Penthouse Asks Judge to Dismiss Claims Over AFF Venture

LOS ANGELES — Penthouse Media Group attorneys are seeking dismissal of a case filed by Broadstream Capital Partners, which alleged the adult publisher and licensor breached a deal to acquire Various Inc. as a joint venture.

Penthouse purchased Various in a cash-and-stock deal for $500 million last December. Various owns and operates and dozens of other social-networking sites.

In its suit, originally filed in Los Angeles Superior Court in December and moved to U.S. District Court in February, Broadstream alleged that Penthouse committed breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty and constructive fraud.

Penthouse filed a motion last week to dismiss four of the five counts, and said it “intends to file a motion for summary judgment respecting [Broadstream’s] first purported claim for breach of contract after taking discovery.”

In a filing obtained by XBIZ on Monday, Penthouse hinted that it would challenge the breach of contract complaint by focusing on the nondisclosure agreement portion of the original deal, claiming that it is unenforceable.

So far, attorneys for both sides have made two attempts through telephonic discussions to try to resolve the case, with the latest held two weeks ago after Broadstream amended its original complaint.

Broadstream in the suit asserted that during the bidding process, Broadstream “learned that Penthouse directly contacted Various to put in a separate bid,” and “ultimately submitted a bid that was higher than the offer from Broadstream and converted this business opportunity from an opportunity for the joint venture to an opportunity for Penthouse alone.”

The effective date of the agreement as listed on the agreement attached as an exhibit to the complaint is Dec. 20, 2006. Penthouse publicly announced its acquisition of Various on Dec. 12, 2007.

Broadstream, in its amended complaint, said that Penthouse CEO Marc Bell at one point denied that his company entered into a contract with Broadstream, “claiming instead that the agreement was with one of Bell’s other companies.”

Broadstream said in each of its four claims that the damages would be “believed to be in excess of $20 million.”

Both parties are slated to face Judge Valerie Baker Fairbank on the motions to dismiss when they meet at U.S. District Court in Los Angeles on May 19.

Attorneys for both Penthouse and Broadstream were unavailable for comment at post time.