Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Clause & Effect

By Stan Soocher
August 26, 2003

If a TV network makes a non-recourse loan to a production company to produce a TV series, could the production company nevertheless be required to pay back the loan? Assume that the agreement with the network provides for a license fee to the production company as well as a loan for production costs that exceed the license fee, and that the loan will be repaid only from the series' net profits. What happens if the series is never syndicated and thus earns no net profits?

This was at issue in a suit by CBS Broadcasting against the Carsey-Werner Co. over the latter's failure to secure a syndication deal for the TV series 'Cybill' starring Cybill Sheperd. CBS had ordered a minimum of 13 episodes of 'Cybill' for the 1994/1995 TV season for a per-episode license fee of $550,000, plus a non-recourse loan equal to the difference between final production cost and the license fee. Carsey Werner produced 87 episodes of 'Cybill' and CBS loaned the production company $53,325,000. Carsey-Werner began to but abandoned efforts to syndicate the series. CBS filed suit in Los Angeles Superior Court for repayment of the loan alleging negligence, and breach of the implied covenant of good faith and fair dealing. Carsey-Werner argued that a good faith effort to syndicate the series couldn't be implied because the contract didn't obligate the production company to do so. The trial court dismissed the complaint.

Reversing in an unpublished opinion, the Court of Appeal of California, Second Appellate Division, ruled that the agreement between CBS and Carsey-Werner contained an implied covenant of good faith and fair dealing that required Carsey-Werner to make good faith, commercially reasonable efforts to syndicate 'Cybill.' CBS Broadcasting Inc. v. The Carsey-Werner Co., B151721 (Jan. 21). According to the appellate court, '[t]he agreement assumes the Production Company will attempt to syndicate the series under certain circumstances. The contingent circumstances occurred. The agreement does not provide the Production Company with express discretion to refrain from syndicating the series at its option. The fact that the loan was non-recourse does not negate the existence of an implied duty to attempt to generate cash flow from which to repay the loan.'

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Removing Restrictive Covenants In New York Image

In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?

Fresh Filings Image

Notable recent court filings in entertainment law.