Opinion ID: 2155881
Heading Depth: 1
Heading Rank: 3

Heading: Scope of the Right of First Refusal

Text: We turn next to the question whether USA's purported exercise of its right of first refusal was a match of the relevant and material terms of the deal between Viacom and WWFE with respect to the Series, as proffered to USA. The threshold issue is the scope of the right of first refusal under the Agreement, [10] which provides as follows: 5. The term hereof shall commence on September 28, 1998 and shall end on September 23, 2001 (the Term). Notwithstanding the foregoing, either party hereto may terminate this Agreement as of September 24, 2000, for any reason whatsoever, by written notice to the other, delivered between March 1, 2000 and March 31, 2000. In no event, however, may [WWFE] enter into any arrangement, understanding or agreement with any such third party with respect to any or all of the three Series without first giving to USA a right of first refusal, exercisable within ten (10) business days following receipt by USA of written notice detailing the terms of the third party offer(s), as to any such offer(s) which [WWFE] intends to accept. If USA does not meet such offer(s), [WWFE] will not enter into an Agreement with such third-party on terms less favorable to it than those contained in the offer(s) without again affording USA a first refusal as above provided. [11] The proposed Viacom transaction with WWFE was a package deal that included other arrangements beyond the Series. The Court of Chancery held, in USA's favor, that the language with respect to any or all of the three Series [12] in paragraph 5(b) defining the scope of the right of first refusal was intended as restrictive language. [13] This holding is consistent with New York law. [14] As a result, the Court of Chancery held that USA must match all terms contained in a third party offer directly related to the Series itself. The Court went on to hold: For example, USA must match terms detailing scheduling of the Series, licensing fees for the Series, advertising splits for the Series, and terms establishing the length of the contract for the right to distribute the Series. USA need not match terms of a third party offer that relate to other subject matters. Other subject matters include the XFL, theme park events, and motion pictures, for example. [15] In reaching this conclusion, the Court applied the plain meaning rule, interpreting the language of paragraph 5(b) in the context of the overall instrument. [16] The Court went further and held, alternatively, that the same outcome would prevail in the context of the parol evidence adduced at trial. Accordingly, the Court of Chancery rejected the contention of WWFE and Viacom that USA was obliged to match all provisions of the April 2, 2000 proposal, including the extraneous provisions. [17] We believe the interpretation of the scope of the right of first refusal by the Court of Chancery was clearly correct as a matter of law. The relevant issues, of course, are: What are the material terms within the scope of the Series and did USA match all of them? Determination of the matching issues is a mixed question of law and fact. To the extent that the determination rests on findings of fact, we defer to the findings of the Court of Chancery if they are supported by the evidence and are the product of a logical deductive process. [18] Questions of law we determine de novo. [19]