Sunbeam Television v. Columbia Broadcasting System, 88-1046-CIV.

• Decision Date: 25 August 1988
• Docket Number: No. 88-1046-CIV.,88-1046-CIV.
• Citation: 694 F. Supp. 889
• Parties: SUNBEAM TELEVISION CORP., Plaintiff, v. COLUMBIA BROADCASTING SYSTEM, INC., National Broadcasting Co., General Electric Property Management, Co. of Florida, Inc., WBC Broadcasting Co., and Alan Perris, Defendants.
• Court: U.S. District Court — Southern District of Florida

694 F. Supp. 889

SUNBEAM TELEVISION CORP., Plaintiff, v. COLUMBIA BROADCASTING SYSTEM, INC., National Broadcasting Co., General Electric Property Management, Co. of Florida, Inc., WBC Broadcasting Co., and Alan Perris, Defendants.

No. 88-1046-CIV.

United States District Court, S.D. Florida, Miami Division.

August 25, 1988.

Michael Nachwalter, Miami, Fla., Allan Milledge, Coral Gables, Fla., for plaintiff.

Joel S. Perwin, Miami, Fla., Jerome J. Shestack, Philadelphia, Pa., for NBC, Gen. Elec., WBC and Alan Perris.

William B. Killian, Miami, Fla., for CBS.

MEMORANDUM OPINION AND ORDER OF REMAND

SPELLMAN, District Judge.

THIS CAUSE comes before the Court upon Plaintiff's Motion for Remand. The background of this case, in brief, is as follows. The Plaintiff is the owner of a local South Florida television station, WSVN (Channel 7), which has been affiliated with Defendant NBC for around 25 years. The Plaintiff alleges that its long-standing relationship was a "joint venture," and that the continuation of this relationship was a prerequisite for the Plaintiff's future economic success.

In 1984, FCC regulations changed permitting national networks to own up to 12 local stations, servicing no more than 25% of household serviceable.¹ The national networks quickly and fervently began to compete for ownership of successful local stations.

In late 1985, a non-citizen of Florida, KKR, Inc., which possessed both a cable network operating in South Florida and, through its wholly-owned Florida subsidiary, Defendant WBC, a local television station WTVJ (Channel 4), was forced by FCC regulations to sell one of these two interests. KKR chose to divest itself of WBC and its local station, WTVJ, which had been affiliated with Defendant CBS.

Plaintiff alleges that KKR and Lorimar-Telepictures entered into a tentative contract for the purchase of WTVJ for $405 million. Subsequently, as the CBS/WTVJ contract allowed, upon change of local station ownership, CBS had the right to terminate the affiliation relationship upon 180 days notice to WTVJ prior to January 1, 1989—the contract's termination date. CBS allegedly threatened to terminate its affiliation with WTVJ, thereby substantially reducing the local station's value, if the local were not sold to it at a substantially reduced price. This thwarted the Lorimar purchase as Lorimar had contemplated purchasing a nationally affiliated local station.

Plaintiff alleges, CBS abused its right of termination to coerce KKR into selling WTVJ to CBS at a price substantially below its market value (as evidenced by Lorimar-Telepicture's offer of $405 million), specifically at prices of $170, $190, or $230 million. The average of these prices is approximately $197 million—less than half that agreed to by Lorimar. Needless to say, CBS's threat to terminate seriously reduced the value of WTVJ as an unaffiliated local commands far less for advertising and programming than does a local affiliated with one of the three national networks. To demonstrate that its termination threat was not a bluff, CBS obtained an option to buy WCIX (Channel 6), a local station with which CBS would affiliate itself if Plaintiff did not comply with CBS's demands.²

Thus, Plaintiff alleges that KKR and/or WBC realized that the only way to circumvent or to minimize the undervaluation of WTVJ's sale would be to solicit its sale to one of the other two national broadcasting companies—NBC the present affiliate of WSVN—Plaintiff's former station. The pleadings and memoranda do not assert why National Network ABC was not solicited to compete with Defendant NBC, thereby introducing some element of competition into the sales transaction and conceivably resulting in a higher price, even if less than the $405 offered by Lorimar. The unexplained fact that only one of two comparable bidders was contacted, and that a sale was ultimately consummated at a price substantially below its market price, suggests the possibility of collusion between the parties named. By virtue of the limited number of nationals (three) in the television market, a national has a great deal of bargaining power and control of relationships and agreements between itself and local affiliate stations or their owners.

