Rather v. CBS Corp.

Majority - Catterson, J.

No, a 'pay or play' contract does not require active utilization of services as long as compensation is paid, a long-term employment relationship does not create a fiduciary duty, and fraud claims cannot be based on speculative lost future opportunities under New York law. The court found that the Supreme Court (trial court) erred in denying the defendants’ motion to dismiss the claims for breach of contract and breach of fiduciary duty, and thus dismissed the complaint in its entirety. Regarding the breach of contract claim, the employment agreement, specifically reaffirmed in a 2002 amendment, contained a 'pay or play' provision, stating CBS was 'under no obligation to use [Rather’s] services or to broadcast any program' so long as it continued to pay him the applicable compensation. Rather continued to receive his normal CBS salary until his contract was terminated in June 2006. Subparagraph 1(g) of the amendment, which outlined conditions for termination and accelerated payment if Rather was not assigned to 60 Minutes II, did not modify the 'pay or play' clause. The court emphasized that the prefatory clause '[e]xcept as otherwise specified in this Agreement' required 1(g) to be read in conjunction with the 'pay or play' provision, meaning CBS only retained the option to accelerate payment if he was not assigned, not an obligation to actively feature him in broadcasts. For the breach of fiduciary duty claim, the court held that employment relationships, even long-standing or high-profile ones, do not create fiduciary relationships, citing Angel v Bank of Tokyo-Mitsubishi, Ltd. and other precedents. Rather was an established correspondent represented by a leading talent agent who negotiated a detailed and lucrative contract. This distinguished his situation from cases like Apple Records, which involved fledgling, unsophisticated artists, or Wiener, where the defendant acted as an agent on the plaintiff's behalf. On the fraud claims, the court affirmed their dismissal for failure to allege pecuniary loss under the 'out-of-pocket' rule, as established in Lama Holding Co. v Smith Barney. This rule dictates that damages are measured by the actual pecuniary loss sustained as a direct result of the fraud – the difference between the value of what the plaintiff was induced to make and the consideration exacted. Rather’s claims for lost business opportunities or more remunerative employment were deemed 'undeterminable and speculative' and not actionable under this rule, as he failed to identify a single specific, available opportunity he declined due to CBS’s actions. Furthermore, claims of underuse were duplicative of breach of contract, and alleged promises of future intent (like contract extension) are nonactionable. The court also affirmed the dismissal of the breach of the implied covenant of good faith and fair dealing claim as duplicative of the breach of contract claim, and the tortious interference with contract claim, finding new Viacom not liable for old Viacom's acts and dismissing the claim against CBS based on the economic interest doctrine, absent sufficient allegations of malice.