VICI Racing LLC v. T-Mobile USA Inc.

Filing 140

OPINION. Signed by Judge Sue L. Robinson on 2/8/2013. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

VICI RACING, LLC,
Plaintiff,

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)
)
)

v.
T-MOBILE USA, INC.,
Defendant.

) Civ. No. 10-835-SLR
)
)
)
)

Christopher Loizides, Esquire of Loizides PA, Wilmington, Delaware. Counsel for
Plaintiff. Of Counsel: Juan Carlos Antorcha, Esquire and Joseph P. Klock, Jr., Esquire
of Rasco Klock Reininger Perez Esquenazi Vigil & Nieto.
Jennifer C. Wasson, Esquire and Peter J. Walsh, Jr., Esquire of Potter Anderson &
Corroon LLP, Wilmington, Delaware. Counsel for Defendant. Of Counsel: John D.
Lowery, Esquire and Gavin W. Skok, Esquire of Riddell Williams P.S.

OPINION

Dated: February 8, 2013
Wilmington, Delaware

~~dge
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. (/d.)
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. (/d.) 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 FACT
A. 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, lnc., 1 Klaus-Peter Statz ("Statz"), 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?" (/d. at 28) Meixner replied that "Porsche Motorsports USA I
VICI Racing" was looking for a sponsor for the 2009-2011 Le Mans seasons. (/d. at 27)
The sponsorship would be economically valuable toT-Mobile because VICI could "offer
T-Mobile to be the network service provider for the VWIAudi Group and Porsche AG
Telematics services." (/d.) Meixner further offered that VW and Porsche were
beginning to use telematics systems "starting with their annual volume of approximately
425,000 (VW I Audi I Porsche, US market)." (/d.) Meixner ended his email saying that
he was looking forward to "T -Mobile becoming a partner forT elematics applications I
Network provider solutions." (/d. at 28) Subsequently, Statz forwarded Meixner's email
toT-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." (/d. at 27)
Statz closed his email with the following: "Further information can be provided if TMobile US is interested in evaluating this opportunity." (/d.)
2. Dotson forwarded Statz'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." (/d.) Nokes in

1

Deutsche Telekom, Inc. is the parent company ofT-Mobile USA.

2

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"), aT-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. (/d. at 358:2-5, 359:22-23) Keefe claims
that he understood this example to mean that "when we [T-Mobile] sponsor, we [TMobile] get the business" as part of the "[s]ame agreement." (/d. at 360:1-8)
4. Meixner then spoke with both Horn and Keefe, on March 13, 2009, about the
possibility of aT-Mobile sponsorship. (DTX-20 at 817) He also sent Keefe an outline
of what aT-Mobile- VICI racing partnership could possibly include, which Keefe
forwarded to Horn. (PTX-9) This sponsorship outline did not mention telematics and

3

did not represent VICI to be a part of Porsche. 2 (/d.) Horn then emailed Lakeru an
initial overview of the business potential of a VIC I 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. (/d.)
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 .... " (!d.) Meixner emailed Keefe again
on March 18, 2009, asking if Keefe had heard back from T-Mobile's finance
department. (ld. 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. (/d.) Keefe replied
that the sponsorship was still under review and that T-Mobile was hoping for a final
answer by week's end. (/d.) Meixner pushed one more time to get an answer by the
next day so that VIC I could participate in the Sebring race. (!d.) Meixner also wrote
that his "friends at Porsche/Audi/VW [had] already signaled their full support .... "3 (/d.)
6. Shane Johnson ("Johnson"}, aT-Mobile financial analyst, emailed Horn a
financial analysis of the VICI sponsorship on March 19, 2009. (PTX-4 at 23-24) The
2

The information merely provided that "VIC I ... has had a twenty year winning
involvement at all levels of global motor racing, delivering continued success with the
Porsche brand." (PTX-9 at 415)
3

It is unclear if Meixner was referring to the racing sponsorship, the telematics
business, or some combination of both.

4

analysis concluded that the sponsorship was only valuable if T -Mobile secured the
telematics business. (/d. 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. (/d.) Based
on this breakdown, Johnson concluded that the profit from the telematics business
justifed the costs of the VICI sponsorship. (Jd.) 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 VIC I - 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. (Jd. 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 (/d. at 175) His breakdown mentioned that VW was
coming out with a new sedan called the "NMS." (ld.) According to Horn, this
information (the number of vehicles that will be produced in certain production years)

4

The court notes that other than this email, no other communications relating to
a breakdown of how many cars would be equipped with telematics has been brought to
its attention.

5

was "critical to [T-Mobile's] analysis" of the sponsorship's feasability. (0.1. 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 .... " (/d. at 433:4) The next
day, Horn emailed Lakeru the final analysis of the proposed VIC I 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

(/d.) Horn said that VIC I 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. (!d.) 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 [TMobile] would have an out for years two and three of the deal." (/d. (emphasis
added)) He concluded that the "[b]ottom line is we are spending $15M to get $90M and
potentially much more." (/d.)
8. On March 26, 2009, Horn emailed Meixner the official sponsorship proposal:
"2 cars for three years. Total cost [toT-Mobile] $15M. Paid $1M in 2009, and $7M in
both 2010 and 2011. T -Mobile will receive the telematics and handset business for the
three brands." (PTX-63 at 705) After receiving T-Mobile's proposal, Meixner emailed
Horn a revised version of the base contract. (PTX-63 at 706-712) This contract

5

It is unclear to whom "we" is referring. However, because the second usage is
clearly referring toT-Mobile, it seems that Horn is using "we" in the first instance to
mean T -Mobile personnel.

