Pryor Cashman Clients Defeat Paramount Pictures in Matter of First Impression
In a matter of first impression, Pryor Cashman successfully obtained dismissal of a lawsuit brought by Paramount Pictures seeking upwards of $8 million in attorneys’ fees from the firm’s clients, NewStar Financial and Allianz Risk Transfer (“Appellants”).
Background - The Federal Lawsuit
This case stemmed from a 2008 federal lawsuit concerning investments made by Appellants in several films produced and distributed by Paramount. In the federal action - currently pending before the U.S. Court of Appeals for the Second Circuit - Appellants asserted that Paramount misrepresented its intent to “pre-sell” foreign territories in distributing the films (in an attempt to reduce costs), to the grave detriment of their investments.
The State Appellate Victory
Following the district court’s ruling, Paramount commenced a state action for attorneys’ fees based on Appellants’ alleged breach of a covenant not to sue. Appellants then moved to dismiss Paramount’s complaint on the grounds that the district court’s decision was res judicata and therefore Paramount was barred from bringing what was a compulsory counterclaim under the Federal Rules of Civil Procedure.
On appeal, the New York Appellate Division, First Department agreed with Appellants, unanimously holding, “the later assertion in a state court action of a contention that constituted a compulsory counterclaim in a prior federal action between the same parties is barred under the doctrine of res judicata.”
This victory resolves a previously unsettled issue concerning the interplay between NY res judicata under the NY permissive counterclaim rules and the federal compulsive counterclaim rule.
Pryor Cashman Attorneys
Pryor Cashman partners James Janowitz and William Charron, along with associates Bryan Mohler, Benjamin Akley and Dasha Chestukhin, represented Appellants in this matter.
To read the First Department’s decision in its entirely, please click here.
