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KATZ AGENCY, INC. v. EVENING NEWS ASSN.

May 13, 1981

The KATZ AGENCY, INC., Plaintiff,
v.
The EVENING NEWS ASSOCIATION and KTVY, Inc., Defendants



The opinion of the court was delivered by: CANNELLA

MEMORANDUM AND ORDER

Plaintiff's motion for an order of attachment is denied. Fed.R.Civ.P. 64; N.Y.C.P.L.R. § 6201.

Defendants' motion to dismiss the amended complaint for lack of personal jurisdiction is denied. Fed.R.Civ.P. 12(b)(2).

 FACTS

 The Katz Agency, Inc. ("Katz"), a Delaware corporation with its principal place of business in New York, brings this diversity action for breach of contract against The Evening News Association (the "Evening News"), a Michigan corporation operating a nationwide communications business, and KTVY, Inc., a wholly-owned Michigan subsidiary of the Evening News. KTVY, Inc., in turn, owns and operates television station KTVY in Oklahoma City. Plaintiff seeks to recover damages for the alleged premature termination in August 1979, of an agreement under which plaintiff served as the national advertising sales representative for KTVY. Following that termination, plaintiff was replaced as the station's sales representative by MMT Sales, Inc. ("MMT"), which is incorporated in New York and has its principal place of business here.

 A careful review of the relationships between each of these entities is necessary to a determination of this motion. In 1954, plaintiff contracted with KTVY's predecessor, WKY, *fn1" to become its exclusive national advertising representative. *fn2" Under the 1954 Agreement, which was amended from time to time over the years, *fn3" Katz solicited advertising for the station from potential customers throughout the United States. If the party solicited wished to purchase broadcast time on KTVY, it submitted its order directly to the station in Oklahoma City, where it was accepted or rejected. Katz also guaranteed the payment of all such orders accepted by the station and was empowered to bill and collect therefor. *fn4" Finally, the 1954 Agreement provided for termination by either party on one year's written notice. *fn5" The relationship between Katz and the station was a successful one, as evidenced by the fact that the parties operated under the 1954 Agreement for over twenty-five years until its termination in August 1979.

 Although Katz solicited advertising for KTVY on a nationwide basis, a substantial portion of its efforts took place in New York. Between 1976 and 1979, for example, KTVY derived approximately one-third of all its national advertising revenue, amounting to several million dollars, from the New York market through Katz's efforts. Katz worked closely with KTVY personnel during this period. There is some dispute as to the degree of closeness, but it is clear to the Court that Katz and KTVY jointly developed marketing strategy, discussing from time to time KTVY's rate philosophy and structure, the impact of current economic factors, and sales strategy and techniques, although KTVY retained final decision-making authority. To facilitate this relationship, KTVY employees made periodic visits to New York. Notably, U. Nick Panos, KTVY's national sales manager, travelled to New York twice in 1976, twice in 1977, once in 1978 and once in 1979, to consult with Katz personnel. These visits, lasting from three to seven days, were unquestionably for the purpose of bolstering the working relationship between KTVY and Katz. While in New York, Katz's employees and Panos discussed and developed rate structures and marketing strategy, as outlined above. Their discussions were not limited to one particular area, but covered the gamut of the relationship between KTVY and Katz. In addition, Panos met with KTVY's customers in the New York area, primarily media buyers for advertising agencies, building good will and solidifying the seller-buyer relationship as well as soliciting future orders. Katz arranged the itineraries for these agency visits, and the particular Katz salesman whose responsibilities included servicing the agency involved would normally accompany Panos on the visit. In addition, in 1976 and 1978, several other KTVY employees made at least four other trips to New York for discussions with Katz.

 As noted previously, MMT replaced Katz as KTVY's national advertising sales representative in August 1979. Plaintiff claims, and defendants do not dispute, that MMT has conducted its activities on KTVY's behalf since then in essentially the same manner as did Katz. The working relationship continues to be a close one, as evidenced by Panos's visits to New York in April and June 1980, for three and four days respectively, for discussions with MMT personnel and advertising agency customers. In addition, Panos and five other KTVY employees visited New York in December 1979 for discussions and consultations of the same nature. Finally, MMT's responsibilities as KTVY's sales representative are set forth in an agreement executed in August 1979, which establishes the exclusive nature of MMT's solicitation efforts. *fn6" The agreement provides, moreover, that MMT "shall assist (KTVY) in the collection of delinquent accounts on advertising contracts solicited by (MMT)." *fn7"

 The relationship between the Evening News and KTVY, Inc. is also a close one. In July 1975, the Evening News formed a subsidiary known as Channel 4, Inc. for the purpose of acquiring the assets of station KTVY. In November 1975, Channel 4, Inc. changed its name to KTVY, Inc. and in January 1976, KTVY, Inc. purchased the station. The boards of directors of KTVY, Inc. and the Evening News are identical and the main offices of both corporations are located at 615 Lafayette Boulevard in Detroit. *fn8" Despite this proximity, programing and sales decisions are made in Oklahoma City by KTVY personnel, who are employees of KTVY, Inc. The Evening News performs financial services for KTVY, such as overseeing the preparation of tax returns and reviewing pension and insurance programs.

 Significantly, despite the close working relationship between KTVY's employees and Katz, Katz was never made aware of the existence of KTVY, Inc., and apparently assumed that the Evening News had itself purchased the station's assets in 1976. Indeed, when KTVY's general manager Lee Allan Smith wrote, on stationery bearing the legend "KTVY 4," to Katz's president James M. Greenwald in December 1978 to notify Katz of the termination of any agreements between the two, the letterhead contained no indication that the station was owned by KTVY, Inc., a separately incorporated entity. *fn9" Moreover, Peter A. Kizer, vice president in charge of the Evening News's Broadcast Division, wrote to Katz on July 11, 1979 to advise it formally that KTVY intended to change its national sales representative to MMT. *fn10" In the letter, Kizer, on behalf of the Evening News, expresses his appreciation for the job that Katz had done over the years. The letter indicates that a copy was sent to Smith, at "KTVY" not "KTVY, Inc." Furthermore, on August 21, 1979, Kizer again communicated with Katz, this time by telegram:

 
Further to my letter dated July 11, 1979, this shall confirm that MMT Sales, Inc., shall commence acting as our Sales Representative for Station KTVY effective the start of business August 27, 1979. You are hereby notified that your authority to act on our behalf is terminated effective with the close of business August 24, 1979.
 
We have instructed our Station to accept sales orders only from MMT and to advise our advertisers that MMT is our sole representative as of August 27, 1979.
 
Although we look forward to settling any claims or liabilities among us in the immediate future, we will hold you fully accountable for any damages which we may directly or indirectly incur as a consequence of your failure to follow this directive and our earlier notification. *fn11"

 Kizer signed the telegram as an official of the Evening News, not as an official of KTVY, Inc., and a copy was sent to Smith as an official ...


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