Legal Fight Over FriendFinder Acquisition Apparently Settled
Broadstream Capital, XBIZ has learned, filed a motion to dismiss its long-running legal battle just one week before the two companies were slated to begin a jury trial last month at U.S. District Court in Los Angeles.
In its original suit, Broadstream claimed damages would be “believed to be in excess of $20 million.”
When reached by XBIZ Thursday, attorneys from both sides — Jeffrey Valle representing Broadstream and Ira Rothken representing Penthouse Media Group (now known as FriendFinder Networks) — said they couldn’t comment on the dismissal of the case, citing confidentiality tenets.
Broadstream Capital Managing Partner Jim Goldfarb also told XBIZ that he would not disclose any information relative to the case.
“I believe the outcome speaks for itself,” he said.
Terms of the apparent settlement were not disclosed.
Last year, Penthouse changed its name to FriendFinder Networks, which now includes Penthouse magazine, AdultFriendFinder.com, 25 other social-networking sites and additional adult-business properties.
In December 2007, Penthouse purchased Various in a cash-and-stock deal for $500 million. Various owned and operated AdultFriendFinder.com and dozens of other social-networking sites.
In the suit, Broadstream claimed that during the bidding process for the FriendFinder properties, Penthouse contacted Various company officials to put in a separate bid from a bid it was working on with Broadstream, which said it was working on a joint venture with Penthouse.
Broadstream alleged that Penthouse committed breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty and constructive fraud.
Penthouse challenged the breach of contract complaint by focusing on the nondisclosure agreement portion of the original deal, claiming that it is unenforceable.
Broadstream asserted that during the bidding process, Broadstream “learned that Penthouse directly contacted Various to put in a separate bid,” and “ultimately submitted a bid that was higher than the offer from Broadstream and converted this business opportunity from an opportunity for the joint venture to an opportunity for Penthouse alone.”
Penthouse later charged that Broadstream induced 20 third parties to sign a three-page document that it described as a nondisclosure agreement, but which also contained a noncompete provision.
Once a party signed the nondisclosure agreement, Penthouse attorneys argued at the time, Broadstream intended to extort exorbitant fees and compensation if it ultimately decided to participate in the acquisition of Various.
They also claimed that Broadstream falsely claimed that it was a merchant bank “with significant experience investing in the adult entertainment industry.”
The trial was slated to have an array of witnesses, including several funds that received correspondence with Broadstream, Various’ Andrew Conru and Lars Mapstead. Also, Penthouse CEO Marc Bell and President Daniel Staton would have testified.
Bell did not respond to an XBIZ request for comment over the apparent settlement.