On appeal of pretrial rulings in English suit by licensor of "Jerry Springer" TV shows that seeks to prevent licensee from dissolving their contract based on alleged decline in acceptability of recent shows, English Court of Appeal, applying Dutch law, affirms trial judge's interpretation of key contract language which requires similarity of content to 1998 shows
Universal Studios International BV (Plaintiff) is a Dutch company, part of the Universal Studios Group (USG), headquartered in the United States. It is the international licensor of the TV programs, "The Jerry Springer Show" (Springer) and "Maury Povich" (Povich). Flextech Rights Ltd. (Defendant), is an English corporation. Through a "1998 Agreement", Defendant had obtained from Plaintiff the U. K. rights to broadcast many of these programs. (Since the pretrial issues addressed here are identical for both shows, the Court generally limits its discussion to Springer.)
Springer is a well known talk show named after its regular host. It mainly shows to an American audience but Plaintiff and others have licensed it for broadcasting in many countries. Defendant broadcast Springer in the U. K. from 1995 to 1998 under a series of one-year licenses. In April 1998, Plaintiff invited bids for future seasons of the show. Plaintiff wanted a "run of series" deal for Springer. Negotiations led to the 1998 Agreement.
The controversial nature of Springer created a risk of conflict between Springer's shock value and the standards set by England's Independent Television Commission (ITC). It had drawn up a TV program code. It regulates the type of material (1) which a licensee could not show at all, (2) which the licensee could show only after 9 pm, and (3) which a licensee could only show during the school day but not on school holidays (NSH).
In the ITC's opinion, there is a legitimate role for programs that cover difficult social and emotional issues, and some editions of Springer have even been educational. "There has been some public debate, however, about the exploitational aspects of the show. Springer often gets its participants from the poorer segments of American society, and invites them to parade their faults and misfortunes for public entertainment. Many are inarticulate and unable to make a proper case for themselves. Guests frequently resort to persistent verbal abuse or physical violence." [¶ 5]
The 1998 Agreement provided that the programs would remain substantially similar in form and substance to the 1997/1998 U.S. season. In a letter dated December 30, 2002, however, Defendant's solicitors wrote to Plaintiff claiming that the contents of Springer had drifted significantly downhill over the last few years, The letter alleged that this constituted a major breach of the 1998 Agreement. Defendant, therefore, was "dissolving" the 1998 Agreement as of January 1, 2003 on the basis of Article 6:245 of the Dutch Civil Code (DCC). (The parties agree that Dutch law governed the 1998 Agreement).
Plaintiff denies the validity of this dissolution, insisting that the 1998 Agreement remains in force. Therefore, it retains its rights to receive license payments due (1) with respect to programs supplied before the purported dissolution and (2) with respect to payments that fall due under the 1998 Agreement on an installment basis until the end of the series run.
In July 2004, the Court decided prior to trial that it would determine certain preliminary matters. Excepted were those issues dealing with assessing the content of the individual episodes of Springer and some other limited issues.
There are two main disputes between the parties. The first is whether, and in what respect and to what extent, Plaintiff was breaching any of its obligations under the 1998 Agreement. Assuming there were breaches, the second is whether Defendant was entitled to terminate (or, in Dutch law, to "dissolve") the 1998 Agreement. Central to the dispute is the interpretation of Clause 4(a) of the 1998 Agreement requiring that each licensed episode of Springer was to be "similar in content and overall production value to the episodes in the 1997/1998 U.S. broadcast season".
In deciding the preliminary issues, the trial Judge was to assume the truth of certain allegations set forth in Defendant's Defence. For example, this document alleged that, in the 1997/98 season out of a total of 194 new Springer episodes, about 31% had run into compliance problems. Moreover, the ITC barred plaintiff from broadcasting about 7% of the episodes because of their content (incurable by editing). On the other hand, by the 2001/2002 season, out of a total of 190 new episodes, about 93% had ITC compliance problems. In addition, the ITC banned about 22% of the episodes as incurable by editing.
The Record contains the following synopsis of "Cheaters' Bazaar," one of the milder (but ITC-restricted) examples of a Springer program. "Phil reveals that he is gay and is only sleeping with Tiffany to get close to her boyfriend Danny. Tami reveals to her boyfriend Mike that she has been prostituting herself with their mutual friend Jason in order to pay the bills. Kelly reveals that she has been cheating on her husband Mike with his best friend."
Plaintiff sued Defendant in the U.K. to enforce the 1998 Agreement. Disappointed by some of the pretrial rulings, Defendant appealed to the English Court of Appeal (Civil Division). That Court unanimously upholds the rulings of the lower court.
The principal appellate issue centers on the meaning of the words "similar in content" in Clause 4(a). Dutch law governs any disputes on this point. To a greater extent than under English law, the Dutch courts can, in principle, look to the actions of the parties and the negotiations leading up to the execution of the contract, plus the actions of the parties after the execution, as an aid to construction. In this case, the Court notes, the applicable approach is practically the same as under English law.
Plaintiff contends that compliance (or lack of same) with the ITC Code was legally irrelevant, and that the contents of the Defence schedules were inadmissible on the issue of similarity of content under Clause 4(a). Conversely, Defendant's chief claim is that the Judge was at least entitled to conclude that, if they make good at trial the facts they now allege, they show (1) that very many of the episodes of the 2001/2002 series were not "similar in content ... to the episodes in the 1997/1998 [series]", and (2) that Dutch law, therefore, entitled Defendant to dissolve the 1998 Agreement.
