Home Shopping Club, Inc. v. Roberts Broadcasting Co.

• Decision Date: 28 July 1998
• Docket Number: No. 73196,73196
• Citation: 989 S.W.2d 174
• Parties: HOME SHOPPING CLUB, INC., Plaintiff/Respondent, v. ROBERTS BROADCASTING COMPANY, Defendant/Appellant.
• Court: Missouri Court of Appeals

Page 174

989 S.W.2d 174

HOME SHOPPING CLUB, INC., Plaintiff/Respondent, v. ROBERTS BROADCASTING COMPANY, Defendant/Appellant.

No. 73196.

Missouri Court of Appeals,

Eastern District,

Division Two.

July 28, 1998.

Glenn E. Davis, Jordan B. Cherrick, Jennifer S. Lohman, Armstrong, Teasdale, Schlafly & Davis, St. Louis, for appellant.

Gerald P. Greiman, Daniel V. Conlisk, Francis X. Neuner, Jr., Dankenbring, Greiman, Osterholt & Hoffmann, P.C., St. Louis, for respondent.

CRANE, Presiding Judge.

Plaintiff Home Shopping Club (HSC), a broadcast network, brought an injunction action against defendant Roberts Broadcasting Company (Roberts), a broadcast television station, to enforce the parties' television affiliation agreement in which Roberts agreed to broadcast HSC programming during specified time periods. Roberts appeals from the judgment of the trial court permanently enjoining it from preempting HSC's broadcasts in the agreed time periods with any paid "infomercial" or commercial advertising programing until the affiliation agreement terminates on March 31, 2003. We affirm.

FACTUAL BACKGROUND

HSC is a broadcast network which markets goods and services through live television broadcasts twenty-four hours a day, seven days a week to affiliated broadcast television stations, cable television systems, and satellite dish receivers. Roberts is located in St. Louis, Missouri and operates FCC-licensed UHF broadcast television stations.

Roberts, as licensee of television station WHSL, Channel 46, in East St. Louis, Illinois, and HSC entered into a television affiliation agreement (the Agreement) on August 27, 1989. As amended, the Agreement continues through March 31, 2003. The Agreement recites that Roberts "has determined that the public interest, convenience and necessity would be served by its broadcast of the HSC PROGRAM SERVICE." It provides that Roberts will broadcast HSC programming at a set hourly rate during the following time periods:

Monday through Saturday: Midnight to 11:59 PM

Sundays: Midnight to 6:00 AM and 10:00 AM through 11:59 PM

The Agreement further provides that HSC will make available to Roberts five minutes per hour in which Roberts can broadcast local programming and commercials of its own choosing.

The Agreement provides that HSC will pay compensation for its programming as follows:

STATION compensation shall be $190 per hour for each hour HSC programming is carried. It is understood that HSC will compensate STATION only for those hours it airs HSC programming....

HSC reserves the right to evaluate and change at anytime STATION'S hourly compensation rate as set forth herein. Any increase in STATION'S compensation shall become effective on the date specified in HSC'S notice to STATION. Should HSC decrease STATION'S compensation below that set forth herein, HSC shall notify STATION in writing at least 90 days prior to the effective date of such reduction, but in any event, HSC shall not reduce STATION'S compensation below $182 per hour prior to March 31, 1998 In addition, the Agreement contains a "Right of Refusal" clause which gives Roberts the right to refuse any HSC programming that it "reasonably believes to be unsatisfactory or unsuitable or contrary to the public interest" or to substitute programming that it believes is of "greater local or national importance":

unless STATION is in breach of this Agreement.

16. RIGHT OF REFUSAL. Nothing herein contained shall be construed to prevent or hinder STATION from rejecting or refusing such portions of the HSC PROGRAM SERVICE which STATION reasonably believes to be unsatisfactory or unsuitable or contrary to the public interest or substituting a program which in STATION'S opinion is of greater local or national importance. STATION shall provide HSC with prompt telegraphic notification of any such refusal, rejection or substitution.

The Right of Refusal clause is based on the FCC's "Right to Reject" Rule contained in 47 C.F.R. Section 73.658(e) which provides:

(e) Right to reject programs. No license shall be granted to a television broadcast station having any contract, arrangement, or understanding, express or implied, with a network organization which, with respect to programs offered or already contracted for pursuant to an affiliation contract, prevents or hinders the station from:

(1) Rejecting or refusing network programs which the station reasonably believes to be unsatisfactory or unsuitable or contrary to the public interest, or

(2) Substituting a program which, in the station's opinion, is of greater local or national importance.

