The two biggest Spanish-language media companies in North America take their feud to a Los Angeles federal courtroom in a couple of weeks in what may be the culmination of a five-year real-life Mexican soap opera.
The case pits Grupo Televisa, the dominant broadcaster in Mexico, against L.A.'s Univision Communications, the dominant Spanish-language TV network in the United States and owner of KMEX-TV (Channel 34) in Los Angeles. At stake is a program licensing contract worth hundreds of millions of dollars.
The trial's preliminary witness list is a Who's Who of Spanish-language media. It includes Jerry Perenchio, the reclusive Malibu billionaire who ran Univision for 14 years; Emilio Azcarraga Jean, the young chairman of Televisa; Andrew Hobson, Univision's chief financial officer; Stephen Rader, co-founder of Beverly Hills-based investment firm Clarity Partners LP; and Walter Ulloa, chief executive of L.A.-based Entravision Communications Corp.
The dispute centers on a program license agreement in which Televisa agreed to supply telenovelas (soap opera-like dramas that air every weeknight) and other programs to Univision on a price schedule set until 2017. The agreement was signed in 1996 by Perenchio and Azcarraga Jean's father, Emilio Azcarraga Milmo, known in TV circles by his nickname "El Tigre."
But El Tigre died a year later from cancer, and the son has made no secret that he feels Perenchio took advantage of his ailing father.
The quarrel began about five years ago when Univision changed the way it calculated the royalties on Televisa programs, resulting in much lower payments. Televisa sued for breach of contract. Univision sued seeking $118 million in refunds, claiming the new royalty calculations applied retroactively.
Then Televisa countersued that Univision had "materially breached" the original agreement, so it had the right to terminate the contract.
That's significant because Televisa supplies many of the highest rated programs for Univision.
Julio Rumbaut, a Miami-based TV consultant, estimates that Televisa shows account for about 40 percent of Univision's revenues. Based on 2007 figures, that could be about $800 million annually.
Now, after years of legal wrangling, the programming contract is still the central legal issue before the court.
When contract disputes go to court, the judge traditionally decides issues of contract interpretation while the jury decides issues of fact, said Steve Velkei, a commercial litigation attorney at Sonnenschein Nath & Rosenthal LLP in Los Angeles, who is not involved in the case.
In the Univision-Televisa battle, "the two are so intertwined, it's hard to separate them," Velkei said. "It's a tough one."
Trying to void the programming agreement is an aggressive move by Televisa, Velkei said. He expects that Univision's lawyers will show that Televisa tried to do a merger in 2006 as a way to enter the U.S. television market.
"That creates an incentive for Televisa to find a way to get out of this contract," Velkei said.
Another remarkable feature about the case is that it has dragged on for years without a settlement at least so far while the companies continue to transact business on a regular basis.
"We are all a little older, but the issues remain the same," said Marshall Grossman, an attorney at Bingham McCutchen LLP in Santa Monica that represents Televisa. He estimates the trial will last five to seven weeks. The trial is to begin Jan. 6.
Grossman was asked if personal animosities will lead to attempts to embarrass witnesses on the stand. "I expect the trial to focus on the merits of the case without any gamesmanship," he said. "We are prepared to put out the facts, and we believe the chips will fall on the Televisa side."
A Univision spokeswoman declined to comment for this story. In the past, the company has said it has not breached the programming agreement and that it expects Televisa to abide by the contract until 2017.
The trial will also be a showcase for several of the city's top lawyers. Televisa has counsel from Grossman and colleagues at Bingham McCutchen. Univision's team includes John Keker of Keker & Van Nest LLP and Ron Olson of Munger Tolles & Olson LLP. Judge Philip Gutierrez will referee the proceedings.
But neither the billionaires on the witness stand nor the attorneys qualify as the most important personalities at trial. That designation belongs to the eight jurors who will decide the case.
"In a juror's mind, there's always a villain or a bully," said Philip Anthony, chief executive of the L.A.-based jury consulting firm DecisionQuest. "In business disputes, most jurors focus on the relative size of the companies. They look for which side had the advantage of knowledge and control in the situation."
Both sides plan to call these Spanish-language media figures to testify in the trial about an important contract dispute between Univision and Televisa.
The ex-Hollywood agent and his minority partners bought Univision in 1992 for $550 million. After building Univision into a powerhouse due in part to its
exclusive rights for Televisa shows he sold it in 2006 for $13.7 billion. He will
testify about the programming negotiations.
L.A.-based Entravision owns more than 40 Univision-affiliated TV stations. Ulloa will testify for both sides about the Univision network's revenue-sharing arrangements with stations.
Chief Operating Officer
In 2005, Perenchio appointed Rodriguez head of programming at Univision, a move that Azcarraga saw as a power grab. Rodriguez will testify about the change in Univision's accounting procedures that resulted in lower royalty payments to Televisa.
Emilio Azcarraga Jean
At age 29, he inherited Mexico City-based Televisa. His deceased father negotiated the agreement in dispute at the trial, so Azcarraga has blood and money at stake. He will testify why Televisa wants to terminate its contract to supply programs to Univision.
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