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FLAIR BROADCASTING CORP. v. POWERS

March 16, 1990

FLAIR BROADCASTING CORPORATION, J. TIMOTHY HARRINGTON, AND JOHN N. BODEN, PLAINTIFFS,
v.
HEIDI SCHMID POWERS, MANLEY P. CALDWELL, JR., AND CITICORP TRUST, N.A., PERSONAL REPRESENTATIVES OF THE ESTATE OF ROBERT A. SCHMID; HEIDI SCHMID POWERS, INDIVIDUALLY; AND MANLEY P. CALDWELL, JR., INDIVIDUALLY, DEFENDANTS. BROADCASTING COMPANY OF THE CAROLINAS; AND HEIDI SCHMID POWERS, MANLEY P. CALDWELL, JR. AND CITICORP TRUST, N.A., PERSONAL REPRESENTATIVES OF THE ESTATE OF ROBERT A. SCHMID, COUNTERCLAIM PLAINTIFFS, V. FLAIR BROADCASTING CORPORATION, J. TIMOTHY HARRINGTON, AND JOHN N. BODEN, COUNTERCLAIM DEFENDANTS.



The opinion of the court was delivered by: Conboy, District Judge:

MEMORANDUM OPINION AND ORDER

BACKGROUND

On September 23, 1987, the Seller and the Buyer entered into a Stock Purchase Agreement (the "Agreement") providing for the sale of all of the BCC stock to the Buyer.*fn1 The Agreement, which is quite long and detailed, is found at Exhibit A to the Affidavit of J. Timothy Harrington, sworn to May 21, 1989, and is governed under the law of South Carolina. See Agreement § 12.08. It is not necessary to detail all of the events as they transpired between the parties; it suffices to say that the transaction was not consummated. In essence, the question the parties are asking us to decide is who, if anyone, breached the Agreement. The Buyer claims the transaction was not consummated because the Seller did not perform all of its obligations under the Agreement which were conditions precedent to the Buyer's obligation to close, to wit: the Seller did not terminate the pension plan in the manner provided in section 4.07 of the Agreement.*fn2 The Seller claims that it fully or substantially performed all of its obligations under the Agreement, and that it was the Buyer who breached the Agreement by failing and refusing to close the deal because it was unable to assemble the financing. The Seller also claims that because the deal was not consummated, through no fault of its own, on the Closing Date of January 15, 1988, it was entitled to draw on the $500,000 in letters of credit provided by the Buyer pursuant to § 1.04 of the Agreement.*fn3 The Buyer claims that the Seller was and is not entitled to this money and seeks its return.

This litigation has a somewhat checkered history which we will explain briefly. On or about May 4, 1988, Schmid and BCC commenced a declaratory judgment action against the Buyer in the United States District Court for the District of South Carolina, in which it sought a judgment that it was entitled to draw upon the letters of credit and keep the money as liquidated damages. In mid-November of 1988, the Buyer sought to have that action dismissed on various grounds, including improper venue. At the same time, the Buyer commenced an action against the Seller in the District of New Jersey, which the Seller moved to dismiss on January 10, 1989, alleging, inter alia, that the Seller had breached the Agreement. On January 23, 1989, the court in South Carolina dismissed the action there on the ground of improper venue, finding that venue was more appropriately laid in New York. On April 7, 1989, the court in New Jersey dismissed the action for lack of personal jurisdiction. The instant action was filed in this Court on April 14, 1988 and the counterclaim was filed May 31, 1989. On December 27, 1989, the Fourth Circuit Court of Appeals affirmed the decision of the district court in South Carolina. Broadcasting Company of the Carolinas v. Flair Broadcasting Corporation, 892 F.2d 372 (4th Cir. 1989). Accordingly, we are now the only Court where there is litigation pending between all of the named parties.

There are three voluminous motions before this Court. First, there is the Buyer's motion for partial summary judgment, seeking a judgment that the Seller's Estate is liable for the purported breach by the Seller and that the Estate is liable for conversion of the $500,000 letters of credit. At this time, the Buyer does not seek judgment on its various other tort theories alleged in the complaint,*fn4 nor does it seek to assess the amount of damages. Also before the Court is the Seller's cross-motion for summary judgment on its counterclaim, by which the Seller seeks a declaration that it did not breach the contract, rather the Buyer did, and therefore it is entitled to keep the $500,000. Finally, there is a motion by the Buyer to strike certain of the affidavits submitted by the Seller on the cross-motion and in opposition to the Buyer's motion. We will address the question of whether the affidavits should be stricken before we deal with the merits of the summary judgment motions.

