Ackerley Media Group v. Sharp Electronics Corp.
| Citation | 170 F.Supp.2d 445 |
| Decision Date | 09 November 2001 |
| Docket Number | No. 01 Civ. 4135(CBM).,01 Civ. 4135(CBM). |
| Parties | ACKERLEY MEDIA GROUP, INC., Plaintiff, v. SHARP ELECTRONICS CORP., Defendant. |
| Court | U.S. District Court — Southern District of New York |
Jeffrey Harris, Rubin, Winston, Diercks, Harris & Cooke, L.L.P. Washington, DC, for plaintiff.
David S. Versfelt, Kirkpatrick & Lockhart LLP, New York, NY, for defendant.
This is a diversity breach of contract action brought by plaintiff Ackerley Media Group, Inc. ("Ackerley") against Sharp Electronics Corporation ("Sharp"). Ackerley, a Washington corporation with principal place of business in Seattle, Washington, handles the in-arena advertising for the Seattle Supersonics NBA basketball team ("Sonics"). Sharp, a New York corporation with principal place of business in Mahwah, New Jersey, is a manufacturer of electronics goods.
Ackerley filed its complaint on May 16, 2001. In lieu of an answer, Sharp filed a motion to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6). Following briefing by both parties, the court heard oral argument on Sharp's motion on October 16, 2001. At the close of oral argument, the court issued an Order from the bench denying Sharp's motion. This opinion sets forth the reasons for that Order.
Ackerley claims that it had a three season (1998-1999 through 2000-2001) advertising contract with Sharp and that Sharp failed to pay for the 2000-2001 season. Sharp claims that the agreement was a valid contract only for the first year (1998-1999) and an unenforceable "agreement to agree" for the following NBA seasons (1999-2000 and 2000-2001). Sharp also maintains that the complaint must be dismissed because Ackerley failed to plead its performance with sufficient particularity.
When passing on a Rule 12(b)(6) motion to dismiss, the court must "accept as true the factual allegations of the complaint, and draw all inferences in favor of the pleader." Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993). The court may also consider any documents upon which plaintiff undeniably relies and which are integral to its claims. See Int'l Audiotext Network, Inc. v. AT & T, 62 F.3d 69, 72 (2d Cir.1995). The following exposition of the facts is therefore based on (i) the allegations contained in Ackerley's complaint; (ii) the terms of the "Team Sponsorship Agreement" ("TSA") which forms the purported contract upon which Ackerley sues (see Compl. ¶ 13; Def.'s Mem. Ex. 1); (iii) the terms of the "1999-2000 Seattle SuperSonics Letter of Intent" (see Compl. ¶¶ 13, 16; Def.'s Mem. Ex. 2); and (iv) the terms of the "1999-2000 Seattle SuperSonics Contract Addendum" (see Compl. ¶¶ 13, 16; Def.'s Mem. Ex. 3).
On or about August 1, 1998, Ackerley and Sharp entered into a written agreement-the TSA-whereby Ackerley would provide Sharp with in-arena advertising at the Sonics' home basketball games in consideration of the payment to Ackerley by Sharp of the amounts set forth in the agreement. Ackerley also agreed to provide Sharp with certain other fringe-type benefits such as four free tickets to each game, a parking space, one night in a VIP luxury suite, recognition in a printed program, and the right to purchase non-reserved tickets prior to the general public.
Paragraph 1 of the TSA provides that:
1. Terms of Agreement
a. This Agreement shall commence on August 1, 1998 and all rights herein shall terminate immediately upon the conclusion of the last game played by the Seattle Supersonics in the 2000-2001 NBA season.
b. [Sharp] shall have the right to seek the renegotiation and extension of the terms of its Sponsorship of the Sonics, provided that agreement terms are met by April 30, 2001. If agreement terms are not agreed upon by said date, Sonics may solicit competitive bids.
c. [Sharp] shall have the option to terminate sponsorship agreement at the conclusion of the 1998-1999 and 1999-2000 NBA seasons. [Sharp] agrees to submit termination request in writing on or before April 30, 1999 and April 30, 2000 respectively for termination request to be honored.
