Globalisation of businesses and the use of the internet as a communication norm have contributed to the growth in media deals and disputes. Bigger deals, resulting in mammoth media organisations, and the impact of new laws on businesses, are some of the challenges that lawyers faced in the year 2000.
As the law rapidly changes and grows in this area, The Lawyer has attempted to draw together the top technology and media deals of 2000. The list is subjective, but features deals and cases which set precedents in various ways or contained novel or particularly interesting aspects.
Time Warner merges with AOL
Value of deal: $165bn (112.2bn) on signing at 10 January 2000.
Interesting aspects: This is one of the largest mergers in history. It was structured as a fixed exchange ratio deal so that Time Warner shares were converted to a fixed number of shares in the resulting merged entity, rather than issued in return for a transactional or financial amount. This was a prerequisite for the deal at a time when the bubble was bursting on internet stocks. As a deal protection issue, the merger was structured as one of equals so that neither party was the acquirer. Consequently, stockholder approval of the deal was required from both companies.
The long regulatory timetable for the deal meant that the final regulatory approval was not obtained until early January 2001, even though stockholder approval was obtained in June 2000. Various regulatory approvals were required, including the most complicated from the European Commission and US Federal Trade and Communications Commissions (the latter was required due to Time Warner holding broadcasting licences in the US).
Structurally, one new company has been formed with two subsidiaries, into which the separate businesses of Time Warner and AOL have been preserved and transferred. Post-closing issues are ongoing regarding the organisation and restructuring of the business.
Fees for Cravath Swaine & Moore, around $35m (23.8m), are believed to be the most expensive legal fee for a merger to date. The fees were earned on a contingency basis and had the deal not been successful, Cravaths would have received only nominal fees (The Lawyer, 24 January 2000).
Jurisdictions: Mainly US law for the deal and stock market approvals. EC law and other jurisdictions in Latin America and Asia for regulatory approvals.
Law firms: Cravath Swaine & Moore advised Time Warner. The lead partners were Faiza Saeed and Robert Kindler (now at Chase Manhattan) and the team included litigation partner Robert Joffey and tax partner Lewis Steinberg. In the UK, Herbert Smith advised Time Warner, with Richard Fleck as lead partner.
AOL represented by Simpson Thacher & Bartlett. Lead partner: Richard Beattie. Team included: corporate partners Philip Ruegger and David Sorkin, benefits partner Ken Edgar, competition partner Kenneth Logan and tax partner Steve Todrys. Wilmer Cutler & Pickering’s London, Brussels and Washington DC offices advised on competition aspects outside the US. Lead partner: Thomas Mueller (See The Lawyer, 11 January 2000, 12 June 2000, 17 July 2000 and 22 January 2001.)
Court orders Daily Express journalist to reveal source in Elton John case
Interesting aspects: Freedom of speech and checks to preserve democracy were upheld when the Court of Appeal overturned a first-instance decision in October 2000, which ordered a journalist to reveal her source.
A counsel’s opinion presented to the claimant (regarding other litigation being pursued by Elton John) had been obtained by one of the defendants, journalist Rachel Baird. The case involved intense speculation as to how the opinion had been obtained, and the defendants refused to disclose their source. At first instance, Mr Justice Morland praised Baird’s conduct in the matter, but nonetheless passed a decision requiring disclosure.
Particularly interesting was the test that the then Master of the Rolls Lord Woolf, Lord Justice Pill and Lord Justice May in the Court of Appeal set out to assist courts in determining whether disclosure should be ordered. To require a journalist to reveal a source, the public interest merits must be demonstrated and it must be shown that all other avenues to find the source have been explored. Conflicting public interests of journalists to protect confidential sources and of lawyers to protect legal professional privilege had to be evaluated. Professional legal privilege should not override a journalist’s undertaking to protect a source, unless the public interest and justice required it, according to the Court of Appeal’s judgment.
The Court of Appeal also held that Judge Morland should have attached greater significance to the failure of the chambers, from where the legal opinion was removed, to conduct an internal enquiry.
During the proceedings, the legal opinion was published on the internet by a third party. The claimants were challenged as to what they would do to establish the source, as it provided an alternative means of identifying the culprit.
Leave to appeal to the House of Lords was refused and the petition to the House of Lords rejected.
