USDC S.D. New York, February 5, 2010

Click here for a copy of the full decision.  

Court denies defendants’ motion to dismiss for lack of personal jurisdiction based on defendants’ assertion that they were not signatories to agreement containing New York forum selection clause, holding that defendants, who are allegedly successors-in-interest to plaintiff’s licensee, are “closely related” under New York law to plaintiff’s licensee and the clause could be invoked against them; court also denies defendants’ motion to dismiss for failure to state a claim, holding that language in licensing agreement is ambiguous and therefore precludes dismissal at this stage; court grants defendants’ motion to dismiss tortious interference claim based on defendants’ economic interest, a defense under New York law to such a claim.

Plaintiff Metro-Goldwyn-Mayer Studios entered into a broadcast license agreement and amendment with TPS, a French satellite television network, which contained a New York forum selection clause and certain extension provisions to protect MGM from being frozen out in the event TPS merged with a competing French satellite company. MGM alleged that defendant Groupe Canal+ owned a competing satellite network called CANALSAT and merged CANALSAT with TPS, and renamed the entity Canal+ Distribution. When TPS stated that MGM was not entitled to exercise its extension option, MGM sought to enforce its licensing agreement against Canal+ Distribution as successors-in-interest to TSP and eventually filed suit against defendants for breach of contract and tortious interference with contract.

Defendants moved to dismiss for lack of personal jurisdiction, asserting that they were not signatories to the broadcast licensing agreement and could not be bound by the agreement’s choice of forum. 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 such that “enforcement of the forum selection clause is foreseeable by virtue of the relationship between the signatory and the party sought to be bound.” A successor to a signatory to a forum selection clause is a closely related entity. The court denied defendants’ motion to dismiss, holding that, although the precise corporate relationships between the defendants remain unclear where no discovery had been taken, the facts alleged provide a sufficient basis for the court to allow MGM to enforce the forum selection clause against the defendants.

Defendants also moved to dismiss the breach of contract claim for failure to state a claim, asserting that the condition precedent to the extension of the licensing agreement – i.e., a “merger” involving TPS, as defined in the agreement – had not taken place during the term of the agreement. Under the 1999 Amendment to the 1996 Agreement between MGM and TPS, “[i]n the event (and only in such event) of a Merger, consolidation, or reorganization between TPS and [CANALSAT] which result[ed] in a unified holding, whether direct or indirect, in the hands of a single entity or group of shareholders, of” the services of TPS and CANALSAT, MGM had the option to extend the output terms of the Agreement for an additional five years. The parties agreed that a formal merger between TPS and CANALSAT did not occur during the term of the Agreement; however, MGM asserted that the parties’ definition of “merger” contemplated the transfer of control over TPS that took place within the term of the Agreement, and that MGM was therefore entitled to extend the output terms of the Agreement.

The court denied defendants’ motion to dismiss the breach of contract claim. “Given the broad terms set by the parties to the 1996 Agreement, and the various stages of restructuring between TPS and CANALSAT alleged to have taken place within the contract period, the court finds that the relevant terms of the Agreement are ambiguous as applied to the facts alleged in this case at this stage of the litigation. The Court therefore has insufficient data to dismiss the amended complaint for failure to state a claim for breach of contract.”

Finally, the court granted defendants’ motion to dismiss the tortious interference claim asserted against defendants Canal+ France and Groupe Canal+. Under New York law, economic interest is a defense to a claim of tortious interference, unless there is a showing of malice or illegality. The court held that MGM failed to allege anything showing that defendants “acted with any motivation beyond their own economic interest when furthering a merger between CANALSAT and TPS.”