Charter Looks to Dismiss Fox News' Fraud Claim

Fox News claims that Charter has manipulated its acquisition of Time Warner Cable to underpay license fees.
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On Wednesday, Charter Communications and Time Warner Cable told a New York judge that Fox News is attempting to extract "tens of millions of dollars of subscription fees to which it is not entitled as a matter of contract, industry practice, or common sense."

The parties are in court trying to figure out, after Charter and TWC closed their $71.4 billion merger in May, which cable company's agreement governs Spectrum's carriage of Fox News. (Univision and Showtime have filed similar suits on the same subject.)

Charter was paying more per subscriber than TWC was, so naturally, Charter now wants to pay Fox News under the TWC deal. According to Fox News, however, Charter can't claim that TWC is the surviving party to contracts after previously telling regulators and shareholders it was acquiring TWC.

As Fox News' complaint puts it, "Charter’s position that TWC acquired and now manages Charter is a ruse, acting as a fraud on Plaintiff and on the public generally — a point no more clearly seen than that, since its acquisition of TWC, Charter has reportedly decided to vacate the Time Warner Center and move all operations to Charter’s offices in Connecticut."

Fox News wants a judge to declare that the Charter agreements, not the terminated TWC deals, are the operative ones. 

Charter has other ideas and is prepared to bring to move forward on the weighing of contracts. 

"Plaintiff maintains that the deal that should set the terms for the combined New Charter is the higher-rate deal that applied to a smaller operator, with fewer customers, rather than the lower-rate deal that applied to a bigger operator, with more customers," states a court brief. "This is nonsensical and contrary to the fundamental economic logic of the cable industry."

For now, however, Charter's attorneys at Paul, Weiss (the same firm hired by Fox News to conduct an investigation of Roger Ailes) are letting the contract claims pass in favor of an effort to dismiss as "duplicative" the non-contract claims like fraud and breach of an implied covenant of good faith and fair dealing.

"This is purely a contractual dispute over which agreement governs the relationship," states a motion to dismiss.

Charter also is arguing against the idea of fraud during negotiation of the Fox News agreement.

Charter says the fraud claim "is nothing more than a claim that New Charter never intended to follow its contracts," and with respect to what was said during carriage fee talks about the cable company's future plans to become a larger company, Charter tells the judge that statements of future intent are not actionable under New York law. 

As for "speculation" of what was said to regulators about the merger, Charter points out that any representations to authorities like the FCC came a year after its agreement with Fox News. Plus, Charter believes such allegations are misplaced.

"In essence, Plaintiff contends that had Defendants said something different to their regulators, it may have prompted some unspecified action by Fox News, which in turn may have led to some unspecified result," states Charter's motion. "The Amended Complaint, however, does not — and in fact cannot — allege with adequate specificity how Fox News’ decision not to make submissions led to any actionable harm."

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