Law firms: Richards Butler acted for the three defendants. Lead partner and head of media litigation Michael Skrein was supported by Belinda Paisley, a partner in the commercial disputes department. Michael Beloff QC of 4-5 Gray’s Inn Square and Patrick Moloney QC of 1 Brick Court were instructed by Richards Butler for the defendants.
Eversheds represented the claimants (including itself), led by partner Norman Chapman. David Pannick QC of Blackstone Chambers and Neil Calver of Brick Court Chambers were instructed in the Court of Appeal. Anthony Scrivener QC of 2-3 Gray’s Inn Square and Neil Calver were instructed at first instance.
Premier League football rights sold to BSkyB
Value of deal: 1.3bn for the two rights packages sold.
Interesting aspects: The rights to a live football package was sold to BSkyB for just under 1.14bn, which enabled BSkyB to sell on rights to subscribers. The “free to air” package was sold to ITV for 183m. Both deals were for the next three football seasons.
The deal is believed to be the largest sports rights media deal outside the US to date. The impact of digital television and the internet affected how the rights were sold.
To maximise the sale price and ensure a fair and transparent process, the football rights were sold by auction. The deals were signed in July 2000.
Jurisdictions: UK law and EC Competition law.
Law firms: Denton Wilde Sapte advised the Premier League. Media and technology partner Nick West and competition partner Polly Weitzman were assisted by Angus Swainson.
BSkyB’s in-house team handled the deal led by head of legal Deanna Bates. ITV’s in-house team was led by head of legal Simon Johnson.
Stepstone obtains internet hypertext injunction
Interesting aspects: One of the first cases in which the European Directive on the Legal Protection of Databases (the directive) was used to control hypertext links over the internet.
Ofir, a Danish media company, used hypertext links to other online job recruiters, including Stepstone, to market itself as the biggest online job portal in Europe. There was no breach of copyright as there was no copying of the information or database.
Proceedings were served last year and Stepstone obtained an injunction against Ofir using the directive in Cologne on 16 January 2001. The action was undertaken in Germany as Osborne Clarke advised its client, Stepstone, to look at where the harm occurred on application of a tortious test.
The decision generated much concern regarding the ability to use hypertext links, on which the internet is reliant. However, it established that most hyperlinks are legal. Illegality becomes an issue only when the hypertext links are unreasonably prejudicial to the business.
US interest in the case was sparked as North America does not have similar laws to Europe’s directive and is struggling to control prejudicial hypertext links.
Law firms: Osborne Clarke represented Stepstone in London, Paris, Cologne and Copenhagen and coordinated advice from its offices in these jurisdictions. Lead partner Adrian Lifely (litigation in London) was assisted by assistants Georgie Taylor and Vanessa Gidwani. The team also included: Cologne partner Marcus Sacr鬠who advised on German law; Dan Terkildsen, the Copenhagen partner who advised on Danish law; and Paris partner Frederic Lecomte, who advised on French law. Speechly Bircham represented Ofir in the UK.
(See The Lawyer, 19 February 2001, for the first case under the Copyright and Database Regulations 1997.)
Northern & Shell acquires Express Newspapers Group
Value of deal: 125m.
Interesting aspects: Northern & Shell (N&S) acquired the Express Newspapers Group from United News & Media when it purchased three companies and their subsidiaries. Assets of the group which passed over in the sale included the Daily Express and The Daily Star newspapers and half of the Irish Independent Star and half of West Ferry, the largest printing plant in Europe, co-owned with The Daily Telegraph.
The high-profile transaction attracted great media interest, with various third parties calling on the Secretary of State to refer it to the regulatory authorities, given N&S’s ownership of some pornographic publications.
Work for N&S included checking whether any of its publications could be construed as a newspaper, which would require mandatory approval from regulatory authorities under mandatory newspaper regulations.
The deal completed on 22 November 2000. Subsequently, The Daily Telegraph, a bidder for the Daily Express, has exercised pre-emption rights to purchase the Daily Express’ rights in West Ferry. A purchase price cannot be agreed and the matter has been submitted to arbitration.
Law firms: Linklaters & Alliance acted for N&S. Senior assistant Olivia McKendrick, who won The Lawyer Awards 2000 assistant of the year, led on the deal with support from banking partner Gideon Moore, competition partner Michael Cutting and relational partner Nick Eastwell.
Ashurst Morris Crisp advised United News & Media (now United Business Media). Lead partner Chris Ashworth was assisted by senior assistant Andrea Fessler.
