The lawsuit that Jeff Smulyan’s JS Acquisition filed against former financial partner Alden Global Capital claims that Alden bailed out of their deal to take Emmis Communications private because radio stock prices had dropped. But Smulyan claims breach of contract by Alden and wants the vulture capital firm to be ordered to pay damages.

The suit that JS Acquisition filed in an Indiana state court notes that prices of other publicly traded radio companies fell from the time Alden and JS Acquisition signed their deal to bid to take Emmis private on May 24th to when opposition to the buyout terms was announced by a group of preferred stock holders on July 9th. The buyout partnership had been announced in April, but the lawsuit cites May 24th as the date JS Acquisition and Alden formalized the financial terms of their agreement. But while radio stocks had gone down, the lawsuit states that “This decline in the value of other publicly traded radio companies did not give Alden the right to escape its obligations to fund the Going Private Transaction under the [May 24th agreement].”

How much had radio stocks plummeted in that time frame? According to RBR-TVBR’s report of Wall Street activity on Friday, May 21 compared to the closing prices on Friday, July 9th the drop was significant. Entercom went from $12.19 to $9.07. Cumulus Media went from $4.21 to $2.75. Radio One dropped from $3.96 to $1.31. Beasley went from $5.96 to $3.79. Emmis, with the buyout pending, moved up during the period from $2.14 to $2.27, edgng closer to the proposed buyout price of $2.40.

Alden’s exit from the deal was publicly disclosed on August 30th. With the buyout deal delayed, Emmis had already seen its stock price go down, but it dropped 31 cents that day to $1.71.

The JS Acquisition lawsuit against Alden claims that the terms of the deal actually improved for Alden under the renegotiation and that Alden was obligated to go to closing. The suit is seeking as-yet-unspecified damages for breach of contract.

A spokesman for Alden told RBR-TVBR that the firm would not comment on the lawsuit.

RBR-TVBR observation: This will no doubt be a long court battle – and look for Emmis to file its own lawsuit against Alden soon. Lots of lawyers will get paid fighting this out, but that won’t help Emmis shareholders who are now holding stock that is trading at less than half of the price in the abandoned going private buyout.