Friday, September 06, 2013

Radio station's past results no guarantee of future performance

Community Music Centers of Atlanta, LLC v. JW Broadcasting, Inc., No. A13A1016 (Ga. Ct. App. Aug. 27, 2013)

Community, which offers music lessons, agreed to advertise on JW’s radio station, but failed to pay for services rendered.  When JW sued, Community counterclaimed for breach of contract and fraud.  The trial court granted summary judgment to JW, and the court of appeals affirmed.  Community’s basic argument was that JW misrepresented the exposure that it would provide through podcast downloads.  The deal included a 6-month initial package (later extended) at $1500/month that bought on-air commercials, a banner ad on the station’s website, in-studio interviews featuring representatives of Community, and sponsorship of a weekly radio segment.

Community chose a segment called “Backroads and Banjos with Art Rosenbaum” to sponsor for its exposure in the Atlanta market.  The segment aired three times each Wednesday, and was also available as a podcast.  During their negotiations, JW’s account executive told Community that “[t]his segment has received hundreds of thousand s of download s on iTunes meaning this will give [Community] a ton of additional exposure.”  While it was advertising through JW, Community repeatedly reported satisfaction; after the agreement concluded, Community’s director told JW that he was “grateful ... for the role 1690 has played this year in doubling our enrollment.” Community also acknowledged its debt to JW and offered to pay off the balance in ten equal payments. But two weeks later, Community asked about podcast download statistics.  JW estimated that the total number of podcast downloads of the sponsored segment during the advertising agreement was likely less than hundreds of thousands.

Though Community argued that JW breached the contract, the court found that JW never promised to provide hundreds of thousands of future downloads.  Instead, it touted past results.  This also precluded a fraud claim.  Even if JW “suggested” that Community’s sponsorship would result in hundreds of thousands of ad exposures, “[f]raud cannot consist of mere broken promises, expressions of opinion, unfulfilled predictions or erroneous conjecture as to future events.”  Community didn’t seek a certain number of downloads; it sought to sponsor a radio show for a specific time period.  Moreover, Community failed to show any evidence that JW’s representation about the number of past downloads was false—it simply showed that there’d been at least 35,000 downloads from April 2010 to December 2011, but it didn’t show evidence about earlier times.

Nor did Community show justifiable reliance or due diligence, as required for fraud.  It didn’t inquire into the number of podcast downloads until the agreement expired.

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