Ham Broadcasting Company, Inc v. Cumulus Media, Inc et al
MEMORANDUM AND OPINION by Chief Judge Thomas B. Russell on 5/13/2011; re 14 MOTION to Dismiss Amended Complaint filed by Cumulus Broadcasting, LLC, Cumulus Licensing, LLC, DBBC, LLC, Cumulus Media, Inc ; an appropriate order shall issuecc:counsel (KJA)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
CASE NO. 5:10-CV-00185-R
HAM BROADCASTING COMPANY, INC.
CUMULUS MEDIA, INC., et al.
This matter first came before the Court upon Defendants’ Motion to Dismiss Plaintiff’s
original complaint (DN 6). During the pendency of that motion, Plaintiff filed an amended
complaint (DN 9), whereupon Defendants filed their Motion to Dismiss the amended complaint
(DN 14). Plaintiff has responded to this latter motion (DN 17) and Defendants have replied (DN
20). This motion is now ripe for adjudication. For the reasons that follow, Defendants’ Motion
This action in diversity arises out of a contractual agreement between media companies
that own and operate radio stations in the western parts of Kentucky and Tennessee. Plaintiff
Ham Broadcasting Company, Inc. (“Ham”) owns and operates WKDZ-FM (“WKDZ”), a station
located in Trigg County, Kentucky. WKDZ currently broadcasts into Christian County and the
surrounding area. Defendants Cumulus Media, Inc., Cumulus Broadcasting, LLC (“CB”), and
Cumulus Licensing, LLC, are all wholly owns subsidiaries of Defendant DBBC, LLC
In 1993, Ham filed a petition with the FCC for permission to change WKDZ’s
location from Cadiz, Kentucky, to Oak Grove in Christian County, Kentucky. The move was
fostered by Ham’s desire to increase its broadcast area and to include parts of Tennessee. By
1999, the FCC petition had been approved, but Ham had not yet implemented the changes to
WKDZ. It was then that representatives of CB approached Ham and indicated that it wanted to
upgrade a radio station that it owned in Nashville, Tennessee, to include the areas now covered
by Ham’s approved petition (“Nashville Upgrade”). On February 25, 2000, Ham and DBBC
executed an agreement (“Agreement”) whereby Ham would withdraw its FCC petition, thereby
allowing DBBC to submit a similar petition to the FCC for the Nashville Upgrade to broadcast
into the area of Tennessee previously covered by WKDZ. In exchange, DBBC made an initial
payment to Ham of $250,000.00.
The Agreement also contemplated that as a result of the Nashville Upgrade, the FCC
would ultimately require Ham to relocate its radio transmitter site, then located in Cadiz. If this
came to pass, the Agreement provided for a second payment of $250,000.00 to Ham on the
occurrence of two conditions: the FCC’s ruling on the Nashville Upgrade “require[d] WKDZ to
change site at Cadiz” and the FCC decision on the upgrade became “final.” DN 6-2 at 3.
According to the Agreement, this second payment was to cover the general expenses needed to
move the transmitter.
A dispute over this second payment has given rise to the instant action. Ham alleges in
its Complaint that the two conditions necessary to trigger the second payment have occurred, and
as DBBC refuses to tender payment, it is in breach of contract.1 Alternatively, Ham claims that
the parties modified the Agreement through a letter sent to Ham from DBBC’s counsel. Under
this newly modified Agreement, Ham states it is entitled to the second payment. Finally, Ham
Implicit in Ham’s filings is that the transmitter in Cadiz has been moved, although the
circumstances surrounding its relocation are sparsely described in the record before the Court.
brings a claim of unjust enrichment, stating that DBBC’s expansion into Northern Tennessee has
denied Ham the opportunity for future improvements that would allow it to broadcast into this
area. Ham charges that because of the advantage of a larger broadcast area, DBBC is liable for a
sum that reflects the unjust enrichment it has realized as a result of Ham’s abandonment of its
FCC petition. DBBC denies the majority of the allegations in Ham’s Complaint and now moves
to dismiss this action under Federal Rule of Civil Procedure 12(b)(6), based on the “clear
language” of the Agreement.
“When considering a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure, the district court must accept all of the allegations in the complaint as true, and
construe the complaint liberally in favor of the plaintiff.” Lawrence v. Chancery Court of Tenn.,
188 F.3d 687, 691 (6th Cir. 1999) (citing Miller v. Currie, 50 F.3d 373, 377 (6th Cir. 1995)).
To survive a Rule 12(b)(6) motion to dismiss, the complaint must include “only enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007); see also Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009). The “[f]actual
allegations in the complaint must be enough to raise a right to relief above the speculative level
on the assumption that all the allegations in the complaint are true.” Twombly, 550 U.S. at 555
(internal citation and quotation marks omitted). A plaintiff must allege sufficient factual
allegations to give the defendant fair notice concerning the nature of the claim and the grounds
upon which it rests. Id.
