Arbitron, Inc. v. Tralyn Broadcasting, Inc.

• Decision Date: 04 March 2005
• Docket Number: Docket No. 03-9276(L).,Docket No. 04-0264-cv(CON).
• Citation: 400 F.3d 130
• Parties: ARBITRON, INC., Plaintiff-Appellant, v. TRALYN BROADCASTING, INC., Defendant, JMD, INC., doing business as WLNF-FM, doing business as WROA-AM, doing business as WZKX-FM, doing business as WGCM-AM-FM, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

400 F.3d 130

ARBITRON, INC., Plaintiff-Appellant, v. TRALYN BROADCASTING, INC., Defendant JMD, INC., doing business as WLNF-FM, doing business as WROA-AM, doing business as WZKX-FM, doing business as WGCM-AM-FM, Defendant-Appellee.

Docket No. 03-9276(L).

Docket No. 04-0264-cv(CON).

United States Court of Appeals, Second Circuit.

Argued: September 7, 2004.

Decided: March 4, 2005.

Alfred R. Fabricant, Ostrolenk, Faber, Gerb & Soffen, LLP, New York, NY, for Plaintiff-Appellant.

Lawrence J. Bernard, Jr., Washington, D.C., for Defendant-Appellee.

Before: McLAUGHLIN, CALABRESI, and HALL, Circuit Judges.

CALABRESI, Circuit Judge.

This breach of contract dispute raises the question of whether, under New York law, two parties entering into a licensing agreement for radio ratings and data may authorize one party to adjust the price of that data unilaterally at some point in the future. Several issues of New York contract law are peripherally implicated in this case, and some of them are sufficiently important and unsettled that, under different circumstances, they might warrant certification to the New York Court of Appeals for resolution. But ultimately, we conclude that the contract before us delegated, with unmistakable clarity, price-setting authority to a single party, and that New York law does not invalidate such contracts. We therefore vacate the district court's order of summary judgment and remand for reconsideration.

I. BACKGROUND

Plaintiff-appellant Arbitron, Inc. ("Arbitron"), a Delaware corporation [A9], is a popular listener-demographics data provider for North American radio stations. Arbitron licenses its copyrighted listener data to regional AM and FM stations, which then use the demographic profiles of station listeners to attract advertisers. In 1997, Arbitron entered into one such license — a "Station License Agreement to Receive and Use Arbitron Radio Listening Estimates" (the "License Agreement")with defendant Tralyn Broadcasting, Inc. ("Tralyn"), a Mississippi corporation [A9]. The License Agreement permitted Tralyn's only radio station (WLUN-FM in the Gulfport, Mississippi area, later known as WLNF-FM) to use Arbitron listening data reports. Over its five-year term, the License Agreement charged Tralyn a monthly rate of $1,729.57 for the use of Arbitron's listening data reports by this single station.

Were this monthly license fee the only pricing portion of the License Agreement, this case would present an extremely simple contract dispute. But another clause of the agreement — which we shall call the "escalation clause" — provided that, were Tralyn or its successor to acquire additional radio stations in the same or adjacent regional markets, a new license fee would be charged. Upon acquiring such stations, Tralyn was required to notify Arbitron so that Arbitron could determine a new license fee, and, if necessary, approve the assignment of the licensing agreement to a new party in interest. Any new licensing fee would be set, according to the escalation clause, at Arbitron's discretion. The clause provided:

In the event that Arbitron consents to the assignment of this Agreement, Arbitron reserves the right to redetermine the rate to be charged to the assignee.... Station agrees that... if it is or was purchased or controlled by an entity owning or otherwise controlling other radio stations in this Market or an adjacent Market ... Station ... will report the change and the effective date thereof to Arbitron within 30 days of such change. In the event of such occurrence, Station further agrees that Arbitron may redetermine its Gross Annual Rate for the Data, Reports and Services licensed hereunder, as well as any Supplementary Services, effective the first month following the date of the occurrence. Notwithstanding Station's failure to notify Arbitron, pursuant to provisions of this paragraph, Arbitron may redetermine the Station's Gross Annual Rate for all Data, Reports and Services, as well as any Supplementary Services, based on the foregoing, effective the first month following the date of the occurrence.

Pursuant to this "escalation clause," Arbitron was given the right to increase the license fee as Tralyn purchased additional stations (or as entities owning additional stations purchased Tralyn). Thus, the escalation clause assumed that, as Tralyn acquired additional regional stations, it would share listener data among each of these stations, and, by allowing Arbitron to increase Tralyn's fees, the clause provided Arbitron with a mechanism to reflect this additional use.

