Weigel Broadcasting Co. v. Tv-49, Inc., No. 06 C 1490.
| Decision Date | 29 November 2006 |
| Docket Number | No. 06 C 1490. |
| Citation | 466 F.Supp.2d 1011 |
| Parties | WEIGEL BROADCASTING CO., Plaintiff. v. TV-49, INC., a Wisconsin corporation, and Joel J. Kinlow Sr., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Mark A. Rabinowitz, Tonya Gentry Newman, Neal, Gerber & Eisenberg, Chicago, IL, for Plaintiff.
William Francis Dolan, Jason Michael Marks, Tony U. Iweagwu, Jr., Bell Boyd & Lloyd LLC, Chicago, IL, for Defendants.
Plaintiff Weigel Broadcasting Co., an Illinois company, filed this complaint in the Circuit Court of Cook County, 06-CH-03246, against defendants TV-40. Inc. a Wisconsin corporation, and Joel J. Kinlow Sr. (collectively TV-49), alleging breach of contract for the sale of a television station. Defendants removed the case to this court, invoking diversity jurisdiction under 28 U.S.C. §§ 1441 and 1446. After limited discovery, defendants filed a motion to stay discovery pending the determination of a motion for summary judgment. The motion to stay discovery was granted. Presently before this court is defendants' motion for summary judgment, which we grant in part and deny in part.
Defendant TV-49 is a small television station based out of Racine, Wisconsin, whose stock is wholly-owned by defendant Joel Kinlow. On May 18, 2005, an offer was made for the purchase of TV-49 by plaintiff, Weigel Broadcasting Company, an Illinois company engaged in the operation of broadcast television stations . The offer stated that Weigel was interested in acquiring TV-49, including all licenses, authorizations, applications and equipment, including towers and buildings, for $5,000,000 in cash. Plaintiff stated that it was subject to FCC and other regulatory approval, as well as the terms of a customary definitive purchase agreement. It further stated that the purchase agreement would be completed within 40 days from the date of the letter, and the FCC applications would be filed within five days thereafter. The offer then stated that if the terms of the offer were acceptable to defendants, Weigel would place $250,000 in escrow and deposit another $250,000 after the signing of a purchase agreement. The offer was to be held open for ten days and required TV-49, within that time, to agree to the letter and provide written assurance that it had terminated negotiations to sell the station to another party and would not entertain any similar negotiations pending the completion of a definitive purchase agreement.
On July 7, 2005, long after the plaintiffs offer had expired, defendants sent a letter to plaintiff regarding the possible sale of the station:
"Mr. Norman H. Shapiro 26 N. Halsted Street Chicago, IL 60661
Dear Mr. Shapiro:
I am writing this letter as President of TV-49, Inc. to provide written assurance of the basis upon which I am prepared to sell the stock of TV-49, Inc. to Weigel Broadcasting Company.
TV-49 Inc. is the owner of all licenses, authorizations (including construction permits), applications and equipment (excluding tower and real estate) of and related to WJJA-TV and WJJA-DT.
This non-binding Letter of Intent represents, the fundamental terms and conditions upon which I am prepared to enter into a Stock Purchase Agreement (SPA) with. Weigel Broadcasting Company for the stock of TV-49 Inc:
Purchase Price:
The purchase price for all of the outstanding stock of TV-49, Inc. shall be seven million dollars ($7,000,000.00), payable as follows:
• $5.5 million dollars ($5,500,000.00) payable in cash, at closing
• $1.5 million dollars ($1,500,000.00), which will be placed in an escrow account and paid in increments of two hundred fifty thousand dollars ($250,000) per year for six years, with any unpaid' balance becoming due and payable upon move of WJJA-TV's antennae to Weigel Broadcasting Company's Milwaukee tower (or equivalent).
Deposit:
Weigel Broadcasting Company will deposit $250,000.00 into an escrow account, as a good faith deposit pending signing of an SPA and upon such signing will add an additional $250,000.00 to secure your performance under the SPA.
Timing:
Parties agree to immediately proceed with the preparation of a definitive SPA to-be completed and _executed within 40 days hereof (7/13/05). The FCC applications will be filed within 5 days thereafter.
