D I S H Network L L C v. W L A J - T V L L C
Filing
51
ORDER AND REASONS denying 27 Sealed Motion. Signed by Judge Carl J Barbier on 11/1/2018. (crt,Bunting, M)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
DISH NETWORK L.L.C.
CIVIL ACTION
VERSUS
No. 16-869
WLAJ-TV, L.L.C.
SECTION: “J” (3)
ORDER AND REASONS
Before the Court is a Motion to Dismiss or, in the Alternative, Motion for
Summary Judgment (Rec. Doc. 27) filed by Defendant, WLAJ-TV. At the direction
of the Court, Defendant clarified in a pocket brief (Rec. Doc. 30) that it believed that
this matter could be disposed of via 12(b)(6), because cited to exhibits were referenced
implicitly in the Complaint. Plaintiff filed an opposition (Rec. Doc. 32), to which
Defendant replied (Rec. Doc. 34). Having considered the Motion and legal
memoranda, the record, and the applicable law, the Court finds that Defendant’s
Motion should be DENIED.
FACTS AND PROCEDURAL BACKGROUND
Plaintiff, DISH Network L.LC., is a major subscription-television provider in
the United States, which delivers its services to its customers via satellite
transmissions. In order to provide content to its subscribers, DISH contracts with
local television stations. On August 31, 2012, DISH executed a re-transmission
consent agreement (the “Sinclair Agreement”) with the Sinclair Broadcast Group for
re-transmission of content produced by 82 of Sinclair’s TV stations. (Rec. Doc. 27-6).
Among the stations was WLAJ-TV, a station assigned to the Lansing, Michigan
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market area. WLAJ is currently owned by Defendant, WLAJ-TV, LLC. (Rec. Doc. 15
at 1-2).
The Sinclair Agreement was deemed to be effective on August 16, 2012. (Rec.
Doc. 27-6 at 1). Per its terms, DISH agreed to pay Sinclair a fee for each of the stations
that it would rebroadcast. The fee was on a per subscriber basis and would depend
on the affiliated network. Also, among the Sinclair Agreement’s terms was a “More
Favorable Fee” provision, which acted as a “most favored nation” (“MFN”) clause.
(Rec. Doc. 15 at 2). In section 22 of the Sinclair Agreement, Sinclair promised that if
it granted a re-transmission fee more favorable to certain re-transmitter-competitors
of DISH, by more than half a cent per subscriber than that paid by DISH, Sinclair
would offer DISH the benefit of the more favorable fee. The Sinclair Agreement was
set to expire on August 15, 2015. However, section 23 provides:
Audit Right. During the term and for one (1) year thereafter, each
party will have the right, upon reasonable, prior notice, to conduct an
audit of the other party’s books and records that are reasonably
necessary to verify the accuracy of the Re-transmission Fees paid by
DISH and/or verify Operator’s compliance with its obligations under
Section 22.
(Rec. Doc. 27-6 at 14). Additionally, section 24 states:
Survival. Any provision of this Agreement which logically would be
expected to survive termination or expiration of the Agreement shall
survive termination or expiration.
(Rec. Doc. 27-6 at 14). On November 13, 2012, Sinclair sent a notice to DISH
indicating that Sinclair intended to sell WLAJ-TV to Defendant, with an assurance
that Defendant would “assume all of Sinclair’s obligations under the Agreement as
they relate to WLAJ-TV.” (Rec. Doc. 39-4 at 2). The Sinclair Agreement states that
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subject to such notice, “DISH hereby consents . . . in the case of assignment or transfer
of control of one or more, but less than all of the Stations then operated by [Sinclair],
to the assignment of such portion of this Agreement as may then be applicable to such
Station.” In April of 2013, Defendant’s parent company notified DISH that it had
acquired substantially all of the assets to WLAJ and that Defendant had “assumed
certain Station contracts, including the [Sinclair] Agreement.” (Rec. Doc. 39-5 at 2).
However, Defendant claims that when it gave notice it was assuming the
Sinclair Agreement, Sinclair had presented Defendant only with a redacted version
of the Sinclair Agreement (the “Redacted Sinclair Agreement”), which lists a section
22 among its numbered items, but omits its content. (Rec. Doc. 27-4 at 13). While the
substance of section 22 has been whited out, the Redacted Sinclair Agreement does
not in any way obscure the audit right described in section 23. (Rec. Doc. 27-6 at 1213). Rather, the Redacted Sinclair Agreement clearly states that DISH may employ
an audit to “verify Operator’s compliance with its obligations in section 22 hereof.”
