ESPN, Inc. v. Office of the Commissioner of Baseball
76 F. Supp. 2d 383, 1999 U.S. Dist. LEXIS 18050 (1999)
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Rule of Law:
A contractual 'no-waiver' provision does not override the common law doctrine of election of remedies, which requires a non-breaching party to either terminate a contract or continue performance upon a material breach. Furthermore, a party who believes its counterparty has breached a commercial contract is not entitled to engage in 'self-help' by selectively performing its own contractual obligations.
Facts:
- In 1996, ESPN, Inc. ('ESPN') and The Office of Major League Baseball ('Baseball') entered into a telecasting agreement requiring ESPN to broadcast baseball games on Sunday nights.
- The agreement contained a preemption clause allowing ESPN to substitute up to ten baseball games a year for an 'event of significant viewer interest,' but only with Baseball's prior written approval, which could not be unreasonably withheld.
- The agreement also included a clause in which ESPN represented it would not make any contractual commitments that would conflict with its performance.
- On January 13, 1998, ESPN entered into a contract with the National Football League ('NFL') to broadcast regular season NFL games on Sunday nights.
- In January 1998, ESPN requested Baseball's approval to replace three Sunday night baseball games in September with NFL games; Baseball denied the request.
- Despite the denial, ESPN broadcast the NFL games instead of the baseball games in September 1998.
- Baseball continued to accept payment and performance from ESPN for the remainder of the 1998 season and into the 1999 season.
- In January 1999, ESPN again requested to preempt three Sunday night baseball games in September 1999 for NFL games, Baseball again denied the request, and ESPN preempted the games anyway.
Procedural Posture:
- ESPN, Inc. filed a lawsuit against The Office of Major League Baseball in the U.S. District Court for the Southern District of New York, which is a federal trial court.
- ESPN alleged that Baseball materially breached their 1996 telecasting agreement by unreasonably withholding approval for game preemptions and by improperly terminating the agreement.
- Baseball asserted counterclaims against ESPN, alleging that ESPN was the party that materially breached the agreement.
- In preparation for trial, both parties filed motions in limine, which are pre-trial requests for the court to prohibit the opposing party from presenting certain evidence or arguments to the jury.
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Issue:
1. Does a contractual 'no-waiver' provision override the common law doctrine of election of remedies, which requires a non-breaching party to either terminate a contract or continue performance upon a material breach? 2. Is a party to a commercial contract, who believes the other party has unreasonably withheld contractually required approval, entitled to engage in 'self-help' by performing as if approval had been granted?
Opinions:
Majority - Scheindlin, District Judge.
1. No. A standard 'no-waiver' provision does not excuse a party from the common law doctrine of election of remedies. The court distinguished between waiver (the relinquishment of a contractual right) and election (the choice between inconsistent remedies after a breach). A 'no-waiver' clause protects a party from inadvertently waiving a right through inaction, but it does not alter the legal consequence of choosing a remedy. When ESPN committed its alleged breaches in 1998, Baseball had to choose between terminating the contract or continuing it. By continuing to accept performance and payments, Baseball elected to continue the contract and thereby lost its right to terminate based on the 1998 breaches. However, this election did not prevent Baseball from terminating the contract based on ESPN's new, subsequent breaches in 1999. 2. No. A party to a commercial contract is not entitled to engage in 'self-help' by disregarding its own obligations, even if it believes the other party has breached. Black-letter contract law provides a non-breaching party with two exclusive options: (1) terminate the contract and sue for total breach, or (2) continue to perform under the contract and sue for partial breach. There is no third option allowing a party to selectively perform its duties. ESPN's reliance on landlord-tenant cases was misplaced, as those cases are based on unique public policy considerations. By broadcasting NFL games without Baseball's contractually required approval, ESPN breached the agreement, regardless of whether Baseball's disapproval was unreasonable; ESPN's proper remedy was to continue performing and sue Baseball for damages.
Analysis:
This case provides a crucial clarification on the interplay between standard contractual 'no-waiver' clauses and the common law doctrine of election of remedies, establishing that boilerplate language does not permit a party to indefinitely reserve the right to terminate for a past breach while continuing to accept benefits. The decision strongly reinforces the traditional framework for remedies in commercial contract disputes, rejecting the notion of 'self-help' or selective performance. It serves as a significant precedent cautioning parties against unilaterally disregarding their obligations, thereby promoting stability and predictability by mandating that disputes over performance be resolved through the legal system rather than through self-adjudication.
