USA Network v. Jones Intercable, Inc.

• Decision Date: 18 January 1990
• Docket Number: No. 88 Civ. 6895 (KC).,88 Civ. 6895 (KC).
• Parties: USA NETWORK, Plaintiff, v. JONES INTERCABLE, INC., and Jones Spacelink, Ltd., Defendants.
• Court: U.S. District Court — Southern District of New York

729 F. Supp. 304

USA NETWORK, Plaintiff, v. JONES INTERCABLE, INC., and Jones Spacelink, Ltd., Defendants.

No. 88 Civ. 6895 (KC).

United States District Court, S.D. New York.

January 18, 1990.

Richard J. Davis, Joseph G. Fortner, Jr. and William J. Ferrall, Weil, Gotshal & Manges, New York City, for plaintiff.

John S. Martin and Howard O. Godnick, Schulte, Roth & Zabel, New York City, for defendants.

OPINION AND ORDER

CONBOY, District Judge:

BACKGROUND

Plaintiff USA Network ("USA") commenced this action against Jones Intercable, Inc. ("Jones") on September 29, 1988, by filing a contemporaneous motion for an order temporarily restraining and ultimately enjoining Jones from terminating its contract, the "Affiliation Agreement,"¹ with USA pending the outcome of the action. We denied USA's request for a temporary restraining order. After further submission of memoranda and affidavits, we conducted a preliminary injunction hearing on November 18, 1988, and issued an opinion and order on January 19, 1989, denying USA's motion for a preliminary injunction. USA Network v. Jones Intercable, Inc., 704 F.Supp. 488 (S.D.N.Y.1989). This prior opinion, familiarity with which is presumed, sets forth fully the background of this case.

Following our denial of USA's motion for a preliminary injunction, the parties conducted extensive discovery. On May 1, 1989, USA sought leave to serve and file a Second Amended Complaint (a) specifying certain additional categories of damages; (b) adding new claims for relief premised upon common law fraud, violation of 18 U.S.C. § 1961, et seq. ("RICO"), and tortious interference with contract; and (c) adding Jones Spacelink, Inc. ("Spacelink") as a defendant. Jones simultaneously opposed the motion for leave to amend and moved for summary judgment on the question of liability in the breach of contract claims in the First Amended Complaint and in Jones' Second Counterclaim, that USA breached Paragraph 16 of the Affiliation Agreement by communicating with municipalities within Jones' service areas. USA cross-moved for summary judgment on the issue of liability in its breach of contract, contractual indemnification, and tortious interference claims, and on Jones' counterclaim. On October 10, 1989, we held oral argument on these motions.

For the reasons given below, we grant USA's motion for leave to amend the complaint, and treat Jones' opposition to that motion as a motion to dismiss, for failure to state a claim upon which relief can be granted, Counts Four (Common Law Fraud), Five (RICO), and Six (Tortious Interference with Contract) of the Second Amended Complaint. We deny Jones' motion to dismiss Counts Four and Six, but grant it with respect to the RICO claim, Count Five. On the cross-motions for summary judgment, we grant USA's motion in part and deny it in part, and Jones' motion for summary judgment is on the whole denied.

DISCUSSION

I. BREACH OF CONTRACT CLAIMS

Both parties have moved for summary judgment on their respective breach of contract claims.² Summary judgment may be granted only when the moving party can establish, based on "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits ... that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The Court must first look to the substantive law of the case to determine which facts are material. Only disputes over material facts will preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The moving party bears the initial burden of establishing that no genuine dispute as to material facts exists. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The burden then shifts to the opposing party to show that a genuine issue of fact exists. See Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 585-86, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986). Ultimately, "in considering the motion, the court's responsibility is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-50, 106 S.Ct. 2505, 2509-511, 91 L.Ed.2d 202 (1986)), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987).

USA alleges that Jones breached its contract with USA by terminating USA from two-thirds of its systems on October 3, 1988, and from the remainder of its systems by the beginning of 1989. Whether Jones breached the contract by cancelling USA from cable systems constituting two-thirds (65%) of Jones' subscribers on October 3, 1988, the first day of the fall television season, depends on the meaning of the letter amendment to the Affiliation Agreement, dated September 1, 1986 ("Side Letter"),³ which was signed contemporaneously with the Affiliation Agreement.

