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IP/Entertainment Case Law Updates

Lincoln Financial Media Company v. CBS Broadcasting, Inc.

In an unpublished per curiam opinion, the Fourth Circuit affirmed the district court’s grant of summary judgment in favor of plaintiff, who had sought a declaratory ruling that its letter agreement with defendant CBS Broadcasting, Inc. remained binding.

In 1996, Jefferson-Pilot Communications Co. entered into affiliation agreements with CBS for two television stations. On the same day, CBS entered into a separate letter agreement in which CBS, among other things, promised to contribute $400,000 annually to help promote the two stations. The letter agreement, however, would no longer be in effect “in the event that Jefferson-Pilot assign[ed] or transfer[ed] any interest in either Station.” The letter agreement further defined “Jefferson-Pilot” as “Jefferson-Pilot Communications Company.”

In 2002, Jefferson-Pilot created a new wholly-owned subsidiary, Jefferson-Pilot Communications/WBTV, Inc., and transferred the broadcast license for its station WBTV as well as the affiliation agreement to this new entity. It informed CBS of this change, and CBS responded that its consent was not required “for this pro forma transfer” but it otherwise did not object to the transfer. Thereafter, CBS continued to make its $400,000 annual payment as it had since 1996.

In 2005, Jefferson-Pilot Corporation – the parent company of Jefferson-Pilot – entered into a merger agreement with Lincoln National Corporation. Under the agreement, although Jefferson-Pilot Corporation would transfer its ownership interest in Jefferson-Pilot to a newly created holding company, Jefferson-Pilot retained its 100 % stake in both of its stations. Jefferson-Pilot informed CBS of the contemplated merger between its parent company and Lincoln, and CBS informed Jefferson-Pilot that it did not object.

After the merger closed, in April 2006, Jefferson-Pilot changed its name to Lincoln Financial, but otherwise did not change its business location, officers, or assets. When Lincoln Financial requested the 2006 promotions payment, CBS refused, arguing that Jefferson-Pilot Corporation’s merger with Lincoln constituted a change of interest under the 1996 letter agreement. CBS also declined to make the payment in 2007. Soon thereafter, Lincoln Financial brought suit seeking declaratory relief that the merger did not render the letter agreement terminated.

The Fourth Circuit agreed with the district court’s conclusion that the plain language of the letter agreement’s termination provision only addressed situations in which the interests of Jefferson-Pilot changed, and not its parent company. The court noted that although CBS could have written the provision broad enough to encompass Jefferson-Pilot’s parent company, it chose not to do so. The court further held that, because the language was unambiguous, it could not consider extrinsic evidence proffered by CBS. Finally, the court observed that CBS designed the promotional payments to maintain a longstanding relationship with Jefferson-Pilot and its stations, and that this relationship ultimately survived the merger.

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