Opinion
NO. 217-2008-EQ-099
01-20-2012
New Hampshire Speedway, Inc. v. Motor Racing Network, Inc.
ORDER
The Petitioner, Motor Racing Network, Inc. ("MRN"), sought damages from the Respondent, New Hampshire Speedway, Inc. ("NHS"), based upon a theory of promissory estoppel. Following a five-day jury trial, a jury awarded MRN $993,724.00 in damages. NHS moves for a judgment notwithstanding the verdict ("JNOV") or, alternatively, for an order setting aside the verdict. MRN objects. The Court held a hearing on NHS's motion on December 2, 2011. Because the Court finds that MRN failed to present evidence sufficient for a rational trier of fact to find that it detrimentally relied on NHS's promise by clear and convincing evidence, NHS's motion for JNOV is GRANTED, and MRN's Motion for Entry of Judgment is DENIED.
I
NHS and Speedway Properties Co., LLC d/b/a Performance Racing Network ("PRN") originally instituted the present case as a declaratory judgment action. NHS and PRN sought an order declaring that its radio broadcasting agree- ment with MRN was unenforceable. In response, MRN filed counterclaims against NHS and PRN and added a third-party defendant, Speedway Motor Sports, Inc. ("SMI"). MRN asserted several claims against these parties, including breach of contract. MRN alleged promissory estoppel against NHS only. MRN's promissory estoppel claim relied, primarily, upon NHS's promise to provide MRN exclusive broadcasting rights at NHS's speedway, which could only be terminated upon three years' notice.
Following several motions for summary judgment, this Court found NHS and MRN's contract illusory and, therefore, unenforceable. As a result, only MRN's promissory estoppel claim against NHS remained. NHS moved for summary judgment, asserting that MRN lacked sufficient evidence to prove the element of detrimental reliance and that lost profit damages were unavailable under a promissory estoppel theory. This Court denied NHS's motion on the grounds that MRN had at least raised genuine issues concerning both detrimental reliance and lost profit damages. (July 19, 2011 Order, at 7.) Shortly before trial, MRN filed motions in limine, once again based upon detrimental reliance and lost profits. The Court denied these aspects of NHS's motions in limine. (August 24, 2011 Order, at 2-6.) A trial on MRN's promissory estoppel claim followed.
During trial, MRN called several witnesses. MRN submitted the testimony of its President, David Hyatt, on the issue of detrimental reliance. Mr. Hyatt testified to the following:
The testimony has been taken directly from the real time trial transcript provided by the parties.
Q: And tell the jury how you relied on that promise?
A: Well, in a number of ways, first of all, we relied on it in the sense that we didn't step in to renegotiate this at any time. We
made a series of promises we understood what we were asking for being we believe the track understood what we were asking for, and as a result we didn't step back in and ask for any changes, we honored our promise and they did. Each time we rolled people and gear into the track, did the broadcast and gave back to them the revenue that we promised and everything went very smoothly. Had we not done that is correct we certainly wouldn't have looked at this term, we would have looked at a different time period, after all we were coming off of a three year agreement with a one year option and certainly in this respect we would not go with something shorter and give the opportunity for the track to and sell us, if you will, in December of any given year.
(Mr. Hyatt, Lines 64:19-65:17, Sept. 26, 2011.)
Q: Can you tell the jury how you were affected by the failure to earn those profits and broadcast those races for those seven years? A: Sure. As I said before, we relied on the termination agreement to lay out financials and time available for us to plan, to build strategy for whether or not we could find other ways to invest that money, to potentially find new strings of revenue, strategize a business plan, to have the time to do that, and we didn't have that time associated with this.
We could - in some cases we may have found that maybe we couldn't replace this, but, quite frankly, we would have had the time to look at that and figure out how we were going address that from a business planning standpoint.
From a management standpoint it's imperative to forecast properly and understand that you have some reliable sources of long term revenue coming in so that you can plan for your business, pay employees, and expand accordingly, or make yourself smaller, if necessary; that could have been another solution, where we would have had to come in and reevaluate our business model, adjust personnel, and adjust our expenses on how we would address our business going forward.
So that in addition to relying on the fact that we didn't want to renegotiate this agreement, and relying on the fact that we probably would have had a different term if we hadn't had this three year termination clause to rely on.
(Mr. Hyatt, Lines 12:22-14:8, Sept. 27, 2011.)
Q: From your perspective did you always intend to come and cover and broadcast every race, NASCAR race as was covered by this arrangement as covered the New Hampshire Speedway? A: Absolutely. As I mentioned before, we're a niche business. If we're not out broadcast races we're not making money. Our inven-
tory is contained in the, and the highest commercial slots is the NASCAR top series, the Sprint Cup races and if you look at the national on the, the two events each year at New Hampshire Speedway represents more than 10, closer to 13 percent of our total inventory.