6

contained the sponsorship fees payable over the 2009, 2010, and 2011 seasons with
payments due by January 1, 2010 for the 201 0 race season and by January 1, 2011 for
the 2011 season. (/d. at 707) Although Horn's email proposal stipulated that VICI
would race two cars, the revised contract had VIC I racing only one car for the 2009
season. (/d.) Also, while the email proposal stipulated that T -Mobile would get both
telematics and handset business from three unnamed brands, neither of these terms or
anything similar appear in the revised contract sent to T -Mobile from Meixner. 6 (/d. at
706-12) Meixner emailed a further revised copy of the contract to Horn with a few
minor changes but still no mention of either the telematics or handset business, stating
that "it would be great if we could wrap this up tonight." (PTX-64 at 717-23, 713)
9. Horn emailed Meixner a revised contract from T-Mobile on March 29, 2009.
(PTX-65) This contract was substantially reworked and had comments and questions,
inserted by T-Mobile's outside counsel. 7 (/d.) It also included the first version of the
disputed section 5.8 provision relating to the telematics business. 8 (/d. at 731) Section
5.8 provided that:

6

The recital of Mexner's revised contract does not reference telematics or the
three brands, instead stating that "the mutual desire and intent of the parties, by their
entering into this Agreement, [is] to promote and maintain their respective corporate
images and reputations through participation in the 2009, 2012 and 2011 American
LeMans race seasons." (PTX-63 at 707)
7

Robert Hines ("Hines"), T-Mobile's in-house counsel, testified that outside
counsel made comments on a draft of the sponsorship agreement. (0.1121 at 657:110) Hines further testified that he did not speak with outside counsel about the
comments, but took them into consideration in changing the draft. (/d. at 711:1 0-18)
8

A comment followed this section, "[I'm not sure what this is or how it ties to the
sponsorship]" (PTX-65 at 731)

7

VICI agrees to allow [T-Mobile] to supply wireless connectivity for the
Porsche, Audi, and VW telematics programs beginning in model year
2011 and employee handset programs as well ....
(/d.) The contract did not define telematics, handset program, VW, Audi, or model year,

nor did any other section of the contract illuminate what this provision might entail.
(PTX-65) Porsche was defined. 9 (/d. at 729)
10. The next day, Meixner made several small revisions toT-Mobile's proposed
contract and emailed it back to Horn, including deleting the definition of Porsche. (PTX66) However, no changes were made to section 5.8. 10 (/d.) Before the final
sponsorship agreement was signed, Hines spoke with Meixner about the rights granted
in section 5.8. (0.1. 121 at 663:7-12, 720:5-20) Hines testified at trial that he "asked
[Meixner] if he had the authority to make the grant ... and [Meixner] said yes." (/d. at
720:17-20) However, Meixner represented that, during that conversation, Hines
explained that section 5.8 only meant "that T -Mobile is exclusive to [VIC I] and that
[VIC I] cannot shop this around and get - promote any other wireless carriers, and that
wasit." (D.I.119at83:1-3)
11 . Meixner and Lakeru executed a final version of the sponsorship agreement
on March 31, 2009. 11 (PTX-1) The fee schedule- $1 million in 2009 and $7 million in
years 2010 and 2011 - remained in place. (/d.) The final version of section 5.8 did not

9

The definition of Porsche was followed by the comment, "[Not clear why we
need this definition since Porsche Corp is not a party to this agt, just the Porsche car
will be under sponsorship.]" (PTX-65 at 729)
10

The comment questioning the section remained, "[I'm not sure what this is or
how it ties to the sponsorship]." (PTX-66 at 742)
11

The executed contract is dated March 30, 2009.

8

mention handsets and read:
VICI grants to [T-Mobile] the right to be the exclusive wireless carrier
supplying wireless connectivity for the Porsche, Audi, and VW telematics
programs beginning in model year 2011 with such exclusivity continuing
throughout the Term of this Agreement.
(/d. at 107) As in prior drafts, telematics, Porsche, Audi, VW, wireless carrier, and

model year were all undefined terms. The contract did not purport to bind Porsche,
Audi, or VW, nor did the contract represent VIC I as being a part of Porsche. However,
the contract did contain a section (9.1) that stipulated that each party "has the full power
and authority to enter into this Agreement and perform its obligations .... " (/d. at 109)
Horn emailed his superiors, Lakeru and Chartier, informing them that the VICI
sponsorship deal was completed. (PTX-7 at 365) Horn concludes the email by saying,
"[T-Mobile is] the EXCLUSIVE telematics provider for Porsche, Audi, and VW. Total
value is in the $90M range. We also are the handset provider as well which will get
some business now and 1000's of devices when the US plant opens in two years." (/d.)
12. T-Mobile prepared a contract summary of the VIC I sponsorship agreement
that Hines signed. 12 (PTX-56) The summary listed VICI's obligation to race T-Mobile
race cars for three seasons under a section labeled "Business Terms." (/d.) It also
listed T-Mobile's obligation to pay certain sums of money on certain dates under
"Business Pricing." (/d.) Lastly, the section labeled "Business Case" resembles section
5.8 of the contract, but instead reads: "VIC I to enable [T -Mobile] to be the exclusive
wireless carrier supporting the telematics programs for Porsche, VW, and Audi." (/d.)
C. Activities After Entering Into Sponsorship Agreement
12

The date of the summary is unclear.

