Charter Asks 5th Circuit to Reject Cable-Royalty Obligations Under 1964 Tex. Agreement

The 5th U.S. Circuit Court of Appeals should affirm the district court’s “sound, thorough, and well-reasoned” declaratory judgment absolving Charter Communications of any further monetary obligations under a 1964 revenue-sharing cable-permit agreement signed by the predecessor companies of Charter and Prewitt Management, said Charter’s responding appellee brief Thursday (docket 23-50419).

The appeal involves the interplay between the 2005 Texas Cable Act and the 1964 agreement in which Charter’s predecessor acquired permits from Prewitt’s predecessor to provide cable service to the Central Texas cities of Waco, Temple and McGregor (see 2309060033). The agreement obligated Charter’s predecessor to make quarterly royalty payments to Prewitt based on its gross revenue derived from cable services in those cities.

The Texas Cable Act changed the regulatory landscape such that the state, not the cities, would issue permits to provide cable service. The statute included a “saving clause” to account for existing contractual obligations such as those in the 1964 agreement. Prewitt argues that through the saving clause, existing contractual obligations were preserved, notwithstanding the change from city-issued cable permits to state-issued permits.

But Prewitt wrongly argues Charter’s payment obligation “is perpetual” under the savings clause “and not bound by any durational limit,” said Charter’s appellee brief. The 1964 agreement “expressly” limits Charter’s payment obligation to the life of the city permits, it said. When the city permits were terminated by the Texas Cable Act, their lives “necessarily came to an end, as did Charter’s payment obligation,” it said. Prewitt’s interpretation would turn the savings clause into a “perpetual money for nothing windfall,” it said.

Prewitt’s arguments “are all mistaken, and none can alter the plain and unambiguous text” of the 1964 agreement and the Texas Cable Act, which the district court “correctly interpreted and applied,” said Charter’s appellee brief. With its appeal, Prewitt seeks to have the 5th Circuit “sign off on perpetual payments for specific city permits that were terminated decades ago,” it said.

Prewitt pushes the “novel theory” that Charter must still pay the Prewitt heirs “for wholly separate state-issued certificates of franchise authority,” said the appellee brief. But Charter obtained those franchise authority certifications “on its own, many decades later,” it said. It did so “under a fundamentally different franchise regime intended to terminate such local cable permits, and with no assistance from Prewitt or his heirs whatsoever,” it said.