CF Entm't, Inc. v. Nielsen Co.
| Decision Date | 10 July 2020 |
| Docket Number | Case No. 20-cv-2393 |
| Parties | CF ENTERTAINMENT, INC., Plaintiff, v. THE NIELSEN COMPANY (US), LLC, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Hon. Steven C. Seeger
CF Entertainment and The Nielsen Company have a dispute about how much CF Entertainment must pay each month for Nielsen's ratings services for The Weather Channel. All parties agree that Nielsen's ratings services are a lifeline for the network. CF Entertainment needs the ratings services so that it can prove performance to its advertisers, and thus continue to collect advertising revenue. "And without advertising revenue, the forecast for The Weather Channel is not good." See Pl.'s Mem. in Supp. of Mtn. for Prelim. Injunction, at 1 (Dckt. No. 6).
The dispute stretches back a few years. Since 2018, CF Entertainment has paid Nielsen $475,000 per month for the services, over its objection. But CF Entertainment believes that the agreed-upon monthly fee is only $41,667, based on an agreement that the parties reached in 2017. After years of discord, CF Entertainment finally had enough and sued for breach of contract, claiming that it is entitled to pay the lower amount.
In the meantime, CF Entertainment announced to Nielsen that it will no longer pay the higher monthly rate, meaning the rate that it has paid since 2018. And it asks this Court to put its thumb on the scale. CF Entertainment filed a motion for a preliminary injunction, asking this Court to prevent Nielsen from suspending its services if CF Entertainment pays the lower amount under the 2017 agreement. In essence, CF Entertainment asks for an order that it can pay the lower amount, and in the meantime, Nielsen can't do anything about it.
The motion for a preliminary injunction is denied. CF Entertainment has paid $475,000 (not $41,667) per month since 2018 under an amendment to the contract. A preliminary injunction would change, not preserve, the status quo.
CF Entertainment argues that it would suffer an irreparable injury if Nielsen cuts off the ratings services. But Nielsen has committed to continue to provide those services as long as CF Entertainment continues to pay the going rate. If CF Entertainment pays, CF Entertainment will receive. Continuing to pay full freight is not an irreparable injury. If CF Entertainment is right about its contractual rights, then it can recover damages and make itself whole. The three essential factors - the unlikelihood of success on the merits, the lack of an irreparable injury, and the existence of an adequate legal remedy - prevent this Court from turning back the clock to 2017.
CF Entertainment is an independent, closely held media company founded by comedian Byron Allen in the 1990s. See Declaration of Mark DeVitre, at ¶ 4 (Dckt. No. 7). It operates multiple cable networks and television stations. Id. The company is part of the Allen Media Group, a collection of integrated and centrally operated media and entertainment companies. Id. By and large, CF Entertainment operates networks with relatively small audiences - such as Justice Central, Comedy.TV, Cars.TV, and MyDestination.TV - on high triple-digit cable networks. See Cplt., at ¶ 21 (Dckt. No. 1); Declaration of Peter Bradbury, at ¶ 9 (Dckt. No. 27-1).
Like most broadcasters, CF Entertainment relies primarily on advertising revenues to fund its operations. See Declaration of Mark DeVitre, at ¶ 5 (Dckt. No. 7). Advertisers pay CF Entertainment to air commercials during breaks in programming. Id. Before payment, advertisers need "proof of performance," that is, data showing the number of viewers watching the program when the advertisement airs. Id. Advertisers need to know that they're getting what they pay for.
Nielsen is a supplier of television audience measurement services. See Declaration of Peter Bradbury, at ¶¶ 4-7 (Dckt. No. 27-1). But Nielsen is not just "a" supplier. CF Entertainment paints Nielsen as an 800-pound gorilla in the industry. CF Entertainment depicts Nielsen as a hulking colossus, a "behemoth" that reigns supreme in the market for ratings services. See Cplt., at ¶ 14 (Dckt. No. 1). For good measure, CF Entertainment calls Nielsen a "heavy-handed" "bully[]" that puts other companies in a "stranglehold," "preys on smaller players," takes "hostage[s]," demands a "ransom," "extort[s]" payment, "bleeds these smaller companies dry," and uses its power to extract "predatory pricing." Id. at ¶¶ 1, 3, 4, 5, 15, 16, 48; Pl.'s Mem. in Supp. of Mtn. for Prelim. Injunction, at 2 (Dckt. No. 6).
Nielsen resists that characterization (see Declaration of Peter Bradbury, at ¶ 8), but suffice it to say that Nielsen is the dominant player in the market for ratings services. Most people have probably heard of Nielsen ratings, but few people can name a competitor.