9

13. On April 7, 2009, Keefe emailed Meixner a PowerPoint presentation about
T-Mobile's M2M capabilities and noted that he was looking forward to making a formal
presentation to Porsche, Audi, and VW. (PTX-49) The PowerPoint contained 17
slides: 2 slides provided a very general overview of who T-Mobile was (id. at 1147-48);
9 slides related to T -Mobile's network capabilities and coverage areas (id. at 1149-57);
6 slides, including one labeled "Why Choose [T-Mobile] for M2M?," related toTMobile's M2M capabilities (id. at 1158-63); and 1 slide had a rendering of the T-Mobile
sponsored VICI race car (id. at 1164). Later in the month, Keefe emailed Horn
informing him that the "President of Porsche US," Paul Ritchie ("Ritchie"), 13 and the
"telematics project manager for VW" have been reviewing T-Mobile's M2M capabilities.
(PTX 42 at 1032) Keefe noted that he was working on setting up meetings with
Porsche and VW, that the car companies were testing T-Mobile's network with good
results, but that things were "moving a little slower than I would like .... " (Id.) The next
day, on April 28, 2009, in response to Meixner's reaching out to him, Ritchie emailed
the CEO of Porsche Cars North America, Detlev Von Platen ("Platen"), asking if Platen
had time for a brief introductory meeting with T -Mobile. (PTX-84 at 7) Ritchie noted
that he had already set a meeting forT -Mobile with some of Porsche's "technical guys"
in Germany, but that a meeting with Platen would help VIC I with its sponsorship. (Id.)
Platen responded favorably to Ritchie's request, offering a meeting with a Marketing
VP, and Ritchie contacted Meixner to set up a time for the meeting. (ld. at 6) A day
later, Meixner emailed Keefe a list of 15 "key people in telematics" at VW along with

13

Ritchie is not the "President of Porsche US" but, rather, is the President and
CEO of Porsche Motors ports North America. (PTX-84)
10

their email addresses. (PTX-48)
14. On May 8, 2009, Lakeru related a concern to Horn, "there is some question
related to the 800 lines of business that VW has here in the US coming over to [TMobile]? We signed a deal with Porsche where they agreed to deliver us that
business." (PTX-32) Horn replied that "[i]t is all coming .... Porsche officially took over
all of VW this week so things are a little disjointed. There are two meetings next week
so it will keep moving forward." (/d.) In preparation for a mid-July meeting between
Porsche and T-Mobile in Germany (PTX-87), on June 1, 2009, Porsche requested that
Meixner get some "bullet points" from T-Mobile. (PTX-30 at 570) After consulting Horn,
Meixner provided Ritchie with the following talking points: "Overview of Telematics
program. Services to be offered, project time frames, models to have service
embedded. Hardware platform, software platform, concierge services, customer care."
(ld; PTX-88)

15. The VICI- T-Mobile race car sustained engine and body damage due to an
accident at the Lime Rock race on July 18, 2009. (PTX-53; D.l. 119 at 90:3-10, 95:4-9)
Later that month, Bill Colleran ("Colleran"), VICI's Commercial Director, emailed Dennis
Kelly ("Kelly") in Motorola's M2M division about a possible sponsorship. (DTX-56)
Colleran gave Kelly the same data about the number of Audi, Porsche, and VW cars
using telematics that Meixner had given toT-Mobile. (/d.) Two days later, Kelly asked
Colleran, "[w]ho would commit to these numbers? Meaning who would be purchasing
these units?" (DTX-54)
16. On August 2, 2009, Meixner sent a letter toT-Mobile's President and legal
department notifying them about the accident at the Lime Rock event, stating that the
11

VIC I car would not be able to race for the next 45 to 60 days while repairs were being
made. (PTX-53) A fellow T-Mobile employee informed Horn on September 25, 2009
that VICI would not be racing at an upcoming event in Atlanta. (DTX-60 at 1262) Horn
emailed Meixner saying: "You are missing Atlanta? What about the people we are
sending from T-Mobile. Not good." (ld.) Meixner replied that VICI had "tried everything
[it] could" and that VIC I had still "arranged for tickets .... " (!d.) Horn replied: "Not
good." (ld.) Meixner replied: "We have no competitive edge right now ... we are
experimenting with all available options we have and the new engine did not work out."
(!d.) A few days later, Meixner emailed Horn asking about a "big meeting" with VW the

next day. (PTX-1 06 at 195) Horn replied that the meeting was all of the following day
in Virginia. (Id.) The next day, Meixner asked Horn how the VW meeting went; Horn
replied that "[i]t went well" and that "[t]hings are looking good for Audi, [but] [s]low for
VW." (ld. at 193)
17. Meixner entered into a sponsorship agreement with Cross Country
Automotive Services ("CC") on October 15, 2009. 14 (DTX-64) The agreement with CC
was $100,000 for the 2010 season and $100,000 for the 2011 season. (ld. at 664-65)
The sponsorship contract is substantially the same as the T -Mobile contract, but section
5.8 is different in several ways. The CC version of section 5.8 reads:
VICI agrees to support [CC] and its affiliate ATX as the exclusive
telematics provider within the automotive industry, including for the Porsche,
14

CC "is in the business of owning and operating an Automotive Services
. Company including ATX Group, Inc., a Telematics Company service .... " (DTX-64 at
664) Because ATX provides telematics software and not the wireless connectivity
provided by T-Mobile, VICI's dealings with CC do not appear to conflict with its dealings
with T-Mobile.
12

Audi and VW telematics programs, with such exclusivity continuing
throughout the Term of this Agreement.
(/d. at 666 (emphasis added))
18. Meixner informed Horn on November 4, 2009 that "[s]ome of my VW guys
are coming to Florida next week, let me know when we can chat this week." (PTX-28;
DTX-65) Horn replied: "Things are not good. The Audi meeting did not go well and
[Lakeru] is still concerned with the program overall. He is not happy about how the
program was run or the missed race." (/d.) Meixner replied:
I am helping to get the business, but there has to be also some security
and stability for the racing program otherwise our VW/AUDI/Porsche
ececs. [sic] especially CEO and Head of the supervisory board are getting
very concerned. If you let me know where the issue is I help.
(DTX-66) Thereafter, Meixner sent Horn an email stating: "Resolving the Audi
Marketing obstacle." (DTX-71)
19. Meixner entered into a sponsorship agreement with Henkel Corporation
("Henkel") on November 25, 2009. 15 (DTX-121) The agreement with Henkel was
$500,000 spread over the 2010 and 2011 seasons, payable by December 31, 2009.

