Delaware Judge Rejects Paramount Bid to Fast-Track Lawsuit Over Warner Bros–Netflix Deal

Vice Chancellor Morgan Zurn of the Delaware Chancery Court ruled on Thursday that Paramount failed to show it would suffer immediate and irreparable harm if the case were not fast-tracked, according to Reuters. The judge said the alleged shortcomings in Warner Bros’ disclosures about its cable television business did not meet the legal threshold for urgent court intervention, particularly because those assets are not part of Netflix’s proposed transaction.

Zurn also noted that Paramount has other avenues to obtain the financial information it is seeking, even as she acknowledged that Paramount’s unsuccessful tender offer “opens the door wider” for the Netflix deal to move ahead, per Reuters. As a result, the court declined to intervene on an expedited basis.

Paramount responded by saying it would continue pressing Warner Bros for greater transparency. In a statement, the company said, “Warner Bros Discovery shareholders should ask why their board is working so hard to hide this information,” according to Reuters.

Warner Bros, for its part, welcomed the ruling and criticized the lawsuit. In a statement cited by Reuters, the company described the case as “yet another unserious attempt to distract and the judge saw right through it.” Netflix did not immediately respond to requests for comment.

The lawsuit is part of a broader campaign by David Ellison-led Paramount to increase pressure on Warner Bros, which operates major film and television studios, owns HBO, and controls a vast content library that includes the Harry Potter and DC Comics franchises, according to Reuters. Paramount asked the court to speed up the case so Warner Bros shareholders could weigh its $30-per-share all-cash tender offer against Netflix’s lower cash-and-stock proposal before Paramount’s bid expires on January 21.

Related: Netflix Prepares All-Cash Bid for Warner Bros Discovery Studios and Streaming Assets

Warner Bros argued that Paramount’s request was premature, saying it intends to release the disputed financial disclosures when it formally seeks shareholder approval for the Netflix transaction, per Reuters. No shareholder vote has yet been scheduled, and Paramount is expected to extend its tender offer after Warner Bros rejected its takeover proposal on January 7.

During Thursday’s hearing, Warner Bros’ lawyer Ryan McLeod pushed back against Paramount’s claims, saying, “This movie is still being shot, and it makes no sense for the court to shut down the set and make decisions based on incomplete facts,” according to Reuters.

Beyond the courtroom fight, Paramount is also pursuing a governance strategy. Earlier this week, it said it plans to nominate directors to Warner Bros’ board in an effort to force negotiations, Reuters reported. Paramount has also proposed changes to Warner Bros’ bylaws that would require shareholder approval to separate the company’s cable television business, including networks such as CNN and Food Network.

Paramount’s own portfolio includes CBS, MTV, Nickelodeon and Paramount Pictures, per Reuters.

At the hearing, Paramount’s lawyer Michael Barlow accused Warner Bros’ board of ignoring the tender offer to clear the way for the Netflix deal. “It’s the kind of inequitable thumb on the scale that Delaware law rejects,” he said, according to Reuters.

Warner Bros countered that it does not believe it is withholding any material information and argued that the sense of urgency was created by Paramount itself. The company said the court should wait until after the proxy materials for what it called the “premium, value-maximizing” Netflix merger are filed.

“The auction ended last year, and Paramount lost,” McLeod said, per Reuters. He also told the court that Paramount would likely need to extend its tender offer “well into next year,” noting that finalizing a merger agreement and securing regulatory approvals could take 12 to 18 months.