(Mr. Hyatt, Lines 66:10-66:22, Sept. 26, 2011.)
Q: And we interrupted you there, but you were telling the jury the way that you relied on this promise. How else did you rely on the promise that was made to you that you would have three years to broadcast in New Hampshire in the event they wanted to terminate the relationship?
A: Well, we certainly provided a lot of extra promotion for the track as well. Back when we had a one year, one year arrangement it was difficult on a couple of fronts to promote the track. One of our goals is to help the track sell tickets. We realize that both the shoulder programming, the ancillary products that we provide and we do some stuff during the week that's NASCAR news related talk related and certainly at races from other tracks we try to promote events and broadcasts that are coming up at other places as a benefit to the tracks. When we had this long term agreement we were certainly very comfortable with the fact we could provide that level of promotion, because that comes out of the content, that comes out of the product that we produce that our fans listen to on a regular basis, and we certainly want to make sure it's informative and intuitive and entertaining for them.
(Mr. Hyatt, Lines 66:23-68:3, Sept. 26, 2011.)
MRN also submitted the testimony of NHS's CEO, Bruton Smith in support of its opposition. MRN submitted Mr. Smith's testimony to "validate" Mr. Hyatt's testimony regarding MRN's reliance. Mr. Smith testified:
Q: You would agree with me, sir, that as the chair of a public company and a man who owned and ran a business for a very, very long time, that the ability to predict your future sources of revenue with some reasonable certainty is very important to management, isn't it?
A: Yes.
Q: And, in fact, having long term business relationships that you can rely on helps to stabilize a company's financial resilience and profitability during difficult or recessionary economic times?
A: Yes.
Q: In plain English, it's good to know where your money's coming from, how much money there's going to be so that you can plan your business accordingly, right?
A: Yes.
Q: And so you rely with respect to SMI, and with respect to all the companies that you own and operate on the dependability of your future sources of revenue, right?
A: Right.
Q: And if somebody cut off a source of revenue that you didn't expect was going to be cut off, that would create a problem for you that you'd have to solve, right?
A: Yes, sir.
(Mr. Smith, Lines 111:1-112:7, Nov. 27, 2011.)
MRN offered the testimony of other witnesses to prove its damages, including Alex Frangoulis and Doug Rice. Mr. Frangoulis testified that he did not consider damages for loss of good will, out of pocket expenses, or logistical expenses. (Mr. Frangoulis, Lines 128:20-129:13, Sept. 27, 2011.) Mr. Frangoulis also testified that MRN had unused minutes which constituted extra inventory from 2006-2010. (Mr. Frangoulis, Lines 108:4-116:23, Sept. 27, 2011.) Mr. Rice, MRN's President, testified that as an arm of SMI, its primary function is to broadcast races and that if it is not broadcasting races, it does not make money. (Mr. Rice, Lines 76:15-78:10, September 28, 2011.) Finally, Mr. Hyatt testified generally that he lost approximately $1.4 million in revenue as a result of not being able to broadcast races at the speedway. (Mr. Hyatt, Lines 14:9-15:19, Sept. 27, 2011). Mr. Frangoulis, MRN's expert, forecasted that MRN would lose $993,724.00 in profits as a result of not being able to broadcast races in the future.
MRN would sell time on its broadcasts in temporal units.
Following the close of MRN's case-in-chief, NHS moved for a directed verdict on several grounds. First, NHS argued that MRN presented insufficient evidence for the jury to find that NHS made a substantial promise to MRN. Second, NHS argued that, as a matter of law, lost profit damages cannot properly be awarded on a promissory estoppel theory under Florida law. Finally, NHS briefly challenged the sufficiency of the evidence relating to "detrimental reliance." (Mr. Donovan, Lines 144:15-23, Sept. 29, 2011.) The Court denied NHS's motion for a directed verdict and submitted the case to the jury. Thereafter, the jury returned a verdict in MRN's favor and awarded MRN $993,724.00.
NHS moves for a JNOV or, in the alternative, for an order setting aside the verdict. Broadly, it asserts two arguments: (1) that MRN failed to prove the element of detrimental reliance by clear and convincing evidence; and (2) that MRN failed to adequately support its claim for lost profits by clear and convincing evidence. MRN objects and argues that several witnesses' testimony satisfied both the element of detrimental reliance and its claim for lost profits. As an initial matter, however, MRN maintains that NHS waived any objections to the sufficiency of the evidence on detrimental reliance and lost profits because NHS failed to properly raise the issues in its motion for a directed verdict.
