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CANDID PRODUCTIONS v. INTERNATIONAL SKATING UNION

January 29, 1982

CANDID PRODUCTIONS, INC., Plaintiff,
v.
INTERNATIONAL SKATING UNION and Beat Hasler, Defendants



The opinion of the court was delivered by: WEINFELD

This action arises out of a series of contracts granting Candid Productions, Inc. ("Candid") the exclusive North American television rights for certain amateur ice skating championships sponsored by the International Skating Union ("ISU"). Candid, the plaintiff, is engaged in the business of purchasing television rights to sporting events, principally skating events and produces programs of such events for sale to television companies all over the world. Defendant, ISU, is the governing body for amateur competitive ice skating and defendant, Beat Hasler, is one of its corporate officers.

ISU sanctions six championships per year-three each in figure and speed skating. Over the past sixteen years, it has granted Candid the North American television rights for certain of these events for specific years. The instant action concerns four such contracts: the 1980-82 World Figure Skating Championships ("World's"); the 1979-81 European Figure Skating Championships ("European's"); the 1979 World Sprint Speed Skating Championships ("Sprint's"); and the 1980 World Women's Speed Skating Championships ("Women's Speeds"). Each of these contracts is about to or has expired and ISU has granted the television rights for the next series of these events to the Columbia Broadcasting System ("CBS"). *fn1" Candid contends that thereby ISU has breached a good faith negotiation clause contained in its contracts for the World's and European's, the first refusal clauses of the Sprint's and Women's Speeds' contracts and seeks equitable relief, or, in the alternative, damages. The defendants move for partial summary judgment only as to the 1980-82 World's and the 1979-81 European's on the ground that the good faith negotiation clauses contained in those contracts are so vague and uncertain so as to be unenforceable as a matter of law.

I.

 The parties have had a contractual relationship extending over a sixteen-year period which terminated shortly before the commencement of this action. Candid's purchase of television rights from ISU began on June 10, 1965 when the parties entered into agreements for the 1967-69 World's and the 1966-68 European's. *fn2" Each of these two contracts contained an identical right of first refusal clause that required ISU to engage in a period of negotiations with Candid for the rights to the next set of championships and granted Candid a right to match any competing offer by a third party if agreement was not reached during the initial negotiation period. The clause, referred to as a good faith negotiation and first refusal right, provides:

 The ISU hereby grants to Candid the right of first refusal to extend their exclusive North American television rights to the (European Championships or World Championships) for an additional three year period. This right of first refusal shall work as follows: Candid and the ISU agree to negotiate in good faith the terms and conditions by which these rights shall be extended. If Candid and the ISU do not come to an agreement, the ISU shall then be free to offer these rights to a third party under the same terms and conditions last offered to Candid. The ISU agrees, however, that should it offer the rights under terms and conditions less favorable than those last offered to Candid, it will first offer the rights under the new terms and conditions to Candid who shall have thirty days in which to accept them. These offerings and acceptances shall be made in writing or by telegram to the respective offices of Candid and the ISU.

 This right of first refusal was continued almost verbatim in the contracts for the 1970-72 World's and the 1973-76 World's with the only substantive change that specific beginning and end dates were fixed for the initial good faith negotiation period. *fn3"

 The parties contracted for the European championships less regularly. After the initial contract for the 1966-68 European's, the next contract was for the 1973-74 competitions. The draft of that contract contained a right of first refusal but such clause was deleted from the final contract. Again there was a gap until the contract for the 1977 European's. This contract also did not contain a right of first refusal but did grant Candid an exclusive option to purchase the television rights for the 1978 European's.

 Denial of the right of first refusal and substitution of the type of good faith negotiation provision which is at the heart of this controversy occurred during negotiations for the 1977-79 World's. That contract, drafted as were all the contracts by Dick Button, President of Candid, contained a grant to Candid of a right of first refusal. However, ISU refused to sign the draft unless the first refusal clause was eliminated. The parties, thereupon, agreed to eliminate that requirement and substituted a provision that ISU would "not negotiate any further contracts for the rights for the World Championships after 1979 without negotiating in good faith with Candid." Thereafter, in executing the contract for the 1979-81 European's, one of the two contracts at issue here, the parties again deleted the first refusal provision as originally drafted by Button, and substituted a good faith negotiation clause. The provision reads:

 The ISU agrees that it will not negotiate any further contract for the rights to the European Championships after 1981 without negotiating in good faith with Candid.

 Finally, on June 1, 1978, the parties entered into the contract for the 1980-82 World's, the other contract at issue here. The good faith negotiation clause in that contract is as follows:

 The ISU agrees that it will not negotiate any further contract for the rights for the World Championships after 1982 without first negotiating in good faith with Candid. *fn4" (Emphasis supplied.)

 Discussion between Candid and ISU concerning television rights to the World's after 1982 began in February 1980 at the Winter Olympic Games at Lake Placid, New York. The parties met again in the middle of March in Dortmund, Germany at the World's skating competition where ISU informed Candid that instead of contracting for a single event for a period of years, as they had in the past, it wanted to structure the contract to cover all six ISU championships for a five-year period-a package deal. Since Candid was unprepared to make an offer of that type at the time, the parties agreed to and did later meet in Davos, Switzerland and then again met for the last time on April 16, 1980 in Paris, France. None of these discussions resulted in an agreement. During this same period, Candid alleges that even prior to its first discussions on a renewal of the contracts, ISU had met and negotiated with representatives of CBS. The result of those discussions was a five-year contract whereby ISU granted CBS the exclusive television broadcast rights for all six ISU-sponsored skating championships.

 Plaintiff contends that ISU breached its good faith negotiation obligation to it by having discussions with CBS and consummating an agreement with CBS prior to its negotiating with Candid and also by its conduct during its negotiations with Candid. Specifically, Candid claims that ISU failed to exchange counteroffers; to disclose the terms offered by CBS; or to accept Candid's proposal to top the price offered by CBS-in sum, that it did not negotiate with plaintiff in good faith. The defendants, solely for the purpose of this motion, do not dispute the validity of Candid's charges of bad faith. *fn5" Instead, they argue that regardless of such conduct, the good faith negotiation clauses contained in the contracts and relied upon by plaintiff are so vague and uncertain as to be unenforceable.

 The motion is presented as one of law based solely upon the clauses at issue. The language is clear and unambiguous. In this circumstance, the construction of the contract is for the Court. *fn6" The motion turns upon ISU's undertaking as expressly stated. Candid incorrectly urges that the primary issue to be decided is "(w)hether the ISU lived up to the obligation imposed upon it." *fn7" This puts the cart before the horse and jumps the issue before the Court on this motion. The threshold question is whether the obligation is enforceable; *fn8" only if it is found to be enforceable is the question posed by Candid, "whether the ISU lived up to its obligation," reached. And that issue, upon the papers here ...


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