Furthermore, “a plaintiff’s obligation to provide the grounds of his entitlement to relief
requires more than labels and conclusions, and a formulaic recitation of the elements of a cause
of action will not do.” Id. A court is not bound to accept “[t]hreadbare recitals of the elements
of a cause of action, supported by mere conclusory statements.” Iqbal, 129 S. Ct. at 1949.
I. Under the Agreement’s unambiguous language, the conditions under which Ham
should receive the second payment have not been met.
While the first payment, about which there is no dispute, is addressed in Section 4(a) of
the Agreement, the disputed portions are contained in Section 1 and Section 4(b). Section 4(b)
sets forth the second payment with the following language:
Further, if the FCC grants the Rule Making Proposal by final order, DBBC shall pay
Ham the additional fixed amount of [$250,000.00] which shall be delivered no later
than five (5) business days after the later of (i) the date that the FCC’s grant of the
Rule Making Order becomes a final order (or finality is waived at DBBC’s sole
discretion) or (ii) the date that DBBC receives an FCC-stamped received copy of the
WKDZ license Application as filed with the FCC in accordance . . . . The payments
by DBBC to Ham are to cover the expected costs of the WKDZ Change, including
engineering and legal fees, necessary equipment purchases and promotional costs.
DN 6-2 at 5. Under the agreement, “WKDZ Change” is defined as “change of [WKDZ’s]
transmitter site with the station remaining licensed in Cadiz.” DN 6-2 at 3. The second payment
is explicitly prefaced by the rather lengthy language of Section 1. Its relevant language is as
DBBC intends to prepare, as appropriate, a rule making proposal or counterproposal
for changes in the FM Table of Allotments specifying the Nashville Upgrade and the
WKDZ change, as well as changes to other stations (the “Rule Making Proposal”),
for submission to the [FCC]. DBBC in its sole discretion will decide when and if to
filed the [petition with FCC for the DBBC upgrade]. . . . Except as expressly
provided in Section 4(a) below, DBBC’s further obligations hereunder are
conditioned upon (i) the grant by the FCC of the Rule Making Proposal that
enables the filing of a construction permit to effectuate the Nashville Upgrade,
that requires WKDZ to change site at Cadiz and that is not subject to the
conditions or changes unless such conditions or changes are accepted by DBBC at
its sole discretion ( the “Rule Making Order”), and (ii) the Rule Making Order’s
becoming final (that is no longer subject to further administrative or judicial review
under applicable law), unless waived by DBBC at its sole discretion.
DN 6-2 at 3 (emphasis added).
In large part, the dispute hinges upon the word “requires” contained in Section 1. DBBC
argues that the second payment is founded on the granting of the “Rule Making Proposal,” which
is itself predicated on the occurrence of two events: (1) the Nashville Upgrade and (2) the
WKDZ Change. DN 6-1 at 4. Each of these events is defined in the Agreement. In sum, DBBC
states that the second payment is only appropriate where the FCC’s ruling regarding the
Nashville Upgrade specifically required WKDZ to change its transmitter site in Cadiz,
Kentucky. The FCC ruling, attached to this motion, makes no mention of Ham, WKDZ, or
orders any action to be taken by Ham with regards to moving the location of their transmitter.
As such, DBBC claims that a “Rule Making Proposal” as set forth under the agreement has not
been granted, and since Section 4(b) unambiguously references a “Rule Making Proposal” as the
condition upon which the second payment must be made, any additional payment is unnecessary.
Ham offers a number of arguments to undermine DBBC’s seemingly straightforward
interpretation of the Agreement.2 It first declares that the word “require,” as it pertains to the
agreement, should be defined as “to have need of.” DN 17 at 4. With this definition, Ham
concludes that “if [DBBC] could not have upgraded their Nashville station without Ham giving
up the [Tennessee] market and changing its site to Cadiz, then the upgrade needed Ham to
change its site at Cadiz and Ham is entitled to its payment.” Id. Ham also focuses on apparent
Several of Ham’s arguments concern trivial discrepancies in the diction between
unrelated sections of the Agreement. The Court finds these arguments frivolous and therefore
does not address them.
discrepancies in Sections 2 and 3 of the Contract that allegedly serve to obviate the requirements
laid out in Section 1 of the Agreement. Id. at 6.
