Clause & Effect

TV Program Hosts/Sales And Assignment Clauses

The Court of Appeals of South Carolina held that the sale of the stock in Multimedia Inc., and the subsequent sale of Multimedia's subsidiary TV production-company's assets, didn't violate the contractual rights of Multimedia TV talk-show host Phil Donahue. Donahue v. Multimedia Inc. (MEI), 3922.

In 1982, Donahue signed a new contract for his services with Multimedia Program Production Inc. (later known as Multimedia Entertainment Inc. (MEI)). Under a final amendment, Donahue's contract term ended in August 1996. Gannett Co. had purchased the stock of parent company Multimedia in 1995; Universal Television Enterprises bought MEI's assets in November 1996, including the tapes of the “Donahue” program.

A “Sale and Assignment” clause in Donahue's contract with MEI stated:

Donahue agrees that Multimedia shall have the right to sell and assign this contract at any time during the term hereof. … Notwithstanding the foregoing, Multimedia agrees that it will not so enter into a binding commitment during the term hereof … for any assignment of rights and interests of Multimedia in the Program and in the distribution in syndication thereof which includes an assignment of this Contract without first consulting with Donahue and specifying and giving Donahue the option to meet the price and other related terms and conditions contained in the offer.”

Donahue filed a breach-of-contract suit in 2001 in a South Carolina county court, claiming that the Gannett and Universal deals violated the assignment clause and Donahue's right of first refusal. Interpreting the Donahue contract under New York law, per the contract's choice-of-law provision, the trial court granted summary judgment for the defendants.

Affirming, the court of appeals first found that the Gannett transaction didn't violate the assignment clause because “Gannett did not purchase the stock of MEI, the party to the contract. Rather, Gannett bought the stock of Multimedia, the corporate parent of the contracting entity. Since the transfer of the stock of a corporation does not constitute an assignment of the corporation's contract, the transfer of the stock of the parent of a contracting corporation can hardly constitute an assignment of its subsidiary's contract.”

The court of appeals next pointed out that the assignment clause in Donahue's contract applied “during the term hereof,” which wouldn't apply to the post-term Universal transaction. But Donahue cited other provisions of his contract that gave him perpetual rights. The court of appeals determined, however, “While Sections 2(c) and 2(d) provide for royalty payments for any reruns of the 'Donahue' program, those limited provisions do not extend other terms of the contract. [Donahue] had no continuing obligation to perform as master of ceremonies for MEI, and MEI had no continuing obligation to produce and distribute the 'Donahue' program without him.”

Donahue further argued that the Universal deal was void because it amounted to the assignment of a personal services contract. But the court of appeals emphasized that such a contract can be assigned if the contract allows for it. According to the court, “Here, it is clear the parties contemplated possible assignment when entering into the agreement. During its entire fourteen-year term, Donahue's contract expressly granted MEI the right to assign, subject only to Donahue's option to meet any offered purchase price. These minimal restrictions on assignment lend little weight to the notion that the parties intended MEI's obligations to be of a 'personal' unassignable nature once the contract expired.”

The Court of Appeal of California, Second Appellate Division, Division One, decided that an individual who gave an option for the right to make the movie “Lost in Space” didn't have a right to a percentage of the gross profits made by New Line Cinema, which ultimately produced the film. Melchior v. New Line Productions, B172404. Plaintiff Ib Melchior had given the option to Prelude Pictures, which later sold the rights to New Line Cinema. The agreement between Melchior and Prelude stated:

If the Picture gets made in association with Prelude, Prelude hereby grants to Melchior, … the right to receive seventy-five thousand dollars ($75,000) as a production bonus payable out of the budget of the Picture . . . and two percent (2%) of Prelude's gross receipts, if any, from the Picture (it being understood that such gross receipts are not the gross profits or receipts of the Picture or the distributor's gross but are Prelude's gross receipts from the Picture …

The film failed to make enough money for Prelude to receive participation revenues from New Line. (New Line paid Melchior the $75,000 production bonus.) Melchior then sued New Line for breach of contract. The trial court granted summary judgment for New Line.

Affirming in an unpublished opinion, the court of appeal agreed with the lower court's finding that “it is clearly anticipated in the [Release Agreement] that others would be involved.” The court of appeal added: “If the Picture was made by someone else in association with Prelude [the agreement] makes it clear that any additional sums of money to be paid to Melchior would be based on 'Prelude's gross receipts, if any, from the Picture,' not on 'the gross profits or receipts of the Picture or the distributor's gross … Inasmuch as Prelude did not receive any gross receipts from the Picture, New Line had no duty to pay Melchior two percent of those gross receipts. Absent a duty, there was no breach of contract.”

The court of appeal handed down its ruling in August; the Supreme Court of California recently denied Melchior's petition for review.

