Vici Racing, LLC v. T-Mobile USA, Inc.

• Decision Date: 25 March 2013
• Docket Number: Civ. No. 10–835–SLR.
• Citation: 921 F.Supp.2d 317
• Parties: VICI RACING, LLC, Plaintiff, v. T–MOBILE USA, INC., Defendant.
• Court: U.S. District Court — District of Delaware

921 F.Supp.2d 317

VICI RACING, LLC, Plaintiff,

v.T–MOBILE USA, INC., Defendant.

Civ. No. 10–835–SLR.

United States District Court,

D. Delaware.

Feb. 8, 2013.

Order Staying Judgment March 25, 2013.

Christopher Loizides, Esquire of Loizides PA, Wilmington, DE, Of Counsel, Juan Carlos Antorcha, Esquire and Joseph P. Klock, Jr., Esquire of Rasco Klock Reininger Perez Esquenazi Vigil & Nieto, for Plaintiff.

Jennifer C. Wasson, Esquire and Peter J. Walsh, Jr., Esquire of Potter Anderson & Corroon LLP, Wilmington, DE, Of Counsel, John D. Lowery, Esquire and Gavin W. Skok, Esquire of Riddell Williams P.S., for Defendant.

OPINION

SUE L. ROBINSON, District Judge.

I. INTRODUCTION

Plaintiff VICI Racing, LLC (“VICI” or “plaintiff”), a Florida corporation with its principal place of business in Miami, Florida, filed this suit against defendant T–Mobile USA, Inc. (“T–Mobile” or “defendant”), a Delaware corporation with its principal place of business in Bellevue, Washington, on September 30, 2010. (D.I. 1) Plaintiff claims damages totaling $14,000,000 for the alleged breach of contract relating to a sponsorship agreement for a sports car racing team. ( Id.)

Defendant asserted three affirmative defenses: (1) plaintiff's complaint failed to state a claim; (2) defendant was fraudulently induced to enter into the contract; and (3) plaintiff failed to perform its own material obligations under the contract. (D.I. 10) Defendant also asserted three counterclaims for: (1) fraudulent inducement; (2) equitable fraud; and (3) breach of contract. ( Id.) Plaintiff answered the counterclaims on April 21, 2011. (D.I.21)

The court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. The parties tried the case to the court from May 21–24, 2012. (D.I. 119–122) The following constitutes the court's findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a).

II. FINDINGS OF FACTA. Initial Sponsorship Discussions

1. A German executive whose company was sponsoring VICI, an American Le Mans Series (“Le Mans”) sports car racing team, approached the CEO of Deutsche Telekom, Inc.,¹ Klaus–Peter Statz (“State”), and told him that VICI was still looking for sponsors. (PTX–4 at 26–27) On March 7, 2009, Statz emailed the VICI Team President, Ron Meixner (“Meixner”), inquiring about “what a possible cooperation with T–Mobile could look like?” ( Id. at 28) Meixner replied that “Porsche Motorsports USA/VICI Racing” was looking for a sponsor for the 2009–2011 Le Mans seasons. ( Id. at 27) The sponsorship would be economically valuable to T–Mobile because VICI could “offer T–Mobile to be the network service provider for the VW/Audi Group and Porsche AG Telematics services.” ( Id.) Meixner further offered that VW and Porsche were beginning to use telematics systems “starting with their annual volume of approximately 425,000 (VW/Audi/Porsche, U.S. market).” ( Id.) Meixner ended his email saying that he was looking forward to “T–Mobile becoming a partner for Telematics applications/Network provider solutions.” ( Id. at 28) Subsequently, Statz forwarded Meixner's email to T–Mobile's CEO, Robert Dotson (“Dotson”), adding that, if T–Mobile sponsored VICI, VICI “would in turn offer the opportunity to enter into the telematics market.” ( Id. at 27) Statz closed his email with the following: “Further information can be provided if T–Mobile U.S. is interested in evaluating this opportunity.” ( Id.)

2. Dotson forwarded State's email on March 11, 2009 to the T–Mobile Chief Operations and Customer Officer, Sue Nokes (“Nokes”), with instructions to have someone on the sales team evaluate the proposed VICI sponsorship's business potential. (PTX–4 at 26) Dotson emphasized that he was not interested in the sponsorship without “a big telematics business opportunity attached.” ( Id.) Nokes in turn forwarded Dotson's email to Doug Chartier (“Chartier”), T–Mobile's Senior VP of Sales, directing him to advise her about the sponsorship's business potential. (D.I. 120 at 413:4–18; PTX–4 at 26) Chartier forwarded the email chain to Femi Lakeru (“Lakeru”), T–Mobile's VP of the Business Sales Group. He asked Lakeru to start evaluating the sponsorship's business potential and to discuss it with John Horn (“Horn”), T–Mobile's national director for machine-to-machine (“M2M”) sales. (D.I. 120 at 413:4–18; PTX–4 at 25–26)