Clifford Chance advised Commerzbank, which sought security over parts of N&S and the Express Group, as it was providing some of N&S’s financing for the acquisition.
(See The Lawyer, 27 November 2000.)
Hello! and OK! battle for media rights
Interesting aspects: The groundbreaking case was the first Court of Appeal case to look at privacy under the Human Rights Act 1998. Debate exists as to whether the case introduced a new privacy right or extended the law of confidence (see privacy article page 37).
An action for breach of copyright, breach of confidence, malicious falsehood and interference with contractual relations was issued by Catherine Zeta-Jones, Michael Douglas and OK!. Arising from their exclusive agreement with OK! to publish photographs of their wedding, an interim injunction was sought against Hello! publishing its own “exclusive” photographs of the wedding.
OK! succeeded in obtaining a without-notice injunction against Hello!. However, Hello! applied to overturn the injunction, which it did on an appeal to the Court of Appeal after deadlock between the two judges sitting was resolved in a new three-judge ruling. A small percentage of Hello! had been distributed before the injunction had been obtained, and after the accelerated decision overturning the injunction, Hello! continued distribution of the issue.
About a month later, the Court of Appeal gave its full reasons for overturning the injunction. It held that on the balance of convenience between the two sides, any damage sustained by OK! could be compensated for in damages, but that it would be extremely difficult to quantify loss suffered by Hello! in preventing publication of the issue.
Charles Russell partner Chris Hutchings, who represented Hello!, says: “Each Court of Appeal judge took a different view. Lord Justice Sedley was the most positive regarding privacy rights and Lord Justice Brook took a neutral approach. Lord Justice Keyne mooted the observation of whether Douglas and Zeta-Jones had sold any privacy rights they had, because they’d sold the rights to pictures of the wedding for 1m.”
Confusion arose from some of the press coverage on the outcome of the injunctive relief stage of the case, which claimed a new right of privacy had been created for celebrities. The defendant was successful in overturning the injunction. A determinative ruling on privacy is awaited as the case now proceeds to a full hearing of the claims
Jurisdictions: English and EC law. Lord Justice Sedley referred to possible issues of US trespass law in the taking of the photographs which could be discussed further at a full trial.
Law firms: Charles Russell advised Hello!. Chris Hutchings of the contentious media group led the deal, assisted by assistant Sarah Thomas. At the interim injunction hearings, Charles Russell instructed Henry Carr QC and Giles Fernando, both of 11 South Square.
Theodore Goddard represented OK!, Douglas and Zeta-Jones. Lead partner was Martin Kramer. Barristers instructed were Michael Tugendhat QC and David Sherborne, both of 5 Raymond Buildings.
(See The Lawyer, 27 November 2000.)
Living Marxism sued for libel
Interesting aspects: ITN sued Living Marxism (relaunched as LM) for libel when LM published an article accusing ITN of faking images of a detention camp in Serbian-held Bosnia. The case was significant because, although it occurred amid cases of allegations of various television programmes creating stories themselves, it was the first attack against a news organisation.
It was also significant because, despite controversy about whether journalists should actually litigate, the two journalists were awarded 150,000 each, the maximum amounts which are not open to appeal. ITN was also awarded 75,000. The substantial awards illustrate the recognition of the critical importance of the journalists’ reputations.
Law firms: Biddle (now Pinsent Curtis Biddle) represented ITN. Duncan Lamont of Biddle’s media group led the deal, assisted by Jamie Alkinson. Lamont joined Charles Russell at the beginning of the month, bringing his client ITN with him.
Christian Fisher (a small civil liberties and human rights London practice) represented LM. The lead partner was Mike Fisher.
(See The Lawyer, 5 February 2001, 1 May 2000, 20 March 2000 and 6 March 2000.)
Takenaka brings defamatory email case against Frankl
Interesting aspects: This defamatory email case was the first to go to court where disclosure was ordered against third parties to determine the identity of an anonymous email sender. The disclosure was ordered by Mr Justice Alliot on the basis of the 1974 Norwich Pharmacal v Customs & Excise case, long before the introduction of the internet.
An extensive and laborious tracing exercise was conducted by Theodore Goddard to determine the identity of the sender of the defamatory electronic statements. It started by examining the email headers and recipients to deduce the email route, which took them through a number of jurisdictions where internet service providers (ISPs) were based and where the sender of the email was located. Jurisdiction issues did not arise to the extent that they could have in an internet case, as all litigation and orders relied on were under UK law.
