November 14, 2017 Session
from the Chancery Court for Shelby County No. CH-13-0586
Walter L. Evans, Chancellor
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.
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
Court Affirmed in part; Reversed in part; and
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
N. Joy, William H. Haltom, Jr., and Laura L. Deakins,
Memphis, Tennessee, for the appellee, Local TV Tennessee, LLC
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.
G. CLEMENT JR., P.SJ., M.S.
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.
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
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.
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
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.
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.
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.
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.
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. 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.
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 ...