In interpreting a contractual agreement, a court’s primary duty is the “effectuate the
intentions of the parties.” Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 384
(Ky. Ct. App. 2002) (citations omitted). “Any contract or agreement must be construed as a
whole, giving effect to all parts and every word in it if possible.” Id. at 385. (citing City of
Louisa v. Newland, 705 S.W.2d 916, 919 (Ky. 1986)). If a contract is ambiguous or fails to
address a material item, parol evidence interpreting certain its language and conditions may be
appropriate. Id. (citations omitted). However, where the terms of an agreement are clear on
their face, “the parties' intentions must be discerned from the four corners of the instrument
without resort to extrinsic evidence.” Id. (citing Hoheimer v. Hoheimer, 30 S.W.3d 176, 178
(Ky. 2000)). Ambiguity only exists where reasonable people would find terms “susceptible to
different or inconsistent interpretations.” Id. (citing Transport Ins. Co. v. Ford, 886 S.W.2d 901,
905 (Ky. Ct. App. 1994)). Finally, “the construction and interpretation of a contract, including
questions regarding ambiguity, are questions of law to be decided by the court.” First
Commonwealth Bank of Prestonsburg v. West, 55 S.W.3d 829, 835 (Ky. Ct. App. 2000) (citing
Hibbitts v. Cumberland Valley Nat’l Bank & Trust Co., 977 S.W.2d 252, 254 (Ky. Ct. App.
Ham’s reading of the Agreement is incorrect and not supported by its clear language.
Section 1 of the Agreement sets out two clear conditions in the definition of “Rule Making
Proposal”: (1) the FCC granting the Rule Making Proposal that requires WKDZ to change site at
Cadiz and (2) that the granting of the Rule Making Proposal effectuates the Nashville Upgrade.
While Ham offers alternative definitions for “requires” to further its own arguments, the
Agreement clearly uses the word’s more common definition, “to make a request or demand of a
person.” Oxford English Dictionary Online, www.dictionary.oed.com (last visited March 3,
2011) (defining “require”). Using this definition, the FCC ruling did not “require” or “demand”
or “request” that WKDZ change its transmitter location in Cadiz. Ham’s reading of the word
“requires” is both strained and unnecessary; as the Court finds the term unambiguous, Ham’s
definition may be rejected. Even a cursory review of the FCC’s ruling shows that the
Agreement’s conditions have not been met, as WKDZ was under no obligation to move its
transmitter site. Therefore, the Rule Making Proposal as envisioned by the express terms of the
Agreement has not occurred, and consequently DBBC has fulfilled its obligations under the
Moreover, a closer reading of Section 4(b) supports this interpretation rather than the one
offered by Ham. The final sentence of this section sets forth that the purpose of the secondary
payment was to “cover the expected costs of the [changes to WKDZ], including engineering and
legal fees, necessary equipment purchases and promotional costs.” DN 6-2 at 5. These are the
costs that Ham could have been expected to incur had the FCC forced it to move the transmitter
in Cadiz and the Agreement’s language demonstrates that the parties contemplated the second
payment to ease Ham’s burden under those circumstances. However, since the FCC did not
“require” the move, Ham is not entitled to the second payment under the Agreement.
Accordingly, Ham is not due the second payment under Section 4(b) of the Agreement.
II. The letter of April 18, 2001, did not modify the contract.
Ham next declares that a letter it received on April 18, 2001, from Mark N. Lipp (“the
letter”), is evidence that the Agreement was modified to accommodate Defendants and its move
of the transmitter in Cadiz. It continues that the modified Agreement provided for Ham to move
its transmitter site “separately from the FCC order upgrading DBBC’s radio station.” DN 17 at
The letter, written on stationary from the law firm Shook, Hardy, & Bacon L.L.P., is
brief, addresses the Agreement, and appears to come from DBBC’s legal counsel. The relevant
language of the letter is as follows:
There have been several recent conversation and much correspondence regarding
possible changes to the compensation paid to [Ham] under the [Agreement]. I wish
to have the terms of the agreement reaffirmed so that there will be no
DBBC acknowledges that at least one of the conditions set forth in Section 4(a) of
the agreement has been met, and accordingly DBBC is currently obligated and
prepared to pay [Ham] $250,000.00 as set forth therein.
Under Section 4(b) of the agreement, if DBBC’s rule making proceeding to upgrade
one of DBBC’s Nashville stations is filed and prosecuted to a successful conclusion,
DBBC will be obligated to pay [Ham] an additional $250,000.00.
Aside from these obligations and the continuing obligation to reimburse [Ham] for
its reasonable documented expenses incurred in cooperating with DBBC under the
agreement, DBBC has not agreed to any other payment or any other amount.
DN 15 at 2 (emphasis added). In particular, Ham points to the phrase in the letter’s third
paragraph that states all is necessary under Section 4(b) is that the FCC is rule making
proceeding be “filed and prosecuted to a successful conclusion.” Id. Ham argues that this
language demonstrates that Defendants were unconcerned with the previously-described
requirements of the Agreement set forth in Section 1.
