Charter Argues It Couldn't Have Breached Univision Contract

Charter CEO Tom Rutledge - Getty P 2016
Courtesy of Getty Images

Charter Communications is facing three lawsuits brought by Univision, Fox News and Showtime Networks where a game of "A or B" is being played. Either the three networks are being carried on Charter's cable systems under (a) the terms of an agreement with Charter or (b) the terms of an agreement with Time Warner Cable. Regardless of the answer, Charter wants to ensure it's not held liable for breaching contract and made its first move in court with this goal in mind Friday.

The disputes emanate from Charter's $71.4 billion acquisition of Time Warner Cable. The parties involved don't see eye to eye on the impact of the merger on their contracts. Univision claims that TWC is being held up as the entity taking over Charter to manage the legacy cable systems. The reason, asserts the Spanish-language broadcaster, is that the TWC agreement runs through June 2022 whereas the old Charter agreement with Univision expired in June. If the deal needs to be renegotiated, that presumably means Charter has to pay today's market rate and hand over more money in license fees. That's why Charter is pretending it has been acquired by TWC, continues Univision, when statements to regulators and shareholders about the merged company's management and leadership support the opposite conclusion.

Charter now has a response.

"In response to Univision’s declaratory judgment claim (which we do not seek to dismiss by this motion), Defendants will ultimately show that their position that the Time Warner Cable contract applies to all of New Charter’s cable systems is consistent with the plain language of the Time Warner Cable contract and the structure and organization of New Charter," states Charter in its latest court papers. "This motion, however, deals with a more limited matter: it seeks dismissal of several of Univision’s contract claims that fail because they are based on an expired contract." 

According to Charter, even if the TWC agreement isn't operative and the wrong licensing rate is being applied, that can't support a breach-of-contract claim.

"There is no dispute that, for the legacy Charter systems, Univision received payments as agreed under the Charter contract until its expiration on June 30, 2016," argues Charter's lawyers at Kirkland & Ellis. "It is a matter of basic contract law that a plaintiff cannot state a breach of contract claim for an expired contract."

And Charter adds that it can't be punished for refusing to "acknowledge" they are not permitting to apply the TWC agreement.

"Univision is unable to point to any provision of the Charter contract that would contractually entitle Univision to negotiate a new contract, much less one at a self-described 'market rate,' " continues Charter's court papers.

Depending on how quickly this dispute gets adjudicated, the situation could really blow up by the end of the year. That's because Univision contends that it can terminate the TWC deal on Dec. 31. Meaning, there would be no (a) or (b) and that the continued existence of Univision on New Charter — or "Spectrum" — could constitute a potential copyright breach. Charter acknowledges the possibility, telling the judge, "If Univision does not want to accept payments pursuant to that contract after year-end, then it can terminate the signal on Defendants’ cable systems at that point. Regardless, that disagreement will be resolved in connection with Univision’s declaratory judgment claim (as well as the declaratory judgment counterclaim that Defendants anticipate filing in due course). At this point, Univision has at best alleged only that Defendants intend to breach the now-expired Charter agreement in the future."