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Network Enterprises, Inc. v. APBA Offshore Productions

April 20, 2006

NETWORK ENTERPRISES, INC, PLAINTIFF,
v.
APBA OFFSHORE PRODUCTIONS, INC. AND MICHAEL D. ALLWEISS, DEFENDANTS



The opinion of the court was delivered by: Haight, Senior District Judge.

POST-TRIAL OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW

I. PROCEDURAL INTRODUCTION

This is a diversity case for alleged breach of contract. The corporate plaintiff, a cable television network, alleges that the corporate defendant breached a written contract to purchase time from and exhibit programs on plaintiff's network. Plaintiff further alleges that the individual defendant is personally liable for the damages resulting from the breach because the corporate form of the corporate defendant should be disregarded.

Discovery had been completed and the case was scheduled for a jury trial. At that point counsel jointly expressed the parties' desire to waive trial by jury and submit the case to the Court for a bench trial. The record on the proposed bench trial would consist of written submissions. No testimony would be taken or exhibits received in open court.

The Court accepted that proposal in principle but advised counsel that in practice the documents submitted would have to be in a form allowing the Court to make the findings of fact and conclusions of law mandated by Fed.R.Civ.P. 52(a). After further consultation and negotiations, counsel for the parties submitted a Stipulation of Undisputed Facts, a Joint Submission of Trial Exhibits, a Joint Appendix to the Trial Briefs, and a trial brief on behalf of each party.*fn1 These documents placed before the Court stipulated facts, pertinent documents agreed to be admissible in evidence, and the testimony of witnesses derived from depositions or, in the case of one witness, from a testamentary stipulation.

Having considered these submissions, the Court is satisfied that a sufficient trial record exists to allow it to make the requisite findings of fact and conclusions of law, and to render a valid judgment in the case. Part II of this Opinion contains the Court's Findings of Fact. Part III contains its Conclusions of Law. Part IV provides for the eventual entry of judgment pursuant to Fed.R.Civ.P. 58.

II. FINDINGS OF FACT

A. Findings of Undisputed Facts*fn2

1. Plaintiff Network Enterprises, Inc. ("Network") is a Tennessee corporation with its principal place of business in Nashville, Tennessee. At the pertinent times Network was in the business of running a cable and satellite television network then known as "TNN" or "The National Network."*fn3 I will in these Findings refer to the plaintiff as TNN when that is the corporate name it was using at the time in question.

2. Defendant APBA Offshore Productions, Inc. ("Productions") is a Florida corporation with its principal place of business in St. Petersburg, Florida. At the pertinent times Productions was a marketing entity whose primary purpose was to generate sponsorships and produce television shows for APBA offshore racing.*fn4

3. Defendant Michael D. Allweiss is a resident and citizen of the State of Florida.*fn5

4. The initials "APBA" which appear in Productions' corporate name stand for the American Power Boat Association, a New York membership corporation that has been in existence since the early 1900s. The APBA was created by power boat racing enthusiasts to establish rules governing the various racing classes and organize power boat races. There are nine or ten categories of power boat racing sponsored by the APBA, including the offshore racing category.*fn6

5. In 1988 Allweiss graduated from the University of Miami Law School. In 1995 he was appointed to the national legal committee of the APBA. In 1996 the APBA appointed Allweiss the general counsel for the offshore category. Allweiss served as the chairman of the offshore racing category of the APBA for the 1999 season.*fn7

6. Before Allweiss became chairman of the APBA offshore racing category, power boat racing was not widely televised.*fn8

7. In 1999 Allweiss formed Productions. He drafted Productions' articles of incorporation and at all pertinent times was the corporation's sole officer, director and shareholder. During its operation, Productions utilized the same office address as Allweiss's Florida law practice.*fn9

8. As an enclosure to a letter dated March 23, 1999, an employee of TNN sent to Allweiss at Productions "a fully executed copy" of an otherwise undated Time Buy Agreement between TNN and Productions, pursuant to which Productions purchased time on TNN to televise programs highlighting its power boat races during 1999. TNN broadcast that programming in compliance with that contract and was fully compensated in accordance with its terms.*fn10

9. In or around January 2000, Productions and TNN reached a "handshake agreement" for a new television arrangement for the upcoming 2000 season.*fn11

