ACME Communications, which O&Os six television stations, will appeal a New York state court decision issued 3/21 granting summary judgment to Cox Enterprises MMT Sales and Harrington Righter & Parsons (HRP) in a dispute that centered around MMT’s abrupt abandonment of its ad representation contract with ACME in May 2009 and MMT’s effort to force ACME to accept services from HRP (another Cox Enterprises subsidiary).
“The ruling came despite a provision in the contract prohibiting assignments without ACME’s written consent and the Court’s finding that ACME had not given its consent to the HRP assignment,” said ACME in a statement.
The judgment would entitle MMT and HRP to a payment of approximately $2.4 million as a “break-up fee” or liquidated damages.
“However, the Court did not address ACME’s counterclaims for damages, which seek millions of dollars in damages from MMT and HRP and are based on MMT’s repudiation and breach of the same contracts. ACME believes that the Court’s finding, to the effect that ACME did not consent to any assignment, supports these counterclaims,” ACME said.
Doug Gealy, ACME’s President and CEO says they will file a motion for reargument with the trial court to raise certain facts and issues which they believe were overlooked by the Court: “We will simultaneously appeal the trial court’s decision to a state appellate court and vigorously pursue our counterclaim. This is clearly an unfair result, as it would require ACME to compensate a rep firm that abruptly terminated all of its services to ACME, and tried to force ACME to accept service from an affiliated rep firm that ACME was not obligated to accept and chose not to accept.”
If upheld following the appeals process, the decision would cost the company an estimated $3.3-$3.5 million, representing the break-up fee, assessed interest expense and the plaintiff’s legal costs. ACME expects to record a charge to earnings in this amount in its Q4, ended 12/31/10.
ACME stations include KWBQ-TV and KASY-TV, Albuquerque-Santa Fe, NM; WBXX-TV, Knoxville, TN; WBDT-TV, Dayton, OH; WCWF-TV (formerly WIWB), Green Bay-Appleton, WI and WBUW-TV, Madison, WI. Sales of the company’s stations in Knoxville (recently approved by the FCC), Dayton and Green Bay are pending. The company also produces The Daily Buzz, a nationally syndicated morning news and lifestyle program which airs on more than 150 television stations. Fisher Communications manages the program.
RBR-TVBR observation: Cox has three rep firms, which also includes TeleRep. Katz Media Group’s television sales arm includes Katz Advantage, Katz Millennium, Katz Continental Television Sales, Eagle Television Sales, Katz Direct and Millennium Sales & Marketing. Petry Media has Petry Television and Petry Networks. Point being that unless ACME could prove the switch to HRP made a dent in its revenues, as long as the rep firm move was still under the Cox Enterprises umbrella (with the same ultimate sales management supervision), it may be a tough appeal. However the court may reduce the break-up fee on appeal.