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ESPN, Inc. v. Office of the Commissioner of Baseball

    Brief Fact Summary.

    Plaintiff entered into a contract with Defendant to air all regular season major league baseball games on its network in exchange for yearly fees. With Defendant’s approval, Plaintiff had the right to preempt 10 baseball games per season for other events and air the games on ESPN2. However, Defendant was not permitted to unreasonably deny such requests. In 1998 and 1999, Plaintiff preempted three baseball games even though Defendant did not approve. Defendant terminated the contract after Plaintiff preempted the games in 1999. Plaintiff sued Defendant and Defendant counterclaimed each alleging that the other had breached the contract. In answer to Defendant’s counterclaim, Plaintiff raised an affirmative defense of election of remedies. Defendant then filed a motion in limine, seeking to bar Plaintiff from raising the affirmative defense. Defendant also asserted that the contract’s no-waiver provision, which provided that either party’s failure to seek redress for breach or demand strict performance of the agreement did not constitute a waiver of rights or subsequent enforcement, effectively overrode the doctrine of election of remedies.

    Synopsis of Rule of Law.

    Under the doctrine of election of remedies, a non-breaching party may not terminate a contract on the basis of a material breach, if that party previously chose to continue the contract after that breach.

    Facts.

    ESPN, Inc. (Plaintiff) entered into a contract with the Office of Major League Baseball (Defendant) in 1996, under which Plaintiff would air all regular season major league baseball games on its network in exchange for yearly fees. Under the contract and contingent to Defendant’s approval, Plaintiff had the right to preempt 10 baseball games per season for other events and air the games on ESPN2, its secondary network. However, Defendant was not permitted to unreasonably deny such requests. In 1998, Plaintiff sought approval to preempt three baseball games so that it could air football games. Defendant did not approve, but Plaintiff nevertheless preempted the baseball games. The same thing happened in 1999. Plaintiff sought to preempt three baseball games, Defendant refused, and Plaintiff preempted the games anyway. Defendant then terminated the contract, alleging that Plaintiff had materially breached.

    Issue.

    Whether a non-breaching party may terminate a contract on the basis of a material breach, if that party previously chose to continue the contract after that breach.

    Held.

    No. Under the doctrine of election of remedies, a non-breaching party may not terminate a contract on the basis of a material breach, if that party previously chose to continue the contract after that breach.

    Discussion.

    If the non-breaching party continues to perform or accepts the breaching party’s performance, this constitutes election to continue the agreement. New York law holds that if the non-breaching party elects to continue the contract, it gives up the right to later terminate based on that breach. Apex Pool Equip. Corp. v. Lee, 419 F.2d 556 (2d. Cir. 1969). The effect of a contractual no-waiver provision on the doctrine of remedies deserves closer scrutiny. The doctrine of waiver permits a party to give up some contractual provision or condition that was included for its benefit in the contract. Once a party waives a right, that party has no remedies for breach of that right. Thus, waiver is not the same as election of remedies, which refers to the non-breaching party’s option to choose between inconsistent remedies following a breach. This means that a no-waiver provision contained in a contract does not negate the doctrine of election of remedies. In this case, Defendant elected to continue the contract following Plaintiff’s 1998 breaches, and it cannot now terminate based on those breaches. Further, Defendant’s assertion that the no-waiver provision in the contract overrides the doctrine of preemption of remedies fails. However, Defendant is not barred by the doctrine of election of remedies from terminating the agreement based on Plaintiff’s 1999 preemptions if, as a matter of law, those preemptions constitute material breaches of the contract.


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