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Medivox Productions Inc. v. Hoffmann-Laroche Inc.

Decided: July 25, 1969.

MEDIVOX PRODUCTIONS, INC., PLAINTIFF,
v.
HOFFMANN-LAROCHE, INC., DEFENDANT



Handler, J.s.c.

Handler

Medivox Productions, Inc (hereinafter Medivox) entered into a contract on May 28, 1964 with defendant Hoffmann-LaRoche, Inc. (hereinafter Roche) for the production of a series of radio programs called "Milestones of Medicine." Medivox is a New York corporation whose principals are John Scott, a well-known broadcaster for New York radio station WOR, Edythe Scott, his wife, and Howard Greene. Roche is a leading manufacturer and distributor of pharmaceutical products. This was a promotional contract calling for 260 radio programs involving short dramatic episodes based on events in medical history, narrated by John Scott and broadcast by radio stations throughout the country on a daily basis; the programs, each with a "credit line" mentioning Roche, were to enhance in the public mind the image of persons and institutions connected with health and to underscore the importance of drugs. Scripts prepared by Medivox were to be submitted to Roche for its review and approval prior to broadcast. Medivox agreed to obtain radio stations to carry the program in designated retail drug marketing areas or cities throughout the country and guaranteed a specified amount of air-time.

The basic contract price was $140,000, to be paid in periodic installments over a period of one year. The broadcasts were initiated on June 22, 1964. On November 25, 1964, seven months before the end of the term, after Medivox had produced approximately 135 programs, Roche terminated the agreement. At this time it had paid Medivox $63,000 under the contract.

Medivox claims that it was performing in accordance with the terms of the contract and that Roche wrongfully terminated. It sues for the balance due as well as other consequential damages. Roche counters that in several respects Medivox was not fulfilling its obligations under the contract and that it was entitled to repudiate. By way of further defenses

and counterclaim for rescission and restitution, it asserts that Medivox committed fraudulent misrepresentations during both the negotiation and performance of the contract.

I

Roche claims that by November 25, 1964 Medivox had fallen so far short in terms of radio station coverage that it had materially breached the contract. The provisions of the contract which govern the obligations of the parties with respect to coverage are set forth in section 4, viz:

Scope of Broadcast -Medivox will make appropriate arrangements with radio stations and deliver such series of programs for broadcast on the basis, wherever possible, of one broadcast per day, five days per week, 52 weeks per year for a total of 260 programs per year on an exclusive broadcast basis with only one radio station in each of the designated marketing areas (as defined below) in the United States; this however shall not imply that a radio station shall be obtained in every designated marketing area.

Where a broadcast schedule as set forth above is not possible to arrange with a particular radio station, some other broadcast schedule may be followed.

The designated marketing areas shall consist of those top 200 cities and/or marketing areas in the United States selected on the dollar volume of retail drug sales encompassing approximately $6,000,000,000 or 73% of the national total as based on figures published in Standard Rate and Data Service, Inc. Spot Radio Rate and Data.

However, in those instances where broadcast areas as defined above overlap, the overlapped cities and/or marketing areas shall be considered a single unit and the list of cities and/or marketing areas as defined herein shall be extended by the same number of cities and/or marketing areas excluded in this manner so as to maintain a constant list of top 200 cities and/or marketing areas. * * *

There is a further provision in section 6 which states:

Medivox guarantees to Roche broadcast time during the year of one and one-half times the basic cost price of One Hundred Forty Thousand Dollars ($140,000.). For the purposes of this contract the value of the broadcast time of each program consisting of three minutes, forty-five seconds of editorial time that will actually be broadcast shall be based upon and equal to the prime one minute, one time spot rate of each station broadcasting 'Milestones of Medicine'

as listed by the latest available Standard Rate and Data Service, Inc. Spot Radio Rate and Data and the Value of the total broadcast time shall be this figure times the number of broadcasts. In the event the broadcast time as above defined shall not be achieved, with appropriate adjustment, if any, for the medically significant areas referred to in paragraph 4, the cost to Roche shall be reduced in the same percentage proportion, and the obligation to Roche hereunder shall be on such reduced and prorated charge.

The written words of the contract define the parameters within which the understanding of the parties must be found.

While it is to be appreciated that the cardinal rule in the interpretation of contracts is to ascertain and effectuate the common intention of the parties, yet where the parties have composed a written memorial of their bargain, the intent that controls is that expressed or apparent in the writing. The parties are normally bound by the language employed regardless of some different intent or divergent understanding entertained by either party. Moscowitz v. Middlesex Borough B. & L. Ass'n , 18 N.J. Super. 182, 186 (App. Div. 1952).

Each party espouses a variant construction of these contract provisions based upon its own conception of their common intention. Medivox urges that paragraph 4 only prescribes the markets within which it had to solicit stations and not, as contended by Roche, a numerical guarantee of stations or markets.