On October 29, 2015—after the expiration of the Sinclair Agreement, but
during the 1-year grace period—DISH notified Defendant that it intended to conduct
an audit to ensure compliance with the MFN clause. Defendant refused to comply
with the audit. On December 7, 2015, DISH gave notice of breach of contract and on
June 22, 2016, DISH filed suit against Defendant, alleging breach of the Sinclair
Agreement.
On July 8, 2016, DISH and Defendant entered into a new re-transmission
broadcast agreement (the “WLAJ Agreement”) (Rec. Doc. 27-7). The agreement was
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made retroactively effective as of August 16, 2015. Notably, the WLAJ Agreement
includes the following passage:
Integration. This Agreement, together with any documents and
exhibits specifically referred to in this Agreement, constitutes the entire
agreement between the Parties to this Agreement. . . . Upon execution
of this Agreement, all prior agreements and understandings between
the Parties related to the Stations will be null and void. Each of the
Parties specifically acknowledges that there are no unwritten side
agreements or oral agreements between the Parties that alter, amend,
modify or supplement this Agreement.
(Rec. Doc. 27-7 at 20). In April of 2018, Defendant filed its Motion. On July 26, 2018,
this matter was transferred to the undersigned judge. The Court heard oral argument
on the matter on October 24, 2018 and took the matter under advisement.
PARTIES’ ARGUMENTS
Defendant argues it is entitled to dismissal or summary judgment on three
grounds: “[1] The assigned re-transmission agreement on which DISH bases its case
is now null and void; [2] The more favorable fee provisions of the null and void retransmission agreement were never assigned to WLAJ anyway; and, [3] Even if the
agreement were not null and void, and even if the ‘more favorable’ fee provision had
been part of the assigned agreement, it would not be applicable here, where DISH
seeks to apply it to WLAJ on a station-by-station basis in conflict with the averaging
language of the Sinclair agreement.” (Rec. Doc. 27-1 at 2).
Plaintiff counters that the WLAJ agreement did not extinguish Plaintiff’s right
to enforce the Sinclair Agreement. (Rec. Doc 32-1 at 16-19). Plaintiff argues that the
“null and void” language is nothing more than a merger provision, which seeks to
make clear that there are no other oral or written agreements binding the Parties. In
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other words, the language is intended to require a court to enforce the parol evidence
rule. Plaintiff argues that the words “null and void” at most terminated the Sinclair
Agreement, but did not rescind it. The distinction being that plaintiffs can seek to
enforce prior breaches of a terminated contract, but not a rescinded contract. Further,
Plaintiff argues that the audit provision survived termination pursuant to the to the
survival provision of the Sinclair Agreement. Thus, Plaintiff had a right to audit
Defendant in order to determine whether Defendant had complied with the MFN
provision prior to contract termination. To the extent that “null and void” is
ambiguous, Plaintiff offers evidence that Parties had considered but ultimately did
not agree to a “clean slate” provision.
Second, Plaintiff argues that Defendant explicitly agreed to assume the
Sinclair Agreement and did so without reservation. (Rec. Doc. 32-1 at 4). Plaintiff
argues that Sinclair’s alleged redaction of a provision had no effect on Defendant’s
assumption of the entire agreement, and that Defendant failed to do due diligence
before assuming the Sinclair Agreement. Finally, Plaintiff argues that summary
judgment is improper, because discovery might reveal facts that contradict
Defendant’s deposition evidence. (Rec. Doc. 32-1 at 8-9).
THE PROPER LEGAL STANDARD
Defendant primarily frames its Motion as a request for dismissal pursuant to
Federal Rule of Civil Procedure 12(b)(6). According to the Rules, a complaint must
contain “a short and plain statement of the claim showing that the pleader is entitled
to relief.” Fed. R. Civ. P. 8(a)(2). The complaint must “give the defendant fair notice
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of what the claim is and the grounds upon which it rests.” Dura Pharm., Inc. v.
Broudo, 544 U.S. 336, 346 (2005) (internal citations omitted). The allegations “must
be simple, concise, and direct.” Fed. R. Civ. P. 8(d)(1).
“Under Rule 12(b)(6), a claim may be dismissed when a plaintiff fails to allege
any set of facts in support of his claim which would entitle him to relief.” Taylor v.
Books A Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002) (citing McConathy v. Dr.
Pepper/Seven Up Corp., 131 F.3d 558, 561 (5th Cir. 1998)). To survive a Rule 12(b)(6)
motion to dismiss, the plaintiff must plead enough facts to “state a claim to relief that
is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when the
plaintiff pleads facts that allow the court to “draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. A court must accept all wellpleaded facts as true and must draw all reasonable inferences in favor of the plaintiff.
Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009); Baker v. Putnal,
75 F.3d 190, 196 (5th Cir. 1996). The court is not, however, bound to accept as true
legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678. “[C]onclusory
allegations or legal conclusions masquerading as factual conclusions will not suffice
to prevent a motion to dismiss.” Taylor, 296 F.3d at 378.
Alternatively and out of an abundance of caution, Defendant asks its Motion
be considered a motion for summary judgment. Rule 12(d) specifies that, if matters
outside of the pleadings are presented and not excluded by the court on a Rule 12(b)(6)
motion, the motion must be treated as a motion for summary judgment. However, not
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all evidence is subject to this rule. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551
U.S. 308, 322 (2007). “[C]ourts ordinarily examine, when ruling on Rule 12(b)(6)
motions to dismiss, . . . documents incorporated into the complaint by reference, and
matters of which a court may take judicial notice.” Id. (citing 5B C. WRIGHT & A.
MILLER, FED. PRAC. & PROC. CIV., § 1357 (3d ed. 2004). The Sinclair Agreement is
incorporated by reference in the Complaint, so consideration of this evidence will not
render this Court’s decision a summary judgment. In attaching the Sinclair
Agreement to its Motion, “defendant merely assist[ed] the plaintiff in establishing
the basis of the suit.” Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99
(5th Cir. 2000). However, the WLAJ Agreement cannot be said to be referenced in the
Complaint, because it was drafted only after the Complaint was filed. Nor does this
Court believe the WLAJ Agreement to be “central” to Plaintiff’s claim; Plaintiff could
certainly prevail without this evidence. See id. Thus, the Court finds that by
considering the WLAJ Agreement, the Court would necessarily convert Defendant’s
Motion to one for summary judgment.
The Court notes that “conversion by the district judge should be exercised with
great caution and attention to the parties' procedural rights,” 5C C. WRIGHT & A.
MILLER, FED. PRAC. & PROC. CIV. § 1366 (3d ed. 2004), but there is no mistaking that
the Parties were prepared for conversion in this case. Defendant’s original Motion
welcomed this Court to apply the Rule 56 standard—thereby putting Plaintiff on
notice—and Plaintiff introduced its own summary judgment evidence in the form of
an e-mail chain exchanged among the Parties’ attorneys concerning the drafting of
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the WLAJ Agreement. (Rec. Doc. 32-7), Isquith for and on Behalf of Isquith v. Middle
S. Utilities, Inc., 847 F.2d 186, 195 (5th Cir. 1988) (finding that procedural safeguards
of Rule 56 require notice to party that court could rule pursuant Rule 56, not that it
would). The choice of whether to exclude extra-pleading material or consider it under
a Rule 56 standard is within the discretion of the district court. Id.
Summary judgment is appropriate when “the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine issue as
to any material fact and that the movant is entitled to judgment as a matter of law.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R. Civ. P. 56(c)), Little
v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). When assessing whether a
dispute as to any material fact exists, a court considers “all of the evidence in the
record but refrains from making credibility determinations or weighing the evidence.”
Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th
Cir. 2008). All reasonable inferences are drawn in favor of the nonmoving party, but
a party cannot defeat summary judgment with conclusory allegations or
unsubstantiated assertions. Little, 37 F.3d at 1075. A court ultimately must be
satisfied that “a reasonable jury could not return a verdict for the nonmoving party.”
Delta, 530 F.3d at 399.
If the dispositive issue is one on which the moving party will bear the burden
of proof at trial, the moving party “must come forward with evidence which would
‘entitle it to a directed verdict if the evidence went uncontroverted at trial.’” Int'l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991). The nonmoving
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party can then defeat the motion by either countering with sufficient evidence of its
own, or “showing that the moving party’s evidence is so sheer that it may not
persuade the reasonable fact-finder to return a verdict in favor of the moving party.”
Id. at 1265.
DISCUSSION
Plaintiff has filed suit for breach of the Sinclair Agreement it alleges that
Defendant assumed. Specifically, Plaintiff alleges that Defendant breached by failing
to comply with the audit requirement of Section 23 of the Sinclair Agreement. (Rec.