3. Lakeru shared the email chain with Horn the next day, with instructions to “look into this and ... discuss.” (PTX–4 at 25) Ryan Keefe (“Keefe”), a T–Mobile business development manager, emailed Meixner saying that T–Mobile was “interested in a relationship and would like to get a better understanding of what that would look like for both the sponsorship and the telematics services.” (DTX–14) In response, Meixner called Keefe and the two of them met later that day. (D.I. 120 at 356:22–357:6) During their meeting, Keefe recalled Meixner saying that “the way this business works, when you sponsor cars, you get their business,” for example, XM Radio (“XM”) had previously sponsored VICI racing and, based upon this sponsorship, XM was able to get its product in consumer production cars. ( Id. at 358:2–5, 359:22–23) Keefe claims that he understood this example to mean that “when we [T–Mobile] sponsor, we [T–Mobile] get the business” as part of the “[s]ame agreement.” ( Id. at 360:1–8)

4. Meixner then spoke with both Horn and Keefe, on March 13, 2009, about the possibility of a T–Mobile sponsorship. (DTX–20 at 817) He also sent Keefe an outline of what a T–Mobile—VICI racing partnership could possibly include, which Keefe forwarded to Horn. (PTX–9) This sponsorship outline did not mention telematics and did not represent VICI to be a part of Porsche.² ( Id.) Horn then emailed Lakeru an initial overview of the business potential of a VICI sponsorship. (PTX–4 at 25) With respect to the telematics business, Horn related that “we would get the three brands which would be 425[,000] cars a year” and estimated that the total sponsorship value was over $160,000,000 if the sponsorship was a “package deal” with the telematics business from VW, Audi, and Porsche. ( Id.)

5. Following up on the potential sponsorship a few days later, Meixner emailed Keefe a schedule of events for the “12 hours of Sebring” race that was to be held the upcoming weekend. (DTX–20 at 817) Keefe responded later that day, offering that the sponsorship was “being reviewed by finance....” ( Id.) Meixner emailed Keefe again on March 18, 2009, asking if Keefe had heard back from T–Mobile's finance department. ( Id. at 816) Meixner indicated that the VICI team was at the Sebring track and ready to race if the finance department gave the green light. ( Id.) Keefe replied that the sponsorship was still under review and that T–Mobile was hoping for a final answer by week's end. ( Id.) Meixner pushed one more time to get an answer by the next day so that VICI could participate in the Sebring race. ( Id.) Meixner also wrote that his “friends at Porsche/Audi/VW [had] already signaled their full support....” ³ ( Id.)

6. Shane Johnson (“Johnson”), a T–Mobile financial analyst, emailed Horn a financial analysis of the VICI sponsorship on March 19, 2009. (PTX–4 at 23–24) The analysis concluded that the sponsorship was only valuable if T–Mobile secured the telematics business. ( Id. at 24) With the telematics business via the sponsorship, Johnson estimated that T–Mobile would: (1) lose $2 million after the first three years; (2) profit $32 million after 5 years; and (3) profit $91 million after 10 years. ( Id.) Based on this breakdown, Johnson concluded that the profit from the telematics business justified the costs of the VICI sponsorship. ( Id.) However, he made clear that T–Mobile needed to build some kind of risk mitigation into the sponsorship so that T–Mobile could limit its financial liability in the event that the telematics business was not secured. ( Id.)

B. Sponsorship Contract Negotiations

7. After an in-person meeting with Horn and Keefe on March 24, 2009, Meixner emailed Horn a “standard contract” to serve as a base for a VICI—T–Mobile sponsorship agreement. (PTX–62 at 694) This contract did not propose any sponsorship fees or other definite terms, nor did it mention telematics, Audi, VW, or represent VICI as part of Porsche. ( Id. at 695–704) Keefe emailed Meixner asking how many VW and Porsche cars would be equipped with telematics in each of the 2011, 2012, and 2013 model years. (DTX–26 at 176) Meixner replied the following day with a breakdown of how many VW, Audi, and Porsche telematics-equipped cars would be produced for the 2011 through 2016 model years.⁴ ( Id. at 175) His breakdown mentioned that VW was coming out with a new sedan called the “NMS.” ( Id.) According to Horn, this information (the number of vehicles that will be produced in certain production years) was “critical to [T–Mobile's] analysis” of the sponsorship's feasibility. (D.I. 120 at 432:14–20) Furthermore, after reading the email, Horn said that he thought that Meixner was “deep in the weeds with these [car] guys on all—and he has all this information. One of the things that surprised me, he even had information on new cars that I didn't even know existed, this new midsized sedan....” ( Id. at 433:4) The next day, Horn emailed Lakeru the final analysis of the proposed VICI sponsorship. (PTX–4 at 23) Horn began his analysis by saying that “[w]e have spoken directly to ... Porsche, Audi, and VW, and we would start getting [telematics] activations next year....” ⁵ ( Id.) Horn said that VICI had asked for $12 million dollars a year for three years, but that T–Mobile was ready to offer $5 million a year for three years. ( Id.) Horn went on to say that “[t]he exit strategy is to tie the sponsorship to the telematics business.... If they fall behind or don't deliver the telematics business [T–Mobile] would have an out for years two and three of the deal.” ( Id. (emphasis added)) He concluded that the “[b]ottom line...