DirecTV Latin Am., LLC v RCTV Intl. Corp.
Annotate this CaseDecided on January 15, 2013
Supreme Court, New York County
DirecTV Latin America, LLC, Plaintiff,
against
RCTV International Corp., Defendant.
651824/2011
For plaintiff DirecTV Latin America, LLC, Mintz & Gold LLP, by Steven G. Mintz and Terence W. McCormick.
For defendant RCTV International Corp., Smith Gambrell & Russel LLP by Colin R.P. Delaney and Stacy E. Yeung.
Shirley Werner Kornreich, J.
Plaintiff, DirecTV Latin America, LLC (DTV), a provider of subscription television services in Latin America, has brought this action seeking a judgment declaring that it appropriately terminated a license and transport agreement with defendant, RCTV International Corp. (RCTV), a television broadcaster. DTV now moves to dismiss defendant's counterclaims. RCTV opposes. For the reasons below, the motion is granted and the counterclaims dismissed.
I.Background
The following account is drawn from the counterclaims and the Television License and Transport Agreement (the Transport Agreement) entered into by RCTV and DTV. In May 2007, the Venezuelan government revoked the broadcast license of an affiliate of RCTV, deeming the broadcaster a political opponent of the president of Venezuela, Hugo Chavez (counterclaims ¶¶ 7—8). On July 1, 2007, RCTV entered into the Transport Agreement with DTV (id. at ¶ 10). Under the Transport Agreement, DTV agreed to distribute RCTV's signal to its subscribers in Venezuela for a term beginning on July 1, 2007 and ending on June 30, 2012 (Transport Agreement §§ 1, 3). However, the Transport Agreement provided that "immediately following written notice to [RCTV]," DTV could suspend the distribution of RCTV's programming or terminate the Transport Agreement should DTV determine, "in its sole discretion," that the distribution of the programming could be construed to violate a law, could be found by a court or government agency to violate a law, or otherwise "could be politically inadvisable" (Transport Agreement, § 7[a]). [*2]
The sole consideration for the contract was the services exchanged, i.e., RCTV transmitted its programming to DTV solely in exchange for DTV distributing the programming through its network (counterclaims at ¶ 67). Under the Transport Agreement, DTV would have no liability for any "incidental or consequential damages . . . occasioned by any failure to perform or the breach of any obligation under this agreement for any cause whatsoever" (Transport Agreement § 10 [original capitalization omitted]).
On December 22, 2009, midway through the contract term, CONATEL, the Venezuelan regulatory agency for broadcasting, issued new regulations governing television channels (id. at ¶13). It classified RCTV as a "national" channel, informing RCTV of such classification on January 20, 2010 and publishing an announcement to that effect on its website and in several newspapers the next day (id. at ¶¶ 14, 16—17). It was CONATEL's position that as a "national" channel, RCTV was required to carry certain government broadcasts (id. at ¶ 14). On January 22, 2010, DTV notified RCTV by letter that CONATEL had informed DTV that RCTV had failed to carry a mandatory government message (id. at ¶ 18). While DTV's letter did not mention any possible consequences of this alleged violation of Venezuelan law, on January 24, 2010, DTV removed RCTV's signal from its subscription package in Latin America, save for customers in certain parts of the Carribean (id. at ¶¶ 21—22, 24).
RCTV does not deny that it failed to make the broadcast in question, but maintains that it was never in violation of Venezuelan law and that it was in fact CONATEL whose actions were illegal (id. at ¶¶ 15, 19). Nonetheless, on February 22, 2010, RCTV submitted an application to comply with CONATEL's new regulations (id. at ¶ 30). The Venezuelan government has taken no action on RCTV's application (id. at ¶ 31).