10. On August 21, 2000, TNN and Productions executed a Time Buy Agreement ("the 2000 Agreement" or "the Agreement"), drafted by TNN to memorialize the 2000 handshake agreement, pursuant to which Productions would broadcast on TNN ten half-hour episodes, each highlighting an APBA Offshore National Race, during consecutive weeks from September 30 through December 2, 2000. The Agreement identifies APBA Offshore Productions, Inc. as "the Purchaser." The first paragraph of the Agreement recites that "Purchaser agrees to purchase the herein described time on TNN in accordance with the Basic Provisions set forth below and the attached General Terms and Conditions together with any Riders thereto." The Basic Provisions comprise the first three pages of the Agreement. They are introduced by the sentence: "These Basic Provisions (the "Basic Provisions") contain certain material terms of agreement between TNN and Purchaser with regard to the purchase of certain time on TNN in order to air the Programs as hereinafter defined." The Basic Provisions include, under the caption "Description of Time Purchased," the dates and time of day of the ten telecasts contracted for. The dates are "September 30, October 7, 14, 21, 28, November 4, 11, 18, 25, and December 2, 2000." The time of day for each date is "11:30 a.m.-12:00 p.m. eastern/pacific time." The parties' signatures appear on the third page of the Agreement, Allweiss signing as "Chairman/Pres." of "APBA Offshore Productions, Inc." The attached General Terms and Conditions comprise pages 4-13 of the Agreement. ¶ 24 of the General Terms and Conditions provides in part: "This Agreement may be amended only by a written instrument duly executed by all parties." ¶ 26 provides in part: "This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed wholly therein." *fn12

11. The 2000 Agreement also included a Renewal Option Rider ("the Renewal Option"), on a separate page initialed by officers of TNN and by Allweiss on behalf of the "Purchaser," an entity identified on page 2 of the Agreement as Productions. The Renewal Option provided in its entirety as follows:

TNN hereby grants to Purchaser the option to exhibit up to thirteen (13) additional original Episodes over TNN's cable programming service from October 1, 2001 through December 31, 2001, under the same terms and conditions as this Agreement at a fee of Forty Thousand Dollars ($40,000.00) per Episode. The dates and times of such telecasts shall be mutually agreed to by the parties hereto. Such option shall be executed, if at all, by Purchaser delivering notice thereof to TNN which notice shall be received by TNN no later than March 1, 2001.*fn13

12. All of Productions' obligations under the 2000 Agreement with respect to television broadcasts during 2000 were fulfilled.*fn14

13. Although as noted in Finding No. 10 the 2000 Agreement was signed on August 10, 2000 and listed TNN and Productions as the parties, in fact Productions stopped actively conducting business in February 2000, at or around the time a license arrangement was formalized between the APBA and an entity known as APBA Offshore Power Boat Racing, LLC ("the LLC"). Allweiss and five or six investors had formed the LLC to secure a license from the APBA to take the offshore racing category private and operate, manage, market and sell the sport in exchange for an annual licensing fee.*fn15

14. On March 6, 2000, Allweiss withdrew the remaining $50,214.92 in funds from Productions' bank account as partial reimbursement of his loans to Productions and deposited the funds into LLC's account as his paid-in capital. The other five or six shareholders put investment capital into the LLC of $100,000 each. After the LLC was created, it utilized the same Florida address as Allweiss's law practice.*fn16

15. Allweiss never told TNN about the withdrawal of the funds from Productions' bank account.*fn17

16. A sum of $100,000 previously provided to Productions by a sponsor was transferred to the LLC, since this money was a pre-payment for a 2000 sponsorship that the LLC, and not Productions, would now fulfill.*fn18

17. Under the license that the LLC held from APBA, the LLC, unlike Productions, was responsible not only for securing sponsorships and producing television, but also for all other activities related to functioning as a professional motor sports business.*fn19

18. Once the license agreement between the LLC and APBA was implemented, there was no more reason for Productions to do anything on a day-to-day basis, although it remains as a lawfully existing company under Florida law.*fn20

19. Neither Allweiss nor anyone else advised TNN of the formation of the LLC and the manner in which it had supplanted Productions. And, as previously noted, Allweiss never told TNN about the withdrawals of the funds referred to from Productions' bank account.*fn21

20. At one time an individual named David Hall had been employed at TNN. But by November 2000 Hall had left TNN and was acting as a consultant to Allweiss and the LLC. At that time Allweiss and Hall began having discussions with Brian Hughes, a TNN officer whose title was Senior Vice President of Sports and Outdoors, regarding bringing all of the offshore programming over to TNN and doubling the number of shows, as well as doing a combination barter deal rather than a time buy deal. The existence of the LLC was not known to TNN at that time.*fn22

