Published On: Sun, Apr 5th, 2015

Judge Throws Out Securities Suit Against DreamWorks Animation

"Plaintiff has provided no testimony of confidential witnesses, nor anything else beyond its own financial analysis of Turbo's potential for profitability."

Dreamworks

A class action lawsuit over securities fraud filed against DreamWorks Animation has been thrown out by a federal judge. The suit was brought over alleged improprieties surrounding the company’s write down of losses which resulted from its 2013 flop Turbo.

This is more good news for the company which has had a number of duds in recent years and been forced to lay off a large number of its employees. Its stock soared last week after the unexpectedly strong opening of its latest movie “Home.”

U.S. District Judge James Otero ruled that the plaintiffs in the case failed to bring forward sufficient evidence to justify their allegations.

In his ruling Otero wrote, “Katzenberg did not simply say Turbo will be a profitable film, but instead said ‘based on the data that we have to date, we do believe that Turbo will be a profitable film.” In other words he made no promises that Turbo would make money.

“Plaintiff has provided no testimony of confidential witnesses, nor anything else beyond its own financial analysis of Turbo’s potential for profitability, before attempting to tie that analysis to the fact that DreamWorks later recorded an impairment charge related to Turbo as evidence that Defendants’ statements during the earnings calls were false when made, ” wrote the judge.

Filed last summer and brought by Charles Paddock, a DreamWorks shareholder suing on behalf of himself and other investors, the complaint alleged that, “DreamWorks Animation is engaged in the development, production and exploitation of animated films and their associated characters worldwide through feature films, television, and consumer products. During the Class Period defendants made false and/or misleading statements and/or failed to disclose that:

“DreamWorks Animation failed to take a timely write-down for Turbo, a 2013 feature film about a supercharged snail.”

“The Company’s net income for the fiscal year of 2013 was materially overstated. The Company lacked adequate internal and control over financial reporting. And the Company’s financial statements were materially false and misleading at all relevant times.”

The Securities and Exchange Commission had previously investigated DreamWorks Animation and found no evidence of criminal activities.

The plaintiffs in the case, however, have been given a chance to try again if they can come up with new evidence to back up their charges.

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