With respect to price, paragraph 7 of the TSA states:
7. Sponsorship Fee
a. Annual Fee: In consideration for the rights granted
herein, [Sharp] shall pay to Sonics the annual
Sponsorship Fee which shall be as follows
NBA Season Annual Sponsorship Fee
1998-1999 $144,200 gross/$122,570 net
1999-2000 $144,200 gross/$122,570 net plus
an additional amount not to
exceed 6% of previous season
contract total. Such exact
amount to be mutually agreed
upon by both parties
2000-2001 1999-2000 contract amount plus an
additional amount not to exceed
6% of previous season contract
total. Such exact amount to be
mutually agreed upon by both
parties
Ackerley and Sharp each fully performed according to the terms of the TSA for the 1998-1999 season.
For the 1999-2000 NBA season, the parties executed a "Letter of Intent" on August 18, 1999, followed by a "Contract Addendum" dated December 2, 1999. That Addendum fixed the price for the 1999-2000 season at $146,363 gross / $124,408 net. Both sides fully performed according to the terms of the Addendum.
Sharp failed to send Ackerley written notice of termination of the TSA for the 2000-2001 NBA season. Ackerley subsequently fully performed its obligations under the TSA for the 2000-2001 season.
Sharp failed to pay Ackerley for the 2000-2001 season, and Ackerley is now suing Sharp for $144,200-the TSA's gross price for the 1998-1999 season. Ackerley also seeks attorneys' fees to which it is entitled under the terms of the TSA.
Another relevant section of the TSA concerns choice of law and forum:
16. Governing Law: Venue
This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Washington. The appropriate state and federal courts located in King County, Washington shall have jurisdiction of all matters arising under this agreement and will be the forum in which to adjudicate such matters.
The TSA also contains an integration clause and a requirement that any amendment be in writing.
Defendant Sharp asserts two arguments why plaintiff has failed to state a claim: (1) there was no valid contract for the 2000-2001 season since the TSA failed to specify price, a material term; and (2) there are no specific allegations that plaintiff Ackerley performed during 2000-2001. Before the court can delve into the merits of these contentions, the court must address a choice of law issue.
Defendant Sharp argues that New York rather than Washington state law should apply because "New York is the forum chosen by Ackerley for bringing this action." Def.'s Mem. at 4 n. 3. According to Sharp, since the purported 2000-2001 agreement is not a valid and binding contract, "there is no agreement of the parties to resolve their dispute under Washington [s]tate law." Def.'s Reply Mem. at 2. According to Sharp, since the parties are in a federal court in New York, the court should look to New York law to determine whether the TSA was a valid contract. Sharp, however, cites no authority in support of its position.
Plaintiff Ackerley argues that the TSA's choice of law clause is controlling on this point. According to Ackerley, given "the parties' choice of Washington law to govern their contract," the court must look to Washington law to determine the validity of that contract. Pl.'s Mem. at 4. The problem with Ackerley's argument is that it presumes that the TSA is a binding contract. If, as Sharp argues, the TSA is not a valid and binding contract, then the relevance of the choice of law clause becomes immediately suspect. Morever, even assuming that the parties intended to be bound by Washington law, their express choice of law is not necessarily determinative. See Heller & Co. v. Video Innovations, Inc., 730 F.2d 50, 52 (2d Cir.1984) (). As explained below, the court need not even consider the parties' purported choice of Washington law to conclude that Washington law does, in fact, govern.
As an initial matter, the only significance to be given to the fact that plaintiff brought suit in this district is that New York choice of law rules will apply. See Fieger v. Pitney Bowes Credit Corp., 251 F.3d 386, 393 (2d Cir.2001) () (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 497, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)). As explained below, under New York choice of law rules, the validity of the contract must be determined by looking to Washington state law.1
The choice of law rules in contract disputes are hardly paragons of clarity. See, e.g., 17 C.J.S. Contracts § 13 (1999) (); see also Lazard Freres & Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1539 n. 5 (2d Cir.1997) (). Compare Allstate Ins. Co. v. Stolarz, 81 N.Y.2d 219, 597 N.Y.S.2d 904, 613 N.E.2d 936, 943-45 (1993) (Hancock, J., dissenting) (), with id. at 940 (). To make things as simple as possible for the case at bar, rather than complicating the...
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