Forum Selection Clause Applies To Merged TV Company

Judge Batts continued: “Plaintiff alleges further that [defendant] Canal France owns 100% of the shares of Canal Distribution ' and that [defendant] Groupe Canal owns 65% of the shares of Canal France and a direct or indirect controlling interest in Canal Distribution. While the precise corporate relationships between the[d]efendants remain unclear at this early stage of the litigation, before any discovery has taken place, the facts alleged provide a sufficient basis for this [c]ourt to conclude that MGM may invoke the forum selection clause in its Agreement with TPS against [d]efendants as entities that are 'closely related' to TPS under New York law.”

The district judge went on to deny the defendants' motion to dismiss MGM's breach of contract claim, instead ruling that the relevant contract terms were ambiguous. But the court did dismiss the tortious interference allegation for failure to state a claim by emphasizing that MGM failed to allege that the defendants acted “with any motivation beyond their own economic interest when furthering a merger between CANALSAT and TPS.”

The U.S. District Court for the Southern District of New York decided that a forum selection clause in a television broadcast agreement applied to a company within which the original signatory broadcaster later was merged. Metro-Goldwyn-Mayer Studios Inc. v. Canal Distribution S.A.S., 07 Civ. 2918(DAB).

In 1996, MGM entered into an agreement to provide pay-TV rights in movies and TV programs to TPS Societe en Nom Collectif (TPS), a French satellite network. In case of disputes, the agreement's forum selection clause cited New York. The contract's initial five-year term was subsequently extended for an additional five years to Dec. 31, 2006. The extension agreement gave MGM the right to extend the license for yet another five years, if TPS merged with another company. TPS did merge with CanalSatellite S.A. (CANALSAT), its only competitor, into Canal Distribution. The TPS and CanalSatellite owners announced the merger would be completed in November 2006, though it was approved in January 2007. In September 2006, MGM initially notified TPS and then later Canal Distribution that MGM would exercise its license extension option. But the French parties refused to perform, and MGM sued the Canal Distribution owners in New York federal court for breach of contract and tortious interference with contract.

District Judge Deborah A. Batts ruled that the New York court had personal jurisdiction over the defendants by noting: “Under New York law, a signatory to a contract may invoke a forum selection clause against a non-signatory if the non-signatory is 'closely related' to one of the signatories '. A non-party is 'closely related' to a dispute if its interests are 'completely derivative' of and 'directly related to, if not predicated upon' the signatory party's interests or conduct.”

Judge Batts continued: “Plaintiff alleges further that [defendant] Canal France owns 100% of the shares of Canal Distribution ' and that [defendant] Groupe Canal owns 65% of the shares of Canal France and a direct or indirect controlling interest in Canal Distribution. While the precise corporate relationships between the[d]efendants remain unclear at this early stage of the litigation, before any discovery has taken place, the facts alleged provide a sufficient basis for this [c]ourt to conclude that MGM may invoke the forum selection clause in its Agreement with TPS against [d]efendants as entities that are 'closely related' to TPS under New York law.”

The district judge went on to deny the defendants' motion to dismiss MGM's breach of contract claim, instead ruling that the relevant contract terms were ambiguous. But the court did dismiss the tortious interference allegation for failure to state a claim by emphasizing that MGM failed to allege that the defendants acted “with any motivation beyond their own economic interest when furthering a merger between CANALSAT and TPS.”