Doc. 15).1 The Parties agree that New York law controls in this case. (Rec. Doc. 32-1
at 7). “Where, as here, the proper resolution of the case turns on the interpretation of
[New York] law, [district courts] “are bound to apply [New York] law as interpreted
by the state's highest court.” Am. Intern. Specialty Lines Ins. Co. v. Rentech Steel
LLC, 620 F.3d 558, 564 (5th Cir. 2010) (quoting Barfield v. Madison Cnty., Miss., 212
F.3d 269, 271–72 (5th Cir. 2000)). “Under New York law, there are four elements to
a breach of contract claim: ‘(1) the existence of an agreement, (2) adequate
performance of the contract by the plaintiff, (3) breach of contract by the defendant,
and (4) damages.’” Ellington Credit Fund, Ltd. v. Select Portfolio Servicing, Inc., 837
F. Supp. 2d 162, 188–89 (S.D.N.Y. 2011) (citing Harsco Corp. v. Segui, 91 F.3d 337,
348 (2d Cir. 1996)). Here, the “existence” of the Sinclair Agreement effectively turns
on this Court’s interpretation of the phrase “null and void” in the WLAJ Agreement.
Plaintiff also asks for declaratory relief in the form of an order declaring that Defendant assumed
the Sinclair Agreement in its entirety and that the MFN clause will be applied in such a way that
WLAJ is the only retransmission fee aggregated in calculating the MFN rate.
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Additionally, Defendant argues it did not breach the Sinclair Agreement, because it
never assumed the audit or MFN provisions or because the provisions cannot be
appropriately applied to Defendant.
New York law holds that the “the initial interpretation of a contract ‘is a matter
of law for the court to decide.’” K. Bell & Associates, Inc. v. Lloyd's Underwriters, 97
F.3d 632, 637 (2d Cir. 1996) (citation omitted). Unless a term is found to be
ambiguous, New York law generally prohibits consideration of any evidence beyond
the four corners of a contract. See W., Weir & Bartel, Inc. v. Mary Carter Paint Co.,
255 N.E.2d 709, 711 (N.Y. 1969). In other words, “extrinsic evidence may not be used
to create an ambiguity in an otherwise unambiguous agreement.” Consarc Corp. v.
Marine Midland Bank, N.A., 996 F.2d 568, 573 (2d Cir. 1993). “Whether or not a
writing is ambiguous is a question of law to be resolved by the court.” W.W.W.
Associates, Inc. v. Giancontieri, 566 N.E.2d 639, 642 (N.Y. 1990). Contractual
language is unambiguous if it possesses “a definite and precise meaning, unattended
by danger of misconception in the purport of the contract itself, and concerning which
there is no reasonable basis for a difference of opinion.” JA Apparel Corp. v. Abboud,
568 F.3d 390, 396 (2d Cir. 2009) (quoting Breed v. Insurance Company of North
America, 46 N.Y.2d 351, 355 (N.Y. 1978). “Where reasonable minds could be said to
differ because the language the parties used in their written contract is susceptible
to more than one meaning—each as reasonable as the other—and where extrinsic
evidence of the parties' actual intent exists, it should be submitted to the trier of fact.”
Consarc Corp., 996 F.2d at 573. “[I]nterpretations that render contract provisions
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meaningless or superfluous” are disfavored. Manley v. AmBase Corp., 337 F.3d 237,
250 (2d Cir. 2003).
I.
This case poses several difficult questions of contract interpretation. The first
that the Court must resolve is the consequence of the WLAJ Agreement’s declaration
that, “Upon execution of this Agreement, all prior agreements and understandings
between the Parties related to the Stations will be null and void.” (Rec. Doc. 27-7 at
20). Defendant argues the effect of the language is plain: “whatever rights and
obligations WLAJ and DISH owed one another under the pre-existing retransmission agreement were rescinded and replaced by the rights and obligations
they agreed to under their new re-transmission agreement.” (Rec. Doc. 27-1 at 12).
Plaintiff cites to an opinion that gives some support to its proposition that a “null and
void” contract is one that has been rescinded. In Rekis v. Lake Minnewaska Mt.
Houses, Inc., 573 N.Y.S.2d 331, 335 (N.Y. App. Div. 3d Dept. 1991), the court stated
that a plaintiff seeking to have a contract “declared null and void” was in fact seeking
the “equitable remedy of rescission.” The Rekis court wasn’t interpreting contractual
language, but the opinion does show that “null and void” might signify what is often
referred to as an “agreement of rescission.” An agreement of rescission is an
agreement among parties to discharge the duties owed to one another. See
RESTATEMENT (SECOND) OF CONTRACTS § 283 (1981); see also M.J. Posner Const. Co.,
Inc. v. Valley View Dev. Corp., 499 N.Y.S. 2d 997, 999 (N.Y. App. Div. 3d Dept. 1986)
(“Generally, the agreement of rescission operates as an accord and satisfaction of the
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prior covenants.”). If this Court found the “null and void” language to constitute an
agreement of rescission, the result would be that DISH and WLAJ have released any
possible claims they had against each other for any breach of the Sinclair Agreement.
