Dick Broadcasting Company, Inc. of Tennessee v. Oak Ridge FM, Inc.
2013 Tenn. LEXIS 13
| Tenn. | 2013Background
- DBC and Oak Ridge FM entered three related agreements for WOKI-FM: Time Brokerage Agreement, Consulting Agreement, and Right-of-First-Refusal Agreement.
- Right-of-First-Refusal required each party's prior written consent to assign; other two agreements allowed assignment without consent.
- The rights were to be assigned in the context of DBC’s sale to Citadel; Citadel deal prompted consent requests.
- Oak Ridge FM, via Mr. Pirkle, refused consent unless additional consideration or terms favored Oak Ridge; consent withheld to negotiate better terms.
- DBC completed the Citadel deal without the assignments and with a $10 million price reduction.
- Lower courts differed: trial court granted summary judgment against DBC; Court of Appeals vacated, holding implied covenant applied; Supreme Court granted review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether silent consent clauses trigger implied good faith duties | DBC: implied covenant applies; non-assigning party must act in good faith and commercially reasonably | Oak Ridge FM: silent clause allows unfettered discretion to deny consent | Yes; implied duty applies and requires good faith/commercial reasonableness |
| Scope of implied duty in the context of assignment of the Right-of-First-Refusal | Implied duty constrains withholding to reasonable, non-arbitrary standards | Duty does not apply to three-party consent where terms silent; may give absolute discretion | Implied duty applies; withholding must be reasonable and commercially reasonable |
| Whether the trial court properly considered extrinsic testimony about counsel advice | Evidence of advice bears on bad faith/intent | Such testimony is not material to contract interpretation | Trial court error to rely on attorney-discussion testimony; misstatement of evidence |
Key Cases Cited
- Wallace v. Nat'l Bank of Commerce, 938 S.W.2d 684 (Tenn.1996) (implied duty of good faith in contract performance)
- Park Place Ctr. Enters., Inc. v. Park Place Mall Assocs., 836 S.W.2d 113 (Tenn.Ct.App.1992) (implied duty; reasonableness governs denial of consent)
- Town & Country Equip., Inc. v. Deere & Co., 133 F.Supp.2d 665 (W.D.Tenn.2000) (consent to assignment must be reasonable when silent)
- Prince v. Elm Investment Co., 649 P.2d 820 (Utah 1982) (reasonable basis required for withholding consent)
- Homa-Goff Interiors, Inc. v. Cowden, 350 So.2d 1035 (Ala.1977) (landlord must act reasonably in withholding consent)
- Feldman, Tennessee Practice: Contract Law and Practice, none (none) (cited for doctrinal context on good faith evolution)