"Content" is a conveniently broad concept. It could include, inter alia, the format, the nature and detail of the subject-matter, the manner of presentation (e.g. prepared or impromptu, judgmental or dispassionate, academic or vulgar), the degree and nature of contribution by, and interaction between, presenter, participants, and audience, as well as the language used (sophisticated or basic, foul or polite, etc).
In determining the specific nature of content, the Court notes, appellate review is limited. "Similarity of content is, in my view, a question of fact, albeit not of primary fact; it is more a question of inference from primary facts, a "˜Jury question'... Accordingly, it is very much a question for the fact-finding tribunal, which, in this case, will ... be the judge at the final hearing. [As a result], the trial Judge's ... ultimate duty is to apply the words of the 1998 Agreement. The role of [this] court at this stage is to give as much helpful guidance as possible." [¶ 32].
"There is no question ... of Plaintiff being in breach of contract simply because of an episode, or even a large number of episodes ... of a series being untransmissible because it, or they, failed to comply with the ITC Code (or could only be shown at certain times under that Code). The risk under the 1998 Agreement lay ... with Defendant. ... to ensure compliance with regulatory provisions such as the ITC Code.'"
"Clause 8 and Rider 8 do indeed make reference to compliance with regulations such as the ITC Code, but only in order to permit Defendant to edit episodes to achieve compliance. If an episode, which would otherwise be non-compliant, could reasonably be edited so as to render it compliant, then ... Defendant could not rely on it as a non-compliant episode. ... While the extent of non-compliance in the case of many of the 2001/2002 episodes cannot be relied on per se to establish dissimilarity of content, it does not follow that the extent of such non-compliance cannot be relied on as evidence of such dissimilarity." [¶ 34].
"[Another] argument ... on behalf of Plaintiff (which is an argument which would not have been open, even in principle, if English law was applicable) was that Defendant's expressed concern in the negotiations leading up to the 1998 Agreement was that [Springer] would become less controversial and "˜edgy', not more so. It was because of that concern that the requirement of similarity with the episodes in the 1997/1998 series was included in Clause 4(a). The fact that a provision is included in a contract because of a concern expressed by one of the parties does not by any means lead to the conclusion that it was included to deal only with that concern." [¶¶ 37, 38]
In sum, the Court of Appeal's conclusions so far are as follows. "First, a comparison by reference to the compliance, or degree of compliance, with the ITC Code is admissible, and, indeed, relevant, evidence on the issue of similarity of content. The fact that an aspect of an episode goes to compliance does not in any way prevent it being within the ambit of the "˜content' of the episode, either as a matter of ordinary language or for the purposes of Clause 4(a). Further, the fact that some of the episodes of the 1997/1998 series were non-compliant does not invalidate this point, although it certainly is not irrelevant to the issue of similarity of content; on the contrary, it is a point upon which Plaintiff can properly rely."
"Secondly, the weight to be given to non-compliance, ... is very much a matter for the judge who determines the final issues between the parties. It is of questionable value for [an appellate] court to indicate at this stage ... what weight, is to be given to the issue of non-compliance with the ITC Code ..., when determining whether an episode complies with Clause 4(a), and whether DCC Article 6.245 entitled Defendant to dissolve the 1998 Agreement."
"Accordingly, it appears to me that the Judge approached the issues of infringement of Clause 4(a) and of Defendant's right to dissolve the 1998 Agreement on the correct basis as a matter of law. ..." [¶¶ 46-48].
"... [T]he hearing [below] proceeded on the basis of the assumed facts as set out in the Defence. These assumed facts are not admitted by Plaintiff. Further, they are almost certain not to be the only facts raised at the final trial, relating to the question of the similarity of content of the relevant episodes. The former aspect speaks for itself. As to the latter aspect, [an] example should suffice." [¶ 51].
"...[T]he contents of many of the episodes of the two series may have many more aspects than those contained in the brief synopses and reasons for certification contained in the schedules to the Defence. It does not appear that [the trial Judge] saw any of the episodes; unfortunately for the trial judge, it is inevitable that he will have to watch a number (probably many) of the episodes of the two series in question. He will therefore have a much fuller ... assessment of the contents of many of the episodes than is possible at this stage." [¶ 53].
"It must be necessary for the judge who determines such issues to see at least some of the episodes of the two series (although I would strongly encourage the parties to agree a sensible basis upon which the trial judge can reach a conclusion on the two ultimate issues without having to view anything like the totality of all the episodes of both series)." [¶ 57].
"In these circumstances, I would uphold the Judge's decision without reservations ... in relation to Rider 8. That renders it unnecessary to revisit the conclusions I have reached [on] the issues arising in relation to Clause 4(a). So far as those issues are concerned, I would substantially uphold the Judge's decision." [¶ 80].
Citation: Universal Studios International BV v. Flextech Rights Ltd., Case No: A3/2005/2476, [2006] E.W.C.A. Civ. 1036, 2006 WL 2133138 (Ct. of App. Civ. Div. 2006).
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