Defendant alleges that on February 25, 2010, representatives of RCTV and DTV met in Caracas to discuss restoring RCTV's signal to DTV's network (id. at ¶ 32). It contends that the parties agreed that DTV would carry two channels of RCTV programming (id. at ¶ 34). One channelwould be known as "RCTV Mundo" and would be distributed outside Venezuela (id.). The other channel would be known as "RCTV International" and would be a Venezuelan domestic channel (id.). On the issue of consideration the counterclaims contain contradictory allegations. RCTV first alleges that DTV agreed to pay a "per-subscriber" fee for the RCTV Mundo channel; neither a price nor a method of calculating one is specified (id.). RCTV, however, also claims that the February agreement, like the Transport Agreement, contemplated a no-fee transaction (id. at¶ 37). According to RCTV, the parties further agreed that DTV would carry one of the channels "on its own satellite," and that it would purchase advertising time on the two channels and would raise capital for RCTV Mundo. No specific amounts for either of these latter two items are alleged nor is there any indication of how such amounts could be calculated (id. at ¶ 34). Finally, it is alleded that DTV agreed to use its best efforts to restore RCTV's signal to its grid as close as possible to March 1, 2010; the counterclaims are silent as to any specific guidelines for evaluating such efforts (id.).
In April 2010, DTV expressed doubts about RCTV Mundo's prospects for success (id. at ¶ 40). At that time, DTV stated that it had "effectively received a formal request from the [Venezuelan] ministry to remove RCTV's channels for the time being" (id. at ¶ 41). Though the parties continued to meet and exchange correspondence for some months afterwards, substantive [*3]negotiations came to an end by the end of June 2010. RCTV's programming was never restored to DTV's network (id. at ¶¶ 55—56).
II.Procedural Background
On June 2, 2011, DTV sent RCTV a letter purporting to terminate the Transport Agreement. A month later, DTV commenced an action in this court, seeking a declaratory judgment that its actions were justified under the contract and the enforcement of the Transport Agreement's forum selection clause. In August, RCTV removed the case to the federal district court for the Southern District of New York on diversity jurisdiction grounds and answered the complaint with counterclaims. On May 30, 2012, Judge Crotty of the Southern District remanded the matter to this court, finding that the action for declaratory judgment did not meet the monetary threshold required in diversity cases (DIRECTV, Latin America, LLC v RCTV International Corp., SDNY, May 30, 2012, Crotty, J., case no. 11 Civ. 5456). Upon the parties' stipulation, RCTV amended its counterclaims on July 13, 2012, seeking damages for breach of contract and promissory estoppel. DTV now moves to dismiss these counterclaims.
III.Standard
On a motion to dismiss a claim or counterclaim, the court must accept as true the facts alleged in the complaint as well as all reasonable inferences that may be gleaned from those facts (Amaro v Gani Realty Corp., 60 NY3d 491 [2009]; Skillgames, L.L.C. v Brody, 1 AD3d 247, 250 [1st Dept 2003] [citing McGill v Parker, 179 AD2d 98, 105 (1992)]; Mazzai v Kyriacou, 98 AD3d 1088, 1090 (2d Dept 2012); see also Cron v Harago Fabrics, 91 NY2d 362, 366 [1998]). The court is not permitted to assess the merits of the complaint or any of its factual allegations, but may only determine if, assuming the truth of the facts alleged, the complaint states the elements of a legally cognizable cause of action (Skillgames, id. [citing Guggenheimer v Ginzburg, 43 NY2d 268, 275 (1977)]). "However, factual allegations that do not state a viable cause of action, that consist of bare legal conclusions, or that are inherently incredible or clearly contradicted by documentary evidence are not entitled to such consideration." (Skillgames, 1 AD3d at 250 [citing Caniglia v Chicago Tribune-New York News Syndicate, 204 AD2d 233 (1st Dept 1994)].
IV.Analysis
A.Which Agreements Govern
RCTV claims that the parties entered into two agreements the original Transport Agreement and a subsequent agreement reached in February 2010. DTV admits to the Transport Agreement, but maintains that the February 2010 understanding did not rise to the level of a contract.
It is well settled law that "[i]f an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract" (Cobble Hill Nursing Home, Inc. v Henry & Warren Corp., 74 NY2d 475, 482 [1989]; see also Express Indus. & Term. Corp. v Dept. of Transp., 93 NY2d 584 [1999]; Joseph Martin, Jr., Delicatessen, Inc. v Schumacher, 52 NY2d 105 [1981]).
