A PYMNTS Company

US: China’s LeEco motion to dismiss fraud suit dismissed

 |  July 30, 2018

LeEco, once considered the “Netflix of China,” must face a fraud lawsuit over its failed US$2 billion merger with American smart TV manufacturer Vizio. A California federal judge largely rejected LeEco’s motion to dismiss.

Vizio alleges that when the two companies agreed to merge in the middle of 2016, LeEco was in a worse financial state than it was letting on publicly. The lawsuit in California further contends that LeEco needed the merger to create the public impression of its own financial health, and even further, that the merger was used as part of a “secret plan” to obtain information about Vizio’s large corporate clients.

The merger agreement called for a US$100 million termination fee, but allegedly LeEco attempted to get this down to US$40 million by coming to a second deal with Vizio—called the “Framework Agreement”—in which the parties agreed to instead pursue a joint venture.

LeEco argued that the second agreement had a section wherein Vizio released claims against LeEco, but US District Court Judge David Carter wrote that “Vizio alleges with specificity that the Framework Agreement was executed under fraud on the basis that specific, false promises were made on behalf of Defendants to secure the execution of the Framework Agreement.”

Here is the full decision. 

Full Content: Hollywood Reporter

Want more news? Subscribe to CPI’s free daily newsletter for more headlines and updates on antitrust developments around the world.