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Local TV Tennessee LLC v. N.Y.S.E. Wolfchase LLC

Court of Appeals of Tennessee, Jackson

April 9, 2018

LOCAL TV TENNESSEE LLC D/B/A WREG-TV
v.
N.Y.S.E. WOLFCHASE LLC D/B/A THE NEW YORK SUIT EXCHANGE

          November 14, 2017 Session

          Appeal from the Chancery Court for Shelby County No. CH-13-0586 Walter L. Evans, Chancellor

         This is a breach of contract action in which both parties assert affirmative claims. Plaintiff, a Memphis TV station, sued one of its advertisers for breach of an advertising agreement to recover approximately $511, 000 for past advertising services. Defendant Advertiser filed a counterclaim under the Tennessee Consumer Protection Act, for constructive fraud, and for breach of contract. The trial court granted judgment on the pleadings with respect to the breach of contract claim in favor of Plaintiff and awarded damages of $510, 000. Subsequently, the trial court granted Plaintiff's Motion to Dismiss Defendant's Second Amended Counter-Complaint in its entirety, finding that Defendant failed to state any claims upon which relief could be granted. Defendant appealed. We have concluded that Defendant's Answer constituted a denial that Defendant owed approximately $511, 000 in unpaid advertising fees; therefore, Plaintiff's Motion for Judgment on the Pleadings should have been denied. We affirm the trial court's dismissal of Defendant's claims for constructive fraud; however, we have determined that the factual allegations in the Second Amended Counter-Complaint are sufficient to state claims for breach of contract, and claims under the Tennessee Consumer Protection Act. Therefore, we reverse the dismissal of these claims and remand for further proceedings.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed in part; Reversed in part; and Remanded.

          Frank L. Watson, III and William E. Routt, III, Memphis, Tennessee, for the appellant, N.Y.S.E. Wolfchase, LLC d/b/a The New York Suit Exchange.

          Justin N. Joy, William H. Haltom, Jr., and Laura L. Deakins, Memphis, Tennessee, for the appellee, Local TV Tennessee, LLC d/b/a WREG-TV.

          Frank G. Clement Jr., P.J., M.S., delivered the opinion of the Court, in which J. Steven Stafford, P.J., W.S, and Kenny W. Armstrong, J., joined.

          OPINION

          FRANK G. CLEMENT JR., P.SJ., M.S.

         Plaintiff, Local TV Tennessee, LLC d/b/a WREG-TV ("WREG"), is a Memphis TV station that touts itself as the "number one" channel to advertise on in the Memphis market. Defendant, N.Y.S.E. Wolfchase, LLC d/b/a The New York Suit Exchange ("NYSE"), is a retail seller of men's business and casual clothing located in East Memphis. Like many retailers today, NYSE depends heavily on television advertising in order to promote its products, obtain customers and generate sales.

         WREG provided television advertising for NYSE for several years without issue. However, in November 2012, a dispute arose over the amount of money NYSE owed for past advertising. At that time, NYSE made it clear to WREG that it would be necessary for NYSE to pay WREG from future revenues that would be generated from continued advertising on WREG. NYSE also disputed whether WREG had performed all of the requested advertising. Nevertheless, the parties expressed a desire to continue doing business with one another. To resolve this dispute, on November 14, 2012, WREG and NYSE entered into a contract known as the NYSE/WREG Advertising Plan ("Advertising Plan"). The relevant portions of the one-page document are as follows:

1. Total [Accounts Receivable] balance due is approximately $511K.
2. Payment plan: Beginning 11/16/12 through 9/30/13. 50 postdated checks will be given to WREG for $10, 220 each. 10 checks will be paid by 12/31/12 for a total of $102, 220. 40 checks will be paid from 1/1/13 through 9/30/13 for a total of $408, 800. All checks will be given to WREG upon acceptance of the agreement. Checks will be dated per the check schedule (see below).
3. Advertising spending: NYSE may spend up to $350K of new advertising during this same time period, 11/16/12 through 9/30/13, with a minimum required expenditure of $250K but not to exceed the maximum of $350K. A maximum of $75K to be used 11/16/12 through 12/31/12. The amount of advertising used shall never exceed the amount paid in per this agreement.
8. The January 2013 incentive trip will be rewarded.

