Radio Networks, LLC v. Baisden Enters., Inc.

RADIO NETWORKS, LLC, Plaintiff/Counter-Defendant, v. BAISDEN ENTERPRISES, INC., and MICHAEL BAISDEN, Defendants/Counter-Plaintiffs, v. CUMULUS MEDIA, INC., Counter-Defendant.

Civil Action No. 3:14-cv-1860-L

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

June 13, 2017

MEMORANDUM OPINION AND ORDER

Before the court are: Defendants/Counter-Plaintiffs Baisden Enterprises, Inc. and Michael Baisden's Motion for Summary Judgment (Doc. 121), filed November 18, 2016; Plaintiff/Counter-Defendant Radio Networks, LLC and Counter-Plaintiff Cumulus Media, Inc.'s Motion for Partial Summary Judgment (Doc. 168), filed November 18, 2016; Radio Networks, LLC and Cumulus Media, Inc.'s Motion to Exclude Testimony of C.D. Shamburger, Jr. (Doc. 125), filed November 18, 2016; and Radio Networks, LLC and Cumulus Media, Inc.'s Motion to Exclude Testimony of Spencer Brown, Esq. Relating to Audits (Doc. 128), filed November 18, 2016. Having considered the motions, responses, replies, record, evidence, and applicable law, the court denies Defendants/Counter-Plaintiffs Baisden Enterprises, Inc. and Michael Baisden's Motion for Summary Judgment (Doc. 121); grants in part and denies in part Plaintiff/Counter-Defendant Radio Networks, LLC and Counter-Plaintiff Cumulus Media, Inc.'s Motion for Partial Summary Judgment (Doc. 168); denies as moot Radio Networks, LLC and Cumulus Media, Inc.'s Motion to Exclude Testimony of C.D. Shamburger, Jr. (Doc. 125); and denies as moot Radio Networks, LLC and Cumulus Media, Inc.'s Motion to Exclude Testimony of Spencer Brown, Esq. Relating to Audits (Doc. 128).

I. Background Facts

Radio Networks, LLC ("Radio Networks") provides radio programming for various radio stations in the United States. Radio Networks is a subsidiary of Cumulus Media, Inc. ("Cumulus"). Michael Baisden ("Baisden") is a radio personality and from 2008 to 2013 was the talent for a radio talk program produced by Baisden Enterprises, Inc. ("BEI"), known as The Michael Baisden Show. Baisden is the sole owner and member of BEI. In 2008, BEI and Radio Networks entered into an agreement for the production and delivery of The Michael Baisden Show. This lawsuit arises from a contractual dispute between the parties over whether Radio Networks overpaid BEI and Baisden $1,000,000 during the final fifteen-month period of their agreement.

On May 21, 2014, Radio Networks filed this action to recover the alleged $1,000,000 overpayment. On January 20, 2016, Radio Networks filed its First Amended Complaint (Doc. 86), now the operative pleading in this case, suing BEI and Baisden for: (1) breach of contract (Count One); (2) restitution and money had and received (Count Two); and (3) fraudulent transfer under the Texas Business and Commerce Code § 24.005 (Count Three). Radio Networks seeks judgment in the amount of $1,000,000, exemplary damages, pre- and postjudgment interest, costs, and attorney's fees. Disagreeing about the deal's specifics, and the amount of money to which they were entitled during the final fifteen-month period of their agreement, BEI and Baisden responded by joiningCumulus as a Counter-Defendant,¹ offering a number of affirmative defenses, and asserting counterclaims against Radio Networks and Cumulus for: (1) breach of contract for refusing to match offers BEI received from a competing radio network in or around March 2013 (Count One); (2) breach of contract for not allowing BEI to complete an audit of the revenues and expenses relating to the distribution of the Program (Count Two); (3) breach of contract for failing to use commercially reasonable efforts to obtain distribution of the Program (Count Three); (4) breach of contract for failing to engage in good-faith negotiations for a potential extension of the Agreement (Count Four); and (5) tortious interference with prospective business relationships (Count Five). Defs.' Sec. Am. Ans., Joinder, and Countercl. (Doc. 87). BEI and Baisden seek actual and compensatory damages, lost profits, pre- and postjudgment interest, costs, and attorney's fees. In addition, BEI and Baisden seek a declaratory judgment that a noncompete covenant in the parties' agreement is unenforceable.