The Agreement also provides that, where applicable, federal, state and local law, including FCC rules and regulations, governs the contract.

Roberts has been the exclusive broadcast carrier of HSC programming in the St. Louis area since 1989. From 1989 through early 1996, Roberts broadcast HSC programming as set out in the Agreement.

In a letter dated May 4, 1996, Roberts unilaterally announced to HSC that it would "experiment with other programming" and undertake "a gradual reduction in [HSC] programming." The only reason given for this decision was that Roberts felt HSC had taken an action which breached the Agreement. During June of 1996, Roberts preempted approximately 150 hours of HSC programming. During July, August, and September, Roberts preempted approximately 167, 183, and 177 hours, respectively, of HSC programming. Other than the May 4 letter, Roberts has not given HSC any notice of preemptions and has never given telegraphic notification of any refusal, rejection or substitution as required by the agreement.

Roberts substituted paid "infomercials" for the HSC programs. Many of these were programs of approximately 30 minutes in length advertising various products or services for sale and soliciting viewers to call a toll-free number to make a purchase using a credit card. Examples included the Ab Sculptor, the Juice Man, George Foreman's Lean Mean Fat Grilling Machine, Prolong lubricants, Vanna White's Perfect Smile tooth whitening system, Viper Bite golf equipment, and the Ronco Food Dehydrator. Others were paid religious programming such as Jerry Falwell's The Old Time Gospel Hour and The Awakening Hour.

Roberts received broadcast fees of $500 to $1,100 per hour from broadcasting these paid "infomercials." Michael Roberts, Chairman and Chief Executive Officer of Roberts, testified that over a ten month period Roberts could generate an additional $400,000 to $1,000,000 by preempting HSC programming in favor of "infomercials." Michael Roberts testified that Roberts preempted some of the HSC programming because the HSC programming was redundant and it wanted to diversify its programming format. He testified that the "infomercials", which sold one product in a half hour time slot, sold products that were helpful to the community along with good advice or in-depth information about the product and services being offered. He specifically responded to the following questions as follows:

Q Can you tell us specifically which, if any, of [the factors in paragraph 16] you are relying on for the preemptions here?

A Well, I find that the redundancy of the program and monotony of the program had become unsatisfactory and I'd like to see--I felt that it would be in the best interest of our station to create some diversity and break the monotony.

Q So are you telling us you're relying on the "unsatisfactory" language?

A That's one. I also feel that the diversity of the programming is of greater local importance. I feel that it offers more in depth subject matter within an electronic retailing format environment.

HSC continued to pay Roberts the agreed $190 for each hour of HSC broadcast on WHSL. HSC did not reduce its payments to Roberts because of the preemptions. HSC contends that it could not calculate its alleged losses from preemption with any certainty.

TRIAL COURT PROCEEDINGS

HSC filed a verified petition for injunctive relief in which it asked the trial court to enjoin Roberts from preempting HSC's programming. After preliminary and permanent injunction hearings, the trial court found that Roberts was breaching the agreement by preempting HSC programming in favor of more lucrative paid "infomercials" and commercial advertising programming without a reasonable belief that HSC's programming was unsatisfactory or that the substitute programming was of greater local or national importance. In its Findings of Fact the trial court specifically found:

14. As a matter of fact, defendant has not rejected plaintiff's programming because defendant "reasonably believes [it] to be unsatisfactory or unsuitable or contrary to the public interest," nor has defendant substituted programs which in defendant's opinion are of greater "local or national importance." Defendant has preempted plaintiff's programming solely for economic reasons. The Court rejects as not credible the testimony adduced by defendant suggesting that substitute programming was of special interest to viewers in the St. Louis area, or that defendant was motivated by the religious or cultural interests of its viewers in preempting plaintiff's programming.

It concluded that the Right of Refusal clause did not confer a right to reject for wholly economic reasons and in particular, did not give Roberts the right to seek out and substitute more lucrative "infomercials" and commercial advertising programming in lieu of HSC's programming. It permanently enjoined Roberts from:

broadcasting over station WHSL, Channel 46, any paid 'infomercial' or commercial advertising programming (defined as programming advertising or promoting the sale or purchase of property, goods, or services, or solicitation of contributions for any purpose, but excluding paid political announcements), other than that supplied by plaintiff Home Shopping Club, Inc., until March 31, 2003; provided, that defendant may substitute at any time any programming,...