SUPREME COURT FOR THE STATE OF NEW YORK COUNTY OF NEW YORK UNIVISION COMMUNICATIONS INC., UNIVISION NETWORKS AND STUDIOS, INC., and UNIVISION LOCAL MEDIA INC., Plaintiffs, Index No.: 653568/16 I.A.S. PART: 49M JUSTICE: O. Peter Sherwood v. CHARTER COMMUNICATIONS, INC., CHARTER COMMUNICATIONS HOLDING COMPANY, LLC, and TIME WARNER CABLE ENTERPRISES LLC, Defendants. CHARTER S MEMORANDUM OF LAW IN SUPPORT OF ORDER TO SHOW CAUSE FOR PRELIMINARY INJUNCTION WITH TEMPORARY RESTRAINING ORDER Charter respectfully submits this memorandum of law in support of its request for a temporary restraining order and preliminary injunction against Univision, pursuant to CPLR 6301 and 6313, to preserve the status quo in the business relationship between the parties during the pendency of this litigation until a decision is reached on the merits. 1 Yesterday, Univision pulled the signal for all Univision programming from all Charter cable systems. These actions seek to circumvent the very litigation that Univision started, are causing immediate and irreparable harm to Charter, and deprive millions of Charter subscribers of Univision programming. Through this application and the related Order to Show Cause, Charter seeks to restore the status quo, whereby Univision continues to provide its content to Charter and its 1 Charter refers collectively to Charter Communications, Inc., Charter Communications Holding Company, LLC, Time Warner Cable Enterprises LLC, and Spectrum Management Holding Company, LLC. Univision refers collectively to Univision Communications Inc., Univision Networks and Studios, Inc., and Univision Local Media Inc. 1 of 19
customers, as it has been doing through the pendency of this litigation and for years before, until this lawsuit is resolved. 2 Univision filed this case to obtain judicial resolution of one central question: whether, as Charter maintains, Univision is bound by the terms of a programming agreement between Univision and Time Warner Cable (the TWC Agreement ) to continue to provide its content and receive payment under that agreement or, as Univision contends, there is no agreement in place between the parties because the TWC Agreement was terminated by virtue of a transaction between Time Warner Cable and Old Charter which resulted in the current, combined entity. Univision filed its complaint nearly seven months ago and in August the Court entered a scheduling order. Over the ensuing months, the parties have engaged in intense and time consuming discovery and have incurred substantial fees and costs in the process. In the meantime, Univision has continued to provide its programming content and has accepted payments from Charter based on the terms of the TWC Agreement. Rather than allow the litigation that it commenced to proceed in due course, so that this Court may decide whether the TWC Agreement governs the parties relationship, Univision has taken matters into its own hands and out of the Court s by engaging in unjustified and inappropriate self-help. In an effort to pressure Charter to accept Univision s position in this litigation, on the evening of Friday, January 27, 2017, Univision began running an alarmist nationwide advertising campaign including contrived Breaking News reports and crawls 2 This Court has authority to grant this Order to Show Cause without any counterclaims pending. [I]n ordering the maintenance of the status quo ante pending its determination, a court is exercising an inherent power, not dependent upon statutory provisions governing the issuance of injunction pendente lite. Matter of Ohrbach v Kirkeby, 3 AD2d 269, 273 [1st Dept 1957]; see also Thomas M. Fleming et al., 67A NY Jur 2d, Injunctions 59. No counterclaims are currently on file because counterclaims must be filed with an answer, and the answer is not yet due under CPLR 3211(f) given the pendency of Charter s motion to dismiss. Should the Court nonetheless prefer that Charter have a claim on file, Charter will initiate a new action with a complaint and a Request for Judicial Intervention asking that it be assigned to your Honor given the close relationship with this case. 2 2 of 19
