Lincoln Financial Media Co. v. CBS Broadcasting, Inc.

Citation: 316 F. App'x 235Docket: No. 08-1478

Court: Court of Appeals for the Fourth Circuit; March 10, 2009; Federal Appellate Court

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In 1996, CBS Broadcasting Incorporated (CBS) entered into Affiliation Agreements with Jefferson-Pilot Communications Company (Jefferson-Pilot) to provide network television to two of Jefferson-Pilot’s stations. As part of these agreements, CBS agreed to an annual promotional payment of $400,000 to Jefferson-Pilot, documented in a Letter Agreement. In 2005, following a merger of Jefferson-Pilot Corporation with Lincoln National Corporation, Jefferson-Pilot rebranded as Lincoln Financial Media Company (Lincoln Financial). After the merger, CBS stopped the promotional payments, prompting Lincoln Financial to file a declaratory judgment action in the U.S. District Court for the Western District of North Carolina, asserting the Letter Agreement remained valid. The district court ruled in favor of Lincoln Financial, confirming the Letter Agreement's binding nature and ordering CBS to pay $800,000 in past promotional payments plus prejudgment interest. CBS appealed the decision, which was affirmed by the appellate court. 

The Affiliation Agreements mandated CBS to provide programming for WBTV and WCSC-TV for fifteen years and included conditions regarding notifications of control transfers to the Federal Communications Commission (FCC). The Letter Agreement specified the promotional payment arrangement and noted that this obligation would cease if Jefferson-Pilot assigned or transferred any interest in either station. CBS made the required payments from 1996 until 2005, despite a transfer of the WBTV license to a new subsidiary in 2003 and FCC approval for that transfer.

In October 2005, Jefferson-Pilot Corporation merged with Lincoln National Corporation, retaining 100% ownership and broadcast licenses for its subsidiaries, Jefferson-Pilot Communications/WBTV, Inc. and WCSC, Inc. Jefferson-Pilot transferred its ownership to a newly formed holding company, Lincoln JP Holdings, LP, where Lincoln National held a 99.9% interest. On December 14, 2005, Jefferson-Pilot notified CBS of the merger, and CBS later expressed no objections. The merger was completed on April 3, 2006, with Jefferson-Pilot becoming a subsidiary of Lincoln JP Holdings, LP and changing its name to Lincoln Financial, while maintaining ownership of the stations.

Subsequently, Lincoln Financial requested a $400,000 promotional payment from CBS for 2006, which CBS refused, claiming the merger transferred any interest in the stations and allowed them to terminate the promotional agreement. Lincoln Financial filed a lawsuit on February 6, 2007, seeking a declaratory judgment and damages for unpaid promotional payments for 2006 and 2007. The parties agreed to cross-motions for summary judgment without discovery in July 2007. 

On March 3, 2008, the district court ruled in favor of Lincoln Financial, determining that the merger did not transfer any interest in WBTV or WCSC, thereby affirming the binding nature of the promotional agreement. The court awarded Lincoln Financial $800,000 plus prejudgment interest. CBS appealed, and the appellate court has jurisdiction under 28 U.S.C.A. § 1291. The summary judgment is reviewed de novo, with the standard that it is appropriate when there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law.

CBS's obligation to make promotional payments under the Letter Agreement is void only if Jefferson-Pilot assigns or transfers interests in either station. The district court clarified that following the acquisition of Jefferson-Pilot Corporation by Lincoln National, Jefferson-Pilot became a subsidiary of Lincoln National and changed its name to Lincoln Financial. However, this merger did not constitute an assignment or transfer of interests in the stations, as Jefferson-Pilot did not assign anything during the merger, only its name was altered.

CBS argued that the merger's change in ownership nullified the promotional payment obligation under the Letter Agreement. While the merger did change Jefferson-Pilot's parent company, the agreement stipulates that payments terminate only if Jefferson-Pilot itself transfers interests, not based on its corporate parent's status. The court found the contractual language clear and unambiguous, rejecting CBS's appeal to consider external evidence of intent. Additionally, the historical relationship between CBS and Jefferson-Pilot remained intact post-merger, supporting the conclusion that the promotional payments were still valid.

The district court granted Lincoln Financial's motion for summary judgment, affirming that both Lincoln JP Holdings, LP and Lincoln JP Company, LLC were absorbed into Lincoln National Corporation in March 2007. Jurisdiction was established under 28 U.S.C.A. § 1332, with CBS as a New York corporation and Lincoln National as an Indiana corporation, and Lincoln Financial as a North Carolina corporation. The amount in controversy exceeded $75,000. Although there was a dispute over which state's law governed the interpretation of the Letter Agreement, CBS and Lincoln Financial agreed there was no significant difference between New York and North Carolina law, leading the district court to avoid a resolution on the choice of law.