(/d. at 118) The Henkel sponsorship contract is substantially the same as the T-Mobile
contract, but section 5.8 is different in several ways. The Henkel version of section 5.8
reads:
VICI agrees to support HENKEL and its affiliates within the automotive
industry, including for the Porsche, Audi and VW brands, and shall not
promote HENKEL's competitors, with such exclusivity continuing
throughout the Term of this Agreement.

15

Henkel is an international company, headquartered in Dusseldorf, Germany,
with brands and technologies in three areas: laundry and home care; cosmetics and
toiletries; and adhesive technologies. See www.henkel.com.
13

(/d. (emphasis added))
20. Horn emailed Lakeru on November 30, 2009 about a recent meeting with
Meixner. (PTX-23; DTX-73) Horn said the meeting was "good yet uncomfortable," and
that Meixner was frustrated because Horn let him do all the talking. (/d.) Horn said that
Meixner had been trying to figure out what he could do "to get things on track" and
shared that he had a good meeting with his friends from VW. (/d.) Horn did not ask
any questions about the VW meeting, but he did tell Meixner that T-Mobile was
reviewing the sponsorship agreement. (/d.) Horn did not share, however, "what [TMobile was] doing to position [itself] to get out of the contract." (/d.)
21. Meixner emailed Horn on December 10, 2009 to tell him that he had a
meeting with Audi the next day and another with VW the following week. (DTX-76)
Meixner also said that he could get Henkel to give T -Mobile their handset business.
(/d.) Greggory Garrett ("Garrett"), the Chief Strategy Officer for IT & Innovation at VW
Group of America, verified Meixner's connections at VW for Horn. (PTX-19 at 522)
Garrett said that Meixner had weekly meetings with the head of VW motorsports, Clark
Cambell ("Cambell"), and that Cambell's boss would eventually be the one to market
the "connected vehicle services" (i.e., telematics). (/d.)

D. Dissolution of the Sponsorship
22. On January 5, 2010, Meixner sent T-Mobile a notice of default for the nonpayment of $7,000,000 due under the sponsorship agreement by January 1, 2010.
(PTX-41) Two days later, Matthew Welch, aT-Mobile Major Account Executive,
emailed Meixner saying:

14

I received a call from [Volkswagen Group of America] yesterday afternoon
requesting my presence at an informal one-on-one meeting with Stefan
Jacoby, Warren Richie and the CFO ... I must say that this is a wonderful
opportunity for me and [T-Mobile] and I appreciate your efforts in keeping
us in the game at VW ....
Once again Ron, I really appreciate you and your efforts.
(PTX-83) On the same day, Hines sent Meixner a letter terminating the VI CI-T-Mobile
sponsorship agreement. (PTX-40; DTX-80) The termination letter claimed VICI
materially breached the contract because:
VICI made a material representation and warranty (in Section 5.8) that
VICI had the authority to bind Audi, VW and Porsche ... to an obligation
making [T-Mobile] the exclusive wireless carrier supplying wireless
connectivity for the ... telematics programs beginning in model year
2011. As it turns out ... VICI does not have and has never had the
authority to grant such rights ... or to contractually bind Audi and VW in
that regard .... VICI has not provided any other real support toT-Mobile
to assist us in meeting that objective.
In addition, we note that VICI failed, without justification or prior notice to [TMobile], to race ... at one key event where [T-Mobile] was present with business
guests.
(ld.)

Ill. CONCLUSIONS OF LAW
A. Breach of Contract
1. Section 5.8
23. The core dispute in this case centers around section 5.8 of the sponsorship
agreement. Defendant, T-Mobile, contends that: (1) section 5.8 of the sponsorship
agreement contractually obligated VICI to convey business from VW, Audi, and
Porsche toT-Mobile; and (2) VICI breached the agreement by not delivering this
business. Conversely, plaintiff, VIC I, contends that: (1) section 5.8 created no such
obligation; (2) VICI fully performed under the contract; and (3) T-Mobile breached the
15

contract by failing to make sponsorship payments.
a. Section 5.8 is ambiguous on its face

24. In Delaware, the interpretation of contracts is a matter of law for the court to
determine. See Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d
1192, 1195 (Del. 1992). A court's interpretation of a contract "will give priority to the
parties' intentions as reflected in the four corners of the agreement." GMG Capital
lnvs., LLC v. Athenian Venture Partners I, L.P., 36 A. 3d 776, 779 (Del. 2012) (citing
Paul v. Deloitte & Touche, LLP, 974 A.2d 140, 145 (Del. 2009)). "In upholding the
intentions of the parties, a court must construe the agreement as a whole, giving effect
to all provisions therein." E./. duPont de Nemours and Co. v. Shell Oil Co., 498 A.2d
1108, 1113 (Del. 1985) (citations omitted). "[T]he meaning which arises from a
particular portion of an agreement cannot control the meaning of the entire agreement
where such inference runs counter to the agreement's overall scheme or plan." /d.
25. If a contract's terms are clear and unambiguous, the court will interpret such
terms according to their ordinary and usual meaning. See Paul, 97 4 A.2d at 145.
Contract terms are held to be clear and unambiguous "when they establish the parties'
common meaning so that a reasonable person in the position of either party would have
no expectations inconsistent with the contract language." Eagle Indus., Inc. v.
DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) (citing Rhone-Pou/enc,
616 A.2d at 1196). "A contract is not rendered ambiguous simply because the parties
do not agree upon its proper construction. Rather, a contract is ambiguous only when
the provisions in controversy are reasonably or fairly susceptible of different