The ISPs resisted disclosure as far as possible, given their reliance on internet customers signing up and relying on confidentiality. The Data Protection Act 1984 was invoked as being a bar to disclosure by some ISPs.
After obtaining orders against various ISPs, including Microsoft and Compuserve, it was discovered that the defamatory emails were sent by a laptop owned by Thames Water assigned for use on a project in Turkey. David Frankl, a former employee of Takenaka, was identified as the sender of the emails to Takenaka.
A joint independent computer expert was appointed to examine the laptop after the defendant denied sending the emails. It was concluded from information resuscitated from the laptop’s hard drive that Frankl did send the emails despite his denials. In his defence, Frankl suggested that the emails could have been sent by remote-control viruses, such as Back Orifice.
Damages of 25,000 were awarded against the individual Takenaka employee libelled in the email. The company was also awarded 1,000 in damages. Costs were awarded against the defendant.
Judgment was given in October 2000. The defendant is currently seeking leave to appeal via an oral hearing after leave was rejected on the papers by Lord Justice Chadwick.
Law firms: Theodore Goddard represented Takenaka and Brian Corfe. The lead partner was Rupert Earle. Justin Rushbrooke of 5 Raymond Buildings was instructed at the hearing. Graham Shipley of 19 Old Buildings was the defendant’s barrister, instructed by Bailey Gibson solicitors.
Pearson, Bertelsmann and Groupe Bruxelles Lambert get together in joint venture
Value of deal: In excess of 12bn.
Interesting aspects: Largest European broadcasting company, created from a massive joint venture between Pearson, Bertelsmann and Groupe Bruxelles Lambert (GBL), called RTL Group (listed on the London Stock Exchange).
Pearson transferred its television content into RTL (previously Audiofina). RTL, a Bertelsmann subsidiary, was used as the combination vehicle for the venture and owned a stake in European television and radio group CLT-Ufa. Bertelsmann contributed its shareholding in CLT-Ufa for a shareholding in the new venture company. As the largest shareholder, it owns 37 per cent of the enlargened share capital of RTL. Pearson owns 22 per cent, GBL 30 per cent and the minority holding is held by public shareholders.
The primary listing for RTL was transferred from Luxembourg to London. The deal is unusual in that it created a joint venture with a minority holding. It is also unusual to have a foreign company with its primary listing in London and for a London-listed company to have such a small minority listing. Given the size of the company this was permitted. The deal was completed in July 2000.
Bertelsmann has since agreed to buy GBL’s shareholding, subject to competition and regulatory approvals, in exchange for a minority holding by GBL in Bertelsmann.
Jurisdictions: English, Luxembourg and EC competition law.
Law firms: Freshfields Bruckhaus Deringer acted for Pearson. Will Lawes was lead partner on the deal. The team included: corporate partners Barry O’Brien and Rod Carlton; tax partner Timothy Ling; employment, pensions and benefits partners Simon Evans and Daniel Schaffer; and Brussels partner David Broomhall.
Slaughter and May advised Bertelsmann and GBL. Lead partner Charles Randall was assisted by corporate partner Padraig Cronin and tax partner Gareth Miles.
Jeanette Winterson brings Icann case against cyber-squatter
Interesting aspects: Author Jeanette Winterson brought proceedings under the Internet Corporation for Assigned Names and Numbers (Icann) dispute resolution procedure against a cyber-squatter who had registered her name as a domain name. The cyber-squatter, Mark Hogarth, offered to sell the domain name to Winterson in return for a royalty of 3 per cent on all sales made from her website.
The case was the first Icann cyber-squatting case to deal with rights in a celebrity’s own name and which was successful. Under the Icann rules, the complainant must establish the domain name is the same or confusingly similar to their trademark. Winterson did this by relying on her own name and trademark rights subsisting in her name.
Jurisdiction: Uniform Dispute Resolution Policy (UDRP) adopted by Icann with four service providers established to hear UDRP disputes. The World Intellectual Property Organisation (Wipo) is one such provider, whose remit it was to hear this case. Individuals purchasing domain names are contractually bound to abide by any ruling under UDRP.
Law firms: Bird & Bird represented Jeanette Winterson. Lead partner Morag McDonald was assisted by Rob Williams. Hogarth did not instruct lawyers. n