running across viewers TV screens stating that Charter s customers are about to lose access to Univision programming and suggesting that subscribers call Charter to complain or cancel their service. Pursuant to Rule 24, Charter wrote to the Court on January 31, 2017, to notify the Court of Univision s actions and of its intention to seek the instant relief. Univision then proceeded yesterday to pull the signals for all Univision programming from all Charter cable systems. These actions immediately and irreparably harm Charter and its customers. Hundreds of thousands of Charter customers enjoy Univision for their daily viewing, which they have lost. Univision s advertising campaign and now its cessation of service is harming Charter s relationship with its customers. Charter has already received tens of thousands of calls from concerned customers, and Univision s service disruption will likely cause a large number of customers to cancel their Charter service. Indeed, Charter has already received calls from customers who decide to cancel their Charter service because of the lack of Univision programming. See, e.g., Transcript of Customer Service Call (Ex. 5). When a customer switches to another distributor, they often sign long-term contracts that make it difficult, if not impossible, to get them back. Moreover, by pulling its signal, Univision is essentially directing a verdict in its favor in this case because its cessation of service is premised on the assumption that its position in this litigation (that no contract governs) is correct and that Charter s position (that the TWC Agreement governs) is incorrect. But that is for this Court to decide. The entire reason Univision filed this lawsuit, and the parties have been spending many months and incurring substantial fees and costs litigating this case, is to present that very issue to this Court for resolution. 3 3 of 19
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The TWC Agreement and the Old Charter Agreement Univision programming is directed at Latino- American viewers, and includes news and sports programming. (Andreski Aff. 3.) Univision programming is among the most-watched Spanish-language programming that Charter transmits. (Id.) On May 18, 2016, Old Charter, Time Warner Cable, and other entities entered into a transaction resulting in the creation of a combined entity, now known as Charter Communications, Inc. (the Transaction ). (Degnan Aff. 4.) Charter has approximately 17 million video subscribers and operates in the largest Hispanic markets in the country, including New York and Los Angeles. (Andreski Aff. 2.) (Id. 5.) On July 8, 2016, Univision filed this lawsuit against Charter, asking for declaratory and monetary relief. Univision claims that the now-expired Old Charter Agreement Charter, by contrast, argues that the TWC Agreement, Univision seeks monetary and declaratory relief. Univision has not sought any injunctive or emergency relief. 5 5 of 19
The parties have been litigating the dispute since July 2016. The Court entered a schedule on August 30, 2016 [Dkt. No. 43]. The parties have extensively negotiated search terms, engaged scores of contract reviewers to review documents, and brought discovery disputes to the Court. (J. Brown Affirmation 2.) On the night of Friday, January 27, 2017, Univision began running crawls on all Univision stations urging Charter s customers to call Charter effectively suggesting to Charter s customers that they threaten to terminate their Charter cable subscriptions in an apparent effort to force Charter to accept Univision s legal position. (Andreski Aff. 6.) On January 29, 2017, Univision began broadcasting fictional breaking news advisories delivered by Univision-affiliated news anchors, who exhorted Charter s subscribers to call Charter. (Id.) Since Univision s propaganda campaign began, Charter has received tens of thousands of phone calls from its customers. (Id. 9.) Yesterday, February 1, 2017, Univision caused a blackout of Univision programming on Charter s cable systems. (Id. 7.) At this time, Charter is unable to broadcast any Univision programming to any of the 17 million Charter video subscribers. (Id. 2, 7.) ARGUMENT New York law, specifically CPLR 6301, authorizes this Court to grant both preliminary injunctions and temporary restraining orders. 4 Such injunctive relief is appropriate where the moving party demonstrates: (1) a likelihood of success on the merits, (2) irreparable injury absent the granting of the preliminary injunction, and (3) a balancing of the equities in the movant s favor. Putter v Singer, 73 AD3d 1147, 1148-49 [2d Dept 2010] (citations omitted); see also CPLR 6301, 6313. Charter s request for injunctive relief satisfies each of the above requirements. 4 New York law governs these proceedings. (See 2009 TWC Agreement (Ex. 3) J.11) 6 6 of 19