ANALYSIS

A. Motion to Strike

The Buyer requests, by extensive letter motion dated November 21, 1989, that we strike the affidavits of Grady Hubbard and William Blount, both sworn to on June 27, 1989, and submitted by the Seller in support of its motion for summary judgment and in opposition to the Buyer's motion. The Buyer cites Sellers v. M.C. Floor Crafters, Inc., 842 F.2d 639, 643 (2d Cir. 1988) and In re Teltronics Services, Inc., 762 F.2d 185, 192 (2d Cir. 1985) in support. The bases for the Buyer's objections to these affidavits essentially are that depositions of these individuals taken after the submission of their affidavits conclusively demonstrate that the affidavits contained untrue and misleading statements and that one of the affidavits was not made on personal knowledge as required by Federal Rule of Civil Procedure 56.*fn5 Taking the Hubbard Affidavit first, we agree with plaintiff that the subsequent deposition testimony indicates that the key portion of the affidavit, specifically paragraph 6 relating to the termination of the pension plan, was not made on personal knowledge. Accordingly, we grant the Buyer's motion to strike that paragraph.*fn6

With respect to the other portions of the Hubbard Affidavit as well as large sections of the Blount affidavit, the Buyer contends that these should be stricken because they contain information which is untrue and/or misleading. To support this contention, the Buyer has set forth in manageable, tabular form the disparities in the deposition and affidavit testimony. However, the cases cited by the Buyer do not support striking the affidavits on the ground that they contain false or misleading information; rather, the cases involve situations where affidavits contained hearsay and were not submitted on personal knowledge. This distinction is crucial. We are now faced with two essentially antithetical and inconsistent accounts by the same individuals as to what the terms of the Agreement were intended to mean. The Buyer would have us strike the affidavits because that testimony is less favorable to the Buyer. Were we to do so, however, we would be making a determination that the deposition testimony is the more credible. It is not appropriate to make such a credibility determination at this time and, accordingly, we cannot and will not strike these affidavits, or the portions thereof, on the ground that they are false and/or misleading.*fn7

B. Summary Judgment Motions

As for the summary judgment motions, each side incredibly argues that, despite the volume of adverse documents submitted, there are no genuine issues of fact which preclude the grant of summary judgment in its favor. There are basically five issues which are raised on the summary judgment motions. They are: what is the meaning and intent of section 4.07 regarding termination of the pension plan; whether the conduct mandated by section 4.07 was a condition precedent to the Buyer's obligation to close; if section 4.07 is indeed a condition precedent under the Agreement, whether this condition may be waived by conduct or whether a waiver must be in writing; whether the closing date was "of the essence"; and whether the letters of credit posted pursuant to § 1.04 of the Agreement were "earnest money" or "liquidated damages."

Before we focus on these issues, it is necessary to examine the relevant principles of contract construction, particularly in the context of motions for summary judgment. The parties agree that South Carolina provides the controlling substantive law and that the standards for summary judgment under Federal Rule of Civil Procedure are also applicable. Rule 56(c) provides that summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law." The Court must first look to the substantive law of the case to determine which facts are material. Only disputes over material facts will preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The moving party bears the initial burden of establishing that no genuine dispute as to material facts exists. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). The burden then shifts to the opposing party to show that a genuine issue of fact exists. See Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 585-86, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986). Ultimately, "[i]n considering the motion, the court's responsibility is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-50, 106 S.Ct. 2505, 2509-11, 91 L.Ed.2d 202 (1986)), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987). We observe that disputed "legal questions . . . present nothing for trial and [are] appropriately resolved on a motion for summary judgment." Holland Indus. v. Adamar of New Jersey, Inc., 550 F. Supp. 646, 648 (S.D.N.Y. 1982) (legal questions relating to contract and statutory interpretation did not preclude summary judgment). Similarly, legal arguments presented in affidavits are no more sufficient to create a factual dispute than legal memoranda and oral argument. See 6 J. Moore & J. Wicker, Moore's Federal Practice ¶ 56.22; see also Jersey Central Power & Light Co. v. Township of Lacey, 772 F.2d 1103, 1109-10 (3d Cir. 1985) ("Legal memoranda and oral argument are not evidence and cannot by themselves create a factual dispute sufficient to defeat a summary judgment motion."), cert. denied, 475 U.S. 1013, 106 S.Ct. 1190, 89 L.Ed.2d 305 (1986); New York State Energy Research and Development Authority v. Nuclear Fuel Servs. Inc., 561 F. Supp. 954, 960 (W.D.N.Y. 1983) (affidavits were defective since they contained legal argument and interpretation).

"Where a motion for summary judgment presents a question concerning the construction of a written contract, the question is one of law if the language employed by the contract is plain and unambiguous." Moss v. Porter Bros., Inc., 292 S.C. 444, 357 S.E.2d 25, 27 (Ct.App. 1987); First-Citizens Bank & Trust Co. v. Conway Nat'l Bank, 282 S.C. 303, 317 S.E.2d 776, 777 (Ct.App. 1984). Where the intention of the parties may be gathered from the four ...


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