Paragraph 4 on its face does not crystalize an affirmative duty on the part of Medivox to obtain a radio station in each of the designated marketing areas or to obtain any particular number of radio stations. The language, however, is not felicitous in defining this aspect of coverage. The duties which it apparently imposed on Medivox are to "make appropriate arrangements with radio stations" and to "deliver" the programs "on an exclusive broadcast basis with only one radio station in each of the designated marketing areas". The "appropriate arrangements" to which reference is made are "whenever possible, one broadcast per day, 5 days per week, 52 weeks per year for a total of 260 programs per year"; if such a broadcast schedule is "not possible to arrange

with a particular radio station, some other broadcast schedule may be followed." The duty to "deliver such series of programs" entails furnishing these to only one radio station in a single marketing area on an exclusive basis. Any inference otherwise generated by this language that it raises a positive duty to secure a radio station in every one of the designated marketing areas is effectively negated by the concluding sentence of the first paragraph of section 4.

To the extent that there is any latent ambiguity in the contract, there may be examination of relevant circumstances as well as the objects and purposes of the parties in order to fix more precisely the meaning of what was expressed in the written contract. Atlantic Northern Airlines, Inc. v. Schwimmer , 12 N.J. 293 (1953); Garden State Plaza Corp. v. S.S. Kresge Co. , 78 N.J. Super. 485 (App. Div. 1963), certif. den. 40 N.J. 226 (1963). Extrinsic evidence to this end was offered freely by both parties; however, it does not support the conclusion pressed by Roche that the intention of paragraph 4 was to obligate Medivox to place the programs in all of the 200 designated markets or that Medivox was to secure any particular number of markets.

The negotiations which eventuated in the written contract were incepted at a meeting on May 13, 1964 at which there were present the three principals of Medivox and various representatives of Roche, including Dr. Virginius Mattia, at present the president of Roche but then the vice-president for marketing for all of the commercial divisions of Roche; William Enes, then general manager in charge of sales, marketing, advertising and promotion of Roche Laboratories, and Alfred Zobel, then director of public relations of Roche and its various divisions. Considerable time was spent discussing Medivox's proposal with respect to coverage and syndication. This would entail the solicitation by Medivox of the ranking radio stations in each of the top 200 retail drug sales marketing areas. Medivox mentioned that a considerable number of stations had been broached and that numerous "commitments of interest" had been received. It was further explained

that the marketing areas were selected in order to assure Roche, as a manufacturer of pharmaceuticals, meaningful coverage in areas where the program with Roche's name would have a maximum impact and benefit. It was not represented to Roche, however, that Medivox would obtain a radio station in each of the marketing areas, that is, 200 radio stations.

Medivox also explained its guarantee of broadcast time and the method by which it would be computed. It offered to guarantee Roche broadcast time worth 1 1/2 times the basic contract price, to be computed by a formula and, according to Medivox, the guarantee of broadcast time as proposed was preferable to a numerical guarantee of radio stations selected indiscriminately without regard to the type of audience to be reached.

The final contract was drafted and executed on May 28, 1964. The particular provisions for coverage went through a painstaking evolution. In an initial draft prepared by Medivox, it merely stated in general terms that the programs would be broadcast by stations throughout the country with no reference to any number of stations or marketing areas. In a subsequent draft prepared by Roche it was provided that Medivox would obtain a station "[i]n each of these 200 marketing areas." This provision, however, was changed radically in the final draft. In the executed contract, as noted, this provision dispelled any obligation to secure a particular number of stations.

The final contract reflects the common understanding ultimately reached by the parties. While Roche did during the course of negotiations desire that a specified number of radio stations be obtained by Medivox to carry the program, it capitulated to Medivox's suggestion that there be no minimum numerical guarantee and that Medivox need not obtain a radio station in each of the 200 designated marketing areas.

Medivox's performance with respect to syndicating the programs cannot be considered deficient either in terms of

the contract itself or even as measured against Roche's expectations of a numerical and percentage guarantee of stations and markets. Medivox had contracted with approximately 133 stations by the end of November 1964. At least 120 of these stations were, in fact, carrying "Milestones of Medicine" on a daily basis for 13-week periods. It had thus subscribed more than 50% of the stations in the top 200 marketing areas. Most of these radio stations were ranked 1, 2, or 3 in their particular areas. In terms of percentage of coverage these stations represented 25.5% of the national total of retail drug sales, more than 1/3 of 73% of the markets. Actual broadcast time achieved was $86,899, figured very conservatively on the basis of only 101 stations. This actual broadcast time was between 1/3 and 1/2 of the total broadcast time of $210.000 which Medivox had guaranteed. By the end of November 1964 the contract term itself was between 1/3 and 1/2 over, with still seven months to run. In view of all these circumstances, and against any measure of performance, it cannot be concluded that Medivox was guilty of a material breach of contract with respect to its efforts to syndicate the program.

II

Roche asserts that Medivox was in breach of its contract because of the poor quality of scripts. The validity of Roche's repudiation should be approached in terms of whether it had reserved expressly or impliedly a contractual power to be the final arbiter as to the quality of scripts. If Roche had reserved the ultimate right to be satisfied with scripts, the validity of its termination can be determined by the genuineness -- not the reasonableness -- of its dissatisfaction.

It is clear that there was no express contractual right to terminate the agreement, nor can such a right be implied. If, however, during the course of performance one party fails to perform "essential obligations under the contract," he may ...


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