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Blockbuster Named in Pending Class Action Suit

10 Nov, 2005 By: Erik Gruenwedel

A Hartford, Conn.-based law firm specializing in class action lawsuits, is seeking similar status in a shareholder lawsuit filed against Blockbuster Inc. in the U.S. District Court for the Northern District of Texas.

The suit, filed by Schatz & Nobel, P.C., alleges Dallas-based Big Blue violated federal securities laws by not properly disclosing its inability to absorb a special dividend to former parent Viacom that resulted in $1.1 billion in debt to Blockbuster.

The suit, which seeks unspecified damages, alleges Blockbuster was “wholly unprepared” to create the technological infrastructure required to integrate its in-store and online rentals operations in addition to transforming into a separate entity.

The complaint says Blockbuster's core in-store operations are not able to generate sufficient cash flow and that the company has abandoned its 2005 guidance, among other charges.

The suit seeks shareholders who purchased Blockbuster stock between Sept. 8, 2004 and Aug. 9, 2005.

A Blockbuster spokesperson was not immediately available for comment.

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