The fallout from disappointing sales of the "Shrek 2" DVD continues for DreamWorks Animation SKG, which acknowledged June 2 that a law firm known for filing class-action claims filed a lawsuit on beha

(The Hollywood Reporter) -- The fallout from disappointing sales of the "Shrek 2" DVD continues for DreamWorks Animation SKG, which acknowledged June 2 that a law firm known for filing class-action claims filed a lawsuit on behalf of shareholders.

The firm, Abbey Gardy, listed DWA chief executive Jeffrey Katzenberg and board chairman Roger Enrico as defendants in the suit. It alleges that the defendants failed to disclose to shareholders quickly enough that retailers were returning massive numbers of "Shrek 2" DVDs.

DWA reported first-quarter results May 10 that were far short of Wall Street estimates, blaming the shortfall on weaker-than-expected sales of "Shrek 2." The movie, which grossed more than $914.5 million at the international boxoffice, has sold more than 35 million DVD units and could boast 40 million by year's end.

A retail hit by almost any measure, the sales were still short of DWA projections. DWA shares dropped from $36.50 to $32.05 the day the news hit and have been steadily declining since. They lost 35 cents June 2, closing at $29.75.

In the suit, DWA, Katzenberg and Enrico are accused of recklessly disregarding several facts that would affect DWA shares, including the retailer returns of the DVDs and declining sales and overshipment of them. "Issuing a series of material misrepresentations to the market" had the effect of "artificially inflating the price of DreamWorks securities," the plaintiffs say in the complaint.

"We believe the suit is completely without merit, and we intend to defend ourselves vigorously," DWA spokesman Bob Feldman said.