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J2 Deal Sours as Parties File Suit

J2 Deal Sours as Parties File Suit

By AMANDA BRONSTAD

Staff Reporter

The board of Los Angeles-based J2 Communications Inc., embroiled in a bitter dispute over a deal for the sale of the company, agreed at a special shareholder meeting held Dec. 6 to a one-week moratorium on litigation, though the prospect of a settlement was dim.

The deal between J2’s management and a shareholder group seeking to buy the business, whose primary asset is the National Lampoon brand, dissolved into litigation in November as the two sides traded charges that the other had tried to sabotage the March 5 deal

The first legal salvo in the dispute was fired by members of the group set to buy the company, led by J2 board member Daniel Laikin and shareholder Paul Skjodt, who filed suit against the company in Los Angeles Superior Court Nov. 16 alleging fraud and breach of contract

The suit, which put the acquisition on hold, came after Laikin and Skjodt found the company was in danger of being de-listed because it had not held an annual shareholder meeting in two years

“They’re disturbed and outraged that the current management would place the company’s Nasdaq listing in peril over something as simple and easy as an annual meeting,” said their lawyer, John Kirkland, of Greenberg Traurig LLP’s Los Angeles office

James Jimirro, J2’s chief executive, said the company did not have an annual shareholder meeting because it planned to hold it after the acquisition was closed. The lawsuit filed by Laikin and Skjodt, he said, is frivolous and over “piddly things.”

“Those are smokescreens,” he said. “Our lawsuit is very serious. Securities fraud is serious stuff.”

According to filings at the Securities and Exchange Commission, seven additional shareholders joined the Laikin and Skjodt group National Lampoon Acquisition Group LLC and gained 51.6 percent ownership of the company

That prompted Jimirro to file suit on Dec. 3 in U.S. District Court in Los Angeles charging that a number of share purchases were made by friends, family and affiliates of Laikin and Skjodt facts he claimed were not disclosed in SEC documents

“You’re not allowed to form a group to take over a company without disclosing these things are affiliated with each other,” Jimirro said

Kirkland said Laikin and Skjodt did not attempt to defraud the company, saying many of the 24 defendants named in Jimirro’s suit have no affiliation with either shareholder

At the time the deal was struck, J2’s shares were trading at $14, close to the 52-week high of $15. Last week they were trading below $5.

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