Opinion
111,651.
06-26-2015
STECKLINE COMMUNICATIONS, INC., Appellant, v. JOURNAL BROADCAST GROUP OF KANSAS, INC., Appellee.
William P. Tretbar and Adam R. Burrus, of Fleeson, Gooing, Coulson & Kitch, L.L.C., of Wichita, for Appellant. Amy S. Lemley, Jay F. Fowler, and Alex W. Schulte, of Foulston Siefkin LLP, of Wichita, for Appellee.
William P. Tretbar and Adam R. Burrus, of Fleeson, Gooing, Coulson & Kitch, L.L.C., of Wichita, for Appellant.
Amy S. Lemley, Jay F. Fowler, and Alex W. Schulte, of Foulston Siefkin LLP, of Wichita, for Appellee.
Before PIERRON, P.J., BUSER and POWELL, JJ.
MEMORANDUM OPINION
POWELL, J.
Steckline Communications, Inc. (SCI) appeals the district court's dismissal of its breach of contract suit against Journal Broadcast Group of Kansas, Inc. (Journal) on the grounds that it lacked standing to bring such a suit. SCI argues the district court violated proper procedure in dismissing the case and the district court erred on the merits. Because we agree with the district court that SCI lacked standing to bring the present suit, we affirm.
Factual and Procedural Background
SCI owns and operates a business known as Mid America Ag Network (MAAN), which produces and distributes news and information programming for broadcast over various radio stations in Kansas and surrounding states. SCI acquired MAAN's name, image, and business assets in 2005. Journal owns six radio stations, including KFDI–FM and KLIO–AM, that broadcast from facilities in Wichita, Kansas. SCI provided content to KFDI–FM and KLIO–AM pursuant to the terms of a settlement agreement entered into by Journal and MAAN in 2003.
In 2003, MAAN and Journal settled a lawsuit relating to a prior affiliation agreement whereby MAAN provided certain agricultural programming to KFDI–FM and KFDI–AM. The purpose of the agreement was to settle the parties' past disputes and to enter into a new affiliation agreement whereby MAAN would continue to provide programming content to Journal. SCI was not a party to this settlement agreement. The term of the agreement was 15 years beginning June 9, 2003, and lasting until June 9, 2018.
While many of the particulars of the agreement are immaterial for our purposes, a few key provisions state as follows:
“13.... Effective August 1, 2003, this 2003 Agreement will represent the sole and entire agreement of the parties related to any radio station or other asset of [Journal] and its affiliates or to MAAN and its affiliates.
“14. Binding Effect; Assignment. This 2003 Agreement shall be binding upon and inure to the benefit of the successors, heirs and assigns of each party, provided, however, that MAAN shall not assign this 2003 Agreement, or any interest therein, to any Wichita radio broadcast competitor of [Journal], without the prior written consent of Douglas K. Kiel or Steven J. Smith (or their respective successors), which consent may be withheld by them in their sole discretion; and (ii) [sic ] neither party shall assign this 2003 Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld.
“16. Amendment. This Agreement shall only be amended or altered through a written agreement signed by an authorized officer of each party. No future course of conduct shall be interpreted to amend or modify the express terms of this 2003 Agreement.”
Subsequently, SCI acquired the right to operate MAAN in 2005. A document produced by SCI during discovery, titled “Joint Action of Directors and Stockholders by Written Consent in Lieu of Special Meeting,” provided that MAAN would “assign all of the rights, property and obligations described on Exhibit A ... to the New Corporation in exchange for all of the issued and outstanding shares of capital stock” in MAAN. The “New Corporation” was authorized by MAAN to be formed “under the name Steckline Broadcasting, Inc., or under such other name as Gregory Steckline may determine.” Pertinently, Exhibit A authorized the assignment of business/advertiser contracts, contacts, etc., as well as affiliate contracts. There is no evidence in the record showing whether MAAN obtained written consent from Journal before assigning the settlement agreement to SCI.
Despite any alleged irregularities concerning the assignment of MAAN's rights under the settlement agreement to SCI, Journal continued to do business with SCI, operating as MAAN, under the settlement agreement. However, problems with MAAN's content arose in late 2010. Journal documented more than 40 instances in which the quality of MAAN's content resulted in broadcasted periods of dead air. Such issues persisted more than a year without a solution. Additionally, on June 29, 2012, audio of a comedy routine containing over 20 uses of profanity was inadvertently broadcast during a time in which MAAN was scheduled to provide content to Journal. MAAN denied it was the source of the problematic content. Ultimately, Journal gave written notice to MAAN on July 10, 2012, that the problematic broadcast constituted an incurable breach of the settlement agreement and terminated it. Journal ceased broadcasting content provided by MAAN.