         Paragraph 1 of the contract stated NYSE owed an approximate balance of $511, 000 to WREG for prior advertising. In order to pay off that balance, Paragraph 2, entitled "Payment Plan, " detailed how NYSE agreed to tender 50 postdated checks in the amount of $10, 220 each to WREG (totaling $511, 000) that WREG would deposit each week pursuant to the agreed upon schedule. Paragraph 3, entitled "Advertising Spending, " contemplated new advertising, whereby NYSE agreed to purchase, and WREG agreed to provide, between $250, 000 and $350, 000 of new advertising over the same period. Additionally, pursuant to Paragraph 8, WREG agreed to award NYSE with an incentive trip (a vacation provided by WREG to certain advertisers free of charge) that was to take place in January 2013.

         After both parties signed the Advertising Plan, NYSE stated it was ready, willing, and able to perform all of its obligations under the agreement, and had already partially performed by delivering all of the postdated checks to WREG. Immediately after signing the Advertising Plan, WREG began airing NYSE advertisements; however, the following day, WREG notified NYSE that it would have to agree to modify the Advertising Plan to remove the incentive trip. When NYSE refused to sign a new or amended agreement, WREG returned all of the postdated checks and ceased all advertising for NYSE. The timing of this dispute between the parties happened during a peak retail season, the week before Thanksgiving.

         WREG filed suit on May 18, 2013, asserting claims for breach of contract, accounting, quantum meruit, and demanding damages for approximately $511, 000 in unpaid advertising spending. NYSE filed its Answer and Counter-Complaint on June 13, 2013, which was subsequently amended on July 3, 2013. In its Counter-Complaint and Amended Counter-Complaint, NYSE asserted its own claims for breach of contract against WREG for refusing to honor the Advertising Plan as written. NYSE alleged it suffered significant damages caused by WREG's breach because it was forced to immediately purchase replacement advertising at a higher rate in the open market during a peak retail season (Thanksgiving and Christmas). Furthermore, it was unable to advertise on the "number one" station in the marketplace, it was forced to continue to purchase replacement advertising at a higher rate throughout the term of the Advertising Plan, and NYSE has been unable to replace WREG with an advertising provider with the coverage and viewership of WREG.

         Subsequently, WREG filed a Motion for Judgment on the Pleadings and Motion to Dismiss the Amended Counter-Complaint for failure to state a claim for which relief may be granted. Therein, WREG claimed it was entitled to judgment on the pleadings merely because NYSE admitted the allegations contained in Paragraph 10 of the Complaint. Paragraph 10 stated that on or about November 14, 2012, WREG and NYSE entered into the Advertising Plan. According to WREG, NYSE's admission that the parties entered into the Advertising Plan implied that NYSE also admitted to owing approximately $511, 000 in unpaid advertising fees. WREG further represented that "the only performance that was required [in the Advertising Plan] was on the part of [NYSE]" and that "[t]he contract was for the payment of a debt, not some future business transaction." NYSE filed its response to WREG's Motion for Judgment on the Pleadings on October 30, 2013. Although NYSE admitted in its Answer that the parties entered into a contract, it specifically denied every allegation pertaining to an alleged amount owed for previous advertising. NYSE also maintained that the Advertising Plan required performance on the part of both parties, and that the agreement contemplated new advertising spending.

         Meanwhile, on October 9, 2013, NYSE also filed an Answer and Second Amended Counter-Complaint, in which NYSE asserted additional causes of action against WREG, including claims for violating the Tennessee Consumer Protection Act and constructive fraud.

         On January 24, 2014, the trial court granted WREG's Motion for Judgment on the Pleadings as to the breach of contract claim, finding that NYSE breached the Advertising Plan, and awarded WREG $510, 000 in damages[1]. In the same order, the trial court denied WREG's Motion to Dismiss NYSE's Amended Counter-Complaint, finding that NYSE had stated a claim for breach of contract against WREG as a matter of law.

         Shortly thereafter, on February 10, 2014, WREG filed a second Motion to Dismiss, this time seeking to dismiss all claims asserted in the operative Second Amended Counter-Complaint. Following a hearing on September 30, 2016, the trial court granted WREG's Motion to Dismiss the Second Amended Counter-Complaint in its entirety. In its oral ruling, the trial court stated that the allegations contained within NYSE's Second Amended Counter-Complaint were not "sufficient to maintain such an action." The trial court specified in its order entered on November 1, 2016, that "[a]n order granting judgment on the pleadings in the amount of $510, 000 against [NYSE] previously on January 24, 2014 is hereby ENTERED as a final judgment pursuant ...


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