TV Program Hosts/Sales And Assignment Clauses

The Court of Appeals of South Carolina held that the sale of the stock in Multimedia Inc., and the subsequent sale of Multimedia's subsidiary TV production-company's assets, didn't violate the contractual rights of Multimedia TV talk-show host Phil Donahue. Donahue v. Multimedia Inc. (MEI), 3922.

In 1982, Donahue signed a new contract for his services with Multimedia Program Production Inc. (later known as Multimedia Entertainment Inc. (MEI)). Under a final amendment, Donahue's contract term ended in August 1996. Gannett Co. had purchased the stock of parent company Multimedia in 1995; Universal Television Enterprises bought MEI's assets in November 1996, including the tapes of the “Donahue” program.

A “Sale and Assignment” clause in Donahue's contract with MEI stated:

Donahue agrees that Multimedia shall have the right to sell and assign this contract at any time during the term hereof. … Notwithstanding the foregoing, Multimedia agrees that it will not so enter into a binding commitment during the term hereof … for any assignment of rights and interests of Multimedia in the Program and in the distribution in syndication thereof which includes an assignment of this Contract without first consulting with Donahue and specifying and giving Donahue the option to meet the price and other related terms and conditions contained in the offer.”

Donahue filed a breach-of-contract suit in 2001 in a South Carolina county court, claiming that the Gannett and Universal deals violated the assignment clause and Donahue's right of first refusal. Interpreting the Donahue contract under New York law, per the contract's choice-of-law provision, the trial court granted summary judgment for the defendants.

Affirming, the court of appeals first found that the Gannett transaction didn't violate the assignment clause because “Gannett did not purchase the stock of MEI, the party to the contract. Rather, Gannett bought the stock of Multimedia, the corporate parent of the contracting entity. Since the transfer of the stock of a corporation does not constitute an assignment of the corporation's contract, the transfer of the stock of the parent of a contracting corporation can hardly constitute an assignment of its subsidiary's contract.”

The court of appeals next pointed out that the assignment clause in Donahue's contract applied “during the term hereof,” which wouldn't apply to the post-term Universal transaction. But Donahue cited other provisions of his contract that gave him perpetual rights. The court of appeals determined, however, “While Sections 2(c) and 2(d) provide for royalty payments for any reruns of the 'Donahue' program, those limited provisions do not extend other terms of the contract. [Donahue] had no continuing obligation to perform as master of ceremonies for MEI, and MEI had no continuing obligation to produce and distribute the 'Donahue' program without him.”

Donahue further argued that the Universal deal was void because it amounted to the assignment of a personal services contract. But the court of appeals emphasized that such a contract can be assigned if the contract allows for it. According to the court, “Here, it is clear the parties contemplated possible assignment when entering into the agreement. During its entire fourteen-year term, Donahue's contract expressly granted MEI the right to assign, subject only to Donahue's option to meet any offered purchase price. These minimal restrictions on assignment lend little weight to the notion that the parties intended MEI's obligations to be of a 'personal' unassignable nature once the contract expired.”

The Court of Appeal of California, Second Appellate Division, Division One, decided that an individual who gave an option for the right to make the movie “Lost in Space” didn't have a right to a percentage of the gross profits made by New Line Cinema, which ultimately produced the film. Melchior v. New Line Productions, B172404. Plaintiff Ib Melchior had given the option to Prelude Pictures, which later sold the rights to New Line Cinema. The agreement between Melchior and Prelude stated:

If the Picture gets made in association with Prelude, Prelude hereby grants to Melchior, … the right to receive seventy-five thousand dollars ($75,000) as a production bonus payable out of the budget of the Picture . . . and two percent (2%) of Prelude's gross receipts, if any, from the Picture (it being understood that such gross receipts are not the gross profits or receipts of the Picture or the distributor's gross but are Prelude's gross receipts from the Picture …

The film failed to make enough money for Prelude to receive participation revenues from New Line. (New Line paid Melchior the $75,000 production bonus.) Melchior then sued New Line for breach of contract. The trial court granted summary judgment for New Line.

Affirming in an unpublished opinion, the court of appeal agreed with the lower court's finding that “it is clearly anticipated in the [Release Agreement] that others would be involved.” The court of appeal added: “If the Picture was made by someone else in association with Prelude [the agreement] makes it clear that any additional sums of money to be paid to Melchior would be based on 'Prelude's gross receipts, if any, from the Picture,' not on 'the gross profits or receipts of the Picture or the distributor's gross … Inasmuch as Prelude did not receive any gross receipts from the Picture, New Line had no duty to pay Melchior two percent of those gross receipts. Absent a duty, there was no breach of contract.”

The court of appeal handed down its ruling in August; the Supreme Court of California recently denied Melchior's petition for review.