21. In the succeeding months, Allweiss and Hall on behalf of the LLC (whose existence was still unknown to TNN) had continued conversations with Hughes about replacing the 2000 Agreement then in effect between TNN and Productions with a new or altered deal with TNN.*fn23

22. On February 23, 2001, Allweiss faxed to Hughes at TNN a letter on the letterhead of "APBA Offshore Racing" which stated:

As you know, David Hall and I have been discussing with you since December the restructuring of the APBA Offshore television relationship for 2001. I realize we are very close to striking a new and exciting deal for both of us but, unfortunately, my renewal option under the 2000 agreement expires on March 1, 2001. Consequently, I sincerely would appreciate a thirty (30) day extension of the renewal option to give us sufficient time to finalize our new deal.*fn24

23. Hughes replied by a letter to Allweiss dated February 28, 2001, which stated:

In everyone's best interest, rather than proceeding as you referenced in your FAX, I would simply operate pursuant to your contract, with the understanding that we will continue to pursue the altered deal David and I have discussed. I should have word by the first of next week. However, in the event that the proposal is rejected, the fallback would in fact be what is earmarked in the present agreement.*fn25

24. Allweiss responded with a faxed letter to Hughes dated March 1, 2001 which read:

Thank you for your correspondence dated February 28, 2001. As you know, the proposed new deal we have been discussing calls for thirteen shows, a payment of $200,000 by APBA Offshore, and three minutes of commercial inventory per show for us. Since we have not finalized the deal, however, and the option to renew last year's deal expires today, I hereby exercise the option in accordance with the contract.*fn26

25. After this exercise of the Renewal Option contained in the rider to the 2000 Agreement, Allweiss and Hall continued to have discussions with Hughes about a new deal. Also, in or about July 2001, Allweiss had discussions with Hughes concerning the broadcast schedule for the 2001 telecasts.*fn27

26. On August 7, 2001 Mary Beth Pacisi, a "Legal Administrator" at TNN, addressed to Allweiss at "APBA Offshore Productions, Inc." in St. Petersburg, Florida a letter bearing that date and captioned: "Amendment to the Time Buy Agreement for ' APBA Offshore National Races.' " The text of the letter read in full:

Enclosed please find three (3) originals of the referenced amendment to the agreement between APBA Offshore Productions, Inc. and Network Enterprises, Inc. Please sign each of the originals and return them to my attention. I will see that you receive an original for your files.

I can be reached at 615/457-7522 if you have any questions.

The letter enclosed three one-page documents bearing the caption appearing at the head of the letter, as well as copies of the 2000 Agreement including the Renewal Option Rider. The text of the document began by saying:

THIS AMENDMENT (" Amendment ") dated August 7, 2001, modifies the Time Buy Agreement dated August 21, 2000 (the "Agreement") by and between NETWORK ENTERPRISES, INC., d/b/a TNN ("TNN") and APBA Offshore Productions, Inc. ("Purchaser") and supersedes conflicting provisions contained in the Agreement.

The Amendment then provided:

1. For the year 2001, the Description of Time Purchased in the Basic Provisions shall be amended to read as follows:

Description of Time Purchased in the year 2001:

Dates: Ten consecutive Sundays beginning on September 30, 2001 and ending on December 2, 2001.

Time of Day: 11:30 a.m. eastern/pacific

Exclusivity to TNN: Yes, during the above exhibitions.

2. In all respects not inconsistent with this Amendment, the Agreement is hereby ratified and affirmed in its entirety. Upon the execution hereof by both parties hereto, this Amendment shall be attached to and become a part of the Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.

Lines then appeared for signatures by officers of Network and Productions.*fn28

27. On August 9, 2001 Hughes sent Allweiss an e-mail which read:

Michael: You should have received a letter today that reflects our conversations of a few weeks ago. If you would, please review ASAP and get it back to us. Looking forward to seeing the first show. Hope you are well. Regards, Brian.

Hughes was referring to Pacisi's letter to Allweiss dated August 7.*fn29

28. In August or September, 2001, as the initial broadcast date of September 30 specified in the Amendment to the 2000 Agreement prepared by TNN and forwarded to Allweiss approached, it became clear to Allweiss that TNN would not offer an acceptable "new" or "altered" deal that had been the subject of prior discussions involving Allweiss, Hall and Hughes. Allweiss thereupon convened the board of the LLC, which decided not to broadcast its programming on TNN. Instead, the LLC board ...


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