A contract to produce a television series is not a personal services contract and may be assumed and assigned, according to a July 9 opinion by Bankruptcy Judge John P. Mastando, III of New York.
The corporate debtor had a contract with a cable TV channel to produce eight seasons of documentaries. Halfway through the contract, the debtor filed a chapter 11 petition and sold all of its assets to a consortium of three secured lenders who held almost $500 million in debt. The lenders had formed a corporate acquisition vehicle to be the purchaser.
The debtor filed a motion to assume and assign the production contract to the purchaser. The TV network agreed that the contract was executory but objected, contending it was a contract for personal services that can’t be assumed under Section 365(c).
The section provides that a “trustee may not assume or assign any executory contract . . . if — (1)(A) applicable law excuses a party, other than the debtor, to such contract or lease from accepting performance from or rendering performance to an entity other than the debtor or the debtor in possession.”
The contract required the debtor to produce and deliver eight seasons of documentaries. Judge Mastando said that the contract gave the network “approval rights over creative elements and key personnel involved in creating the” series but did “not identify specific individuals required to produce the” series.
The outcome of the objection was controlled by California law, which precludes the assumption of personal services contracts. However, Judge Mastando said that objections to assignability are “narrowly construed.”
For starters, Judge Mastando said that courts “applying California law have found the fact that a party contracted with a corporation as evidence that a contract is not for personal services.” On the other hand, contracts “to serve as a general manager and artist recording contracts are contracts for personal services.”
The debtor pointed out that the contract did not identify specific individuals to perform the services. In addition, the acquiror said that its business plan called for retaining existing management and key employees. Judge Mastando said that the requirements of the contract “are not sufficiently specific to qualify as personal services.”
Although management contracts can be personal services contracts, Judge Mastando said that it was not a management contract because the provisions were “indicative of a contract for the creation and delivery of a product rather than the management of a project.”
Judge Mastando granted the motion to assume and assign.
A contract to produce a television series is not a personal services contract and may be assumed and assigned, according to a July 9 opinion by Bankruptcy Judge John P. Mastando, III of New York.
The corporate debtor had a contract with a cable TV channel to produce eight seasons of documentaries. Halfway through the contract, the debtor filed a chapter 11 petition and sold all of its assets to a consortium of three secured lenders who held almost $500 million in debt. The lenders had formed a corporate acquisition vehicle to be the purchaser.
The debtor filed a motion to assume and assign the production contract to the purchaser. The TV network agreed that the contract was executory but objected, contending it was a contract for personal services that can’t be assumed under Section 365(c).