TV-49, Inc. will continue to have the rights to lease space on the tower owned by Mr. Kinlow at a nominal fee ($1.00 per annum) until the earlier of the following: (a) WJJA's antennae are moved to Milwaukee, or (b) 20 years from the date of closing.
Should the above terms be acceptable to Weigel, and indicated as, such by executing this document, TV-49 Inc., it's [sic] owner and representatives will cease all negotiations to sell to any other party and will not enter into or entertain any such similar negotiations pending completion of a definitive and binding SPA with Weigel.
I look forward to working with Weigel on concluding a quick, clean, and mutually beneficial transaction and appreciate the time, effort, and money, which Weigel has already committed to this transaction.
On July 13, 2005, both parties signed the letter of intent, with the modifications that the right to lease the TV tower, would extend for 20 years after closing, and that the 40-day period for the execution of the SPA would begin on July 13, 2005, instead of July 7, 2005 (plf.cplt., exh. C).
After the letter of intent was signed, plaintiff requested of defendants certain documents to aid in its investigation of the station, which defendants agreed to provide, but it is unclear whether they did in fact do so.
On August 11, 2005, plaintiff sent defendant a draft of the escrow agreement , which referred to the letter of intent as "nonbinding," and on August 17, 2005, six days before August 23, 2005, the expiration of the 40-day period for the execution of the SPA, plaintiff provided defendants with a 70-page draft 'SPA, with the caveat that it had not yet been reviewed by plaintiff's counsel and therefore was subject to revision . The draft SPA included all the provisions normally found in a contract of this type, including warranties, indemnities, terms for the release of money in escrow, closing procedures, licensing and notice requirements, a confidentiality and liquidated damages clause. It also included a provision requiring TV-49 to make a channel election with the FCC, demanding its right to be carried on cable channel 49 — it was currently being carried on channel 19. It also stated, in section 1.1, that the "purchase price" was $5.5 million. (Id.)
The 40-day mark passed and no definitive SPA had been executed. On September 1, 2005, when counsel for defendants returned the escrow agreement signed by defendant Kinlow, it stated it had not yet completed review of the 70-page draft SPA . On September 6, 2005, plaintiff deposited the $250,000 into escrow with its attorney, and forwarded a copy of the executed escrow agreement and verification of payment to defendants . On September 20, 2005, counsel for defendants e-mailed plaintiff a list of over 30 concerns they had with the draft SPA . These concerns, included the purchase price, the $25,000 liquidated damages clause, and the requirement for channel election, The channel election, which needed to be completed by October 1, 2005, a time before the sale realistically would close.2
On September 22, 2005, counsel for plaintiff wrote to defendants regarding their comments, stating that "[w]ith respect to the comments you have already provided, we would anticipate that all outstanding issues could be resolved by good faith negotiations within a very short time frame" . However, counsel for plaintiff went on to state that plaintiff was concerned that defendants would not be willing to make the necessary channel election, which it claimed "has been from the outset a fundamental component of this transaction from my client's standpoint." (Id.) Counsel further stated that "[i]f your client is unwilling to make the necessary election, however, my client has no further interest in pursuing this matter." (Id.)
On October 1, 2005, defendants made the channel election, electing to remain on channel 19 and not moving to channel 49, as plaintiff requested (plf's resp., exhs. W and X). Counsel for defendants informed plaintiff of this election on October 4, 2005, and the next day notified plaintiff that TV-49 had begun discussions with other parties and had received a draft letter of intent from a third party, Entravision (plfs response, ¶ 21). Plaintiff attempted, unsuccessfully, to re-ignite negotiations with defendants in November (plfs response, exhs. Y and Z). On January 12, 2006, TV-49 signed a letter of intent with Entravision for the purchase of the station.
Plaintiff subsequently filed this action for breach of contract, alleging that the letter of intent was a binding contract requiring the parties to negotiate exclusively and in good faith towards the SPA. Further, it alleges that defendants breached this contract when they failed to respond to the draft until September 20, 2005, did not provide further comments on the draft, and entertained an offer by...
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