Vici Racing, LLC v. T-Mobile United States, Inc.

Decision Date13 August 2014
Docket Number13–1780.,Nos. 13–1615,s. 13–1615
Citation763 F.3d 273
PartiesVICI RACING, LLC, Appellant in 13–1780 v. T–MOBILE USA, INC., Appellant in 13–1615.
CourtU.S. Court of Appeals — Third Circuit

OPINION TEXT STARTS HERE

John D. Lowery, Esquire, Gavin W. Skok, Esquire, Seattle, WA, James C. Martin, Esquire, (Argued), Colin E. Wrabley, Esquire, Pittsburgh, PA, Peter J. Walsh, Jr., Esquire, Jennifer C. Wasson, Esquire, Wilmington, DE, Counsel for Appellant in 13–1615, (Cross Appellee in 13–1780).

Juan C. Antorcha, Esquire, Joseph P. Klock, Jr., Esquire, (Argued), Coral Gables, FL, Christopher D. Loizides, Esquire, Wilmington, DE, Counsel for Appellee in 13–1615, (Cross Appellant in 13–1780).

Before: AMBRO, GREENAWAY JR., Circuit Judges, and BAYLSON *, District Judge.

OPINION OF THE COURT

BAYLSON, District Judge.

I. Introduction

This appeal arises out of a contract dispute between VICI Racing LLC (VICI), the owner of a sports car racing team, and T–Mobile USA, Inc. (T–Mobile), a telecommunications company that agreed to be a corporate sponsor of the sports car team. Appellant/Cross–Appellee T–Mobile appeals a $7 million judgment entered against it in the District Court for the District of Delaware. After a bench trial, the District Court ruled that T–Mobile breached a contract with Appellee/Cross–Appellant VICI and awarded VICI $7 million in damages. On appeal, T–Mobile argues that it should not have been held liable for any damages arising out of the contract and is instead entitled to damages. VICI filed a cross-appeal, seeking an additional $7 million pursuant to what it contends is a liquidated damages clause in the contract.

II. Background

VICI is the former operator of a sports car racing team that competed in the American Le Mans Series.1VICI Racing, LLC v. T–Mobile USA, Inc., 921 F.Supp.2d 317, 320 (D.Del.2013). T–Mobile owns and operates a wireless telephone service including automobile-based wireless telephone service. J.A. 887.

Beginning in March 2009, VICI President Ron Meixner entered into discussions with T–Mobile executives about sponsoring the VICI team for the 2009, 2010, and 2011 Le Mans racing seasons. VICI Racing, 921 F.Supp.2d at 320. Meixner informed T–Mobile that a “sponsorship would be economically valuable for T–Mobile because VICI could offer T–Mobile to be the network service provider for the VW/Audi Group and Porsche AG Telematics services.” Id. (internal quotation marks and citation omitted).2 A number of discussions were held within T–Mobile about the financial opportunities associated with providing telematics services to VW, Audi, and Porsche, as well as how the Agreement with VICI would secure that business. See id. at 321–22.

A. The Agreement

On March 30, 2009, T–Mobile and VICI entered into a Sponsorship Agreement (the “Agreement”). J.A. 894. The Recitals section of the Agreement states that T–Mobile agrees to sponsor VICI and that VICI and T–Mobile “desire to promote and maintain their respective corporate images and reputations through participation in the 2009, 2010 and 2011 American LeMans race seasons.” Id. at 887. The Agreement required VICI to field one T–Mobile–sponsored Porsche racecar during the 2009 season and two T–Mobile–sponsored Porsche racecars during each of the 2010 and 2011 seasons. Id. at 887. The Agreement also required VICI to display T–Mobile's logo and trademark on its racecars, trailers, uniforms, and other promotional items. Id. at 888–89.

Additionally, section 5.8 of the Agreement provides that “VICI grants to [T–Mobile] the right to be the exclusive wireless carrier supplying wireless connectivity for the Porsche, Audi and VW telematics programs beginning in model year 2011 with such exclusivity continuing throughout the Term of this Agreement.” Id. at 888. The meaning and relevance of section 5.8 were a hotly disputed issue at trial.

As for T–Mobile, section 4 of the Agreement required it to make the following payments to VICI:

2009 Race Season: $1,000,000.00 payable by April 1, 2009; 3

2010 Race Season: $7,000,000.00 payable by January 1, 2010; and

2011 Race Season: $7,000,000.00 payable by January 1, 2011.

Id. at 887–88.

