Fox

Plaintiff brought a class action on behalf of the holders of unsecured debentures issued by Metro-Goldwyn-Mayer, Inc. (MGM), the predecessor of defendants MGM Grand Hotels, Inc. (Hotels) and Metro-Goldwyn-Mayer Film Company (Film Co.). In 1980, several years after the debentures were issued, MGM decided to divide its business into two separate corporations—one to operate the hotel business and one to operate the business of producing films. Pursuant to that decision, MGM transferred all of its assets involved in the film business to a new corporation (Film Co.), in exchange for all of the stock in that new corporation. MGM then, having changed its corporate name to MGM Grand Hotels, Inc. (Hotels), distributed the Film Co. stock to its shareholders in proportion to those shareholders’ proportionate interest in MGM.

The theory of the complaint is that that series of transactions resulted in a decline of the market value of the debentures, since it left Hotels with only about 50 percent of its former assets and the debentures were no obligations of Film Co. The complaint is in four causes of action: the first alleging fraud; the second a fraudulent transfer; the third for…