16

interpretations or may have two or more different meanings." Rhone-Poulenc, 616 A.2d
at 1195. If a court determines that a contractual provision is ambiguous, the "court may
consider evidence of prior agreements and communications of the parties as well as
trade usage or course of dealing." Eagle Indus., 702 A.2d at 1233.
26. Turning to the VICI- T-Mobile sponsorship agreement, although T-Mobile
has repeatedly asserted that it entered into the sponsorship only to gain the telematics
business from Audi, VW, and Porsche, this intention is not "reflected in the four corners
of the agreement." GMG Capitallnvs., 36 A.3d at 779. The recitals state the purpose
of the contract is to "sponsor an American LeMans Series racecar" to "promote and
maintain [the parties'] respective corporate images and reputations through participation
in the 2009, 2010 and 2011 American LeMans race seasons." (PTX-1 at 106) The
sponsorship contract in question is eight pages long and contains over 300 lines of text.
(PTX 1) In these 300 plus lines of text, the word telematics is used only one time, in a
three line provision (section 5.8) with no indication that this provision was the bedrock of
the deal forT -Mobile. (/d. at 107) The court will not rely upon the meaning inferred
from such an obscure provision to illuminate the contract's overall scheme or plan. See

E. I. duPont de Nemours and Co., 498 A.2d at 1113.
27. Examining section 5.8 in the context of the larger contract, it is evident that
the language of that provision is "fairly susceptible of different interpretations" and
section 5.8 could "have two or more different meanings." Rhone-Poulenc, 616 A.2d at
1195. Section 5.8 recites that "VICI grants to T-MobileUS the right to be the exclusive
wireless carrier supplying wireless connectivity .... " (PTX-1 at 107) Although T-Mobile

17

contends that this is in fact language of conveyance, the phrasing is too convoluted to
have any one clear meaning. From the final version of section 5.8, it is not clear if VIC I
has: given T-Mobile the right to go after the telematics business from the three
companies; bound itself to help T -Mobile secure telematics business; or given T -Mobile
some right to telematics business without the business itself. Furthermore, section 5.8
contains undefined key terms that are open to multiple interpretations. For instance,
the contract does not define Porsche, Audi, VW, or from which division of these global
companies VICI is purportedly giving T-Mobile business. Lastly, an examination of the
rest of the contract reveals no other provisions that in any way illuminate the language
contained in section 5.8.
b. Parol evidence does not resolve section 5.8's ambiguity
28. Because the meaning of section 5.8 cannot be divined from within the
contract's four corners, the court must look to "evidence of communications of the
parties as well as trade usage or course of dealing" in order to resolve the latent
ambiguity. Eagle Indus., 702 A.2d at 1233. An examination of the exhibits and
testimony presented at trial does not help define the terms of section 5.8. Emails
between the parties reveal that T-Mobile was concerned with only the United States
models of the cars produced by VW, Audi, and Porsche and that VICI did convey
information relating to how many telematics equipped cars each company would be
producing in the coming years. (PTX-4) Hines testified that he called Meixner to clarify
section 5.8, asking him if he had the authority to grant the telematics business and
Meixner's response was "yeah, yeah, yeah." (0.1. 121 at 659:12-18) Meixner's
testimony was that Hines told him that section 5.8 prevented VICI from "promot[ing]
18

other wireless carriers." (D.I. 119 at 82:25-83:3) With respect to the telematics
business, Meixner understood that he should promote T -Mobile to his contacts and
"open doors." (/d. at 83:7-14) However, beyond these sparse details and contradictory
testimony pertaining to the contract negotiations, the evidence does not add any detail
to the terms of section 5.8. The record contains no evidence demonstrating that either
party had a clear understanding of the obligations and duties imposed by section 5.8.
The court finds that the terms of section 5.8 are ambiguous on their face, and continue
to be ambiguous even in light of parol evidence.
c. Section 5.8 is unenforceable and severable
29. "A contract must be reasonably definite in its terms to be enforceable."
Scarborough v. State, 945 A.2d 1103, 1112 (Del. 2008); see also A veta Inc. v. Bengoa,

986 A.2d 1166, 1186 (Del. Ch. 2009) ("binding agreement must address the material
terms of the bargain clearly and definitely"); Most Worshipful Prince Hall Grand Lodge
v. Hiram Grand Lodge Masonic Temple, Inc., 80 A.2d 294, 295 (Del. Ch. 1951) ("It is

well settled that an agreement in order to be a legally binding agreement must be
reasonably definite and certain in its terms."). Furthermore, Delaware law holds that
"[a]n invalid term of an otherwise valid contract, if severable, will not defeat the
contract." Hildreth v. Castle Dental Ctrs, Inc., 939 A.2d 1281, 1283-84 (Del. 2007); see
also Tracey v. Franklin, 67 A.2d 56, 61 (Del. Ch. 1949) (noting that an illegal provision

in a voting trust did not automatically render the entire agreement invalid); Abercrombie
v. Davies, 123 A.2d 893, 903 (Del. Ch. 1956) (holding that the stockholder provisions

were severable and enforceable, after invalidating a portion of a voting agreement);

19

Weed v. Lyons Petroleum Co., 294 F. 725, 731 (D. Del. 1923). "Whether or not the
terms of a contract are severable is purely a question of the intent of the parties."