II
"The well-established rule is that an objection to the sufficiency of evidence is waived unless taken at a time when there may still be an opportunity to supply the deficiency," Derosier v. New England Telephone & Telegraph, 82 N.H. 405, 405 (1926), i.e. before the jury deliberates. Thus, a party may only raise an objection to the sufficiency of evidence in the form of a motion for JNOV follow- ing a jury verdict if he has previously raised the issue in a motion for a directed verdict before the jury deliberated. See, e.g., Carlisle v. Frisbie Memorial Hospital, 152 N.H. 762, 767 (2005). MRN argues that NHS failed to raise the present issues in its motion for a directed verdict and, therefore, cannot raise them now. At the close of the MRN's case-in-chief, NHS moved for a directed verdict on several grounds. Counsel for NHS stated that one of the grounds was "focused on the element of detrimental reliance." Counsel for NHS went on to dispute the awarding of "lost profits." Both statements properly raised the issues presently before the court.
The fact that NHS did not elaborate extensively on its objections does not prevent the Court from hearing them now. The "cardinal principle that procedure shall be such as justice and convenience require vests the presiding justice with . . . broad discretion in these matters." Derosier, 82 N.H. at 406. Where an argument as to the sufficiency of evidence, although not extensively briefed, is raised throughout the course of the trial, the court has discretion to consider it post verdict. See id. Here, NHS informed the Court, on the record, throughout this case that it did not believe MRN had enough evidence to prove detrimental reliance or lost profits. Thus, the Court may consider the issues raised by NHS in its motion for JNOV and motion to set aside the verdict.
III
"It is a feature of a jury trial for the trial judge not only to see that the trial is fairly conducted, but also to correct or vacate what turns out to be an unfair result." Wituskie v. Malouin, 88 N.H. 242, 245 (1936). "A motion for JNOV relates to the sufficiency of the evidence and presents a question of law." Akwa Vista, LLC v. NRT, Inc., 160 N.H. 594, 598 (2010). "A party is entitled to JNOV only when the sole reasonable inference that may be drawn from the evidence, which must be viewed in the light most favorable to the nonmoving party, is so overwhelmingly in favor of the moving party that no contrary verdict could stand." Id. "In deciding whether to grant the motion, the trial court cannot weigh the evidence or inquire into the credibility of witnesses." Boynton v. Figueroa, 154 N.H. 592, 602 (2006). "If the evidence adduced at trial is conflicting, or if several reasonable inferences may be drawn, the court must deny the motion." Id.
Lower Florida courts have provided different rationales for damage awards based upon fluctuating theories. (Order of Aug. 24, 2011, citing Eric Mills Holmes, Corbin on Contracts, sec. 8.11 p. 56-58, sec. 8.12 pp. 108-113). However, the Florida Supreme Court has followed the Restatement (Second) Contracts in analyzing promissory estoppel claims. W.R. Grace v. Geodata Services, Inc., 547 So.2d 919, 924 (Fla. 1989). In order to support a cause of action for promissory estoppel under Florida law: (1) there must be a definite and substantial promise; (2) the person seeking to enforce the promise must justifiably rely upon that promise; and (3) the person seeking to enforce the promise must have reasonably relied on that promise to his of her detriment. See JN Auto Collection, Corp. v. U.S. Security Ins. Co., 59 So.3rd 256 (Fla. Dist. Ct. App. 2011); see also Restatement (Second) of Contracts § 90 (1). An element of promissory estoppel is detrimental reliance. Lumbermens Mut. Casualty Co. v. Percefull, 638 So.2d 1026, 1028 (Fla. Dist. Ct. App. 1994). Detrimental reliance requires that the promisee take "substantial action[] or forego a[] material right, so that an injustice could only be avoided by applying the equitable doctrine." Mount Sinai Hospital of Greater Miami, Inc. v. Jordan, 290 So.2d 484 487 (Fla. Dist. Ct. App. 1974). Mere expectations are insufficient to support detrimental reliance. See W.R. Grace, 547 So.2d at 924. Detrimental reliance requires that "the promisee changed his or her position to his or her detriment based on the representation." JN Auto Collection Corp. v. U.S. Security Ins. Co. , 59 So.3rd 258.