I. The Balance of the Equities Favors Charter Under New York law, the equities favor a movant seeking to maintain the status quo here, Charter. See CanWest Global Communications Corp. v Mirkaei Tikshoret Ltd., 9 Misc 3d 845, 872 [Sup Ct, NY County 2005]; Klein, Wagner & Morris v Lawrence A. Klein, P.C., 186 AD2d 631, 633 [2d Dept 1992]. Moreover, [i]n balancing the equities, the court must weigh the harm each side would suffer in the absence or face of injunctive relief. See Matter of Gerald Modell Inc. v Morgenthau, 196 Misc 2d 354, 363 [Sup Ct, NY County 2003]; see also Repair Tech Inc. v Zakarin, 8 Misc 3d 1022[A], 2005 NY Slip Op 51233[U], *5 [Sup Ct, Kings County 2005] ( The failure to grant preliminary injunctive relief would cause greater injury to the plaintiff than the imposition of the injunction would cause to the defendants. (citation omitted)). Here, the balance of equities decidedly favors Charter for multiple reasons. First, the equities favor injunctive relief given that Charter s instant application is intended to do no more than preserv[e] the status quo while the legal issues are determined in a deliberate and judicious matter. State of New York v City of New York, 275 AD2d 740, 741 [2d Dept 2000] (affirming the grant of a temporary restraining order and holding that the equities lie in favor of preserving the status quo while the legal issues are determined in a deliberate and judicious manner (citation omitted)); accord CanWest Global Communications, 9 Misc 3d at 872 ( [S]ince CanWest merely seeks to maintain the status quo, the balance of equities tilt in its favor. ). In this case brought by Univision, the ultimate question, which the Court will decide in due course, is whether the TWC Agreement continues to apply. By taking down the signal, Univision presumes that its position in this litigation (that no contract currently requires it to continue to provide its signal to Charter) is correct and thus essentially substitutes its judgment for that of the Court. Because it is far preferable for the Court to determine the contractual issues put before it by Univision in a deliberate and judicious manner, rather than for Univision to 7 7 of 19
take action that strips Charter of contract rights it may ultimately be found to possess, the law favors interim relief that merely preserves the status quo as of the date Univision filed this lawsuit while the Court ultimately decides the parties respective rights. See Tucker v Toia, 54 AD2d 322, 326 [4th Dept 1976] (plaintiffs whose benefits were about to be cut off by the State entitled to preliminary injunction to hold the parties in status quo so that the court could properly decide the issues). Univision has been providing and Charter has been carrying Univision programming throughout the more than seven-month duration of this litigation, despite the legal dispute between the parties. Yet now, as the parties are well along in their preparation of this case, Univision has pulled its signal from all Charter cable systems. Univision s actions are plainly a disruptive change to the status quo, and the relief Charter seeks would simply restore the status quo as it existed before Univision began these tactics, and as such is particularly appropriate. Second, granting Charter its requested relief will not impose any undue burden upon Univision. See Gerald Modell, 196 Misc 2d at 363; Repair Tech, 2005 NY Slip Op 51233[U], *5. Univision has brought contract claims seeking money damages. Further, Univision has made proposals to provide its programming for the entire term of the TWC Agreement if Charter agrees to pay higher fees. Thus, even if Univision s interpretation of the contract is correct (which it is not, as explained in III below), the harm alleged by Univision can be remedied with money damages. Indeed, the only relief sought by Univision in its lawsuit against Charter is declaratory and monetary relief. (See Compl. at Prayer for Relief.) By contrast, as explained below in II, if Univision is not immediately enjoined, Charter will be irreparably harmed by Univision s conduct. Where, as here, the irreparable injury to be sustained is more burdensome to the plaintiff than the harm caused to the defendant through the imposition of the injunction, 8 8 of 19
the balance of equities favors immediate equitable relief. See Klein, Wagner & Morris, 186 AD2d at 633. Third, the public interest clearly favors the grant of the injunction. If Univision s actions are permitted, Charter s 17 million video subscribers will lose access to Univision programming. (Andreski Aff. 2, 5.) Courts have repeatedly recognized the importance of providing diverse programming and information sources to the public. See Time Warner Cable of N.Y.C. v Bloomberg L.P., 118 F3d 917, 923 [2d Cir 1997]; Cable TV Fund 14-A, Ltd. v Prop. Owners Ass n Chesapeake Ranch Estates, Inc., 706 F Supp 422, 435 [D Md 1989]. This consideration is particularly on-point here, given that Univision provides Spanish-language programming aimed at Latino-American audiences, and Charter operates in some of the largest Hispanic markets in the country, including New York and Los Angeles. (Andreski Aff. 2.) II. Charter Will Suffer Irreparable Harm and Has No Adequate Remedy at Law