Children's Broadcasting Corp V. Walt Disney Company

• Decision Date: 16 February 2000
• Docket Number: No. 99-1813,99-1813
• Citation: 245 F.3d 1008
• Parties: (8th Cir. 2001) CHILDREN'S BROADCASTING CORPORATION, A MINNESOTA CORPORATION, PLAINTIFF - APPELLANT, v. THE WALT DISNEY COMPANY, A DELAWARE CORPORATION; ABC RADIO NETWORKS, INC., A DELAWARE CORPORATION, DEFENDANTS - APPELLEES. Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1008

245 F.3d 1008 (8th Cir. 2001)

CHILDREN'S BROADCASTING CORPORATION, A MINNESOTA CORPORATION, PLAINTIFF - APPELLANT, v. THE WALT DISNEY COMPANY, A DELAWARE CORPORATION; ABC RADIO NETWORKS, INC., A DELAWARE CORPORATION, DEFENDANTS - APPELLEES.

No. 99-1813

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: February 16, 2000

Filed: April 10, 2001

Appeal from the United States District Court for the District of Minnesota. [Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Before McMILLIAN, Lay, and John R. Gibson, Circuit Judges.

John R. Gibson, Circuit Judge.

Children's Broadcasting Corporation appeals from an order of the district court that set aside a jury verdict for Children's on its claims for breach of contract and misappropriation of trade secrets against ABC Radio Networks, Inc. and The Walt Disney Company. The court concluded that Children's had not presented sufficient evidence of causation and damages. In addition to granting judgment as a matter of law for ABC Radio and Disney, the district court granted their alternative motion for a new trial. We reverse the grant of judgment as a matter of law and affirm the grant of a new trial limited to the issue of damages. We also affirm the district court's pre-trial grant of summary judgment against Children's on four claims.

In the early 1990s, Children's created Radio AAHS, a 24-hour radio format aimed at children age twelve and under and their parents. Also during that time period, ABC Radio considered starting a children's radio network and approached Disney with a proposal. At that time, Disney decided not to go forward.

By 1995, Radio AAHS was reaching around thirty percent of the United States through company-owned and affiliated radio stations. Early that year, Children's solicited ABC Radio to become its strategic partner, and executives from the two companies discussed options. ABC Radio's plan to invest in Children's stalled after Disney announced in July that it was purchasing Capital Cities/ABC, Inc., the parent corporation of ABC Radio. Bob Callahan, the president of ABC Radio, informed Christopher Dahl, the president of Children's, that ABC Radio would not be investing in other companies pending the outcome of the Disney purchase. After waiting a while, Dahl approached ABC Radio to see if the two companies could work out a deal.

In November 1995, Children's and ABC Radio entered into a letter agreement under which ABC Radio agreed to provide certain services for Radio AAHS, including advertising sales, affiliate development, and consulting. Children's agreed to pay ABC Radio $25,000 per month for services plus commissions on advertising sales. Children's also gave ABC Radio a warrant to buy Children's stock. Although ABC Radio agreed that it would not represent any third-party children's radio formats without Children's consent, the contract specifically provided that ABC Radio could represent "any format developed by ABC, its parent, subsidiary or affiliated companies, as constituted now and in the future." Both parties agreed to keep information developed during the term of the agreement confidential and to use this information only for the purposes of the agreement. The agreement was terminable at will upon ninety days written notice by either party.

Around the same time ABC Radio entered into the agreement, it was considering entering the children's radio field with Disney. In January 1996, the two companies had not yet decided to enter the market, but they continued to make plans for a network called Radio Disney throughout the first half of 1996. Disney acquired Capital Cities/ABC, Inc. on February 6, 1996.

On June 21, 1996, ABC Radio executives David Kantor and Scott McCarthy met with executives of Children's in Minneapolis. Kantor informed them that ABC Radio was considering developing its own children's radio network, and he invited Children's to become a "superaffiliate," carrying Radio Disney programming instead of Radio AAHS programming. Dahl rejected this offer.

On June 27, Callahan sent a memo to Michael Eisner and Michael Ovitz recommending the development of a children's radio network, beginning with a four-month test period of Radio Disney in three markets. By letter dated July 25, ABC Radio notified Children's that it was terminating the contract. The ninety-day notice period expired on October 24, and the Radio Disney test began on November 18. Children's continued to broadcast Radio AAHS until January 1998.