Ordinarily, the damages for promissory estoppel are limited to the damages suffered as a result of the reliance on the unenforceable promise—called "detrimental reliance." Only in cases in which the promisor unjustly benefits from the promise may expectancy damages be recovered. Section 90 of the Restatement (Second) of Contracts provides two illustrations of this principle:
8. A applies to B, a distributor of radios manufactured by C, for a "dealer franchise" to sell C's products. Such franchises are revocable at will. B erroneously informs A that C has accepted the application and will soon award the franchise, that A can proceed to employ salesmen and solicit orders, and that A will received an initial delivery of at least 30 radios. A expends $1,150 in preparing to do business, but does not receive the franchise or any radios. B is liable to A for the $1,150 but not for the lost profit on 30 radios.Restatement (Second) of Contracts, § 90, Illustrations 8-9 (emphasis supplied).
9. The facts being otherwise as stated in Illustration 8, B gives A the erroneous information deliberately and with C's approval and requires A to buy the assets of a deceased former dealer and thus discharge C's "moral obligation" to the widow. C is liable to A not only for A's expenses but also for the lost profit on 30 radios.
The doctrine can be distilled as follows: when a plaintiff acts in reasonable reliance on a promise and suffers harm, he may recover damages to compensate him for the harm caused. But when a plaintiff acts in reasonable reliance in a promise which was dishonestly made and which enriched the promisor, the plaintiff may recover both damages to compensate him for the harm suffered from the reliance and his expectancy damages. Both illustrations demonstrate that harm caused by reliance is a necessary prerequisite to establishing one's claim. Without first establishing detrimental reliance, inequitable conduct by the promisor and unjust enrichment of the promisor are irrelevant considerations. See Restatement (Second) of Contracts § 90, comment (d).
Here NHS made a promise upon which MRN relied. There is also no doubt that the evidence supports a finding that NHS benefited from its refusal to honor its promise, because its subsidiary PRN profited from broadcasting the same races that MRN expected to broadcast. Neither party addresses whether there is evidence that NHS's promise was made dishonestly. The critical issue here therefore appears to be the paucity of evidence that MRN suffered a detriment because it relied on NHS's promise.
NHS argues that MRN failed to prove detrimental reliance by clear and convincing evidence, as required by Florida law. (Order, July 19, 2011.) MRN objects and argues that through several witnesses, including Mr. Hyatt, it established that MRN detrimentally relied on NHS's promise by: (1) foregoing the opportunity to renegotiate the agreement; (2) making general business decisions based on a three year termination provision; (3) loss of expected profit; and (4) providing extra promotion.
First, MRN argues that it relied to its detriment on NHS's promise because it was prevented from renegotiating a more favorable contract. In other words, MRN argues that had it known the contract was illusory, it would have renegotiated a better deal. However, inability to renegotiate an otherwise illusory contract does not constitute "detrimental reliance." In determining whether a pro- misee has relied to his detriment, the proper question is not what the promisee would have done had he known that the promisor would not have carried out the promise; instead, the proper inquiry is whether the promisee changed his position as a result of the promise made. See Salz v. Dept. of Admin., 432 So.2d 1376, 1378 (Fla. Dist. Ct. App. 1983). Where a promise is unenforceable, a promisee will always regret not seeking more favorable terms. But that does not mean the promisee detrimentally relied on the promise. MRN's first rationale supporting detrimental reliance is unpersuasive.
Second, MRN contends that it made general business decisions in reliance on NHS's promise. Mr. Hyatt's testimony reflects that MRN was unable to properly "lay out its financials." Mr. Hyatt testified that MRN could have found other ways to invest the money it used to broadcast races if it had known NHS would not keep its promise. He asserted that from a management standpoint, it is "imperative to forecast properly and understand that you have some reliable sources of long-term revenue. . . ." MRN also submits Mr. Smith's testimony to "validate" Mr. Hyatt's testimony. However, the Court finds the testimony insufficient to support detrimental reliance. Although MRN may not have sought alternative revenue streams, it did not produce evidence from which a reasonable fact finder could find by clear and convincing evidence that it materially changed its position in reliance on the promise. For example, it did not discontinue broadcasting for another speedway in reliance on NHS's promise or fail to market its services to other speedways. Instead, MRN's reliance is based, once again, on what it would have done had it known that the promise would not be kept. This evidence does not support detrimental reliance.
Third, MRN asserts that it relied to its detriment because it expected that it would be entitled to three years of broadcasting at the speedway. In pertinent part, Mr. Hyatt testified that he expected to earn profits from the speedway and that the profits constituted 13% of MRN's overall inventory. He further testified that MRN would have made approximately $1.4 million in revenue, and $993,724.00 in profit but for NHS's breach of its promise. MRN asserts that the entirety of its "lost profits" testimony supports the element of detrimental reliance. It relies not only on the testimony of its expert, Mr. Frangoulis, but also on the testimony of Mr. Rice and Mr. Hyatt, who also testified that MRN lost profits as a result of NHS's refusal to allow MRN to continue broadcasting.
