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Subaru of America, Inc v. Ddb Worldwide Communications Group

September 22, 2011

SUBARU OF AMERICA, INC.,
PLAINTIFF,
v.
DDB WORLDWIDE COMMUNICATIONS GROUP, INC., DEFENDANT.



The opinion of the court was delivered by: Honorable Joseph E. Irenas

OPINION

IRENAS, Senior District Judge:

This is a contract dispute between Subaru of America, Inc., ("Subaru"), and its former advertising agency, DDB Worldwide Communications Group, Inc. ("DDB").*fn1 DDB presently moves for summary judgment on Counts 2 though 4 of the Second Amended Complaint.*fn2 For the reasons stated herein, the Motion will be granted in part and denied in part.

I.

Subaru asserts that DDB breached certain terms of the "Agreement" that governed the parties' relationship during the period of January 1, 2005 through 2007 and part of 2008.*fn3 To understand the contract's provisions, however, some background concerning the advertising business in the United States is necessary.

Large national retailers, such as Subaru (which sells automobiles), hire outside advertising agencies to handle almost every aspect concerning the national advertising of their products. While the ad agencies apparently provide a wide array of services, including the actual production of advertisements, at issue in this case are the "media buying and planning" services DDB performed on Subaru's behalf.*fn4

Media planning is the process whereby the ad agency creates a "strategic plan" for delivering the "advertiser's creative message" to the "proper audience in the most cost-effective manner." (Mayer Decl. ¶ 7) Media buying is the purchasing of commercial time from the appropriate national and local television stations in order to best achieve the media plan's objectives. (Mayer Decl. ¶ 9)*fn5 The ad agency purchases commercial time for its clients "based in large part on the GRPs [('gross ratings points')]*fn6 that the stations project will be achieved by a particular television schedule." (Mattimore Decl. ¶ 4). In other words, through its media planning and buying, the ad agency tries to ensure that its clients' "television ads [will] be seen by an advertiser's target audience" (Mattimore Decl. ¶ 3), by placing the right advertisement on the right network, at the right time.

After the media planning and buying has occurred, ad agencies also conduct "post-buy analyses" to determine whether the television stations performed as expected. (See Mattimore Decl. ¶ 7; Mayer Decl. ¶ 15) The post-buy analyses generally look for two problems: "underdeliveries" and "violations."

An underdelivery occurs when a television station fails to deliver a minimum number of viewers (expressed in GRPs) for the commercial time purchased. (Mayer Decl. ¶ 12; Mattimore Decl. ¶ 4) Because the price of commercial time is based upon GRPs (Mattimore Decl. ¶ 4; Mayer Decl. ¶ 11), when a station underdelivers, an advertiser such as Subaru has quite literally not gotten what it paid for.

Violations, on the other hand, can occur in several different situations. Most commonly, a station commits a violation by running a commercial too frequently ("double-spotting"), running a commercial during a prohibited program ("restricted programming"), or simply running the wrong commercial ("trafficking"). (Mayer Decl. ¶ 14)

When post-buy analyses reveal underdeliveries or violations, the ad agency asks the television stations for "make goods"-- free additional commercial time intended to make up for the problem. (Mattimore Decl. ¶ 6; Mayer Decl. ¶ 16) "Sometimes the Stations agree to provide make goods, and sometimes they refuse if they disagree that a make good is owed." (Mattimore Decl. ¶ 8) Subaru does not dispute that the stations ultimately decide whether to provide a make good.

Relevant to the instant Motion, Subaru asserts that over the course of the parties' contractual relationship, DDB failed to pursue certain make goods, leaving approximately $5 million-worth of make goods unclaimed. Subaru also asserts that it was entitled to terminate the parties' agreement upon 90-days notice, rather than 180-days, based on its subsequent discovery that a key DDB employee did not bill any time to Subaru's account in 2007.

The relevant provisions of the Agreement are as follows:

1. APPOINTMENT OF AGENCY

[Subaru] (hereinafter 'you') desires to retain the services of [DDB] (hereinafter 'we' or 'us') to provide effective marketing and advertising communications and advice in marketing your products. Accordingly, you hereby engage and appoint us as your Agency of Record in the United States for your automotive products to provide strategy development, creative development and production, media planning, buying, monitoring and post-buy analysis, day-to-day account service, competitive tracking and reporting, billing and budget reporting. . . .

2. AGENCY SERVICES

We will perform for you the specific services set forth in . . . Exhibit A [to this Agreement.]*fn7 In addition, we will perform the following general services . . . . . (iv) Through our affiliated company . . . provide media planning.

(v) Through our affiliated company . . . contract . . . for and otherwise obtain . . . time . . . for . . . broadcasting . . . your advertising, endeavoring to secure the most advantageous rates available.

(vi) Check and verify . . . broadcasts . . . to such degree is normally performed by advertising agencies.

(vii) Audit invoices for space, time, material preparation and services.

(viii) Review, approve and pay invoices for media, production and other third party charges.

(ix) Provide post-buy analyses and obtain 'make goods' or credits.

10. TERMINATION

(a) The term of this agreement shall commence as of the date hereof and shall continue in full force and effect unless terminated by either party giving the other not less than 180 days prior written notice of such termination. . . . You may terminate this agreement on 90 days prior written notice if there is a personnel change or reduction in the job ...


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