8:26am PT by Eriq Gardner
Univision Files Lawsuit Against Charter Over License Fees After TWC Merger
In a lawsuit filed on Friday in New York Supreme Court, Univision alleges that Charter Communications is using its acquisition of Time Warner Cable to impose below market license fees for the Spanish-language broadcaster.
According to the complaint, after Charter closed its $71.4 billion merger in May, it argued that TWC was managing the cable systems. States Univision, "But everyone knows that is simply not true: the longstanding CEO and the senior executive team of Charter, as well as its pre-existing board of directors, now in fact manage and control all such cable systems, and virtually the entire TWC leadership team has departed."
This is important because the licensing agreement between Univision and Charter was set to expire on June 30, according to the lawsuit, while the deal between Univision and TWC has a term period that runs through June 2022. Thus, whether the two companies will be negotiating new fees is at stake.
Univision alleges that Charter is using the merger "as a pretext to unilaterally impose license fees that are dramatically below current market license fees," which the Spanish-language media giant says can't happen by the terms of a contract it says "contained a heavily-negotiated provision concerning corporate acquisitions that governs the precise situation here: if Charter or any of its Affiliated Companies acquired the distribution systems of another distributor, the purchased distributor would remain subject to the operative agreement between Univision and that other distributor, but only until he end of the calendar year in which the acquisition occurred. After that time, the Charter Agreement would govern the acquired systems."
Many of the statements that Charter has made about its management and leadership over TWC are now being cited by Univision.
After Univision attempted negotiations in May, Charter "responded with stalling, obfuscation, and refusal," states the complaint. After Univision gave Charter a six-month extension after the June 30 expiration as an alleged act of good faith so that its broadcasting didn't go black on Charter's network, the defendant is said to have announced that "distribution of the Univision services shall be pursuant to the terms of the TWC Agreement.”
Univision is now seeking an order declaring that the Charter, not the TWC agreement, is the one that governs, plus damages for a claimed breach of contract and breach of the covenant of good faith and fair dealing. Univision is repped by attorneys at Weil, Gotshal.
A statement from Charter reads, “We have a long-term contract with Univision and we expect them to honor it.”