MRN claims that Mr. Frangoulis's damages calculation included $1,362.00 in hotel room operating expenses for which NHS did not reimburse MRN. MRN argues that these operating expenses satisfy the element of detrimental reliance. The Court disagrees. Mr. Frangoulis testified unequivocally that he was focusing on "lost profits." Furthermore, counsel for NHS asked Mr. Frangoulis if he had taken into account any "out of pocket or logistical expenses," to which Mr. Frangoulis answered, "No." MRN claims that Mr. Frangoulis was "confused" by the question. However, the Court considers only the sufficiency of the evidence actually presented. See Akwa Vista, LLC, 160 N.H. at 598. Although the Court views the evidence in light most favorable to the non-moving party, id., the Court cannot consider whether the answer provided was due to the witness's confusion, and ascribe it a meaning the witness explicitly disavowed.
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MRN's argument is based upon the premise that lost profits and detrimental reliance are one in the same. However, this claim is nothing more than a statement of MRN's expectancy damages; it is not detrimental reliance. See JN Auto Collection, Corp., 59 So.2d at 256; W.R. Grace & Co., 547 So.2d at 924. Lost profits are expectancy damages that may be awarded in promissory estoppel only where the promisee proves that the promisor improperly benefitted from the breach of the promise. See Restatement (Second) of Contracts, § 90, comment (d).
Finally, and perhaps most plausibly, MRN maintains that it detrimentally relied on NHS's promise because it provided "extra promotion" for NHS's speedway. However, this claim fails to satisfy the element of detrimental reliance for two reasons. First, the entirety of MRN's "extra promotion" consisted of promoting races that MRN actually broadcasted. No evidence exists that MRN was not compensated for broadcasting races that it promoted. Adequately compensated performance may not form the basis for detrimental reliance. See Harris v. Sch. Bd. of Duval County, 921 So.2d 725, 734-35 (Fla. Dist. Ct. App. 2006) (promissory estoppel is inappropriate where it is based upon fully compensated performance). Second, and critical to the Court's analysis, Alex Frangoulis testified that there was "extra" inventory, i.e. "unsold minutes," available during MRN broadcasts from 2006-2010. See NHS's Supp. Mot., at Ex. A. Thus, MRN provided NHS with additional promotions without suffering detrimental reliance because it only gave NHS inventory that it could not sell anyway. Therefore, no evidence exists to demonstrate that MRN's additional promotion was actually a detriment to it, and thus it is insufficient to support detrimental reliance.
IV
That all of these arguments do not provide a basis for a jury verdict is demonstrated by the verdict itself, which is on its face insufficient to support the a promissory estoppel claim. The Court gave the jury a verdict form that contained 3 special questions, requiring it to answer: (1) whether there was a promise that MRN reasonably could have relied upon; (2) whether MRN relied on the promise; and (3) whether MRN suffered a detriment as a result of the reliance. The jury answered all three questions in the affirmative and rendered a judgment for $993,724.oo. As MRN notes in its Objection to NHS's Motion for JNOV and Motion to Set Aside the Verdict and Incorporated Memorandum of Law:
Here, the totality of the evidence presented at trial regarding MRN's damages was precise and explicit and established that MRN lost $993,724.00 in profits over the three year period it was promised it could broadcast Sprint Cup and Nationwide Series Races from NHS.MRN's Objection to NHS's Motion for JNOV and Motion to Set Side the Verdict with Incorporated Memorandum of Law, at 13 (emphasis supplied).
This statement is a critical concession by MRN. The jury awarded the precise amount of damages the Plaintiff claimed as lost profits, illustrating the fact that the jury believed it had no evidence before it from which it could award damages for detrimental reliance. The finding that MRN suffered no damages as a result of detrimental reliance is a finding that MRN failed to establish an element of its promissory estoppel claim. Restatement (Second) of Contracts,§ 90.
In sum, because MRN did not produce evidence from which a reasonable trier of fact could find by clear and convincing evidence that it reasonably relied on NHS's promise to its detriment, an element of its promissory estoppel claim, the jury's verdict cannot stand. It follows that NHS's motion for JNOV must be GRANTED. Because the Court finds that MRN has failed to satisfy the essential element of detrimental reliance, it does not consider whether MRN also failed to adequately prove lost profits. Because the Court finds that NHS is entitled to JNOV, MRN's Motion for Entry of Final Judgment must be DENIED.
SO ORDERED.
_________________________
Richard B. McNamara,
Presiding Justice