The Qatar-based broadcaster said the allegations, made in August 2014, were false and potentially misleading. It maintained that contractual protections agreed during the January 2013 acquisition entitled it to seek compensation for liabilities arising from Current TV’s operations before the takeover.
Gore and Hyatt, who founded Current TV, accused Al Jazeera of improperly withholding $65 million belonging to the channel’s former shareholders. Their lawsuit, filed in Delaware’s Court of Chancery, sought the release of funds held in escrow under the acquisition agreement.
Al Jazeera countered that the money had been reserved to protect the purchaser against claims involving contractual obligations undertaken by Current TV before ownership changed.
The broadcaster said third parties had alleged breaches of agreements dating from the period when Gore and Hyatt controlled the channel. It argued that the sellers had provided assurances concerning compliance with those agreements and accepted responsibility for specified liabilities.
Al Jazeera America maintained that its indemnification claims exceeded the money remaining in escrow. It said the acquisition agreement permitted funds to be retained while those claims were addressed.
Gore and Hyatt disputed that interpretation. Their lawyer, David Boies, accused Al Jazeera America of attempting to reduce the effective purchase price after completing the transaction.
Boies said the former shareholders were seeking judicial intervention to recover money they considered rightfully theirs. The plaintiffs maintained that Al Jazeera’s claims against the escrow account were improper and violated the merger agreement.
The disagreement concerned the conditions governing the release of money rather than whether the acquisition itself had taken place. Both sides acknowledged the transaction, but challenged each other’s interpretation of the contractual safeguards.
Under the arrangement, part of the purchase consideration was deposited with an independent escrow agent. The funds were intended to cover qualifying claims arising after completion, with any unused balance payable to the sellers.
Court filings established that $85 million had initially been placed in escrow. Approximately $20 million was subsequently released, leaving $65 million contested between the parties.
Al Jazeera submitted five indemnification claims concerning alleged breaches of representations and warranties provided during the acquisition. Hyatt, acting as representative of the former shareholders, rejected those demands.
The broadcaster subsequently filed counterclaims in September 2014, arguing that Hyatt had breached the merger agreement by rejecting valid claims. It sought to prevent distribution of the disputed funds while the underlying contractual issues remained unresolved.
Several allegations concerned provisions in Current TV’s distribution agreements requiring favourable contractual treatment for certain television distributors. Al Jazeera maintained that the sellers had misrepresented compliance with those provisions.
The former owners challenged the validity of the claims, leaving the Delaware court to examine the contractual language and obligations accepted by the parties.
A separate dispute subsequently arose over responsibility for legal expenses incurred by Gore and Hyatt while defending Al Jazeera’s counterclaims.
Delaware Vice Chancellor Sam Glasscock III examined whether the acquisition agreement required Al Jazeera-related entities to honour provisions governing the advancement of legal costs to former Current TV directors and officers.
The court distinguished between Gore and Hyatt’s original action seeking escrow funds and their defence against counterclaims connected with their former corporate responsibilities.
Its 2016 decision addressed entitlement to advancement of legal expenses, rather than determining the ultimate merits of every allegation concerning the acquisition.
A separate proceeding over fee advancement and indemnification rights was settled in September 2016, according to filings in Delaware. That settlement should not be confused with a judicial finding establishing the original fraud allegations.
The transaction had enabled Al Jazeera to establish a dedicated American news operation using Current TV’s distribution arrangements. Al Jazeera America launched in August 2013, replacing the acquired channel.
The broadcaster subsequently closed its American television operation in April 2016, citing economic conditions and the intensely competitive US television market.
Current TV had been established by Gore and Hyatt in 2005 as an alternative cable television service. Its sale transferred the channel’s distribution relationships and other assets to Al Jazeera, while leaving the former shareholders subject to contractual obligations specified in the merger agreement.
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