Espn, Inc. v. Office of Com'R of Baseball
| Decision Date | 23 November 1999 |
| Docket Number | No. 99 CIV 3225(SAS).,99 CIV 3225(SAS). |
| Parties | ESPN, INC., Plaintiff, v. OFFICE OF THE COMMISSIONER OF BASEBALL, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Eric J. Lobenfeld, Robert A. Schwinger, Jonathan M. Sobel, Chadbourne & Parke LLP, New York, NY, for Plaintiff ESPN.
Robert J. Kheel, Willkie Farr & Gallagher, New York, NY, Robert A. DuPuy, Foley & Lardner, Milwaukee, WI, for Defendant Baseball.
This is a contract dispute between ESPN, Inc. ("ESPN"), an all-sports cable television network, and The Office of Major League Baseball ("Baseball"), which acts on behalf of the Major League Baseball clubs. In 1996, the parties entered into a telecasting agreement (the "1996 Agreement") pursuant to which Baseball granted ESPN the right to telecast regular season major league baseball games on its primary cable service. In exchange, ESPN agreed, among other things, to pay Baseball yearly rights fees and to produce baseball game telecasts on Wednesday and Sunday nights during the regular season.
The 1996 Agreement includes two provisions that are the primary focus of this litigation. The first is a representation by ESPN that "it has not made nor will it make any contractual or other commitments that conflict with or will prevent full performance [of the 1996 Agreement]." 1996 Agreement, Ex. O to 10/15/99 Affidavit of Robert J. Kheel, attorney for Baseball ("Kheel Aff."), at 60. The second provision permits ESPN to preempt up to ten baseball games a season with Baseball's prior written approval, which may not be unreasonably withheld. The preemption provision states:
With the prior written approval of Baseball, which shall not be unreasonably withheld or delayed, ESPN may ... preempt any [Baseball game telecast] hereunder, up to a maximum of ten [Baseball game telecasts] per year, for an event of significant viewer interest.
Id. at 48-49. Pursuant to this provision, Baseball may telecast the preempted baseball games on its secondary cable service, ESPN2. Id. at 49 & 1997 Amendment.
On January 13, 1998, ESPN entered into a telecasting contract with the National Football League ("NFL") whereby ESPN obtained the rights to broadcast regular season NFL games on Sunday nights. See JPTO at 23, 38. On January 30, 1998, ESPN requested Baseball's approval to telecast NFL games in place of baseball games on three Sunday nights in September 1998. See id. at 23, 43. Baseball declined to approve ESPN's request. See id. at 23, 44. Despite Baseball's disapproval, however, ESPN substituted NFL games for baseball games on the three Sunday nights in question. See id. at 25, 45. Baseball refused to allow ESPN to broadcast the preempted baseball games on ESPN2. See id. at 25, 41-42.
This exact series of events repeated itself in January 1999, when ESPN again sought Baseball's approval to replace three baseball games scheduled for Sunday nights in September 1999 with football games. See id. at 25, 45. Baseball denied ESPN's preemption request; ESPN preempted the three September 1999 baseball games in favor of football games; and Baseball refused to allow ESPN to broadcast the preempted games on ESPN2. See id. at 26-27; 45.
In April 1999, Baseball terminated the 1996 Agreement contending that ESPN had materially breached the contract. In response, ESPN commenced the instant litigation in which it alleges that Baseball materially breached the contract by (i) unreasonably withholding its approval of ESPN's preemption requests in 1998 and 1999; (ii) precluding ESPN from broadcasting the preempted baseball games on ESPN2; and (iii) improperly terminating the parties' agreement. See id. at 3. ESPN seeks damages and declaratory and injunctive relief. See id.
Baseball has asserted counterclaims against ESPN in which it alleges that ESPN materially breached the 1996 Agreement by (i) entering into a "conflicting" contract with the NFL; (ii) preempting Baseball games in 1998 and 1999 without ESPN's prior written approval; and (iii) utilizing highlight footage of baseball games in excess of the amount authorized by the 1996 Agreement. See id. at 4. Baseball also seeks damages and declaratory and injunctive relief. See id.