After reviewing the letter and the Agreement, Ham contentions that DBBC may have
modified the contract are devoid of both legal and factual merit. First the letter explicitly states
that its author only wants to “reaffirm [the conditions of the Agreement] so that there will be no
misunderstanding.” Id. Indeed, this is the second sentence of the letter. Id. That the drafter of
the letter failed to mention all the conditions necessary to command performance under Section
4(b) is inapposite; the purpose of the letter is unambiguous: “to reaffirm” the terms of the
Agreement. DN 15 at 2. No reasonable person could believe that the intended purpose of the
letter was to modify the Agreement.
Not only is the letter clear on its face, but there is also express language in the Agreement
that bars this type of modification. Section 8 of the Agreement states that “[t]his Agreement sets
forth the entire understanding of the parties hereto at the time of execution and delivery hereof
with respect to the subject matter hereof and may not be amended except by written agreement
signed by both parties.” DN 6-2 at 5. Kentucky law has found that where a contract “forbids” a
particular type of modification, the reviewing court should seek to “enforce the contract as
written.” O'Bryan v. Massey-Ferguson, Inc., 413 S.W.2d 891, 893 (Ky. 1966). Since the
Agreement expressly requires a writing signed by both parties for an effective modification, the
Court should heed its unambiguous terms and cast aside Ham’s modification arguments.
Overall, the straightforward implications of the letter and the Agreement are that the
parties did not modify the Agreement as originally written. Thus, this argument by Ham is
III. Ham’s claim of unjust enrichment is fatally defective.
Finally, count two of Ham’s Complaint pleads an unjust enrichment claim. In Western
KY Coca-Cola Bottling Co. v. Red Bull North America, this Court described the requirements for
unjust enrichment under Kentucky law:
[T]o prevail under a theory of unjust enrichment, [a party] must prove three
elements: (1) benefit conferred upon defendant at plaintiff's expense; (2) a resulting
appreciation of benefit by defendant; and (3) inequitable retention of benefit without
payment for its value. In other words, unjust enrichment is applicable as a basis of
restitution to prevent one person from keeping money or benefits belonging to
No. 1:08-cv-00056, 2010 WL 65029, at *7 (W.D. Ky. Jan. 5, 2010) (internal citations and
quotation marks omitted). Kentucky law is also explicit that “the doctrine of unjust enrichment
has no application in a situation where there is an explicit contract which has been performed.”
Codell Construction Co. v. Kentucky, 566 S.W.2d 161, 165 (Ky. Ct. App. 1977). Courts
interpreting Kentucky law have repeatedly followed the Codell precedent and held that where a
claim for unjust enrichment tracks an underlying breach of contract claim, such an action is
fatally defective. See e.g., KY Coca-Cola Bottling Co., 2010 WL 65029, at *7; Francis v. Nami
Resources Co., No. 04-510, 2008 WL 852047, at *15-16 (E.D. Ky. Mar. 28, 2008); Res-Care,
Inc. v. Omega Healthcare Investors, Inc., 187 F. Supp. 2d 714, 719 (W.D. Ky. 2001).
After carefully reviewing count two, the Court finds it must fail because the claim for
unjust enrichment is unmistakably based upon the Agreement. As the basis for this unjust
enrichment theory, Ham avers that DBBC “would not have been able to upgrade [the Nashville
Station] and to enjoy the benefit of the larger broadcast area had Ham not withdrawn its FCC
request and agreed to move its community licence to Cadiz, Kentucky.” DN 9 at 5. The
Complaint also charges that “[t]he relocation and upgrade of [the Nashville Station] has worked
to Ham’s detriment, in that it blocks potential future upgrades of Ham’s radio stations into the
desirable broadcast area.” Id. The actions Ham describes here, foregoing the benefit of its FCC
petition and losing the broadcast area in northern Tennessee, are clearly contemplated by the
Agreement. Indeed, Ham was paid the initial sum of $250,000.00 because it withdrew its
petition with the FCC, which in turn allowed DBBC to file its own petition covering the same
geographic area. Ham states that it seeks to recover the revenue DBBC has realized “as a result
of Ham’s performance.” DN 9 at 6. However, the document that compelled any performance
was in fact the Agreement.
In setting forth these facts,3 the Court is incapable of divorcing the current claim of unjust
enrichment from the subject matter of the Agreement. All that has transpired in this action is the
sum result of the contract between the parties; that Ham believes it was not fully compensated
for the FCC petition it surrendered or that DBBC has enjoyed more success from the terms of the
Agreement than previously anticipated is not a basis of a claim of unjust enrichment. As Ham’s
claim for unjust enrichment is actually a contract claim in disguise, it must fail.
FOR THE FOREGOING REASONS, Defendant’s Motion to Dismiss (DN 14) is
GRANTED. An appropriate order shall issue.
May 13, 2011
All of these facts are directly on the face of the Agreement and Ham’s Amended
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