See M.J. Posner, 499 N.Y,S, 2d at 999.2 Summary judgment for the Defendant would
be appropriate in that case.
Plaintiff does not quibble that the WLAJ Agreement supersedes the Sinclair
Agreement, but argues that the effect of the “null and void” language was a
“termination,” rather than a rescission. A termination differs from a rescission in
that, “[o]n ‘termination’ all obligations which are still executory on both sides are
discharged but any right based on prior breach or performance survives.” UNIF.
COMMERCIAL CODE § 2-106. Does that distinction matter here? Plaintiff argues it
does. According to section 23 of the Sinclair Agreement, the right to audit survives
one year past expiration of the term of the Sinclair Agreement. (Rec. Doc. 27-6 at 14).
The Sinclair Agreement not only expired, it was at the least terminated, but section
24 of the Sinclair Agreement states that, “Any provision of this Agreement which
logically would be expected to survive termination or expiration of the Agreement
shall survive termination or expiration.” (Rec. Doc. 27-6 at 14). Thus, according to
Plaintiff, “DISH continues to have the right to seek remedies for breaches of the prior
Contrary to Plaintiff’s claims, where a contract requires mutual execution, an agreement of rescission
does not necessarily require each party to return any benefit already received. See RESTATEMENT
(SECOND) OF CONTRACTS § 283 (1981) (“An agreement of rescission discharges all remaining duties of
performance of both parties. It is a question of interpretation whether the parties also agree to make
restitution with respect to performance that has been rendered.”).
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Agreement even as the parties agree their current and future conduct will be
governed by the New Agreement.” (Rec. Doc. 32-1 at 17).
In support of its interpretation of the “null and void” provision, Plaintiff relies
Primex Intern. Corp. v. Wal-Mart Stores, Inc., 679 N.E.2d 624 (N.Y. 1997), a case
concerning the viability of an arbitration clause in a contract superseded by a new
agreement which included an integration provision. The integration provision stated:
This Agreement may not be amended, changed, modified, or altered
except by a writing signed by both parties. All prior discussions,
agreements, understandings or arrangements, whether oral or written,
are merged herein and this document represents the entire
understanding between the parties.
Id. at 596-57. The Court of Appeals of New York noted that arbitration agreements
generally survive and remain enforceable as to disputes that arise out of obligations
owed pursuant to the underlying contract regardless of whether the contract has
expired or has been canceled by breach. Id. at 599. The court opined that “the purpose
of a general merger provision”—which typically uses the quoted language—is “to
require full application of the parol evidence rule.” Id. Accordingly, the court held
that the above language in the merger agreement was insufficient to retroactively
revoke the parties’ mutual consent to arbitrate disputes stemming from the original
contract. Id.
Obviously, the integration provision in Primex did not use the words “null and
void.” Rather, the Primex provision specifically stated that agreements were
“merged”—language ordinary to an integration provision. Id. Primex, therefore, is not
dispositive. Nevertheless, in the WLAJ Agreement the phrase “null and void” comes
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near the end of the contract, in a subsection labeled “Integration,” surrounded by
language typical of an integration agreement.3 Viewed in this context, it would
appear that “null and void” is intended to strengthen the effect of the integration
provision. However, that finding is not particularly helpful, because integration
provisions may have different effects depending on the intent of the signatories to the
contract; one possible effect is a waiver of claims. See id. at 601-602 (“[A] contract
merger clause may be considered the equivalent of a general release of substantive
claims under a prior Agreement.”) (citing 3 CORBIN, CONTRACTS § 578 (1960)).
Therefore, the Court must still determine what effect is to be given “null and void” in
the context of an integration provision.
Defendant’s argument that the meaning of “null and void” as a contractual
term is clearly established by New York law is severely undercut by a cursory review
of the handful of cases it relies on. Defendant cites to no opinion considering that
phrase as a contractual term. The court in Bronx Store Equip. Co., Inc. v. Westbury
Brooklyn Associates, L.P., 721 N.Y.S.2d 28 (N.Y. App. Div. 1st Dept. 2001), unlike the
court in Rekis, does not even utter “null and void” in its opinion. See also M.J. Posner
Const. Co., Inc. v. Valley View Dev. Corp., 499 N.Y.S.2d 997, 999 (N.Y. App. Div. 3d
Dept. 1986) (same); Jacob Gold Realty Inc. v. Sckoczylas, 720 N.Y.S.2d 324, 324 (N.Y.
App. Term. 2000) (same).
