×
You will be redirected back to your article in seconds

Viacom Faces Almost $300 Million in Payments After Court Rules in Harmomix Lawsuit

Viacom is considering its next steps after the Delaware Supreme Court upheld an arbitor’s award of almost $300 million that the company must pay to stockholders in connection with its 2006 acquisition of Harmonix, the music video company that developed “Rock Band” and “Guitar Hero.”

Viacom eventually sold the company in 2010, but its agreement to purchase the company included provisions in which it would pay $175 million and then make additional “earn-out” payments based on the company’s financial performance in 2007 and 2008.

A dispute arose over how Viacom calculated the 2008 “earn-out,” and, as was spelled out in their merger agreement, the disagreement went to arbitration. The selected “resolution accountants,” BDO USA, determined that the 2008 “earn-out” sum was $298,813,095.

But Viacom challenged the arbitration ruling, claiming that BDO refused to hear “pertinent and material” evidence. They pointed to evidence that the 2008 sum should reflect an inventory write-down to reflect the diminished value of unsold goods, something that would have had a $200 million impact on the calculation. Viacom said that they arbitrator asked for permission to address this issue, but that the representative for the Harmonix stockholders, Walter Winshall, refused.

The Delaware Supreme Court, however, rejected Viacom’s contention that the refusal to consider the write-down was “misconduct,” or enough to warrant a court negating an arbitration decision.

“BDO did not ignore any relevant evidence,” the Delaware high court said in an opinion issued on Tuesday. “Rather, it decided that evidence concerning an inventory write-down could not be considered, absent consent of the parties, because that was not identified in the original documents governing the scope of the arbitration. There was no misconduct, even if BDO’s decision on that issue was incorrect.”

The Delaware Supreme Court also rejected Viacom’s contention that the trial court, and not the arbitrator, should have decided whether the dispute over the write-down should have been before BDO.

In a statement, Viacom said. “Regrettably, the Delaware Supreme Court refused to review the obviously incorrect decision of the accountants in this manner. We are considering our next steps.”

A team led by Sidley & Austin partner David Schiffman represented the stockholders. The firm said that they secured a total of $533 million in “earn out” payments for the Harmonix stockholders.

More Biz

  • Sub Pop Cofounder Jonathan Poneman Talks

    Sub Pop Cofounder Jonathan Poneman Talks Legacy and Lifetime Achievement Award

    In its early days, Sub Pop seemed like one of the last record companies on earth that would survive, let alone remain vital, for more than 30 years. They brought Nirvana and Soundgarden to the world, but seemed destined to be forever typecast as the ground zero of grunge, a rock genre that shook the [...]

  • Contract Placeholder Business WGA ATA Agent

    Writers Guild Rejects ATA Offer, Seeks Individual Talks With 9 Top Agencies

    The Writers Guild of America has called off negotiations with the Association of Talent Agents in favor of pursuing individual talks with nine top agencies as it enforces a total ban on packaging fees and affiliated production for agents representing guild members. WGA West president David Goodman announced the guild’s decision to reject the ATA’s [...]

  • Harry Ponsonby and Diane Kamin

    Hollywood’s National Research Group Expands Into Asia (EXCLUSIVE)

    Media research and testing firm National Research Group is this month to open its first office in Asia. The new unit will be located in Singapore and eventually operate across a widely-defined version of Asia Pacific that includes mainland China, Japan and India. Best known for its behind the scenes role in pre-release testing of [...]

  • Jim Gosnell

    APA Claims Texts Were Fabricated in Lurid Sex Harassment Suit

    A former assistant at APA filed a lurid sexual harassment complaint on Wednesday alleging that a partner at the firm sent her graphic text messages and threatened to have her fired when she refused his advances. The assistant, identified in the suit only as Jane Doe, alleges that top management fostered a “toxic, pervasive and [...]

  • Logic Launches BobbyBoy Records as Joint

    Logic Launches BobbyBoy Records as Joint Venture With Def Jam

    Grammy-nominated rapper Logic — aka Sir Robert Bryson Hall II, aka Bobby Hall —has announced a joint venture with Def Jam Recordings for his new label, BobbyBoy Records, which was formerly known as Elysium Records. The imprint’s initial artist roster is comprised of singer-songwriter John Lindahl, Damian Lemar Hudson (featured on “Black Spiderman,” from Logic’s RIAA platinum 2017 album, “Everybody”); Big Lenbo (featured on two previous Logic albums); [...]

More From Our Brands

Access exclusive content