2:18pm PT by Eriq Gardner
Charter Preparing to Claim Fox News Breached Carriage Deal
The legal fight over Charter Communications' television carriage contracts is expanding and will soon involve deals made by other cable and satellite companies. Charter has told a New York judge about its intention to sue Fox News over the "most favored nations" provision of its distribution agreement.
Charter is currently facing separate lawsuits from Fox News, Univision and Showtime Networks, each asserting that the cable giant has misrepresented its $71.4 billion merger with Time Warner Cable to pay lesser license fees.
Fox News has asserted breach of contract and fraud in the way Charter told regulators and shareholders of being the acquiring company only to hold up TWC's contracts as surviving. Charter looks to dismiss Fox News' fraud claim and is arguing that it is customary for a bigger operator, with more customers, to pay lower rates. On Monday, the parties appeared before the judge to argue the dismissal motion as well as talk about a developing discovery fight.
In the midst of this, Charter is signaling a counterclaim.
"The agreements between TWC or Charter and Fox News each contain a clause that is known as a 'Most Favored Nations' or 'MFN' clause," states Charter court papers filed on Friday. "While the specific terms of each agreement are unique, in general these clauses provide that if Fox News offers another cable company more favorable terms, including lower rates than those that are provided for in the agreements at issue here, Fox News is then obligated to offer those same rates to TWC or Charter. Based on publicly available information, and depending upon which agreement is determined to govern the relationship between New Charter and Fox News, Defendants believe that they are entitled to such an offer, and thus intend to file a counterclaim asserting a breach of the MFN clause."
Charter is pushing Fox News for more information about the impact of MFN clauses in its agreements.
Charter also is demanding discovery from Showtime on economic terms with other carriers. Neither Fox News nor Showtime wants to give Charter information on arrangements with other distributors.
As for Univision, its own dispute with Charter has reached such an impasse that on Friday, the Spanish broadcaster said it would begin to inform Charter's customers that they may lose access to Univision.