Consequently, a party may not secure redress for a breach of a promise unless the promise "is sufficiently certain and specific so that the parties' intentions are ascertainable" (Bernstein v Felske, 143 AD2d 863, 864 [2d Dept 1988]). "Definiteness as to material matters is of the very essence of contract law, for without it a court could nto intervene without inmposing its own [*4]conception of what the parties should or might have undertaken" (id. at 864-5). An agreement to agree, where the material terms are left to future negotiations, is not enforceable (id. at 865). Although a price term need not be definite, absent any indication of an objective method from which the price can be calculated, there is no enforceable contract (see Cobble Hill at 483; Express Indus., 93 NY2d at 590; Martin Delicatessen, 52 NY2d at 110).
Here, the allegations detailing the February 2010 understanding between RCTV and DTV leave a number of material terms too vague to conclude that a final agreement was actually reached. The counterclaims are vague and contradictory as to any fee that DTV would pay RCTV for the right to broadcast the RCTV Mundo channel. Similarly vague are DTV's commitments to "invest in advertising" on the two channels and "to raise capital" for RCTV Mundo. To enforce the contract, the court would be faced with the task of guessing a price for DTV's services and estimating amounts for the supposedly promised investments, without, apparently, any guidance from any objective, extrinsic standard. In such a case, "the void is too great, the omissions are too noticeable and the risk of ensnaring a party in a set of contractual obligations that he never knowingly assumed is too serious" (Mocca Lounge, Inc. v Misak, 94 AD2d 761, 762—63 [2d Dept 1983]).
It could be argued, however, that DTV's alleged promise to use "best efforts" to restore RCTV's signal to its grid within a matter of days indicated DTV's willingness to make such efforts even without a full agreement on the other terms. However, for a promise to exert best efforts to be enforceable, there must be clear guidelines against which such efforts can be evaluated (Brown v Bus. Leadership Group, 57 AD3d 212, 213 [1st Dept 2008]; Richbell Info. Servs. v Jupiter Partners, L.P., 309 AD2d 288, 304 [1st Dept 2003]; Strauss Paper Co. v RSA Exec. Search, Inc., 260 AD2d 570, 571 [2d Dept 1999]; Bernstein, 143 AD2d at 865; Mocca Lounge, Inc., 94 AD2d at 763). No such criteria are alleged here. Further, RCTV could not have reasonably relied on DTV's promise to attempt to restore its programming, and, thus, its claim for promissory estoppel is not viable.
B.DTV's Right to Suspend Distribution
As a result, the parties' relationship is governed exclusively by the Transport Agreement. DTV argues that Section 7 of the Transport Agreement authorized it to cease distributing RCTV's programming once it was informed by CONATEL that RCTV had failed to comply with Venezuelan broadcast regulations. RCTV claims that this exercise of discretion constituted a breach of the implied covenant of good faith and fair dealing. In addition, it contends that the suspension was invalid because DTV failed to give proper written notice as required by the Transport Agreement.
RCTV claims that DTV acted without ever receiving an official ruling or directive from the Venezuelan government ordering it to stop broadcasting RCTV's programming. Even if this were true, the Transport Agreement did not require any such formal order. Rather, it permitted DTV to suspend distribution upon determining, "in its sole discretion," that broadcasting the programming "may be construed as violative of any Law . . . could be politically inadvisable or could be found by a court, administrative agency, governmental body, or international agency or body to violate any Law" (Transport Agreement § 7[a] [emphasis supplied]). By using the language of uncertain possibility, the contract makes clear that DTV did not have to wait for the proverbial "knock on the door" to suspend distribution. [*5]
It is true that even where a contract provides for the unilateral exercise of discretion by one of the parties, that party is restrained by the implied covenant of good faith from exercising such discretion "arbitrarily or irrationally" (Dalton v Educ. Testing Serv., 87 NY2d 384, 389 [1995]). Here, RCTV has not alleged facts that could sustain the claim that DTV's actions were, to use RCTV's words, "willy-nilly without any reason" (RCTV brief 10). To the contrary, as noted in the pleadings, the genesis for the Transport Agreement was the admitted tension between RCTV and the Venezuelan government. It is similarly clear that the government had taken the position, communicated to both DTV and RCTV, that RCTV would be required to include certain broadcasts in its programming. The counterclaims do not deny that RCTV failed to make the broadcast the government demanded; they further admit that as of the date of the answer, RCTV was still not in compliance with the relevant government regulations for "national broadcast services." RCTV fails to explain why it would be "arbitrary or irrational" in such circumstances for DTV, who broadcasts in Venezuela, to avoid a confrontation with the Venezuelan government over a channel that, by RCTV's own admission, was being targeted by that government for political reasons (counterclaims ¶ 15).