On January 16, 1987, NBC "and another subsidiary of GE" (presumably Defendant GEPMC of Florida, Inc.) allegedly announced that, subject to FCC approval (which was granted in September of 1987), they had agreed to purchase WTVJ (and its direct owner, KKR subsidiary Defendant WBC) from KKR for $270 million. NBC notified WSVN that its affiliation will be terminated as of January 1, 1989. Thus, WSVN will be without an affiliate for the first time in 25 years. NBC's purchase of WTVJ's at KKR's (or perhaps WBC's) solicitation, has rendered WSVN less valuable in that it is a less desirable vehicle for advertising and programming.

The Plaintiff's continued financial success was allegedly dependent upon the continuation of the 25 year affiliation relationship between WSVN and NBC. Moreover, NBC, which now has conflicting interests in the short term profitability of WSVN (with which it is affiliated until January 1, 1989) and the long term profitability of WTVJ (which it owns with Defendant GEPMC of Florida, Inc., although the station is affiliated with one of its two chief competitors and airs programming that directly competes with that of WSVN for audience share), has operated WTVJ to the benefit of NBC and GEPMC of Florida, and to the detriment of the Plaintiff and WSVN.

Subsequent to the NBC/KKR sales agreement, it is alleged that CBS did not terminate its affiliation with WTVJ, now owned by its chief competitor, NBC. Nor did it challenge the sale before the FCC. As a result, since September of 1987, NBC has owned and operated one local station, WTVJ, affiliated with its competitor, CBS, which airs CBS programming directly in competition with the NBC programming presently being aired by WSVN under its affiliation contract with NBC which is still valid until the end of the year.

The Plaintiff alleges that in the course of purchasing WTVJ, NBC agreed or conspired with CBS that each would allow the other to become its affiliate in local television markets in order to facilitate the purchase of local stations at prices lower than those that would prevail in an open and competitive market. CBS has subsequently conditioned an affiliation agreement with WSVN upon the sale of the local to CBS and has threatened to purchase and affiliate with WCIX should WSVN refuse.

Florida Equitable Bill of Discovery

The Plaintiff instituted this proceeding as a "Pure Bill of Discovery," seeking no monetary damages or injunctive relief, but merely what it alleges to be necessary and otherwise unavailable information to enable it to identify the proper parties against whom and the proper legal theories under which to subsequently sue for relief to which it is allegedly entitled under the facts of the case. The Defendants removed this action to Federal Court claiming both the existence of Diversity and Federal Question Jurisdiction. The Plaintiffs contest both grounds of Federal Jurisdiction and seek to remand.

Although the proposition has not been dealt with frequently in recent years, Florida Courts have specifically stated that the Florida Civil Rules of Discovery do not extinguish the long-standing and distinct right to file a Bill of Discovery in equity, that under the proper circumstances, permits a Plaintiff to seek nothing more than otherwise unavailable information necessary to enable the Plaintiff to continue in the prosecution of, or to institute a suit for relief under a cognizable theory against the appropriate defendants. See First National Bank of Miami v. Dade-Broward Co., 125 Fla. 594, 171 So. 510 (1937); National Car Rental v. Sanchez, 349 So.2d 829 (Fla. 3d DCA 1977) (explicitly finding the filing of a pure bill of discovery "viable in Florida," though not maintainable under the facts at bar); ADKINS & JONES, Florida Civil and Criminal Discovery, section 1-4 (2d ed 1976) (noting the availability of this avenue of relief despite the existence of Fla.R. Civ.P. 1.350).

The general requirements of a bill of discovery are as follows:

The complaint must show that the disclosure of facts which it seeks is necessary to enable the plaintiff to maintain his cause of action or defense in a suit pending or about to be brought in another court, and that the cause of action or defense is legally sufficient. Discovery cannot be had of facts material only to the cause of action or defense of the adverse party, nor where the facts, if disclosed, would not support a cause of action or defense at law. The complaint must also show a present interest of both the plaintiff and defendant in the subject matter, for such a complaint cannot be maintained by a stranger or against a witness. The particular matters as to which discovery is sought must, of course, be set out clearly and definitely.

ADKINS & JONES, supra, at 10 (citing First National Bank).

The viability of the bill is further supported by Fed.R.Civ.P. 34(c), on which the analogous Florida rule of Discovery is based, and which provides "This rule does not preclude an independent action against a person not a party for production of documents and things and permission to enter upon land." The applicable Advisory Committee notes clearly state that this rule was not intended to preempt equitable bills in discovery.

For the purposes of this Motion to Remand, the Court will treat the bill as a distinct Florida proceeding in determining whether it has subject matter jurisdiction over this case. The Court need not reach the merits of whether the Bill will survive a Motion to Dismiss, but seeks to determine whether it has jurisdiction over the matter in the first instance.

The Plaintiff lists several potential claims to which it contends the discovery sought in the bill would be relevant and critical....