Plaintiff, likewise fails to turn up any New York case law establishing that
“null and void” unambiguously signifies a termination. Primex, although relevant,
For example: “This Agreement, together with any documents and exhibits specifically referred to in
this Agreement, constitutes the entire agreement between the Parties.” (Rec. Doc. 27-7 at 20).
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concerned only language typical of integration agreements and not the phrase at
issue. The only decision that Defendant provides where a New York court even uses
the phrase “null and void” is a surrogate’s court opinion dating from 1962. See In re
Cairns' Est., 33 Misc. 2d 621 (N.Y. Sur. 1962). That opinion’s analysis as to the effect
of “null and void” is so vague that each of the Parties urges that it supports its
respective argument. It provides little insight into how New York’s highest court
would decide this case.4 This Court has also searched in vain for New York case law
indicating whether “null and void” means “terminated” or “rescinded.” What relevant
case law this Court has found, confirms that the phrase is not used with sufficient
precision to be unambiguous in this case.
In Indovision Enterprizes, Inc. v. Cardinal Export Corp., 354 N.Y.S.2d 113, 114
(N.Y. App. Div. 1st Dept. 1974), a New York appellate court considered a letter
extending an offer of sale and delivery of a number of bicycles. The letter included
this provision: “This offer will be deemed null and void if letters of credit, as required
in this letter, are not opened.” Id. The offer was accepted pursuant to the terms of the
offer. Id. However, no line of credit was ever opened. The court below held that this
provision prevented any recovery upon invocation and granted summary judgment
against the seller-offeror who sued for breach of contract. Id. However, on review, the
appellate court found that this result was tantamount to holding that the buyer could
The surrogate court held that a “null and void” provision “terminated the indebtedness,” which
rendered the bond and mortgage “extinguished.” In re Cairns' Est., 33 Misc.2d at 624. The court was
obviously concerned only with the result—that the executor could not offset bequests made to the two
mortgagors—which could be achieved without the need to resolve the more technical question before
this Court today.
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by its own act nullify its agreement, a “commercial absurdity.” Id. at 115. Thus, the
appellate court found that reasonable minds could differ as to whether the parties
intended the “null and void” provision to have the effect of rescinding the contract or
placing the buyer in default and terminating the seller’s obligations. Id. One judge,
convinced that the “null and void” provision unambiguously prevented recovery
under the agreement, dissented. Id. at 230 (“[T]he ‘contract’ is clear and
unambiguous, and no extraneous circumstances may be considered to whittle away
the clearly declared intent of the parties, so prominently expressed in the writing
drafted by plaintiff.”). It appears that the majority concluded that the phrase “null
and void” could be naturally read to prevent recovery for breach of the agreement,
but that was unlikely to be the intent of the parties in the context of the agreement.
In Wiser v. Enervest Operating, L.L.C., 803 F. Supp. 2d 109, 124 (N.D.N.Y.
2011), the court was tasked with interpreting disputed oil and gas leases that
included an “unless” clause: “This Lease is made on the condition that it will become
null and void and all rights hereunder shall cease and terminate unless work . . . is
commenced.” Id. at 120. Based on this language, the court held that “the leases
automatically terminated upon defendants’ failure to make delay rental payments.”
Id. at 125. In other words, the court interpreted “null and void” in that specific context
to have the effect of cancelling the agreement.5
The UCC recognizes “cancellation” as yet another distinct end for a contract. UNIF. COMMERCIAL
CODE § 2-106 (“‘Cancellation’ occurs when either party puts an end to the contract for breach by the
other and its effect is the same as that of “termination” except that the cancelling party also retains
any remedy for breach of the whole contract or any unperformed balance.”).
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A contract that is “null” has “no legal effect” and is “without binding force.”
BLACK'S LAW DICTIONARY (10th ed. 2014) (“The phrase null and void is a common
redundancy.”); see also MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY (10th ed. 1993)
(defining “null and void” as “having no force, binding power, or validity”). However,
whether the Parties by invoking the phrase “null and void” meant that their prior
agreements were no longer effective (terminated), or that their prior agreements
never had legal effect (rescinded by agreement) is unclear to this Court. As the small
sample of cases cited above demonstrates, both courts and parties acting pursuant to
New York law have used “null and void” as a synonym for “terminated,” “cancelled,”
extinguished,” and “rescinded.” It is clear that where a provision is invoked rendering
a contract “null and void,” the agreement is rendered ineffective. What is unclear is
whether this ineffectiveness bars recovery for prior breaches of the contract; this more
subtle question would appear to depend on the context in which the phrase occurs.
See Indovision, 354 N.Y.S.2d at 114, Wiser, 803 F. Supp. 2d at 124.