On October 31, 1999, Tralyn was purchased by defendant-appellant JMD, Inc. ("JMD") a Mississippi corporation. At the time JMD acquired Tralyn and WLNF-FM, JMD also controlled at least four other stations in the Gulfport, Mississippi market (WROA-AM, WZKX-FM, WGCM-AM, and WGCM-FM). The purchase agreement between JMD and Tralyn assigned to JMD the License Agreement; JMD thereby assumed responsibility for paying Arbitron, and implicitly, for notifying Arbitron of the additional radio stations now operated by Tralyn's successor. But in violation of Paragraph 11 of the License Agreement, neither JMD nor Tralyn obtained Arbitron's prior written consent to the License Agreement's assignment. Nor did they provide Arbitron with notice of a change in ownership of WLNF-FM. Instead, from November 1999 until June 2002, JMD simply paid the original single-station monthly license fee ($1,729.57) directly to Arbitron. In return, Arbitron provided WLNF-FM with updated listening data (specifically, the Fall 1999 Ratings Book and Research Data — referred to by the parties as the "Fall Book" — which was published in February 2000).

In June 2000, Arbitron discovered, through its own diligence, that JMD had purchased Tralyn and that the terms of the License Agreement had been breached. Arbitron thereupon notified JMD by letter that it was exercising its right to increase the monthly licensing fee under the escalation clause of the License Agreement. Arbitron determined JMD's new annual license fee by multiplying the single-station license fee ($1,779.57) by five ($8,897.85) to reflect the five JMD stations that could now share Arbitron's listener data. It then reduced that figure by 35% to reflect the typical volume discount for licenses covering five or more stations. The result was a revised monthly charge of $5,784.93. Based on this new licensing fee, which Arbitron claimed should have been paid since the October 1999 purchase, Arbitron sent JMD an invoice for "incomplete" payments made between October 1999 and June 2000. It also sent an invoice indicating the additional payments that would be due for the next quarter's listening reports.

JMD never paid these invoices, and subsequently refused to pay anything — even the $1,779.57 due each month under the original one-station License Agreement. Arbitron therefore stopped sending JMD its listening data reports, as it was permitted to do under the License Agreement upon the licensee's nonpayment of the monthly licensing fee.

Arbitron filed the instant suit against Tralyn and JMD on November 1, 2001. Its complaint for breach of contract sought $172,394.22, representing all moneys due under the Licensing Agreement (plus interest) from June 1999 to the end of the contract's five-year term. After a series of discovery squabbles, Arbitron moved to compel JMD to respond to document requests and interrogatories. JMD responded by arguing that all necessary discovery had been completed, and that summary judgment in its favor (as well as monetary judgment against Arbitron for its decision to cease delivery of its listening reports after JMD refused to pay the increased monthly licensing fee) was now appropriate.

On June 5, 2003, the district court (Sweet, J.) denied Arbitron's motion to compel further discovery, and granted summary judgment — but not monetary damages — to JMD. See Arbitron, Inc. v. Tralyn Broad., Inc., 269 F.Supp.2d 264 (S.D.N.Y.2003). The district court concluded that because "[n]either the escalation clause in ¶ 11, nor any other section of the Agreement, contains any basis for determining the new rate to be paid Arbitron in the event changes in ownership occur," the License Agreement's escalation clause was unenforceably vague under New York law. See id. at 266-67. The district court reasoned that

[c]ourts have refused to enforce similarly uncertain agreements. For instance, where a permit failed to specify the amount of rent reduction in the event the landlord exercised an option to reclaim a portion of the premises, and the court held that there "was not a sufficiently definite offer which could give rise to an enforceable agreement." In Matter of Exp.Indus. and Terminal Corp., 93 N.Y.2d 584, 591, 693 N.Y.S.2d 857, 715 N.E.2d 1050 (1999)..... Likewise, in Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, the court struck a renewal clause in a lease providing for future agreement on rent as overly vague. 52 N.Y.2d 105, 436 N.Y.S.2d 247, 417 N.E.2d 541 (1981). It would have "sufficed" for the "methodology for determining the rent ... to be found within the four corners of the lease," but there must be some "objective, extrinsic event, condition or standard on which the amount was to depend." Id. at 110, 436 N.Y.S.2d 247, 417 N.E.2d 541.

269 F.Supp.2d at 267 (footnote omitted). In concluding that the escalation clause (but not the rest of the License Agreement) was void for vagueness, the district court emphasized the following passage from Delicatessen:

[B]efore the power of law can be invoked to enforce a promise, it must be sufficiently certain and specific so that what was promised can be ascertained. Otherwise, a court, in intervening would be imposing its own conception of what the parties should or might have undertaken, rather than confining itself to the implementation of a bargain to which they have mutually committed themselves. Thus,...