Tracey, 67 A.2d at 61. When determining the parties' intent regarding severability,
Delaware courts ask whether the parties gave a single assent to the whole transaction
or whether they assented separately to several things. Orenstein v. Kahn, 119 A. 444,
446 (Del. Ch. 1922). 'The parties' intent to enter into a divisible contract may be
expressed in the contract directly, through a so-called 'severability clause."' 15 RICHARD
A. LORD, WILLISTON ON CONTRACTS§ 45:6 (4th ed. 2012); Doe v. Cedars Academy, LLC,
No. 09C-09-136, 2010 WL 5825343, at *4 (Del. Super. Oct. 27, 201 0) (holding that a
clear and unambiguous severability clause would allow the remainder of an agreement
to be enforced even if a certain provision were invalid); Evans v. State, 872 A.2d 539,
552 (Del. 2005) (stating that, in general, severability clauses are enforceable).
30. In this case, it is clear that the terms of section 5.8 offer no degree of
certainty or definiteness. (PTX-1 at 107) The contract itself does not define the relevant
terms of section 5.8. (!d. at 106) As previously discussed, both parties have testified
that section 5.8 means something completely different than the other and the brief precontract email exchanges between Meixner and T -Mobile employees do not contain
any details that sufficiently illuminate section 5.8 as to render it clear and enforceable.
31. The parties expressed their intention that unenforceable contractual
provisions be severable from the contract by including section 14.7 in the sponsorship
agreement. Section 14.7 recites that:
The provisions of this Agreement are severable and, if any one or more
provisions are determined to be illegal or otherwise unenforceable, in

20

whole or in part, the remaining provisions, and any partially enforceable
provisions to the extent enforceable, shall nevertheless be binding and
enforceable ...
(PTX-1 at 112) This is a clear manifestation of the parties' intention to create a contract
wherein any unenforceable provisions would not destroy the entire agreement. The
court holds section 5.8 to be unenforceable and severable from the remainder of the
otherwise enforceable sponsorship agreement.

d. The forthright negotiator principle does not apply
32. T -Mobile argues that, despite the failure of the extrinsic evidence to reveal
the parties' intent with respect to section 5.8 and the telematics business, section 5.8
should nevertheless be construed against VIC I under the forthright negotiator principle.
Under Delaware law,
the forthright negotiator principle provides that, in cases where the
extrinsic evidence does not lead to a single, commonly held
understanding of a contract's meaning, a court may consider the
subjective understanding of one party that has been objectively
manifested and is known or should be known by the other party.
United Rentals, Inc. v. RAM Holdings, Inc., 937 A.2d 810, 836 (Del. Ch. 2007). "Only
an objectively reasonable interpretation that is in fact held by one side of the negotiation
and which the other side knew or had reason to know that the first party held can be
enforced as a contractual duty." U.S. West, Inc. v. Time Warner, Inc., No. 14555, 1996
WL 307 445, at *1 0 (Del. Ch. June 6, 1996). Applying the forthright negotiator principle,
the court must determine what T-Mobile's subjective understanding of section 5.8 was,
if T-Mobile objectively manifested this understanding, and if T-Mobile's objective
manifestations alerted Meixner to its subjective understanding of the now contested
section 5.8.
21

33. T-Mobile's witnesses asserted at trial that T-Mobile's subjective
understanding of section 5.8 was a firm and definite conveyance by VIC I of telematics
business from Porsche, Audi, and VW toT-Mobile. (0.1. 120 at 436:3-438:12, 440:421, 443:15-444:19; 0.1. 121 at 659:5-661 :7) The court does not find these assertions
credible, based upon the contemporaneous documents of record, which demonstrate
that section 5.8 was added to the sponsorship agreement as "an exit strategy" rather
than a bona vide business arrangement. (See, e.g., PTX 4 at 23)
34. Even if the court were to assume the veracity ofT -Mobile's subjective
understanding, the evidence of record does not support that this subjective
understanding was "objectively manifested" to VIC I or that VIC I knew or should have
known of it. In this regard, the absence of any documentation detailing the scope,
terms, and conditions of the purported $91 million telematics business arrangement
speaks volumes about the purported objective manifestations. Moreover, consistent
with the contemporaneous documentation (or lack thereof), the court finds credible the
trial testimony of Meixner, who testified that his understanding of section 5.8 was simply
that VICI could only promote T-Mobile for any telematics business. (0.1. 119 at 83:1-3)
Although Hines testified that he explicitly asked Meixner if he had the authority to grant
the rights identified in section 5.8 (and Meixner responded affirmatively), in the context
of the documentary record, there is no objective support for the proposition that Meixner
had the authority to commit Porsche, Audi, and VW toT-Mobile's version of section
5.8's business arrangement. (0.1. 121 at 720:17-20) For these reasons, the court
concludes that the forthright negotiator principle does not apply to the facts of record.

2. VICI's failure to race was not a breach
22

35. T-Mobile also asserts that VICI's failure to race the T-Mobile sponsored car
at all of the 2009 Le Mans races is a breach of the sponsorship agreement that gives
rise to an independent basis for termination. VIC I does not contest that it missed
several races during the 2009 season, due to the accident at the Lime Rock race. (D. I.
119 at 90:3-1 0) VIC I argues in this regard that these missed races did not result in a
breach under the doctrine of force majeure which was incorporated into the agreement
under sections 13.1 16 and 13.2. 17 (PTX-1 at 112)
36. As a general matter, "[f]orce majeure clauses are ... drafted to protect a
contracting party from the consequences of adverse events beyond the party's control."
Stroud v. Forest Gate Development Corp., No. 20063-NC, 2004 WL 1087373, at *5

(Del. Ch. May 5, 2004). To this end, "[a]pplication of a force majeure provision, as with
any other contractual provision, starts with the words chosen by the drafters." /d.

