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In 2015, Bloomberg LLP received an email from The Guardian inquiring why Bloomberg reporters in Africa weren’t being paid their full salaries. An email mused whether Michael Bloomberg would see the “irony” of this situation in light of his philanthropic work in Africa. Soon thereafter, as the Nigerian government imposed limitations on the ability to exchange its currency, Bloomberg LLP opted out of a deal with Optima Media Group, its former partner in Africa. Then came a $60 million lawsuit alleging that the contract was terminated improperly. This week, a federal judge ruled Bloomberg must face Optima’s claims, though the business news giant has at least limited its monetary liability in the matter.
The relationship between the two companies began after Bloomberg began looking for an African media company that could produce local business television programming. Optima, which produced content such as Nigerian Idol, Nigerian X-Factor, the Olympic Games and the FIFA World Cup, was picked. In 2012, the parties entered into a content-sharing and licensing agreement.
The deal was supposed to last five years, but Bloomberg could terminate for several specified reasons, including insolvency or if representations, warranties or covenants no longer remained valid.
Thereafter, Optima built a studio in Lagos to serve its new relationship with Bloomberg but ran into some cash-flow problems due to a new policy from the Nigerian Central Bank requiring approval of foreign currency exchanges. Under its deal with Bloomberg, Optima was supposed to be paying in U.S. dollars.
Then came the Guardian inquiry, the termination and, of course, the lawsuit.
In response, Bloomberg argues it was justified to terminate.
U.S. District Court Judge Alison Nathan doesn’t see clear justification at the moment.
First, Bloomberg argues that Optima had indeed become insolvent thanks to the currency restrictions imposed by the Nigerian government.
“Although the complaint does acknowledge that Nigerian currency restrictions sometimes caused payments from BTVA Nigeria and BTVA UK to be delayed, the complaint specifically mentions delays that occurred in 2013 and beginning in the fall of 2014. However, it is not clear whether Optima, or the BTVA entities, was insolvent at the time of termination. Indeed, the complaint states that at the May 6, 2015 meeting with Bloomberg representatives, Optima presented plans to settle any ‘obligations impacted by the foreign-exchange restrictions,’ described additional financing it had received, and ‘confirmed that its existing credit facilities provided more than enough capital to clear BTVA UK’s production-payments backlog that had resulted from the foreign-exchange crisis, and that the additional facilities would be more than adequate to fund the Project in Nigeria for years into the future,'” she writes.
Next, Bloomberg argues that representations at the time of the deal execution were no longer true. Specifically, Bloomberg points to Optima’s promise it would fulfill its production obligations and obtain all necessary regulatory approvals.
The judge doesn’t see enough from the face of the complaint to grant a dismissal on this basis either.
Nathan writes, “Although the complaint acknowledges that the BTVA entities sometimes had delays in remitting salary payments, it is not clear that such a delay would render Optima’s representations about its ability to administer and manage the Channel Window false. Indeed, the Agreement does not expressly state that Optima’s obligations included paying staff, and there is no allegation in the complaint that the delayed payments harmed the production, administration, or management of the Channel Window by, for example, leading to the creation of poor-quality content, or causing production delays or work stoppages.”
Bloomberg also is trying to argue that Optima had failed to allege adequate performance insofar as staffers and contractors were not paid and content was produced after a deadline. The judge says she can’t conclude such inadequacies were material at this point.
Optima survives on its claim that Bloomberg breached contract. Elsewhere in the decision, the judge is at least open to the idea that Bloomberg also breached the implied covenant of good faith and fair dealing. (See full decision below.)
Bloomberg does, though, win a key victory of its own.
The deal with Optima included a clause that limited liability for any contract breach by taking consequential damages off the table. Optima argued that this provision shouldn’t be enforced because of the unequal bargaining power between the parties and that Bloomberg had engaged in bad faith, willful misconduct or gross negligence.
The judge says that parties to a contract are “generally free to allocate risks and limit liability as they choose” and says it is appropriate to enforce such a provision. She adds, “Although Plaintiffs emphasize that Optima was not represented by counsel during the negotiation of the Agreement with Bloomberg, all parties to the Agreement were sophisticated business entities.”
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