Washington, D.C., December 22, 2009—A New Hampshire judge recently ruled in favor of East Coast companies Birch Broadcasting, Inc. and Nassau Broadcasting I, LLC in a $1 million contract dispute against a rival broadcasting company.
New Hampshire Superior Court Judge Richard B. McNamara ruled on Dec. 15th that Capitol Broadcasting Corporation Inc. breached a 2004 stock purchase agreement to sell a radio station to Nassau Broadcasting.
The plaintiffs, Birch and Nassau, were represented at trial by Stephen Díaz Gavin and Kristen M. Jarvis Johnson of Patton Boggs LLP and Manchester-based Mark Attorri of Nelson, Kinder, Mosseau & Saturley, PC.
On Feb. 9, 2004, Capitol Broadcasting and its parent company, Concord Broadcasting, L.L.C. agreed to sell Concord-based WWHK-FM and its federal license for $1 million to Nassau Broadcasting under the condition that the deal would be approved by the Federal Communications Commission (FCC) as required by law.
Both sides agreed to amend the deal on July 16, 2004 when they realized FCC regulations would require additional time to approve of the transfer of the license and possibly assign the purchase rights to a third party. That agreement gave Nassau Broadcasting five years to obtain FCC approval and provided Capitol with 95 percent of the purchase price. Nassau Broadcasting paid Capitol Broadcasting $950,000 towards the $1 million purchase price in 2004. The parties then worked to obtain FCC approval.
Due to complications caused by the FCC ownership limits, in August 2008 Nassau notified Capitol that it intended to exercise its option in the contract allowing Nassau to give its purchase rights to a third party---Birch Broadcasting. Nassau and Birch executed the assignment on February 26, 2008 and notified Capitol of the assignment. Over the next three months, Birch worked closely with Capitol and its related companies to obtain a green light from the FCC to transfer control of the radio station to Birch Broadcasting.
The FCC application even contained an electronic signature from the president of Vox, the ultimate parent company of Capitol and its affiliated companies, showing there was mutual support for the sale. The FCC approved the sale on June 19, 2009. During the entire process, all parties proceeded forward towards a July 16, 2009 deadline. Neither company acted as if any other outcome would occur.
Despite working together for five years to win approval for the deal, Capitol Broadcasting’s legal counsel suddenly determined just a few weeks later on July 1, 2009 that the agreement had expired in February of that year, a clear attempt to kill the deal. Birch and Nassau sued for breach of contract and other counts, requesting the court to require the parties to proceed to closing.
The ruling shows that actions always speak louder than words, particularly ambiguous or vague words. In its ruling, the court found the contract to be “ambiguous” and construed it in Birch and Nassau’s favor. “There is no surer way to find out what the parties meant than to see what they have done,” wrote Judge MacNamara, quoting New Hampshire state law. Capitol and its affiliates’ “post facto interpretation of the agreement is impermissible, and simply cannot be accepted.”
Birch and Nassau pressed for an expedited trial on the merits due to looming deadlines imposed by the FCC. The parties had to extend the FCC’s approval of the transfer, but the deadline for a second request was due December 16, 2009. At Birch and Nassau’s request, the court expedited the discovery and trial, which took place on December 7 and 8, and notified the parties of its decision the morning of December 16.
“This is a significant win,” said Stephen Díaz Gavin, a partner at Patton Boggs who oversaw the case. “It is important because we were able to obtain a favorable decision from the court on the eve of the expiration of a regulatory consent that might not have been extended without the court's ruling.”