In a counterclaim filed in Delaware Court of Chancery, Al Jazeera calls the Gore-Hyatt lawsuit an “attempt at lawyer-coated extortion,” and contends that the duo, in negotiating the sale of the channel, attempted to make a lucrative side deal for themselves.
Al Jazeera rebranded Current TV as Al Jazeera America in August, 2013, after investing in a newsgathering operation in 13 cities.
Al Jazeera argues that the escrow fund — which the company refers to as a “lockbox,” an apparent reference to a phrase that Gore used in his 2000 presidential bid — was intended to indemnify it if any of the sellers’ “representations and warranties proved inaccurate or false.”
Al Jazeera says that after the sale closed, distributors AT&T, DirecTV and Dish Network made claims against Current TV, including that it violated “most favored nation” clauses in contracts that they would get the same terms as other distributors. The exact amount of money involved in the claims were redacted from the Al Jazeera filing.
“The Current TV network only got off the ground, and obtained distribution contracts, because of Gore’s political celebrity and clout,” Al Jazeera said in its 235-page filing. “Even so, the network went through several unsuccessful format changes in seven years, and was on the brink of failure when Al Jazeera decided to buy it.”
“As they were desperately negotiating to sell the network to Al Jazeera, Gore and Hyatt gloated to each other about the ‘windfall’ they were to receive from the sale,” Al Jazeera said.
The purchase price was reportedly $500 million, and, although that figure also was redacted from Al Jazeera’s filing, the company noted that Gore is “reported to have made between $70 and $100 million from the sale.”
Gore and Hyatt contend that they initially harbored “serious reservations” about selling the network to Al Jazeera, but decided to entertain the idea of such a sale after performing due diligence and consulting with former senior U.S. government officials.
But Al Jazeera claims that Gore and Hyatt never expressed such reservations, and that during negotiations, they even tried to make a “side deal” in which Al Jazeera would create an advisory board on which they would serve.
“It was not clear that either Gore or Hyatt would actually perform any services,” Al Jazeera said in its filing. “Gore and Hyatt proposed, as part of the side deal, that they would be paid millions of dollars if Al Jazeera increased its subscribers after the closing or renewed or extended its contracts with existing distributors, whether or not Gore or Hyatt had anything to do with these developments. Gore and Hyatt made clear that the other members of Current media would not share in any of the money to be paid by Al Jazeera under this side deal.”
Al Jazeera contends that it was “extremely uncomfortable” with the proposal because it “smacked of self-dealing,” as some of the purchase price would have been diverted from other Current TV owners to Gore and Hyatt. Al Jazeera claims that after they raised questions about the legality of the proposal, its filing states, Gore and Hyatt withdrew it.
But Gore and Hyatt, in their lawsuit, claim that Al Jazeera tried to “curry favor” with distributors by putting up a weak defense over the disputed distribution agreements. Al Jazeera “would thereby be able to make payments to its distributors to keep them happy without spending a dime of its own money.”
They also call Al Jazeera’s claims that they tried to make a side deal “demonstrably untrue.” They say that it was Al Jazeera that first proposed the side deal, and they rejected it. They noted that the deal was supposed to close on Dec. 31, 2012, but was delayed when Al Jazeera failed to wire funds.
“Our complaint explains how Al Jazeera improperly tried to use our escrow funds to pay the distributors that it wants to carry its channel in the U.S.,” said David Boies, who is representing Gore and Hyatt. “After trying to block our clients’ request that their entire complaint be made public, Al Jazeera has now responded by making false claims to defend its behavior. We are confident that we will prevail when the court hears our case.”
Chris Lehane, a spokesman for Gore and Hyatt, said, “Given that Qatar’s Al Jazeera has now gone from a news organization that had been seeking to prevent news contained in the legal filings from being made public to a news organization that is now fabricating news, is it any wonder that the channel is failing to grow an audience? News is about trust and their filing, which we can demonstrably prove is built on factual misrepresentations and contains outright falsehoods, will further degrade whatever levels of trust Qatar’s Al Jazeera has as a respectable news organization in the U.S.”
Al Jazeera is represented by John Reed and Scott Czerwonka of DLA Piper.