Weigel Broadcasting Co. v. Tv-

Facts

D is a small television station wholly owned by Kinlow (D). P made an offer to buy D. The offer stated that P was interested in acquiring D, including all licenses, authorizations, applications, and equipment, including towers and buildings, for $5,000,000 in cash. The offer was subject to FCC and other regulatory approval, as well as the terms of a customary definitive purchase agreement. It further stated that the purchase agreement would be completed within 40 days from the date of the letter, and the FCC applications would be filed within five days thereafter. If the offer was acceptable to D, P would place $250,000 in escrow and deposit another $250,000 after the signing of a purchase agreement. The offer was to be held open for ten days and required D to agree to the letter and provide written assurance that it had terminated negotiations to sell the station to another party and would not entertain any similar negotiations pending the completion of a definitive purchase agreement. On July 7, 2005, long after P's offer had expired, D sent a letter to P regarding the possible sale of the station for $7 million. The parties were to agree to immediately proceed with the preparation of a definitive Stock Purchase Agreement to be completed and executed within 40 days hereof (7/13/05). The FCC applications will be filed within 5 days thereafter. D was to deposit $250,000.00 into an escrow account, as a good faith deposit pending the signing of an SPA and upon such signing will add an additional $250,000.00 to secure performance under the SPA. If P executed the document D would cease all negotiations to sell to any other party and will not enter into or entertain any such similar negotiations pending completion of a definitive and binding SPA. On July 13, 2005, both parties signed the letter of intent, with the modifications that the right to lease the TV tower would extend for 20 years after closing, and that the 40-day period for the execution of the SPA would begin on July 13, 2005, instead of July 7, 2005. P then requested documents to aid in its investigation of the station, which D agreed to provide. On August 11, 2005, P sent D a draft of the escrow agreement and on August 17, 2005, six days before August 23, 2005, the expiration of the 40-day period for the execution of the SPA, P provided D with a 70-page draft SPA, with the caveat that it had not yet been reviewed by P's counsel and therefore was subject to revision. The draft SPA included all the provisions normally found in a contract of this type. It also included a provision requiring D to make a channel election with the FCC, demanding its right to be carried on cable channel 49 -- it was currently being carried on channel 19. It also stated, in section 1.1, that the 'purchase price' was $ 5.5 million. The 40-day mark passed and no agreement had been signed. executed. On September 1, 2005, D returned the signed escrow agreement and but D had not yet completed a review of the 70-page draft SPA. On September 6, 2005, P deposited $250,000 into escrow with its attorney and forwarded a copy of the executed escrow agreement and verification of payment to D. On September 20, 2005, D e-mailed P a list of over 30 concerns they had with the draft SPA. These included the purchase price, the $25,000 liquidated damages clause, and the requirement for channel election. The channel election needed to be completed by October 1, 2005, a time before the sale realistically would close. On September 22, 2005, P stated that all outstanding issues could be resolved by good faith negotiations within a very short time frame. P stated it was also concerned that D would not be willing to make the necessary channel election, which it claimed: 'has been from the outset a fundamental component of this transaction from my client's standpoint.' P stated that 'if your client is unwilling to make the necessary election, however, my client has no further interest in pursuing this matter.' On October 1, 2005, D decided not to move to channel 49. D informed P of this election on October 4, 2005, and the next day notified P that D had begun discussions with other parties and had received a draft letter of intent from a third party. On January 12, 2006, D signed a letter of intent with Entravision for the purchase of the station. P sued D alleging that the letter of intent was a binding contract requiring the parties to negotiate exclusively and in good faith towards the SPA. D filed a motion for summary judgment claiming that the letter of intent is not binding by its very terms.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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