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Thursday, October 25, 2007

Ted Nugent's Breach of Contract Claim

Reminiscent of the more recent Imus debacle, rocker and lover of hunting, Ted Nugent, has a breach of contract action floating around the Michigan state courts.  The suit arose in 2003 after Nugent "used racial slurs in reference to African-Americans and Asians" on a Denver, Colorado radio program.  Muskegon Summer Celebration (MSC) canceled a performance by Nugent, deciding that Nugent's comments did not reflect the spirit of its celebration and canceled his performance.  Nugent filed an action asserting libel and slander, breach of contract, detrimental reliance, unfair competition and unjust enrichment. 

The trial court granted MSC's motion for summary judgment on the libel and slander and detrimental reliance claims and granted a directed verdict to MSC on the unfair competition and unjust enrichment claims.  The jury returned a verdict in favor of Nugent on the breach of contract claim and awarded the $80,000 contract amount and an $20,000 for lost merchandise sales.  The trial court reduced the verdict by $20,000, figuring that, had Nugent played the concert, he would have owed his agent 25% of the contract amount.

The Michigan Court of Appeals affirmed.  On the breach of contract claim, the court addressed MSC's argument that no contract was formed.  MSC argued that it withdrew its offer for Mr. Nugent to perform before a final agreement was signed.  The Michigan appellate court held:

It is undisputed that various contract documents sent by [the parties' representatives] were never signed.  However, evidence established that the parties nevertheless formed a binding oral agreement.

A valid contract requires the following: 1) parties competent to contract, 2) a proper subject matter, 3) legal consideration, 4) mutuality of agreement, and 5) mutuality of assent. * * * Evidence established that [MSC's representative] called [Mr. Nugent's agent] to make an offer for Mr. Nugent to play on June 30, 2003 for $75,000.  After some negotiation, [MSC's representative] told [Mr. Nugent's agent] that the festival would pay Mr. Nugent $80,000, with a 50 percent deposit.  According to [Mr. Nugent's agent], he and [MSC's representative] agreed on those essential terms, [Mr. Nugent's agent] received approval from Mr. Nugent's manager, and Mr. Nugent was prepared to play on June 30, 2003.  Further, after this conversation occurred, MSC began to advertise that Mr. Nugent would be performing at the festival and it began to sell individual tickets for Mr. Nugent's concert.

Further evidence established that it is common for buyers and booking agents to reach oral agreements for artists to perform, without signed, formal contracts.  [Mr. Nugent's agent] confirmed that his occurred in his own business, entertainment lawyer Michael Novak testified that oral contracts are "the norm" in the music business, and Mr. Nugent's own manager testified that, though it is his job to sign Mr. Nugent's contracts, he rarely does so because signed contracts are generally not used.  Moreover, [MSC's representative] admitted that a percentage of his contracts for the Summer Celebration were not signed and that he would have expected Mr. Nugent to perform irrespective of an executed agreement.  Thus, plaintiffs presented sufficient evidence for the jury to decide whether Mr. Nugent and MSC reached a binding, oral agreement and the trial court correctly denied MSC's motion for summary disposition.

The Court also affirmed the reduction of the contract damages by 25%. 

Is there a lesson here?  Is there an enforceable clause (condition?) that MSC could have inserted in its agreement to avoid paying damages to an artist that uses racial slurs?  Perhaps something akin to a morals clause? 

[Meredith R. Miller]

October 25, 2007 in In the News | Permalink | TrackBack (0)