On October 15, 1999, the parties moved in limine to preclude the admission of certain evidence and argument at their forthcoming trial. Ten separate motions — five by Baseball and five by ESPN — were fully submitted on October 29, 1999. The following constitutes the Court's ruling on six of the ten motions in limine. The remaining four motions will be the subject of separate orders or rulings from the bench.
In its Amendment Answer to Baseball's counterclaim, ESPN asserts the affirmative defense of "election of remedies". By this motion, Baseball seeks to preclude ESPN from asserting such a defense.
The doctrine of "election of remedies" provides as follows:
When a party materially breaches a contract, the non-breaching party must choose between two remedies — [it] can elect to terminate the contract and recover liquidated damages or [it] can continue the contract and recover damages solely for the breach. A party can indicate that [it] has chosen to continue the contract by continuing to perform under the contract or by accepting the performance of the breaching party. Once a party elects to continue the contract, [it] can never thereafter elect to terminate the contract based on that breach, although [it] retains the option of terminating the contract based on other, subsequent breaches.
Bigda v. Fischbach Corp., 898 F.Supp. 1004, 1011-12 (S.D.N.Y.1995) (citations omitted). See also Apex Pool Equip. Corp. v. Lee, 419 F.2d 556, 561-63 (2d Cir.1969) ) (quoting Emigrant Indus. Sav. Bank v. Willow Builders, 290 N.Y. 133, 145, 48 N.E.2d 293 (1943)); Inter-Power of New York, Inc. v. Niagara Mohawk Power Corp., 259 A.D.2d 932, 686 N.Y.S.2d 911, 913 (3d Dep't 1999) ").
ESPN contends that because Baseball accepted full performance by ESPN for the 1998 and 1999 seasons, it elected to continue the 1996 Agreement and therefore cannot seek termination of the contract based on any alleged breaches by ESPN during those years. According to ESPN, Baseball can only seek damages for ESPN's alleged breaches of the 1996 Agreement.
To the extent Baseball seeks termination based solely on ESPN's 1998 contract with the NFL or its preemption of three baseball games in 1998 — assuming that those acts constitute material breaches of the 1996 Agreement — the election of remedies defense bars such relief. That is, with respect to both of the alleged 1998 breaches, Baseball continued to perform and continued to accept performance under the 1996 Agreement for more than a year, and thus it lost its right to terminate for those breaches. See Inter-Power of New York, Inc., 686 N.Y.S.2d at 913 "); see also Lazard Freres & Co. v. Crown Sterling Management Inc., 901 F.Supp. 133, 136 (S.D.N.Y.1995) (same); V.S. Int'l, S.A. v. Boyden World Corp., 862 F.Supp. 1188, 1196 (S.D.N.Y.1994) (same).
Baseball concedes that it "continued performance of the 1996 Agreement after ESPN's 1998 breach" but claims that its ability to terminate the agreement based on those breaches is preserved by the contract's broadly worded "no waiver" provision. BB MIL at 5.2 Essentially, Baseball argues that a contractual "no waiver" provision trumps the common law contract principle of election of remedies. Although Baseball's contention is legally without merit, it raises interesting and seldom addressed issues regarding the relationship between the doctrines of waiver and election and thus merits a more detailed analysis.3
The doctrines of waiver and election of remedies are complementary rather than competing common law contract principles. Under the doctrine of waiver, "a party may, by words or conduct, waive a provision in a contract or eliminate a condition in a contract which was inserted for [its] benefit." Oleg Cassini, Inc. v. Couture Coordinates, Inc., 297 F.Supp. 821, 830 (S.D.N.Y.1969); see also Farnsworth, Contracts § 8.18 (3d ed.1999). Suppose, for example, that under the 1996 Agreement ESPN is obligated to make bi-weekly payments of $100,000 to Baseball. Suppose further that after several months of making the required bi-weekly payments, ESPN begins to tender monthly payments of $100,000 to Baseball. If Baseball accepts and/or fails to object to ESPN's deficient payments, then Baseball has eliminated or "waived" its contractual right to bi-weekly payments of $100,000 under the 1996 Agreement.4
In contrast to a waiver of contractual rights, an election is simply a choice among remedies by the party; it is a decision by that party as to how it should proceed in the wake of the breaching party's nonperformance. In other...
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