Charter will be irreparably injured unless this Court issues a temporary restraining order and, thereafter, a preliminary injunction against Univision. Irreparable harm occurs when the party would not be fully compensated even if it succeeds on the merits i.e., when money damages do not restore the status quo or return Charter to its current position. See Klein, Wagner & Morris, 186 AD2d at 633 ( Irreparable injury in this context means any injury for which money damages are insufficient. (citation omitted)); see also Winchester Global Trust Co. Ltd. v Donovan, 58 AD3d 833, 834 [2d Dept 2009]. Charter will be irreparably harmed by Univision s breach of the TWC Agreement in at least four ways. First, Charter will lose cable subscribers its customers as a result of Univision s actions. Courts have repeatedly recognized that losing customers constitutes irreparable harm for purposes of immediate equitable relief. See CanWest Global Communications, 9 Misc 3d at 9 9 of 19
872 (finding irreparable harm where movant demonstrated, inter alia, loss of customers); JRT, Inc. v STG Props., LLC, 4 Misc 3d 1023[A], 2004 NY Slip Op 51002[U], *4 [Sup Ct, Nassau County 2004] (loss of customers and difficulty to attract new customers as a result of defendant s alleged wrong was irreparable harm); see also Register.com, Inc. v Verio, Inc., 356 F3d 393, 404 [2d Cir 2004] ( injunctive relief is appropriate where it would be very difficult to calculate monetary damages that would successfully redress the loss of a relationship with a client that would produce an indeterminate amount of business in years to come (citation omitted)); Hutzler Mfg. Co. v Bradshaw Intl., Inc., 2012 WL 3031150, *17 [SD NY, July 25, 2012, No. 11 Civ. 7211(PGG)] (finding irreparable harm in design patent case where movant may lose clients and be unable to recover those lost relationships and lose market leadership). If Univision is not immediately enjoined, Charter stands to lose a significant number of customers, constituting irreparable injury to Charter. (Andreski Aff. 5.) In fact, Univision s actions appear to be motivated by a desire to cause Charter to lose these customers, considering Univision s multi-part propaganda campaign which encouraged Charter subscribers to threaten to terminate their relationship with Charter through fake news broadcasts and other means. (Id. 6.) (Id. 8.) (Id.) This is precisely the type of injury for which immediate equitable relief is appropriate. See CanWest Global Communications, 9 Misc 3d at 872; JRT, 2004 NY Slip Op 51002[U], *4. Second, Univision s actions affect Charter s goodwill with its customers. Courts have 10 10 of 19
repeatedly recognized that an action that prevents a movant from providing its product to its customers constitutes irreparable harm for purposes of immediate equitable relief. See Reuters Ltd. v United Press Intl., Inc., 903 F2d 904, 907-09 [2d Cir 1990] (reversing lower court denial of preliminary injunction and finding irreparable injury where terminating the delivery of a unique product to a distributor whose customers expect and rely on the distributor for a continuous supply of that product almost inevitably creates irreparable damage to the good will of the distributor ); Rex Med. L.P. v Angiotech Pharm. (US), Inc., 754 F Supp 2d 616, 621 [SD NY 2010] ( Typically, cases where courts have found irreparable harm from a loss of goodwill or business relationships have involved situations where the dispute between the parties leaves one party unable to provide its product to its customers. ); Global Switching Inc. v Kasper, 2006 WL 1800001, *4, *13 [ED NY, June 28, 2006, No. CV 06 412(CPS)] (cutting off service to movants customers would cause irreparable harm in the form of lost goodwill). Univision s actions seem purposely designed to erode Charter s goodwill with its customers. Charter s customers expect and rely upon Charter to provide the programming that they are accustomed to which includes Univision programming and Univision s actions are preventing Charter from delivering those services. (Andreski Aff. 7, 9.) (Id. 5.) Since Univision s propaganda campaign began on the night of Friday, January 27, 2017, Charter s customer service center has received tens of thousands of telephone calls from concerned customers. (Id. 9.) This harm has been exacerbated now that Univision has pulled its signal, depriving Charter s customers of access to Univision programming through Charter s systems. See Reuters, 903 F2d at 907-08. Third, the harm caused by Univision is irreparable also because the TWC Agreement 11 11 of 19
