As Alden Global Capital seeks to have a court in New York block Emmis Communications from helping CEO Jeff Smulyan sue Alden the main fight is taking place in a federal court in Indiana. That’s where Smulyan’s JS Acquisition (JSA) sued Alden for walking away from their joint effort to take Emmis private.
Smulyan’s JSA says it has suffered financial losses from Alden’s exit, both its costs associated with the effort to buy out all other Emmis shareholders, but also ongoing losses from JSA not being the principal owner of Emmis.
Alden, in response, notes that JSA claims to have suffered damages “in excess of $75,000, but denies that JSA suffered any, or is entitled to recover any, damages by virtue of its claims.” ($75K is just the minimum for the federal lawsuit, but JSA is seeking much more in damages.)
The dispute over the facts of what happened really comes down to the final days before the deal disintegrated. JSA claims that Alden had agreed to have JSA take the lead role in negotiating a settlement with a group of preferred shareholders who had been blocking the buyout until they got better terms. Alden denies that it agreed to let JSA take the lead role. But it does admit that discussions between JSA, Alden and the preferred holders did result in a proposal that actually improved Alden’s financial position. That had been revealed by RBR-TVBR last September.
According to the next seven paragraphs of the JSA lawsuit, the preferred holders then agreed to a deal, Alden indicated its acceptance, the agreement improved Alden’s position by $3.1 million, Alden twice confirmed in writing that it was onboard, JSA (“with Alden’s knowledge”) paid the preferred holders $100K for legal fees and that all was in readiness for closing the transaction to take Emmis private. Then, according to JSA, Alden wanted to renegotiate the $2.40 per share price to be paid to common shareholders. “This was the first time Alden raised any concerns over the price offered for the Emmis Class A Common Stock,” JSA’s lawsuit stated.
For each of those paragraphs, the legal response to the suit was “Alden denies the allegations contained in paragraph” [19-25].
“Then, on August 24, 2010, Randy Smith, Alden’s controlling principal, stated to JSA representatives Ken Moelis and John Momtazee that a recent drop in asset values in the radio industry in general made the Going Private Transaction unattractive to Alden,” said the JSA lawsuit in paragraph 27. “Alden denies the allegations contained in paragraph 27” was the response.
Smulyan’s JSA accuses Alden of breach of contract and demands a jury trial and unspecified damages.
Alden, in response, denies that any contract was ever breached because no definitive deal was ever struck with the preferred holders, so the conditions for taking Emmis private were never met. It wants the court to rule in its favor and against JSA on each claim and for its legal costs to be paid by JSA.
After the Alden response was filed this month, Federal Magistrate Mark J. Dinsmore set a pretrial conference for March 30, with the parties to file scheduling proposals for the case no later than a week prior to that conference.
RBR-TVBR observation: This court battle could drag on long enough for the Emmis stock price to get back to $2.40! We guarantee this outcome: The lawyers will do well.