By Elizabeth J. Goldstein
Special to the Legal
Apparently, ESPN knew long before Faith Hill belted out her NBC opening number that we’d all been waiting all day for Sunday night – and not for baseball. The case of ESPN v. Office of the Commissioner of Baseball, 76 F. Supp.2d 383 (S.D.N.Y. 1999), tells an interesting contractual tale. The contract between ESPN and MLB required ESPN to broadcast a baseball game every Sunday night. ESPN could pre-empt this schedule “for an event of significant viewer interest” if MLB gave its consent. MLB could not unreasonably withhold this consent.
In January 1998, ESPN requested MLB’s approval to broadcast several NFL games on Sunday night in lieu of baseball games. The baseball games would then be moved to ESPN2 per the parties’ contract. MLB refused to grant its permission for the switch. However, ESPN went ahead and broadcast the NFL games anyway. MLB refused to allow ESPN to broadcast the baseball games on ESPN2.
The same series of events occurred in January 1999. ESPN sought permission to move several Sunday night baseball games to ESPN2 so it could broadcast Sunday night NFL games on ESPN. MLB refused. In April 1999, MLB terminated its contract with ESPN, alleging breach of contract based upon ESPN’s decision to broadcast Sunday night NFL games. In the lawsuit, the parties disputed whether past conduct, including a prior written contract between the parties, was admissible to assist a jury in interpreting the contract provision in dispute, the provision requiring MLB not to unreasonably withhold its permission for ESPN to broadcast something other than baseball on Sunday nights.
MLB argued that ESPN could not introduce the prior written contract because of the current contract’s merger clause. The court, however, disagreed. It concluded that while the merger clause prevented the prior written agreement from being considered part of the agreement, it could be used to discern the meaning of an ambiguous contract term. Thus, the prior written agreement was admissible at trial to shed light on the meaning of the disputed provision.
Of course, many drafters intend to start with a clean slate when executing a new agreement. This is one of the reasons for the merger clause. To truly excise prior agreements and prior conduct from the interpretation of the new agreement, one treatise, Negotiating and Drafting Contract Boilerplate, Tina L. Stark, ALM Publishing, New York, 2003, suggests the following sentence:
“The provisions of this Agreement may not be explained, supplemented or qualified through evidence of trade usage or a prior course of dealings.”
Whether or not such a clause would effectively prevent a court from relying on extrinsic evidence where it finds the contract language ambiguous or unclear is problematic, however. The suggested language might well be effective to preclude additions or qualifications to the present agreement, but “interpretation” would be difficult to eliminate where a court is seeking guidance, in construing a doubtful term.
In any event, when parties seek to use a prior course of dealings to avoid contractual duties or to unreasonably withhold approval of the other party’s request for relief from an onerous term, perhaps the question should be: Are you ready for some litigation?
This posting is for informational purposes and should not be construed or interpreted as either legal advice on any matter or as in any way creating an attorney-client relationship.