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The Department of Justice sided with Paramount on Tuesday, arguing that a coalition of 12 states should be forced to post a bond as the price of continuing to block the Warner Bros. merger.
Paramount has argued that
it stands to lose at least $1.88 billion due to the delay resulting from the states’ antitrust lawsuit. The company has asked Judge Araceli Martinez-Olguin to require the states to post a bond in that amount, which would compensate the company in the event that it prevails at trial.
The DOJ is not a party to the state litigation, but filed a “statement of interest” in the case on Tuesday. The document argues that the states must post a “proper bond” because they are acting in the role of “private persons” in enforcing federal antitrust law.
The DOJ approved the Paramount-Warner Bros. merger in June and issued an unusual and lengthy statement explaining its support for the transaction. The 12-state coalition, led by California, reached the opposite conclusion in July, filing suit to prevent the merger from reducing competition in the theatrical and basic cable markets. A trial is scheduled to begin on March 2.
Paramount voluntarily agreed not to close the deal until after a trial is held back in July. At the time, Martinez-Olguin had issued a 28-day temporary restraining order, but had not imposed an injunction that would block the deal indefinitely.
Rather than fight an injunction motion — and potentially be forced to appeal an adverse ruling — Paramount chose instead to concede the issue and concentrate its trial defense. But the company had a change of heart in August, arguing that the states should be forced to post the bond or, in the alternative, allow the merger to proceed.
In opposing Paramount’s request, the states noted that courts routinely waive the bond requirement when states are suing to enforce public interests. Martinez-Olguin waived the requirement to post a bond when she granted the temporary restraining order.
The states also argued that requiring states to post a bond would gut their enforcement power. They also argued that Paramount had given no reason why the court should rewrite a stipulation that Paramount had voluntarily acceded to less than a month earlier.
“Permitting Paramount to enter the stipulation and then rewrite it almost immediately would allow it to unfairly renege on its commitments,” the states argued. “Paramount has failed to show any change in circumstances that would justify its attempt now to rewrite the terms of the stipulation it submitted to the Court.”
A hearing on the bond request is set for Sept. 24.
Paramount has separately challenged whether the states have authority to enforce federal antitrust law at all. In a filing last week, the company suggested that one of its defenses will be that such authority “is vested in the U.S. Department of Justice.”
