(Reuters) – AMC Entertainment Holdings Inc’s board has been hit with a derivative suit in New York federal court challenging the company’s handling of litigation over its $1.2 billion acquisition of Carmike Cinemas.

Investor John Lyon III sued the board members on Thursday in Manhattan after they refused his demand to independently investigate claims made in a securities fraud class action over the deal.

“Because the Board has constructively, wrongfully refused the Litigation Demand, Plaintiff now commences this derivative action in order to protect the Company, rectify the wrongs detailed herein, and hold the wrongdoers accountable for the damages they caused AMC,” Lyon said.

Lyon’s lead attorney, Melinda Nicholson of Kahn Swick & Foti, did not immediately respond to a request for comment. Neither did the Weil Gotshal attorneys representing AMC and its board in the class action.

AMC announced in March 2016 that it would purchase Carmike, making the combined company the largest U.S theater chain. The purchase price was later upped to roughly $1.2 billion.

The deal closed after AMC agreed to the Department of Justice’s requirement that it divest theaters in certain markets.

Lyon’s derivative suit came after the movie theater chain was sued in 2018 for allegedly failing to disclose information about Carmike’s financial struggles.

The 2018 suit survived a motion to dismiss and was certified as a class action in March.

AMC and its board have denied wrongdoing.

Citing Manhattan-based U.S. District Judge Alison Nathan’s opinion in the class action, Lyon said the court found a “strong inference” that AMC CEO Adam Aron knowingly made false statements and materially omitted information about Carmike’s underinvestment in its venues.

Those “damning” findings led him to ask AMC’s board in July 2020 to discipline and sue the people responsible for the alleged misconduct, according to Thursday’s complaint.

The board rejected the demand in September 2020, arguing that following through on it could hurt AMC’s defense of the class action, the complaint says.

The case is John R. Lyon III v. Adam M. Aron et al, U.S. District Court for the Southern District of New York, No. 1:21-cv-07940.

For Lyon: Melinda Nicholson of Kahn Swick & Foti

Counsel information for the AMC board was not immediately known.

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