RCTV further argues that DTV's letter on January 22, 2010, which did not warn of any risk of suspension, did not constitute the "written notice" required by the Transport Agreement. However, this supposed deficiency would only be relevant if failure to give written notice constituted a condition precedent to the exercise of the suspension right. While an express condition must be strictly enforced, "[i]n determining whether a particular agreement makes an event a condition courts will interpret doubtful language as embodying a promise or constructive condition rather than an express condition" (Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co., 86 NY2d 685, 690—91 [1995]). Here, the Transport Agreement merely stated that should DTV determine that suspension is warranted, "then, notwithstanding anything to the contrary in this Agreement, immediately following written notice to [RCTV], [DTV] may (i) cease distributing the [programming] . . ., or (ii) terminate this Agreement" (Transport Agreement § 7[a]). This notice provision lacks explicit conditional language such as "if" or "unless and until" (401 W. 14th St. Fee LLC v Mer Du Nord Noordzee, LLC, 34 AD3d 294 [1st Dept 2006] citing Oppenheimer & Co., 86 NY2d at 691 [holding that obligation by landlord to furnish proof of sale or development was not condition of effective termination where contract merely required that such proof be furnished "when such notice [of termination] is given"]). The written notice requirement, therefore, must be interpreted as a separate promise whose fulfillment was not necessary for DTV to exercise its right to suspend broadcasting. As RCTV has not alleged that it suffered any prejudice or damage from the failure to provide a clearer written notice (see Digital Broadcast Corp. v Ladenburg, Thalman & Co., 63 AD3d 647, 647 [1st Dept 2009]), the only conclusion possible is that the counterclaims fail to state causes of action for breach of contract or breach of good faith.
C.Damages
Even assuming that DTV's actions constituted a cognizable breach, RCTV's claims would still fail because the Transport Agreement bars recovery for consequential damages. A party subject to such exclusion cannot recover for lost profits or other losses beyond "the value of the promised performance" (Appliance Giant, Inc. v Columbia 90 Assoc., 8 AD3d 932 [3d Dept 2004] citing Schonfeld v Hilliard, 218 F.3d 164, 175—76 [2d Cir 2000]). As noted, under the [*6]Transport Agreement, DTV's sole obligation was to deliver RCTV's programming to DTV's own subscribers in Venezuela. The agreement did not require DTV to render any payment, service or asset directly to RCTV. Even if it were true that RCTV's programming was worth more with a carriage contract than without one (see RCTV brief 12—13), any decline in the value of RCTV's assets was only an incidental and indirect consequence of the breach. To hold otherwise would allow any party to collapse the consequences of a breach into the value of the promised performance, thereby eliding any limitation on consequential damages.
Schonfeld, relied upon by RCTV, does not hold otherwise. In dictum, the court there stated that if one contract called for the delivery and execution of another contract which promised certain payments, failure to deliver the promised contract could constitute direct damages, just like failure to deliver any other asset (Schonfeld, 218 F.3d at 177). Here, DTV did not promise to deliver any asset, income-producing or other, to RCTV. DTV did not assume responsibility for the value of RCTV's assets, and the court will not impose such a duty upon it.
For all of the above reasons, RCTV's counterclaims must be dismissed. Although RCTV's right to free expression and the commercial value thereof may well have been violated in a manner prohibited by the laws and traditions of this country, the court cannot force DTV to act as RCTV's champion in its feud with the government of Venezuela. Accordingly it is
ORDERED that the motion of plaintiff DIRECTV Latin America, LLC to dismiss the counterclaims of defendant RCTV International Corp. is granted with prejudice.
Dated: January 15, 2013ENTER:__________________________
J.S.C.
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