Melrose II fund sues Paramount over profits

The Melrose II fund co-financed several Paramount pics, including the 'Transformers' franchise.Investors in Melrose II, a fund which co-financed Paramount pics including the "Transformers" franchise, have sued the studio over profits to several films. Filed today in Los Angeles Superior court, the suit seeks to recover profits related to a nearly $375 million investment in 29 films dating back to 2006. Suit, which also name DreamWorks as a defendant, points to pics including "Mission Impossible 3," "Charlotte's Web," "Dreamgirls," "Flags of Our Fathers," "Blades of Glory," "Jackass 2" and all three "Transformers" films. While the lawsuit does not specify a dollar amount, the contested money is believed to total in the tens of millions. Documents allege that since inking a deal with the studio five years ago, financiers have not yet seen a profit on their investment. The complaint alleges that those investors were entitled to a a 25% copyright interest in up to 30 films and agreed to fund a "pro rata" amount of the production costs. "Melrose II is an important investor and copyright owner and we're going to fight to make sure that they get their fare share of these profits," Kirkland & Ellis LLP's Mark Holscher told Variety. The firm is representing the Melrose II group, which is mainly comprised investors based in NY. "On Melrose Avenue, at the oldest existing film studio in Hollywood, Paramount Pictures Corporation routinely calculates 'net receipts' to take in huge returns on one set of books while reporting losses to its profit participants on another," the suit alleges. This is not the first time investors have accused the studio of Hollywood accounting. In 2008, a number of investors from the studio's Melrose I financing vehicle sued the studio for securities fraud and are currently seeking about $30 million in damages. Paramount did not have an immediate comment. Contact Rachel Abrams at Rachel.Abrams@variety.com