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Note: Licensor, DTVLA WC Inc., entered into agreements with Televisa S.A. de C.V., to sublicense broadcast rights to certain matches of the 2002 FIFA World Cup soccer tournament via free terrestrial television in Mexico. Because Sublicensee's affiliated satellite television network competed directly with Licensor's similar network, the parties agreed to a "blackout" of these stations.

The agreement was contained in two writings which were executed contemporaneously, a Sublicense Agreement and a Letter Agreement. The Letter Agreement contained the details of the blackouts and was incorporated by reference into the Sublicense Agreement. The Sublicense Agreement contained an arbitration clause that provided:

"All controversies and claims relating, related to or arising out of this agreement that cannot be resolved by good-faith negotiations ('Arbitrable Disputes') shall be resolved only by final and binding arbitration conducted privately and confidentially in Los Angeles, California, metropolitan area by a panel of three arbitrators ... ."

The Letter Agreement, however, did not provide for arbitration. It provided:

"For any aspect herein related to the interpretation, fulfillment and judicial requirement of the obligations of Televisa hereto, this Letter Agreement shall be governed by and construed in accordance with the applicable laws of Mexico and Televisa and DTVLA expressly and irrevocably submit themselves to the jurisdiction and competence of the courts of Mexico City, Federal District, irrevocably waiving any other jurisdiction to which they might be entitled due to their present or future domiciles for all disputes related to or arising out of the obligations of Televisa hereunder."

Sublicensee also provided a standby in the amount of US$ 10,000,000. The standby provided that:

"THIS IRREVOCABLE STAND BY LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICE 1998, INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 590 ('ISP') AND AS TO MATTERS NOT ADDRESSED TO ISP IS SUBJECT TO THE LAWS OF MEXICO AND TO THE JURISDICTION OF THE COURTS OF MEXICO CITY, MEXICO."

During the course of the series, Licensor accused Sublicensee of failing to observe the blackout requirements of the Sublicense Agreement. Accordingly, it drew down the letter of credit, and, pursuant to the terms of the Sublicense Agreement, served a demand for American Arbitration Association arbitration seeking declaratory relief and a judgment for an additional US$ 10,000,000.

Claiming that the provisions in dispute were contained in the Letter Agreement which did not provide for arbitration, Sublicensee filed this action in the federal courts in Los Angeles, California pursuant to its terms. The parties filed cross motions, with Licensor moving to compel arbitration and Sublicensee moving to enjoin the arbitration.

The U.S. District Court for the Central District of California, Baird, J., issued an order compelling arbitration and denying Sublicensee's request for injunction. On appeal, the U.S. Court of Appeals for the Ninth Circuit, Beezer, J., Goodwin, J. and Schwarzer, J., in an opinion by Beezer, J., affirmed. On further reconsideration, the appellate court, in a per curiam opinion, withdrew its opinion for lack of appellate jurisdiction, allowing the trial court decision to stand.

[JEB/mjsv]

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