Opinion ID: 602079
Heading Depth: 4
Heading Rank: 3

Heading: Distribution term

Text: 24 The provisions regarding the distribution term are particularly confusing. Both Agreements give MGM/UA distribution rights for a period of ten years after the Picture's first general release. Paragraph 13 of the Financing Agreement gives the parties joint control over any ... disposition whatsoever of the Picture upon expiration of the distribution term. After the distribution term, either party could invoke the buy-or-sell provision. However, [n]otwithstanding anything to the contrary ... United's sole and exclusive distribution and exploitation rights would continue unless and until the Producer exercised that option. The Special Master concluded that the notwithstanding provision logically could not have been intended to extend MGM/UA's distribution term beyond the specified ten years and found that a strict reading of the clause would totally vitiate the express ten-year term for which the parties had negotiated. He found instead that the clause was intended to continue only UA's status as a distributor. 25 The Special Master also noted that the ten-year distribution term had been inserted in place of UA's original in perpetuity language, and that the notwithstanding provision had not been the subject of extensive discussion and resolution (unlike other provisions). Since MGM/UA had drafted the Agreements, he construed the language against them, and found no parole evidence to support MGM/UA's interpretation. Finally, he noted that the Financing Agreement was ancillary to the Distribution Agreement, and that it would have been unusual for an ancillary agreement to expand drastically the rights contained in the main agreement. 26 The Distributors assert that the notwithstanding clause is the governing provision. The Producer had the ability, by exercising the buy-or-sell option, to limit MGM/UA's distribution term to ten years; otherwise the term would continue indefinitely. The parties would have joint control in the sixty days after the Producer decided to exercise the buy-or-sell option. Because the Producer has not exercised the option, the Distributors claim that they continue to have exclusive distribution rights. 27 Although the Distributors argue otherwise, their interpretation of the notwithstanding provision leaves the ten-year term and the joint control provision almost meaningless. Furthermore, these terms are not patently subordinate to the buy-or-sell provision. The Producer also points to documents and testimony in which MGM/UA employees indicated, both internally and to third parties, that the right to distribute the Picture expired after ten years. The Special Master's interpretation gives meaning to all of the relevant provisions and does not reach the level of clear error.