Large, national advertisers require Nielsen ratings before they will pay for advertisements. See Declaration of Mark DeVitre, at ¶ 6 (Dckt. No. 7). Media companies, in turn, need contracts with Nielsen to prove performance. Id. Nielsen ratings are critical to advertising revenue. Id. Without Nielsen ratings, advertisers won't pay for commercials, andadvertising revenue would dry up. Id. The ratings are so essential that CF Entertainment labels Nielsen "monopolistic." See Cplt., at ¶ 1 (Dckt. No. 1).
In 2007, CF Entertainment entered into a contract with Nielsen titled the Nielsen Syndication Service Combined National-Local Service Agreement (the "2007 Agreement"). See Declaration of Mark DeVitre, at ¶ 7 (Dckt. No. 7). Nielsen agreed to provide ratings information and program measurement services to CF Entertainment under an established fee schedule. Id. The contract had a five-year term, with the option to extend. See Cplt., at ¶ 19. At the time, CF Entertainment primarily aired comedy and courtroom-centered programming on broadcast television. See Declaration of Mark DeVitre, at ¶ 8.
The 2007 Agreement recognized that CF Entertainment's portfolio could expand. Id. So the parties "agree[d] to promptly amend th[e] Agreement to include additional charges for such programming or other activities and to adjust the charges payable" if there was an "increase or change in the level or nature of the programming or other activities provided" by CF Entertainment. Id.; see also 2007 Agreement, at ¶ 2(b) (Dckt. No. 7, at 13 of 55). That "increase or change" could include an "acquisition." See 2007 Agreement, at ¶ 2(b).
In the decade that followed, CF Entertainment continued to grow. See Declaration of Mark DeVitre, at ¶ 9 (Dckt. No. 7). It expanded into cable television in 2009, creating and launching several networks. Id. The parties made adjustments through a series of amendments to the 2007 Agreement. Id. The amendments provided for gradual increases in the applicable monthly fees, raising them from $25,000 to $40,000 a month. Id.
The parties disagreed about how best to accommodate the need for a flexible fee structure in light of CF Entertainment's continuing growth. Id. at ¶¶ 10-11. CF Entertainment did not want to renegotiate the fee structure in piecemeal fashion each time that it acquired a newnetwork. Id. at ¶ 11. Instead, CF Entertainment wanted a new global fee structure that would encompass Nielsen's ratings services for any of CF Entertainment's existing networks, plus any networks that it might acquire in the future. Id. at ¶ 10. But Nielsen preferred to amend the agreement if there was an increase or change in CF Entertainment's business. Id. at ¶ 12. Nielsen preferred to take things one step at a time. Id.
In August 2017, the parties executed a global amendment to the 2007 Agreement (the "2017 Amendment"). Id. at ¶ 14; see 2017 Amendment (Dckt. No. 7, at 29 of 55). The 2017 Amendment established new fee schedules for the following seven years. See Declaration of Mark DeVitre, at ¶ 14 (Dckt. No. 7). The 2017 Amendment went into effect on October 1, 2017, and runs through September 30, 2024. Id. at ¶ 17.
Nielsen agreed to provide services including "audience measurement of Client's Networks (as set forth in the Allocation Grid)" and "confidential estimates of television tuning and viewing in the 50 United States." See 2017 Amendment, Schedule 1, at § A.1 (Dckt. No. 7, at 29 of 55); see also 2017 Amendment, at § 8 () (Dckt. No. 7, at 31 of 55). CF Entertainment, in turn, agreed to pay Nielsen under a specific fee schedule. See 2017 Amendment, Schedule 1 (Dckt. No. 7, at 40-51 of 55).
Schedule 1 to the 2017 Amendment included an accompanying Allocation Grid, a multi-page spreadsheet that set the fee schedule. See 2017 Amendment, Schedule 1, Allocation Grid (Dckt. No. 7, at 40-51 of 55). The Allocation Grid identified the media services and digital services that Nielsen would provide, such as "Nielsen Measurement" services, "Nielsen Information" services, technology services, Digital Content Ratings, and so on. Id. The Allocation Grid also identified the monthly fees that CF Entertainment needed to pay, by yearand by channel. Id. So, for example, the monthly fees for measurement services for Justice Central and Comedy.TV totaled $127,646 (each) in the first year, and climbed to $171,057 by year seven. Id. (Dckt. No. 7, at 40 of 55).
The 2017 Amendment recognized that CF Entertainment's business could continue to expand. The parties agreed on a fee structure for "additional" Cable Networks:
In the event Client requests measurement of one or more additional Cable Networks at any time during the term of this Schedule, each such Cable Network shall be added to this Schedule and receive the Services set forth in Sections A.1, A.3, A.4 and A.5 at a Fee of $41,667 per month for a maximum period of forty-eight (48) months, after which Client shall pay an amount for such Cable Network equal to the Fees set forth in the Allocation Grid for the...
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