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preliminary injunction is a provisional remedy, and the purpose is not to determine the ultimate rights of the parties, but to maintain the status quo until there can be a full hearing on the merits. Gerald Modell, 196 Misc 2d at 359 (quotation and citations omitted); accord CanWest Global Communications, 9 Misc 3d at 868. Given the nature and purpose of a temporary injunction order, it is evident that the court should give greater weight to the danger threatened and the consequences thereof... than to questions concerned with the probability of the [movant] being able to prove his or her case. Bisca v Bisca, 108 Misc 2d 227, 232-33 [Sup Ct, Nassau County 1981]. When, as here, the measure of relief sought by the application is simply to preserve the status quo until a final determination can be had, the strength and clarity of [movant s] showing in support of the application as to his or her probabilities of success in the action, are not so important. Id. The law favors preserving the status quo through a temporary injunction, and deferring consideration of the merits, to give the court sufficient time in the due course of the litigation to determine the legal issues in a deliberate and judicious manner. State of New York, 275 AD2d at 741; see also Mr. Natural v Unadulterated Food Prods., 152 AD2d 729, 730 [2d Dept 1989] ( [T]he existence of a factual dispute will not bar the granting of a preliminary injunction if one is necessary to preserve the status quo and the party to be enjoined will suffer no great hardship as a result of its issuance. ). Moreover, in the particular situation presented here, where denial of injunctive relief would render the final judgment ineffectual, the degree of proof required to establish the element of likelihood of success on the merits should be accordingly reduced. Republic of Lebanon v Sotheby s, 167 AD2d 142, 145 [1st Dept 1990] (citation omitted); State of New York, 275 AD2d at 741. In fact, even where a court has grave doubts regarding the likelihood of plaintiffs 13 13 of 19
success on the merits, it should still grant a preliminary injunction to avoid rendering a subsequent judgment ineffectual. Schlosser v United Presbyterian Home at Syosset, Inc., 56 AD2d 615, 615 [2d Dept 1977]; see also State of New York, 275 AD2d at 741 ( Although the State may not ultimately prevail on the merits, the equities lie in favor of preserving the status quo while the legal issues are determined in a deliberate and judicious manner. (citation omitted)). Charter s position in this litigation is that the TWC Agreement controls and gives it the right to continue to retransmit Univision s programming to its subscribers for the next five years. If Univision s cessation of service is permitted, and many of the Charter subscribers who currently watch Univision programming, as expected, cancel their Charter service and never come back, any subsequent judgment affirming that Charter indeed had the right to carry Univision programming for five more years will be for naught, as many of those who would have wanted to view this programming will no longer be Charter customers able to view the programming. In sum, for these reasons, Charter has a reduced burden in its request as to likelihood of success on the merits and indeed is entitled to temporary injunctive relief here to preserve the status quo even if the Court has doubts that Charter will ultimately prevail. Charter plainly meets this low standard here and in fact, for the reasons explained below, Charter will succeed on the merits in this lawsuit. To begin, there is a contract in place between Charter and Univision the TWC Agreement. The TWC Agreement 14 14 of 19
Some background on the combination between Charter and Time Warner Cable illustrates why this is so. During the closing, a Time Warner Cable entity (Time Warner Cable, Inc. or TWCI ) merged with a company known as Merger Sub 2, and the resulting entity changed its name to Spectrum Management Holding Company ( Spectrum ). (Degnan Aff. 14-16.) Spectrum thus became the successor in interest to TWCI. Spectrum also owns, directly or indirectly, all of the cable systems (both the legacy Charter cable systems and the legacy Time Warner Cable systems). (Id. 22.) As part of the closing, assignments were effected in order to transfer the various Time Warner agreements, including the TWC Agreement, to Spectrum, whereas the Old Charter Agreement remained with a subsidiary of Spectrum namely, Charter Communications Holding Company, LLC ( HoldCo ). (Id. 24.) As a result of these transactions, Spectrum is an Affiliate under the TWC Agreement. Thus, all of the entities that are direct or indirect subsidiaries of Spectrum. The TWC Agreement applies to all of Charter s cable systems for two primary reasons. First, 15 15 of 19
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