On December 5, 2012, SCI, referring to itself as MAAN's “predecessor-ininterest,” filed suit in the Sedgwick County District Court against Journal alleging a breach of the settlement agreement and seeking to recover damages stemming from Journal's termination of the agreement. Journal's answer, among other things, alleged that SCI failed to provide notice to Journal of the assignment of the settlement agreement and that SCI was not the proper party to make the claim asserted. Journal also asserted a counterclaim against SCI seeking an order from the court requiring SCI to indemnify Journal for any damages or costs, including attorney fees, it might incur as a result of the June 29 problematic broadcast. SCI answered Journal's counterclaim by denying responsibility for any act of omission giving rise to an obligation to indemnify Journal and stating that no statutory or contractual authority existed for Journal's demand that it be awarded attorney fees.
Following the close of discovery, the parties submitted an agreed pretrial order in which Journal repeated its contention that SCI had not given notice of the assignment and was not the proper party to assert a claim under the settlement agreement. Thereafter, SCI filed a motion for partial summary judgment on the liability portion of its claim against Journal and on Journal's counterclaim against SCI. In its response, Journal argued, among other things, that SCI was not entitled to enforce the settlement agreement because MAAN did not seek Journal's consent before MAAN assigned the agreement to SCI in 2005.
At the hearing on SCI's motion for summary judgment, the district judge denied SCI's motion on the issue of breach of the settlement agreement but granted SCI's motion on Journal's counterclaim for attorney fees. In doing so, the district judge opined from the bench that SCI lacked standing to sue under the contract. A formal journal entry was filed on February 19, 2014; although the court specifically set forth its rulings regarding the breach of the settlement agreement and the availability of attorney fees, the journal entry made no mention of the standing issue.
On February 7, 2014, Journal filed a motion to dismiss pursuant to K.S.A. 60–212(b)(6), arguing the district judge's comments during the summary judgment hearing regarding its standing defense amounted to a ruling that SCI lacked standing to enforce the terms of the settlement agreement. SCI filed its response on February 21, 2014, arguing the district judge's comments with respect to its standing to enforce the terms of the settlement agreement were merely dicta. Significantly, SCI admitted that MAAN did not receive written permission from Journal before assigning its interest to SCI.
On February 24, 2014, the district court held a hearing on Journal's motion to dismiss; following oral arguments, the court dismissed SCI's lawsuit due to a lack of standing. An order was entered on March 10, 2014, dismissing the remainder of Journal's counterclaim for indemnification and extinguishing all remaining claims asserted by SCI and Journal.
SCI timely appeals the district court's dismissal of its claims. Journal does not appeal the dismissal of its counterclaim.
Did SCI Have Standing?
The essence of the dispute surrounding standing involves whether SCI was properly assigned MAAN's rights in the settlement agreement. Journal claims that paragraph 14 of the settlement agreement requires one of two specifically named Journal principals to give advance written permission to MAAN before it may assign its rights to a third party. Journal argues that because MAAN never obtained this approval prior to assigning its interest to SCI, SCI is not a party to the agreement and lacks standing to sue under it.
“We first note that standing is a jurisdictional issue in Kansas.... The existence of jurisdiction and standing are both questions of law over which this court's scope of review is unlimited.” Mid–Continent Specialists, Inc. v. Capital Homes, 279 Kan. 178, 185, 106 P.3d 483 (2005). To the extent resolution of this question involves the interpretation of the settlement agreement, it is well established that “we exercise unlimited review over the interpretation and legal effect of written instruments.” Prairie Land Elec. Co-op. v. Kansas Elec. Power Co-op., 299 Kan. 360, 366, 323 P.3d 1270 (2014).
SCI first raises a number of procedural challenges to the district court's ruling on standing, asserting, among other things, that Journal did not bring a proper motion to dismiss under K.S.A. 60–212. In fact, SCI devotes many pages in its brief to describing the various procedural irregularities which it claims brought the district court to improperly dismiss the case. Unfortunately for SCI,
“[s]tanding to sue is a component of subject matter jurisdiction, which may be raised for the first time on appeal or on the appellate court's own motion. [Citation omitted.] ... It is clear that if a party does not have standing to challenge an action or to request a particular type of relief, then there is no justiciable case or controversy and the suit must be dismissed.” Lightner v. Lightner, 46 Kan.App.2d 540, 545–46, 266 P.3d 539 (2011), rev. denied 297 Kan. 1246 (2013).
Standing cannot be waived. Mid–Continent Specialists, 279 Kan. at 185, 106 P.3d 483. Moreover, our Supreme Court, when faced with procedural disputes surrounding the resolution of the standing issues similar to the ones before us, brushed them aside because the issue of standing may be raised at any time. 279 Kan. at 184–85, 106 P.3d 483. Therefore, we see no reason to examine the alleged procedural irregularities before the district court itemized by SCI because SCI cannot show, for reasons we will more fully explain below, how it was denied the opportunity to present any material facts to establish its standing to sue.
As to the merits, SCI claims that as the assignee of the settlement agreement, it is the proper party in interest and thus has standing to enforce the settlement agreement. SCI further explains that, due to the procedure employed by the district court in dismissing its suit, it never had the opportunity to definitively establish that MAAN had assigned its rights under the settlement agreement to SCI, thus necessitating a remand. Journal counters that SCI, as a “stranger” to the 2003 settlement agreement, cannot now seek to enforce the contract for its own benefit.