Following discovery, the parties filed motions for summary judgment that present overlapping facts, legal issues, and arguments. Radio Networks and Cumulus (sometimes collectively, "Plaintiffs") move for partial summary judgment on their claim against BEI and Baisden (sometimes collectively, "Defendants") for restitution and money had and received (Count Two), and also move for summary judgment on all BEI and Baisden's counterclaims.² BEI and Baisden move for summary judgment on all of Plaintiffs' claims, as well as on their own affirmative defenses of statute of limitations, statute of frauds, the parol evidence rule, ratification and/or waiver, andexcuse due to prior breach. BEI and Baisden also seek summary judgment on their request for attorney's fees and costs for having to defend against Plaintiffs' breach of contract claim. BEI and Baisden have filed objections to certain evidence upon which Plaintiffs rely to support their Motion for Partial Summary Judgment and to oppose Defendants' Motion for Summary Judgment.³ Both summary judgment motions have been fully briefed and are ripe for determination, as are Defendants' objections. The court now sets forth the evidence, viewed in the light most favorable to the nonmoving party, and draws all reasonable inferences in the nonmoving party's favor. See Celotex v. Catrett, 477 U.S. 317, 323 (1986).⁴

On November 12, 2008, BEI and Radio Networks entered into an agreement for the production and delivery of radio programs (the "Programs") featuring Baisden (the "Agreement"). In connection with the Agreement, Baisden signed a personal guarantee (the "Guarantee"), agreeing to "be personally bound by all . . . provisions [of the Agreement] . . . and personally guaranteed the obligations of [BEI]" under the Agreement. Baisden Guarantee (Pls.' Summ. J. App. 28) (Doc.130).⁵ The Agreement was amended by the parties three times: May 4, 2010; July 9, 2010 (the "July 2010 Amendment"); and March 9, 2011.

Among other things, under the Agreement, Radio Networks agreed to pay BEI a specific "Guaranteed Amount" (as defined in the Agreement) for each year of the term of the Agreement, subject to certain limitations. Specifically, under Paragraph 3(b) of the July 2010 Amendment, BEI was to receive:

[T]he greater of Five Million Dollars ($5,000,000) for each of the first three contract years (or cycles) and Seven Million Two Hundred Fifty Thousand Dollars ($7,250,000), for the fourth cycle of fifteen months (the "Guaranteed Amount") or (i) forty percent (40%) of "Net Program Income" in the first contact year or (ii) fifty percent (50%) of Net Program Income in the second and third contract years and the fourth cycle of fifteen months.

July 2010 Amendment ¶ 3(b) (Pls.' Summ. J. App. 42). Thus, for the final fifteen-month period of the Agreement, from January 2012 to March 2013 (the "Final Contract Period"), Radio Networks agreed to compensate BEI in an amount equal to the greater of (1) a specific guaranteed amount of $7,250,000 ("Guaranteed Amount") or (2) fifty percent of "Net Program Income" for the Final Contract Period (as defined by the Agreement). Id. The first $1,000,000 of the $7,250,000Guaranteed Amount was to be paid to BEI as an advance within two business days of the July 2010 Amendment, with the remaining $6,250,000 to be paid in fifteen monthly installments from January 2012 through March 2013. Id.

The Agreement also required Radio Networks to provide a statement each quarter setting forth the Net Program Revenue and Program Expenses for the preceding six-month period. Defendants' share of Net Program Income, if any, was to be paid to them at the time that Radio Networks provided these statements. Any statement to which Defendants did not raise an accounting objection in writing within twelve months was deemed "incontestable" under the Agreement. Agreement ¶ 3(e) (Pls.' Summ. J. App. 18).

The Agreement gave Defendants the "right to audit [Radio Networks'] books and records relating to the distribution of the [Michael Baisden] Programs" once during each twelve-month period of the Agreement. Id. Any "such audit [was] to be conducted during normal business hours at [Radio Networks'] offices upon not less than 30 days' prior written notice." Id. Only one audit was permitted for each twelve-month period, and the scope of any audit that Defendants chose to perform was limited to that preceding twelve-month period that was"not yet incontestable." Id. The Agreement required Defendants to provide their auditor's report to Radio Networks. Id.

Pursuant to the Agreement, Radio Networks paid Baisden and BEI the $1,000,000 advance for the Final Contract Period in July 2010. Radio Networks began paying the remaining amounts owed when the Final Contract Period commenced in January 2012, and paid Defendants the full $7,250,000 over the remainder of the Final Contract Period, rather than only the remaining $6,250,000 of the Guaranteed Amount.

On March 1, 2013, Radio Networks requested that Defendants return the overpayment. BEI did not deny that there was an overpayment, but it requested an audit for the Final Contract Period pursuant to paragraph 3(e) of the Agreement. Pursuant to the Agreement, Defendants were permitted to conduct an audit of Radio Networks' financial records relating to the distribution of the Program in June 2013. The parties agreed that the audit was to occur at Radio Networks' offices on June 12 and 13, 2013. In advance of the audit, BEI asked Radio Networks to make certain documents available that BEI wanted to review in connection with the audit. Radio Networks provided all the documentation related to distribution of the Programs that BEI requested, as well as the majority of the other documents requested. BEI conducted the audit at...