Here, considering “null and void” in the context of the larger agreement does
not render the meaning any more pellucid. On the one hand, if the Parties intended
the term “null and void” to have the effect of merely terminating the contract, then it
is curious that the parties did not use the word “terminate” as they do elsewhere in
the contract. (Rec. Doc. 27-7 at 3). On the other, it would be very strange for the
Parties to waive substantive claims against each other for prior breaches of other
agreements pursuant to three words tucked under a paragraph marked “Integration”
in the back of the contract. (Rec. Doc. 27-7 at 20). Neither reading would render the
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words “null and void” superfluous; Parties have not pointed to any other language in
the contract effecting a termination or a rescission.6 Moreover, the WLAJ Agreement
specifically states that no inference is to be taken against the drafter. (Rec. Doc. 27-7
at 19). As the court in Indovision held, given the context of the entire WLAJ
Agreement, this Court finds that reasonable minds could differ whether the Parties
intended the “null and void” language to waive any and all claims available to the
Parties for breach of prior agreements or to merely terminate the executory
obligations of agreements superseded.
Because the contract ambiguous, consideration of parol evidence is
appropriate. JA Apparel Corp., 568 F.3d at 397. Plaintiff filed suit for Defendant’s
failure to comply with the audit provision in the Sinclair Agreement before the
Parties entered into the WLAJ Agreement on July 8, 2016. Plaintiff has attached as
evidence an e-mail chain indicating the Parties were considering waiving all claims
against one another by use of a “clean slate” provision, but ultimately decided against
a “clean slate” on the same day the WLAJ Agreement was ratified. (Rec. Doc. 32-7).
Defendant counters that the clean slate provision was necessary to waive noncontractual claims. Thus, Defendant argues, the parol evidence does not indicate
“null and void” was not intended to waive DISH’s breach of contract claims. (Rec. Doc.
34-2 at 4). To what extent this evidence, and whatever else is garnered during
Defendant argues that, considering the Sinclair Agreement had expired according to its terms, it
would be superfluous for the Parties to negotiate a termination provision into the WLAJ Agreement.
If the Court were to go down that analytic route, however, the Court would also need consider that the
“null and void” language appears to be lifted from the Sinclair Agreement, which has a substantively
identical integration paragraph. Again, the Court is left to wonder why the Parties would insert an
agreement to discharge claims being litigated contemporaneously, using a recycled integration
provision.
6
18
discovery, says about the intent of the Parties in using the phrase “null and void” is
for the trier of fact to decide. See Town of Wilson v. Town of Newfane, 581 N.Y.S.2d
962, 963 (N.Y. App. Div. 4th Dept. 1992) (“If there is ambiguity in the terminology
used . . . and a determination of the intent of the parties depends on the credibility of
extrinsic evidence or on a choice among reasonable inferences to be drawn from
extrinsic evidence, then such determination is to be made by the jury.”) (citation
omitted).
II.
Defendant also alleges that dismissal or summary judgment is appropriate on
another ground—that Defendant never assumed the contractual provisions that
DISH seeks to enforce. Defendant admits that it notified DISH in writing that it
would be assuming the Sinclair agreement. However, Defendant alleges the version
of the Sinclair Agreement that Defendant received from Sinclair had section 22—the
MFN clause—redacted. Thus, Defendant did not assume this part of the Sinclair
Agreement, because there was no “meeting of the minds” regarding this particular
contractual provision. (Rec. Doc. 27-1 at 9-10). Defendant provides no case law beyond
that establishing this basic principle of contract law.
Plaintiff counters that it agreed to allow Sinclair to assign the Sinclair
Agreement to Defendant only in its entirety and that when Defendant gave notice to
Plaintiff it was assuming the Sinclair Agreement, it did so without reservation.
Moreover, Plaintiff argues that Plaintiff had notice of the MFN provision by virtue of
the unredacted audit provision, which explicitly states the audit right is designed so
19
that DISH may check for compliance with section 22. According to Plaintiff,
Defendant had a duty to investigate the Sinclair Agreement before it agreed to
assume it. (Rec. Doc. 32-1 at 20) (citing Sitar v. Sitar, 61 A.D. 3d 739, 742 (N.Y. App.
Div. 2009) (granting summary judgment on plaintiff’s fraud claims, because plaintiff
failed “exercise ordinary diligence” in reviewing the books of an entity plaintiff
purchased).
The Court agrees with Plaintiff that Defendant failed to satisfy its duty to
investigate the contract that it agreed to assume. When this Court asked defense
counsel at oral argument why Defendant didn’t inquire into what obligations it was
agreeing to assume under section 22, defense counsel’s only response was that the
purchase of a television station is a complicated business, requiring review of many
contracts. That may be so, but that is no reason for this Court to strike provisions of
an agreement that the Defendant agreed to assume without exception.
