Televisa wins ruling against Univision
Grupo Televisa has won a court ruling that could allow the Mexican broadcasting giant to move closer to ending its tumultuous relationship with Univision Communications Inc., the largest Spanish-language media company in the United States.
U.S. District Court Judge Philip S. Gutierrez in Los Angeles on Monday denied Univision’s request to dismiss several claims made by Televisa in a 2-year-old lawsuit. The judge said there was enough evidence for a jury to decide whether Univision acted in “bad faith” when dealing with its partner from Mexico.
The lawsuit is a high-stakes gambit by Televisa to break a 1992 programming agreement that gives Univision exclusive use of Televisa’s popular shows in the U.S. through 2017. Over the years, Univision has become a juggernaut in Spanish-language television in large part because of the enormous ratings produced by Televisa’s telenovelas. The shows generate about 40% of Univision’s revenue.
Televisa has long felt that the agreement is unfair and doesn’t pay the Mexican company for the full value of its programming. If it prevails in the upcoming trial, Televisa could end the contract 10 years early and then sell its shows for a much higher price to Univision or a competitor such as NBC Universal’s Telemundo, which has struggled in the shadows of Univision.
Or, Televisa could use the lawsuit and the trial, scheduled to start March 18, as leverage to negotiate a sizable equity stake in Univision, which was acquired this year for $13.7 billion by a consortium that includes Los Angeles billionaire Haim Saban and four private equity firms.
Televisa lost its 2006 bid to buy Univision, then declined to join the consortium.
“This is a significant victory and we intend to press forward with the goal of terminating the programming license agreement and restoring control of Televisa’s programming to Televisa,” said Marshall Grossman of the Santa Monica law firm Bingham McCutchen, which represents Televisa.
A Univision spokesman said Thursday that the ruling “was not a significant event” and that the ruling did not mean a jury would side with Televisa.
Televisa’s suit, filed in 2005, alleges that Univision has breached the 1992 agreement, and that is enough to excuse Televisa from further obligations to Univision. Televisa contends Univision has not paid $100 million in disputed royalties.
In declining Univision’s motion for partial summary judgment, the judge said some of the evidence suggested “Univision was engaging in activities that could be construed as bad faith.”
Gutierrez pointed to an example of Televisa’s right to audit revenue. But in one case, Univision did not act on Televisa’s request for an audit for more than a year. In addition, the judge said, some Univision executives “misled Televisa’s auditors” about the availability of electronic records, saying that only hard copies existed.
“These are just a few examples in a record replete with many evidencing the bad-faith motivations in Univision’s conduct toward Televisa,” he said.