16

Section 13.1 reads:
Although each party hereto will use all reasonable endeavors to discharge its
obligations under this Agreement in a prompt and efficient manner, no party
hereto accepts responsibility for any failure or delay caused by circumstances
beyond its direct control including but not with limitation any strike, lockout or
other form of industrial action.
(PTX-1 at 112)
17

Section 13.2 reads:
If a party's performance of any non-monetary obligation under this Agreement is
prevented by any condition wholly beyond such party's control, the affected party
will be excused from such performance, provided the affected party: (a) provides
prompt written notice of such interference, the nature of such interference and
the expected duration of such interference to the other party; and (b) resumes
performing its obligations hereunder promptly following the removal of such
interfering condition. The other party will be relieved from performing its
obligations under this Agreement for the duration of such interference. Such
delay or failure shall not constitute a breach of this Agreement under Section 12
(Termination).
(PTX-1 at 112)
23

37. Turning to section 13.2 of the agreement, the force majeure provision at
issue may be invoked if three conditions are met: (1) the prevented obligation is a nonmonetary obligation that is prevented by a condition beyond a party's control; (2) the
affected party provides prompt notice of the interference, its nature, and expected
duration; and (3) performance of the prevented obligation resumes as soon as the
interference is removed. (PTX-1 at 112; see supra note 14)
38. Turning to the facts, the obligation that was prevented in this case was
certainly a non-monetary one; VICI was prevented from racing because of damage to
the race car sustained in an accident at the Lime Rock race. 18 ((0.1. 119 at 90:3-10;
PTX-53) Two weeks after the VIC I race car sustained damage, Meixner faxed a notice
to T -Mobile's president and legal department explaining that the car would be out of
commission for 45 to 60 days. (PTX-53) VICI resumed racing in October 2009 at
Mazda Raceway Laguna Seca. (PTX-1 02)
39. T-Mobile argues that VICI improperly invoked the force majeure provision of
the agreement because the interference that prevented VICI from racing was a financial
one. 19 (0.1. 126 at 29) The court need not address T-Mobile's legal arguments on this
basis because its contention is factually inaccurate. Meixner did tell T-Mobile that, if he
had more money, he would be able to get the damaged car fixed faster or, alternatively,

18

There is no evidence or testimony suggesting that the accident was due to
something within VICI's control.
19

In other words, defendant appears to challenge condition one (discussed
above). Interestingly, Horn's email during the sponsorship negotiations indicate that TMobile was well aware of the risk of having just one race car - "One car would not be
good because if it crashes we would no longer have a car in the race." (PTX-4 at 25)
24

if T-Mobile would buy VICI a new car, it would not miss any races. (D. I. 119 at 91:6-24,
237:5-7) However, a lack of financial resources was not the nature of the interference.
The interference was the damage sustained in the accident at the Lime Rock race. The
fact that money can solve a problem does not mean that a lack of money caused the
problem. The court finds that VICI's failure to race the T-Mobile Le Mans car at four
races was not a breach of contract because Meixner adhered to the force majeure
procedures outlined in section 13.2 of the agreement.

B. Fraud
40. In addition to its breach of contract claim, T-Mobile also claims that VICI is

°

liable for fraudulent inducement and equitable fraud. 2 Fraud requires the following
elements:
1) a false representation, usually one of fact, made by the defendant;
2) the defendant's knowledge or belief that the representation was false, or was
made with reckless indifference to the truth;
3) an intent to induce the plaintiff to act or to refrain from acting;
4) the plaintiff's action or inaction taken in justifiable reliance upon the
representation; and,
5) damage to the plaintiff as a result of such reliance.
Zirn v. VLJ Corp., 681 A.2d 1050, 1060-61 (Del. 1996). Equitable fraud requires all the

elements of common law fraud except the knowing or reckless misstatement. /d. at
1061.
41. On the facts of record, and for the reasons previously discussed, the court
does not find, by a preponderance of the evidence, that Meixner made a false
statement, i.e., that Meixner claimed to have the authority to bind VW, Audi and

20

It is unclear from defendant's brief what type of fraud it contends existed.
25

Porsche to a multi-million dollar telematics deal. Further, upon consideration of the
sophistication ofT-Mobile and the facts of this case, the court finds that T-Mobile would
not have been justified in any reliance on such representations, even if made. As both
of these elements are necessary to a finding of fraud, T-Mobile has not carried its
burden to prove fraud.

C. Damages
42. Having found that VICI did not breach the contract and that section 5.8 is
unenforceable and severed from the contract, the court turns its attention to the
question of damages. Generally, "the non-breaching party is entitled to recover
'damages that arise naturally from the breach or that were reasonably foreseeable at
the time the contract was made.' Contract damages 'are designed to place the injured
party in an action for breach of contract in the same place as he would have been if the
contract had been performed. Such damages should not act as a windfall."' Paul v.

