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Time Warner Cable, Inc. v. Networks Group

September 9, 2010


The opinion of the court was delivered by: Denise Cote, District Judge


In this action, plaintiff Time Warner Cable, Inc. ("Time Warner") has sued The Networks Group, LLC ("Networks"), Turner Media Group, Inc. ("TMG"), Gary Turner ("Turner"), and six limited liability corporations that will be referred to as the "Televisual Entities"*fn1 for, inter alia, breach of contract. The complaint includes a breach of contract claim against Turner as an alter ego of TMG and Networks. It also includes successor liability allegations against the Televisual Entities. Turner and the Televisual Entities have moved to dismiss the complaint for failure to plead either alter ego status or successor liability adequately. For the following reasons, the motion is denied.


A. The Programming Agreement

Networks, a company that the parties agree is "defunct" and "no longer operating," was in the business of providing transactional programming, which the plaintiff describes as television programming that includes infomercials, home shopping programming, and other similar content. Networks is a wholly-owned subsidiary of TMG, which is similarly defunct. Turner is or was, at all relevant times, CEO and Chairman of both Networks and TMG. Turner and his wife, Staci Turner, each own 47.5% of TMG. Turner's uncle, Dan Starr ("Starr"), owns the remaining five percent of the company.

On June 26, 2006, Networks entered into a contract with Time Warner, a cable television company. Under the terms of the Turner Media Group Master Transactional Programming Distribution Agreement ("Programming Agreement"), Networks agreed to pay Time Warner to distribute programming content provided by Networks via the cable systems Time Warner operated around the country. Among the channels to be distributed pursuant to the Programming Agreement were "The Men's Outdoors and Recreation Channel" and "The Resort & Residence Channel." TMG provided a "Provider Parent Guarantee" signed by Turner as CEO/Chairman of TMG, which guaranteed the performance of Networks' obligations under the Programming Agreement. The Programming Agreement contains a choice of law provision selecting New York law and laying venue in a New York court.

Time Warner began to distribute Networks' content in June 2006, and sent monthly invoices of approximately $200,000 to Networks for payment. Networks made only two payments before Time Warner ceased distributing its programming in August 2007. In their answer to the amended complaint, Networks and TMG have admitted liability for breaching the Programming Agreement, disputing only the amount of damages.

B. The Short-Lived Bankruptcy Proceedings

On August 5, 2007, TMG and Networks, along with another company operated by Turner, filed for Chapter 11 bankruptcy in Colorado. Time Warner was involved in the jointly-administered proceedings as a creditor. On August 27, Networks filed a motion to set aside the Programming Agreement.*fn2 A short time later, the bankruptcy trustee filed a motion to dismiss the bankruptcy cases. The ground for dismissal was that the bankrupt entities had chosen not to file documents that would have been necessary to cure deficiencies in their petitions. The motion to dismiss was granted on September 4, and the bankruptcy cases were closed on October 4 without the motion to set aside the Programming Agreement having been decided and without discharging the companies' debts.

C. The Televisual Entities

In late August 2007, Turner informed Time Warner's counsel in the bankruptcy proceedings that he would be starting a new programming company shortly. Turner said that he planned to pay back Networks' debt to Time Warner in the hope that Time Warner would agree to do business with the new company.

In September and October 2007, Turner founded the six Televisual Entities. The only individuals identified in the registration documents filed with the Secretaries of State as associated with the Televisual Entities are Turner, Staci Turner, and Kevin J. O'Toole ("O'Toole"), the individual who acted as a registered agent for Networks and TMG. Starr is alleged to own indirectly some stake in the Televisual Entities. All of the Televisual Entities except Media Holdings*fn3 listed the same street address as TMG for their principal places of business in their registration documents, and later changed their addresses to the current address on file for Networks.*fn4

The Televisual Entities produce lifestyle, entertainment and recreational cable channels. According to its website, Media Works (one of the Televisual Entities) has "interests in a comprehensive suite of digital interactive television networks targeting specifically defined demographics highly sought after by advertisers and distributors." The website explains that Media Works is owned by the founders of TMG. Media Works' website describes the business of TNW, another of the Televisual Entities, as follows:

TV Net Works owns and operates a portfolio of highly-targeted television channels that use a flexible format to reach specific demographics and viewer enthusiasts. The networks combine targeted programming with interactive advertising and transactional shopping components, which allow viewers to request information, and get an in-depth look at products and services, all through their remote control. TV Net Works' interactive channels begin launching in Q3 2009 and will reach over 50 million homes in 2010.

Among the channels available on TNW are the Men's Outdoors and Recreation Channel and the Resort & Residence Channel, two of the channels distributed by Time Warner ...

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