Children's brought this suit on September 26, 1996, alleging a variety of claims, among them fraud, breach of contract, misappropriation of trade secrets, breach of fiduciary duties, and negligent misrepresentation. Children's moved for leave to amend its complaint to seek punitive damages; the district court denied this motion. After discovery, ABC Radio and Disney moved for summary judgment, and the district court granted this motion on all but three claims. These claims (breach of contract for failure to use reasonable efforts to sell advertising and develop affiliates, breach of the contractual duty of confidentiality, and misappropriation of trade secrets) were tried to a jury in a three-week-long trial.

The jury found that ABC Radio breached the contract with respect to advertising sales and confidentiality and awarded $20 million to Children's for this breach. The jury rejected Children's claim that ABC Radio breached the affiliate development provision of the contract. The jury also found that two of the seven items submitted by Children's as trade secrets were valid trade secrets: a list of Children's advertisers sold and proposed and their rates and Children's techniques and processes for Radio AAHS programming. The jury found that ABC Radio and Disney had misappropriated only the advertiser list, awarding Children's $10 million from ABC Radio and $10 million from Disney on this claim. The jury determined that ABC Radio's breach of contract was not a material breach. ¹

ABC Radio and Disney moved for judgment as a matter of law or, in the alternative, a new trial. The district court found that the evidence supported the jury's finding that ABC Radio breached the contract and that ABC Radio and Disney misappropriated the advertiser list, but concluded that Children's had not presented sufficient evidence of causation or damages.

In reaching its conclusion about causation, the district court discussed primarily the testimony of Stephen Willis, one of Children's experts. It concluded that Willis's testimony was nothing more than speculation; that it lacked any credible analysis to support his causation theory; and that no facts supported his conclusions. The court found that Children's offered no evidence that any particular breach or misappropriation was the direct cause of a specific amount of damages. In addition, according to the district court, Willis failed to address other factors that may have limited the success of Radio AAHS.

The district court further found that Children's failed to present reliable evidence of damages. It concluded that Willis's testimony that Children's was damaged in the amount of $177 million was based on unreliable financial projections that were created with an assumption that Children's would have a long-term relationship with ABC Radio and that did not take into account the fact that Radio AAHS had to compete with Radio Disney. Thus, the court found that Willis's damages projections went so far beyond realistic optimism as to be "fairy-tale-like." The jury had no other evidence on which to base a damage award, according to the district court, and it was forced to resort to speculation and conjecture. The court therefore granted judgment as a matter of law to ABC Radio and Disney.

The district court also granted a conditional new trial on the issues of causation and damages. The district court stated that the reasoning supporting its grant of judgment as a matter of law applied to the motion for new trial, that the findings on causation and damages were unsupported by the evidence, and that the verdict conflicted with the weight of the evidence. It also stated that it had erred by allowing Willis's testimony to stand and that this testimony had tainted the trial, thus requiring a new trial.

I.

We review a grant of judgment as a matter of law de novo, viewing the evidence in the light most favorable to the nonmoving party while giving that party the benefit of all reasonable inferences. Van Steenburgh v. Rival Co., 171 F.3d 1155, 1158 (8th Cir. 1999). Judgment as a matter of law is warranted only when all the evidence points in one direction and no reasonable interpretations support the jury's verdict. Mears v. Nationwide Mut. Ins. Co., 91 F.3d 1118, 1122 (8th Cir. 1996); see also Fed. R. Civ. P. 50(a)(1).

The district court upheld the jury's findings of breach and misappropriation, and ABC Radio and Disney do not appeal these determinations. We agree that Children's presented evidence from which a reasonable jury could conclude that ABC Radio breached its contractual duties with respect to advertising sales and confidentiality and that ABC Radio and Disney misappropriated a list of Children's advertisers. We conclude the district court erred, however, by determining that ABC Radio and Disney were entitled to judgment as a matter of law on the issues of causation and damages. ²

A.

Children's presented evidence that ABC Radio's breach of the contract caused damage. Dahl testified that Children's was relying on ABC Radio to sell advertising. Willis testified that ABC Radio's failure to exercise reasonable efforts in advertising sales led to a decline in Children's revenues. Lynne Gross, an expert who testified on Children's behalf, concluded that if ABC Radio failed to perform under the contract, as it related to both affiliate development and advertising...