“ ‘It is essential to the maintenance of an action on any contract that there should subsist a privity between the plaintiff and defendant in respect of the matter sued on.’ “ Professional Lens Plan, Inc. v. Polaris Leasing Corp., 234 Kan. 742, 745, 675 P.2d 887 (1984) (quoting Black's Law Dictionary 1362 [4th ed. rev.1968] ). Moreover, “it is well established that a party to a lawsuit may not assert the rights of others; the challenged conduct must directly affect the party suing over it.” Hartman v. City of Mission, 43 Kan.App.2d 867, 869, 233 P.3d 755 (2010), rev. denied 291 Kan. 911 (2011). It is undisputed that SCI was not an original party to the settlement agreement; therefore, for SCI to have standing, it has to establish that it was properly assigned MAAN's interest in the settlement agreement. See Euler v. Kessler, 156 Kan. 104, 106–07, 131 P.2d 907 (1942) (assumption created a privity of contract).
However, paragraph 14 of the settlement agreement prohibited assignment of the contract unless it was approved in advance and in writing by one of two specific principals of Journal management. While disfavored, Kansas recognizes the enforceability of contract provisions that require written consent before an assignment is valid. Metropolitan Life Ins. Co. v. Strnad, 255 Kan. 657, 669, 876 P.2d 1362 (1994) (restraints on alienation not favored by the law); Fakes v. Osborne, 165 Kan. 176, 178–79, 193 P.2d 218 (1948) (“Where the contract provided against transfer and assignment except on condition, and that condition is not met, the claimed assignee may not maintain an action on the contract as against the other parties to the contract.”). Because such restrictions are disfavored, “[a]ny restriction or prohibition against transfer acts as a restraint on alienation and should be strictly construed against the party urging the restriction.” Metropolitan Life Ins., 255 Kan. at 669, 876 P.2d 1362.
The 2003 settlement agreement was negotiated between Journal and MAAN in resolution of a prior lawsuit, and the terms were clear and unambiguous. MAAN knowingly entered into a contract in which it was only permitted to assign the settlement agreement to another party upon written authorization of senior Journal management. Thus, the provision is enforceable, meaning SCI cannot be an assignee of the settlement agreement unless it can show MAAN received prior written authorization to assign the contract. As there is no evidence in the record that MAAN received such authorization, SCI is not an assignee.
As to SCI's argument that it never had the opportunity to present its evidence on this issue, we disagree. First, whether an assignment of rights between MAAN and SCI occurred is not dispositive under the terms of the settlement agreement itself. Again, as Journal points out, the assignment provision of the settlement agreement makes clear that the parties intended there never be an assignment of MAAN's rights without prior written consent of senior Journal management. Second, SCI does not assert that it can establish that Journal management granted its approval in 2005. Indeed, in its memorandum in opposition to Journal's motion to dismiss, SCI admitted that MAAN did not receive written authorization from anyone at Journal before it assigned its rights to SCI. Third, even if we were to assume SCI is arguing a lack of opportunity to establish such authorization, we note that Journal raised the standing issue numerous times during the litigation: (1) Early on in its answer; (2) in its contentions in the agreed pretrial order; (3) in its response to SCI's motion for summary judgment; and (4) as the basis for its motion to dismiss. After Journal's motion to dismiss was filed, SCI had 3 weeks to submit any evidence. If SCI had any evidence of a writing purporting to grant MAAN permission to assign the settlement agreement to SCI, it had ample time to either present or proffer such evidence. To date, it has not done so.
Finally, SCI contends that Journal's continued performance of the settlement agreement from 2005 to 2012 constitutes a waiver of the assignment provision in paragraph 14 of the settlement agreement because Journal was aware SCI had begun furnishing the content though its operation of MAAN and Journal accepted SCI's performance. SCI argues that Journal has, at best, created an issue of fact regarding its waiver of the consent provision of the settlement agreement.
SCI is correct that, in general, a subsequent course of conduct by a party can constitute a waiver of a contractual right. See Zenda Grain & Supply Co. v. Farmland Industries, Inc., 20 Kan.App.2d 728, 746, 894 P.2d 881, rev. denied 257 Kan. 1096 (1995). However, SCI ignores the specific and unambiguous provisions of the settlement agreement to the contrary. Paragraph 16 of the settlement agreement stipulated that it could only be amended through written agreement signed by each party and that “[n]o future course of conduct shall be interpreted to amend or modify the express terms of this 2003 Agreement.” As it is our duty to uphold contracts whenever possible, Weber v. Tillman, 259 Kan. 457, 463, 913 P.2d 84 (1996), SCI's argument that there is a material question of fact regarding whether Journal waived the assignment provisions of the settlement agreement through its acceptance of SCI's performance in lieu of MAAN's is not persuasive because it is not possible for Journal to waive the assignment provisions of the settlement agreement through its conduct.
As SCI is not a proper assignee of the 2003 settlement agreement, it is not a party and therefore lacks standing to enforce its terms against Journal. Because SCI lacks standing, we need not address the remainder of SCI's claims on appeal.
Affirmed.