Deloitte & Touche, LLP, 974 A.2d 140, 146-47 (Del. 2009) (citations omitted); Duncan
v. Theratx, Inc., 775 A.2d 1019, 1022 (Del. 2001) (citing RESTATEMENT (SECOND) OF
CoNTRACTS§ 347). Further, damages should be reduced by costs or other loss
avoided by the non-breaching party. See RESTATEMENT (SECOND) OF CONTRACTS§ 350.
"[A] party may avoid costs by suspending its own performance when confronted with
breach and avoid loss by making substitute arrangements." West Willow-Bay Court,

LLC v. Robino-Bay Court Plaza, LLC, No. 2742-VCN, 2009 WL 458779, at *4 (Del. Ch.
Feb. 23, 2009) (citing RESTATEMENT (SECOND) OF CONTRACTS§ 350 cmt. b ("Once a
party has reason to know that performance by the other party will not be forthcoming,

26

he is ordinarily expected to stop his own performance to avoid further expenditure.")).
Also, a party may not generally recover damages for losses that it could have avoided
by reasonable efforts. /d. (citing RESTATEMENT (SECOND) OF CONTRACTS§ 350 cmt. b)
Thus, the injured party has a duty to mitigate or minimize its costs and losses. /d.
(citing RESTATEMENT (SECOND) OF CONTRACTS§ 350 cmt. b) (noting that "the injured
party is under no obligation to [mitigate], although it will not be awarded damages for
any loss that could be avoided.").
43. There is support in the record for the fact that the payment schedule was
back-loaded. Meixner testified that a "normal budget number is about $5 million for a
car" per racing season, but the bottom line would be $2.5 million per car. (D.I. 119 at
268:18-23; D. I. 119 at 41 :21-24) The emails between the parties show that VICI
requested $12 million dollars a year for three years, butT-Mobile wanted to offer $5
million a year for three years. (PTX-4 at 23) Horn's analysis stated 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." (/d.) The payment structure offered by T-Mobile and accepted by
VIC I, with a low initial payment of $1 million for the 2009 season and two additional
payments of $7 million, for each of seasons 201 0 and 2011, as well as Meixner's
search for and securing of sponsors throughout the 2009 race season, bolsters VICI's
claim that $1 million was not enough to race a car for the season. (PTX-1 at 106; DTX64; DTX-121)
44. The sponsorship agreement shows that T -Mobile owed VIC I the first $7
million payment by January 1, 2010. (PTX-1 at 106) Instead, after receiving a default
27

notice sent on January 5, 2010, T -Mobile attempted to terminate the contract on
January 7, 2010. (PTX-41; PTX-40/0TX-80) Meixner testified that he was counting on
the $7 million to pay some of the expenses incurred in the 2009 racing season, such as
the damage to the race car. (0.1. 119 at 269:24-270:5, 272:11-17) As of the end of the
2009 racing season in October 2009, VIC I was preparing for the 2010 season. (0.1.
120 at 292:2-11) For the foregoing reasons, the court finds that T-Mobile is in breach of
its obligation to pay VIC I the first $7 million payment.
45. Knowing that T -Mobile would not make any more payments after sending its
termination notice, VIC I had a responsibility to mitigate damages. Meixner testified that,
although he prepared for the next season, VIC I did not race in the 2010 season. (0.1.
120 at 292:2-6, 293:24-294:6) VICI did not present evidence as to its efforts to mitigate
T -Mobile's breach by trying to find a primary sponsor for the 2010 and 2011 seasons. 21
Awarding the second $7 million payment, due by January 1, 2011, would provide VIC I
with an unfair windfall. 22 For these reasons, the court declines to award VICI the
second $7 million payment.

D. Attorney Fees and Costs
46. The sponsorship agreement contains a provision for attorney fees to the

21

There was brief testimony by Meixner that he approached Sprint for
sponsorship. (0.1. 119 at 249:9-20)
22

VICI also argues that it is entitled to the second $7 million payment under
section 11.2 (a quasi liquidated damages provision providing that the aggregate
payments remain due in the event of a breach) and 12.2 (stating that the payment
schedule provision survives any termination). (0.1. 123 at 26-27) The court notes that,
in this case, having the second $7 million payment survive the breach would render the
liquidated damages "unreasonably large" and "unenforceable on grounds of public
policy as a penalty." RESTATEMENT (SECOND) OF CONTRACTS§ 356.
28

prevailing party. 23 In Delaware, each party is generally required to shoulder its own
attorney fees regardless of outcome. Goodrich v. E. F. Hutton Group, Inc., 681 A.2d
1039, 1044 (Del. 1996). However, when a contact specifically provides an attorney fee
provision, i.e., awarding attorney fees to the prevailing party, the courts defer to the
parties' agreement. West Willow-Bay Court, 2009 WL 458779, at *8 (citation omitted)
(noting that "considerations of justice and equity may inform the analysis"). The
"contractual provision entitling the prevailing party to fees will usually be applied in an
ali-or-nothing manner." /d. The court has found that T-Mobile breached the
sponsorship agreement by failing to make the January 1, 2010 payment. VIC I did not
breach the sponsorship agreement. The court concludes, for the purpose of the
attorney fee provision, that VICI is the prevailing party in this case. Pursuant to the
sponsorship agreement executed by both VICI and T-Mobile, the court awards VICI its
reasonable attorney fees and costs.

IV. CONCLUSION
For the foregoing reasons, the court finds section 5.8 of the contract to be
unenforceable and severed, and that defendant is in breach of its obligation to pay
plaintiff the first $7 million payment under the agreement. Additionally, defendant is
responsible for plaintiff's reasonable attorney fees and costs. An appropriate order

23

Section 14.6: Attorney's Fees
In any dispute between VICI and [T-Mobile] whether or not resulting in
litigation, the prevailing party shall be entitled to recover from the other
parties all reasonable costs, including, but not limited to reasonable
attorney's fees.
(PTX-1 at 112)

29

shall issue.

30