsuit filed Tuesday in Los Angeles, the New York investor group Melrose 2 claimed that Paramount Pictures had deliberately inflated losses and underreported revenues to Melrose 2, which invested nearly $375 million in 29 Paramount and DreamWorks films including the Transformers series, Mission: Impossible III, and Dreamgirls. In 2006, Melrose 2 and Paramount entered into an agreement, with the former co-financing the studio’s movies in exchange for a copyright interest in the films. But in the five years since the agreement was signed, Melrose 2 alleges to have not received any profits from its investment.

Paramount released a statement late Tuesday saying that Melrose 2 already received almost 90 percent of its investment back. “Paramount has complied with its obligations to Melrose 2 and has been forthcoming in the audit process,” said Paramount spokesperson Virginia Lam. “We are disappointed that these sophisticated investors would choose to file a lawsuit filled with hyperbole that ignores the true facts rather than seeing that process through to completion. While we intend to vigorously defend this lawsuit, the differences between the parties’ positions are relatively modest in amount and we are confident they can be resolved in the ordinary course [of business].”

Melrose 2’s attorney Mark Holscher fired back in response to Paramount’s statement. “Our complaint sets out very specific details of Paramount’s stone walling our client for years, as well as Paramount’s repeated violations of our contract, and its misrepresentations,” Holscher told EW. “It is hard to believe that anyone will view such practices as an acceptable ‘ordinary course’ for dealing with business partners.”

(Additional reporting by Adam B. Vary)