The Agreement also contains three other provisions that are relevant to this appeal. Section 13.2 of the Agreement is a force majeure clause. According to that provision,

[i]f a party's performance of any non-monetary obligation under this Agreement is prevented by any condition wholly beyond such party's control, the affected party will be excused from such performance, provided the affected party: (a) provides prompt written notice of such interference, the nature of such interference and the expected duration of such interference to the other party; and (b) resumes performing its obligations hereunder promptly following the removal of such interfering condition. The other party will be relieved from performing its obligations under this Agreement for the duration of such interference. Such delay or failure shall not constitute a breach of this Agreement....

Id. at 893.

Section 14.7 of the Agreement is a severability clause, which provides

[t]he provisions of this Agreement are severable and, if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions, and pay partially enforceable provisions to the extent enforceable, shall nevertheless be binding and enforceable, and such illegal or otherwise unenforceable provisions shall be replace[d] by such valid provisions which come closest to the purpose and intent of this Agreement

Id. at 893.

Finally, section 11 of the Agreement has a provision under the heading “Limitation of Liabilities.” Section 11.2 of that provision provides in all capital letters

[t]he maximum aggregate liability of either party and any of its affiliates to the other party, and the exclusive remedy available in connection with this agreement for any and all damages, injury, losses arising from any and all claims and/or causes of action, shall be limited to $20,000 or the aggregate payments payable under this agreement, whichever is higher....

Id. at 892 (some capitalization omitted).

B. The “Telematics” Collaboration

As the District Court's findings of fact detail, beginning in April 2009, Meixner worked with T–Mobile to secure “telematics” business from VW, Audi, and Porsche. For example, Meixner helped set up meetings for T–Mobile with the President and CEO of Porsche Motorsports North America, provided the contact information of fifteen “key people in telematics” at VW, VICI Racing, 921 F.Supp.2d at 325 (citation omitted), and helped pitch T–Mobile's services at a meeting with VW. Id. at 324–26. T–Mobile, however, complained that things were “moving a little slower than [it] would like.” Id. at 325 (citation omitted).

C. The Accident

On July 18, 2009, T–Mobile's sponsored racecar sustained engine and body damage from an accident while racing. Id. On August 2, 2009, Meixner sent a letter to T–Mobile's President and legal department notifying them about the accident. In the letter, Meixner stated that the racecar would not be able to race for 45 to 60 days while it was undergoing repairs. A T–Mobile executive responded by expressing his displeasure that the repairs would mean guests of T–Mobile would not see the T–Mobile racecar compete in an upcoming race. Id.

D. Termination of the Agreement

On January 5, 2010, Meixner sent T–Mobile a notice of default, indicating that T–Mobile had failed to pay the $7 million due under the Agreement by January 1, 2010. Id. at 327. On January 7, 2010, T–Mobile sent a letter to Meixner terminating the Agreement, claiming that VICI materially breached the contract because

VICI made a material representation and warranty (Section 5.8) that VICI had the authority to bind Audi, VW and Porsche ... to an obligation making [T–Mobile] the exclusive wireless carrier supplying wireless connectivity for the ... telematics programs beginning in model year 2011. As it turns out ... VICI does not have and has never had the authority to grant such rights ... or to contractually bind Audi and VW in that regard.... VICI has not provided any other real support to T–Mobile to assist us in meeting that objective.

In addition, we note that VICI failed, without justification or prior notice to [T–Mobile], to race ... at one key event where [T–Mobile] was present with business guests.

Id. (alterations in original).

E. Proceedings in the District Court

On September 30, 2010, VICI filed suit in the District of Delaware against T–Mobile, claiming that T–Mobile breached the Agreement when it failed to pay VICI $7 million on January 1, 2010 and seeking $14 million in damages. T–Mobile asserted, as an affirmative defense and counterclaim, that VICI did not perform its obligations under the contract (1) by failing to race during the period the T–Mobile–sponsored car was damaged and (2) by failing to provide T–Mobile with telematics business to three automakers. T–Mobile also alleged fraudulent inducement and equitable fraud against VICI.

Prior to trial, the parties filed a “joint proposed pretrial order.” This document is divided into several sections where each party listed its own statement of disputed facts, disputed issues of law, and a statement of what the parties intended to prove. Id. at 78.

At the bench trial, VICI's evidence and contentions on damages were exclusively dedicated to the argument that section 11.2 was a liquidated damages clause that fixed the amount of damages at $14 million. T–Mobile did not contest VICI's characterization of section 11.2. It also did not assert as an affirmative defense, nor argue at trial, that VICI failed to mitigate its damages. Rather, T–Mobile relied on the argument that section 5.8 (the telematics provision) was an essential term of the Agreement—that is, if section 5.8 was found to be unenforceable, then the entire Agreement would be unenforceable. Because the Agreement would...

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