868 F.3d 378
5th Cir.2017Background
- Yahoo contracted with SCA Promotions under Contingent Prize Contract #70816 for SCA to insure a $1 billion "perfect bracket" prize; contract dated December 27, 2013 and signed by Yahoo January 2, 2014.
- Two invoices dated December 27, 2013 were attached to the Contract; the second invoice set an $11 million contract fee with a $1.1 million initial deposit and $9.9 million due later.
- The Contract allowed Yahoo to cancel and set tiered cancellation penalties: 25% if cancelled before Jan 15, 2014; 50% if cancelled Jan 16–Feb 15, 2014; 75% after Feb 16, 2014. It also included a limitation of liability to "the amount of fees paid by Sponsor."
- Yahoo paid a $1.1 million deposit on January 13, 2014, then cancelled the Contract on January 27, 2014 after agreeing to cosponsor a similar Quicken Loans contest; Yahoo demanded refund of the deposit and cancellation without penalty.
- SCA sued for breach of contract seeking $4.4 million (50% of the $11 million fee minus the $1.1 million deposit). The district court granted summary judgment for Yahoo on SCA’s claim but granted summary judgment to SCA on Yahoo’s counterclaims; the district court later amended judgment to award Yahoo $550,000 under Rule 60(a). Parties appealed.
Issues
| Issue | Plaintiff's Argument (SCA) | Defendant's Argument (Yahoo) | Held |
|---|---|---|---|
| Meaning of "50% of the fee" in Cancellation Fees Provision | Means 50% of the $11 million contract fee (i.e., $5.5M), less $1.1M deposit => $4.4M owed | Means 50% of the amount Yahoo had paid ($1.1M), i.e., $550,000 refund owed to Yahoo | "Fee" refers to the $11M contract fee; SCA entitled to $4.4M judgment (50% of $11M minus $1.1M deposit) |
| Whether attached invoices are part of the Contract | Invoices are incorporated by attachment/pagination and show the $11M fee | Argues Contract terms do not expressly set $11M fee and invoices not controlling | Invoices are incorporated; Contract includes $11M fee, so "fee" refers to that amount |
| Effect of limitation of liability clause limiting liability to "amount of fees paid by Sponsor" | Limitation read in context does not negate specific cancellation fees; more specific cancellation clause controls | Limitation caps Yahoo’s liability to amounts actually paid (i.e., $1.1M) | Court reads limitation in context, gives effect to specific cancellation provision; limitation does not negate cancellation penalties payable based on contract fee |
| Yahoo counterclaims: breach of confidentiality and failure to obtain coverage | SCA contends it did not disclose Yahoo-designated confidential info and its coverage duties were conditioned on Yahoo providing Official Promotion Rules | Yahoo contends SCA disclosed confidential Concept and failed to secure full coverage as warranted | Affirmed district court: SCA did not breach confidentiality (no designated confidential info) and SCA’s coverage obligation was conditioned on Yahoo providing Official Promotion Rules, which Yahoo never did |
Key Cases Cited
- Vela v. City of Houston, 276 F.3d 659 (5th Cir. 2001) (summary judgment standard reviewed de novo)
- McLane Foodservice, Inc. v. Table Rock Restaurants, L.L.C., 736 F.3d 375 (5th Cir. 2013) (contract interpretation and ambiguity are questions of law)
- Prescott v. Northlake Christian Sch., 369 F.3d 491 (5th Cir. 2004) (extrinsic evidence resolves intent if contract ambiguous)
- Watkins v. Petro-Search, Inc., 689 F.2d 537 (5th Cir. 1982) (same)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (primary objective: ascertain parties’ intent from contract)
- Lopez v. Munos, Hockema & Reed, L.L.P., 22 S.W.3d 857 (Tex. 2000) (interpret contract to effect parties’ intent)
- Heritage Res., Inc. v. NationsBank, Co., 939 S.W.2d 118 (Tex. 1996) (give contractual terms their plain, ordinary meaning)
- Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (Tex. 1994) (more specific contract provision controls a general provision)
- In re 24R, Inc., 324 S.W.3d 564 (Tex. 2010) (documents incorporated by reference become part of the contract)
- LeMaire v. La. Dep’t of Transp. & Dev., 480 F.3d 383 (5th Cir. 2007) (issues not raised in district court are waived on appeal)