DreamWorks Animation Wins Appeal Affirming Dismissal of Securities Fraud Lawsuit over Turbo Movie

On February 17, 2017, a panel of the United States Court of Appeals for the Ninth Circuit affirmed a decision by the U.S. District Court for the Central District of California dismissing a consolidated securities class action lawsuit against Cravath client DreamWorks Animation SKG, Inc. and DreamWorks’s chief executive officer and former chief financial officer.

The suit, brought on behalf of purchasers of DreamWorks common stock between October 29, 2013 and July 29, 2014, alleged that defendants misrepresented the company’s financial performance related to the 2013 animated feature‑length film, Turbo, causing DreamWorks’s stock to be traded at artificially inflated prices during this time, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b‑5. (Please click here for the prior news item about the dismissal.)

In its opinion, the Ninth Circuit held that plaintiff failed to allege DreamWorks made false or misleading statements regarding Turbo’s profitability. The Ninth Circuit also found that plaintiff failed to adequately allege that the decline in DreamWorks stock was a result of fraud and not a result of investors’ disappointment in the film.

The Cravath team included partners Evan R. Chesler and Karin A. DeMasi, who argued on behalf of DreamWorks before the district court and Ninth Circuit. The case is Roofers Local No. 149 Pension Fund v. DreamWorks Animation SKG, Inc., et al., No. 15‑55945 (9th Cir.).