III.
Finally, Defendant argues that dismissal or summary judgment is appropriate
because the “‘more favorable fee’ applied only on an aggregate basis to all 82 stations
listed in Exhibit A of Sinclair’s re-transmission agreement. (Rec. Doc. 27-1 at 11). In
other words, regardless of this Court’s finding that Defendant agreed to assume the
entire Sinclair Agreement, Defendant argues that the MFN provision simply cannot
be applied as written now that WLAJ has been sold to a single-station operator.
Defendant quotes language from the Sinclair Agreement, which purportedly suggests
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that the original signatories only contemplated applying the MFN provision where
an operator, such as Sinclair, owns many stations in contract with DISH:
For clarity . . . [Sinclair] and DISH expressly acknowledge and agree
that “Net Fee” means the net effective per subscriber rate . . . based on
all . . . economic outlays . . . payable to Operator by DISH . . . on an
aggregate (rather than on a station-by-station) basis for all Stations
carried by DISH or the MFN Other Distributor.
(Rec. Doc. 27-6 at 13). Thus, Defendant argues Plaintiff has no basis for auditing a
single station, because compliance with the MFN clause can only be adjudged when
an aggregate re-transmission fee is calculated.
Plaintiff argues that the use of the word “aggregate” does not preclude
application of the MFN provision to a single-station operator, such as WLAJ. Rather,
in the case of a single-station operator, the aggregate fee is calculated in the same
way it would be if the provision were to be applied to Sinclair. Here, it so happens
that the re-transmission fees collected by WLAJ are the only re-transmission fees
collected by Defendant, so the “aggregate re-transmission fee” or “net fee” is equal to
that of WLAJ’s re-transmission fees standing alone.
The Court agrees with Plaintiff that use of the word “aggregate” does not
preclude application of the MFN provision to a single-station operator, such as
Defendant. An “aggregate” is simply a “sum total.” MERIAM-WEBSTER’S COLLEGIATE
DICTIONARY (10th ed. 1999). Whether the sum total is the fee of one station, or two
stations, or eighty-two stations, that number is calculable within the contemplation
of the Sinclair Agreement. The MFN formula is easily applied in this case.
21
Defendant’s contention is not really that the formula cannot be applied
mathematically. Rather, it is that applying the MFN provision as written creates an
absurd result. Defendant provides a hypothetical. If one of Sinclair’s station, such as
WLAJ, had negotiated fees more favorable to DISH’s competitors, that would not
necessarily render Sinclair, as the operator of 82 stations, in breach of the Sinclair
Agreement, because the fees charged by WLAJ would be averaged with the fees
charged by the other 81 stations. It is presumed that some of Sinclair’s stations
charge fees more favorable to rival re-transmitters and others charge fees that are
less favorable. Sinclair’s only concern as a multi-station operator is to ensure that on
average, its stations are not violating the MFN provision. However, by removing a
station from multi-station-operator Sinclair, to a single-station operator, such as
Defendant, the inputs of the formula change significantly. The single-station operator
of a station charging more favorable fees to other re-transmitters is now in breach of
the MFN provision, not because its fees have changed, but because the “net fee” has
changed now that the other station’s fees are not included in the aggregate.
The Court does not think this result is absurd. DISH contracted with the
operator of WLAJ in a manner that ensured it would never receive a worse deal than
its re-transmitter competitors. The sale of WLAJ to Defendant does not deprive DISH
of that benefit it contracted for. Quite to the contrary, as the Court found above,
Defendant agreed to assume the contract in its entirety. It would have been
foreseeable to a party that performed its due diligence that purchase of WLAJ by a
22
single-station-operator could create a breach of the Sinclair Agreement. The MFN
formula is not a difficult one to apply.
With the benefit of adequate inquiry into the terms of the Sinclair Agreement,
Defendant could have availed itself to several options before it purchased WLAJ.
Defendant could have negotiated a better price from Sinclair for the station to
compensate for the anticipated breach or refused to adopt the entirety of the Sinclair
agreement. Defendant failed to ask what it was agreeing to undertake pursuant to
section 22, and now must bear the consequences of that lapse—assuming that the
trier of fact finds that the Parties did not agree to rescind the Sinclair Agreement.
CONCLUSION
Accordingly,
IT IS ORDERED that the Motion for Summary Judgment (Rec. Doc.
27) filed by Defendant, WLAJ-TV is DENIED.
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
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