AMC Sues Insurers Over APE Dispute as Lawyers Seek $20 Million

AMC Entertainment Holdings Inc. sued nearly 20 insurance companies Friday, claiming they’re breaching its liability policies by refusing to cover the cost of a major investor lawsuit the theater operator plans to settle for more than $100 million.

The lawsuit in Delaware’s Superior Court came the same day AMC disclosed smaller quarterly losses than expected, an announcement said to reflect the film industry’s robust recovery from the Covid-19 pandemic. It also followed hours after lawyers leading the shareholder case asked for $20 million in legal fees as part of the proposed settlement. The request was posted to AMC’s investor website late Thursday and to the case docket Friday.

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“These claims fall squarely within defendants’ coverage obligations,” meaning they’re “obligated to, among other things, pay 100% of the defense and settlement costs,” AMC said in its 35-page complaint against 17 liability insurers, including XL Specialty Insurance Co., Continental Casualty Co., and Great American Insurance Co.

XL, a subsidiary of French multinational Axa SA, didn’t immediately respond to a request for comment Friday. Neither did Continental Casualty parent CNA Financial Corp. or American Financial Group Inc., which owns Great American.

The new lawsuit stems from AMC’s blockbuster dispute in Delaware’s Chancery Court with a pension fund and two other shareholders who challenged its plan to convert the APE preferred units into common stock. The move would significantly dilute the retail investors whose “meme stock” rally rescued the company from the brink of a pandemic-related bankruptcy.

Each APE unit represents 1/100th of a preferred share theoretically worth 100 class A shares, so they’re supposed to be equivalent to common stock. But they’ve tended to trade at a steep discount due to uncertainty about whether the conversion would ever be authorized. The gap has fluctuated drastically in recent weeks based on developments in the court case.

The settlement—worth more than $100 million at current trading prices, according to recent court filings—would resolve claims that the APE conversion reflects a complex corporate engineering scheme aimed at unfairly sidelining ordinary shareholders. The deal would give each owner of common stock an additional share for every 7.5 they hold.

Vice Chancellor Morgan T. Zurn, who has received a tidal wave of stockholder letters opposing the agreement, recently scheduled a June 29 hearing to evaluate its fairness. She has said she’s committed to issuing a full written opinion approving or rejecting the settlement, a ruling that would likely come by the end of September.

AMC is represented by Berger Harris LLP and Cohen Ziffer Frenchman & McKenna LLP in the insurance case, along with Richards, Layton & Finger PA and Weil, Gotshal & Manges LLP in the shareholder case. Bernstein Litowitz Berger & Grossmann LLP, Grant & Eisenhofer PA, Fields Kupka & Shukurov LLP, and Saxena White PA are counsel for the investors.

The cases are AMC Ent. Holdings Inc. v. XL Spec. Ins. Co., Del. Super. Ct., No. N23C-05-045, complaint filed 5/5/23 and In re AMC Ent. Holdings Inc. Stockholder Litig., Del. Ch., No. 2023-0215, motion for settlement approval filed 5/4/23.