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Telecom Sues AMC for ‘Strong-Arm’ Tactics

MANHATTAN (CN) - "Breaking Bad" maker AMC canceled a distribution agreement without reason or notice, and threatened to withhold content to hike fees, Telus Communications claims in court.

Telus sued American Movie Classics IV Holding Corp. in Federal Court to stop it from canceling transmission by the end of the month.

Also named as defendant is Hibernia Media, a New Jersey-based content transport service provider that transmits AMC's content to Telus.

Telus, a Canadian telecom based in British Columbia, licenses television programming content from AMC and distributes it to subscribers. It claims AMC sent it a notice of cancellation after it resisted renegotiating the terms of a February 2010 distribution agreement to extract higher fees.

Telus says AMC tried to terminate the contract, which is valid until Dec. 30, 2014, without proper notice, and failed to give it 30 days to cure the alleged default, as required by the agreement.

It claims it nevertheless fulfilled its obligations, which are redacted from the complaint, as are information about fees and subscribers.

Telus says AMC is using strong-arm tactics to pressure it and other distribution partners to accept less favorable terms and pay higher carriage fees.

"While the vast majority of AMC's content is classic movies, AMC has developed a small roster of successful original programming in recent years," the complaint states. "In particular, two series that began before the execution of the agreement, 'Mad Men' and 'Breaking Bad,' have achieved new levels of popularity, and a new series, 'The Walking Dead,' has become AMC's highest-rated program ever.

"However, because the continued popularity of any television series is far from guaranteed, AMC recognizes that it is now in a unique position to demand high rates. Indeed, two of AMC's top programs are ending: the last 'Breaking Bad' episode aired on Sept. 29, 2013, and 'Mad Men' is slated to wrap up in early 2015.

"Seeking to capitalize on what it realizes may be fleeting success, AMC has publicly expressed dissatisfaction with carriage rates AMC receives from its licenses with television distributors, claiming that those rates do not reflect the popularity of the programming."

AMC "embarked on an aggressive campaign" to get higher fees from distributors, which ignited disputes with major partners such as DISH Network and AT&T, according to the complaint.

Telus says it tried to reach a new deal with AMC, but negotiations broke down after AMC sought to rewrite terms to its advantage.

It claims the alleged default is a transparent attempt to force Telus to accept the deal AMC failed to negotiate.

"When Telus did not immediately capitulate to AMC's strong-arm tactics, AMC went a step further, threatening to unilaterally communicate to Telus' subscribers that the service would soon be terminated," the complaint states. "If Telus does not agree to new contract terms by today, Friday, Oct. 11, 2013, AMC claims that beginning this Sunday, Oct. 13, 2013 during the season premiere of its most popular show, 'The Walking Dead,' AMC will broadcast a scrolling message, or 'crawl,' at the bottom of the television content feed seen by Telus' subscribers, announcing an imminent service cancellation. This is not an empty threat: AMC has deployed similar damaging public relations efforts in past disputes with other distributors."

Telus seeks an injunction and damages for breach of contract and good faith.

It is represented by Michael Elkin with Winston & Strawn.

Elkin declined to comment on the lawsuit.

AMC's cult zombie horror series, "The Walking Dead," drew its largest-ever audience last weekend, with 16.1 million people watching the series premiere, according to Reuters.

The company won an Emmy last month for best drama for "Breaking Bad," a series about a meth-dealing high school teacher who turns to a life of crime after being diagnosed with inoperable cancer.

AMC did not reply to a request for comment.

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