The question of interpretation is one of law to be answered by the court, and summary judgment is appropriate "`where the language of the contract is unambiguous, and reasonable persons could not differ as to its meaning.'" Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir.1989) (quoting Rothenberg v. Lincoln Farm Camp, Inc., 755 F.2d 1017, 1019 (2d Cir.1985)); see United States v. 0.35 of an Acre of Land, More or Less, Situated in Westchester County, State of New York, 706 F.Supp. 1064, 1070 (S.D.N.Y.1988); West, Weir & Bartel, Inc. v. Mary Carter Paint Co., 25 N.Y.2d 535, 540, 307 N.Y.S.2d 449, 452, 255 N.E.2d 709, 711 (1969); 3 A. Corbin, Corbin on Contracts § 554, at 222 (1960).<sup>4</sup> The determination of whether a contract or contract term is ambiguous is a threshold question of law for the court. See Tokio Marine & Fire Ins. Co. v. McDonnell Douglas Corp., 617 F.2d 936, 940 (2d Cir.1980); 0.35 of an Acre of Land, 706 F.Supp. at 1070. "It is axiomatic that if the language of an agreement is explicit and unambiguous the courts must give it its plain meaning." 0.35 of an Acre of Land, 706 F.Supp. at 1071 (citing Omaha Indem. Co. v. Johnson & Towers, Inc., 599 F.Supp. 215, 218 (E.D. N.Y.1984)). "Contract language is not ambiguous if it has `a definite and precise meaning, unattended by danger of misconception in the purport of the contract itself, and concerning which there is no reasonable basis for a difference of opinion.'" Hunt, Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d at 1277 (quoting Breed v. Insurance Company of North America, 46 N.Y.2d 351, 355, 413 N.Y.S.2d 352, 355, 385 N.E.2d 1280, 1282 (1978)). "Language whose meaning is otherwise plain does not become ambiguous merely because the parties urge different interpretations in the litigation." Hunt, Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d at 1277. "Our goal must be to accord the words of the contract their `fair and reasonable meaning.'" Sutton v. East River Sav. Bank, 55 N.Y.2d 550, 555, 450 N.Y. S.2d 460, 463, 435 N.E.2d 1075, 1078 (1982) (quoting Heller v. Pope, 250 N.Y. 132, 135, 164 N.E. 881 (1928)).

Turning to the present case, the first question to be determined is whether the meaning of the Side Letter, i.e., its effect on the Affiliation Agreement, is ambiguous. We must determine "whether the agreement is so beset by ambiguity that the determination of the intent of the parties requires a trial at which a jury or other fact finder could clear up the ambiguity by passing on the credibility of the extrinsic evidence and whatever inferences reasonably could be drawn therefrom." 0.35 of an Acre of Land, 706 F.Supp. at 1071. Applying the foregoing principles, we find as a matter of law that the Side Letter is unambiguous in its effect on Paragraph 4(d) of the Affiliation Agreement: the Side Letter does not alter Jones' obligation, outlined in Paragraph 4(d), to provide the USA Network to at least 75% of its aggregate subscribers.

Paragraph 1 of the Side Letter provides:

With respect to subscribers receiving the USA program service as either a basic or tiered cable service in Jones' CATV Cable Television Systems ... Jones shall make payments to USA in accordance with the USA Network Basic Service Schedule ... then in effect. Such rate is contingent upon the delivery of the USA program service as a basic cable service⁵ to at least 75 percent of the total number of subscribers to those CATV Systems owned or controlled by Jones as of September 1, 1986. In the event that Jones fails at any time during the term hereof to deliver the USA program service as a basic cable service to at least 75 percent of such total number of subscribers, Jones shall thereafter make payments to USA, with respect to its tiered USA subscribers only, in accordance with the USA Network Tiered Service Schedule ... then in effect.

USA argues that this Side Letter deals only with when Jones had to pay the higher tier rate, as opposed to the basic rate, and not with market penetration, or the percentage of Jones' aggregate subscribers who, under the Affiliation Agreement, were to receive USA Network programming.

We agree. We conclude, as we have before, USA Network v. Jones Intercable, 704 F.Supp. at 489-90, that the Side Letter only deals with the circumstances in which Jones would have to pay USA according to the higher tier rate. Thus, if Jones provided USA as a basic service to at least 75% of its aggregate subscribers, then it would pay USA according to the basic rate for all of its subscribers. On the other hand, if Jones provided USA as a basic service to less than 75% of its aggregate subscribers, then it would pay USA according to the tier rate for its tiered subscribers. In other words, Paragraph 1 of the Side Letter provides an incentive, based on a fee reduction, for...