APU Legal Studies Original

ABC v. Wolf and the Tale of Needlessly Complicated Contracts

Contracts are a very important tool used in business arrangements to ensure that parties are clear on expectations and thorough in the execution of their commitments. Oftentimes, the nature of different business deals and negotiations require that contracts governing such relationships are lengthy and complex.

But, other times, contracts’ details can be needlessly complicated, creating more headaches than they relieve. One such instance can be found in the case of ABC v. Wolf.

An Overview of Wolf’s Contract with ABC

ABC is American Broadcasting Company, a U.S. national broadcast television network and a subsidiary of Disney Entertainment. Warner Wolf was a television sportscaster, who served as an on-air personality handling sports coverage and commentary for much of the latter half of the 20th century.

In the late 1970s, Wolf was employed by ABC as a sportscaster. His contract was scheduled to end with ABC on March 5, 1980. In the contract, the parties had stipulated several complicated provisions.

First, the contract included a “good-faith negotiation” clause, which stipulated that, during the last 90 days of the contract (from Dec. 6, 1979 through Mar. 4, 1980), Wolf was required to negotiate his renewal with ABC in good faith. The contract also stipulated that, during the first 45 days of the good-faith negotiation period (from Dec. 6, 1979 through Jan. 19, 1980), Wolf was prohibited from engaging in negotiations for work with any other outside employer.

Second, the contract included a “right-of-first-refusal” provision, which stipulated that, for the 90-day period immediately following the termination of Wolf’s contract with ABC (from Mar. 5, 1980 through June 3, 1980), if Wolf should receive an offer for work as an on-air sportscaster from anyone other than ABC, he was required to submit it to ABC. He would allow them to try to match the terms of the offer, and provided ABC did so, agree to return to work with ABC on such terms.

How the ABC v. Wolf Case Unfolded

With the benefit of hindsight, it’s clear that Wolf’s complex contract obligations were likely to cause problems – here’s how the case unfolded.  

In September 1979 – prior to the start of the good-faith negotiation period – Wolf began initial talks with ABC about renewing his contract. There was nothing wrong with this, as the contract did not state that the parties could not start negotiations early. However, no agreement was reached, so ABC and Wolf agreed to postpone discussions and revisit the renewal of Wolf’s contract in October.

Wolf met with ABC later in October – but again, no agreement was reached for contract renewal. Unbeknownst to ABC, Wolf met with CBS about potential employment in October as well – both before and after his meeting with ABC. But remember, this was all still before the commencement of the official (contractually stipulated) 90-day good-faith negotiation period and the coinciding 45-day “no talks with outside employers” period.

Things were relatively quiet on all fronts for the remainder of 1979. Then, in January 1980, ABC returned to Wolf and essentially expressed that they were willing to meet all his original demands for re-employment.

However, Wolf declined. He advised ABC that they took too long to return to tender such an offer and that his intention was to explore outside employment options.

On Feb. 1, 1980 – after the 45-day “no talks with outside employers” had ended, Wolf again met with CBS. The parties orally agreed to terms for Wolf to begin work with CBS later in the year.

A few days later, on Feb. 4, 1980, the parties put the oral agreement in writing. The agreement stipulated that, following the termination of Wolf’s contract with ABC on Mar. 5, 1980, he would begin work with CBS as an off-air production specialist for 90 days. This was presumably to avoid running into conflicts with ABC’s right-of-first-refusal provision – which only prevented Wolf from accepting on-air work during the period.

The contract also stipulated that, for a sum of $100 paid by Wolf to CBS, CBS agreed to hold open an option until June 4, 1980 for Wolf to accept work as an on-air sportscaster with CBS. Again, the obvious intent was to circumvent the 90-day right-of-refusal period in the ABC contract so that Wolf did not have to formally agree to said on-air employment until after the period had ended.

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ABC Sues Wolf for Breach of Contract

ABC was ostensibly unaware of Wolf’s agreement with CBS. In fact, they actually negotiated with Wolf for him to continue his on-air work for ABC during the right-of-first-refusal period, up through May 28, 1980. But at some point, it’s clear that ABC became privy to Wolf’s outside dealings, because on May 6, 1980, ABC sued Wolf – alleging breach of contract and requesting equitable relief from the New York State courts.

As to the issue of breach, this case was tried in the New York Supreme Court of general jurisdiction and then appealed twice. The trial court found that Wolf had neither breached the good-faith negotiation nor right-of-first-refusal provisions of his contract with ABC.

On initial appeal, the Supreme Court Appellate Division found the exact opposite; they held that Wolf had breached both clauses. And, on the second and final appeal to the New York Court of Appeals, the high court split the difference, finding that Wolf had breached the good-faith negotiation clause but not the right-of-first-refusal provision.

But a breach is a breach. The next question, of course, entailed what the court should do about it.

ABC wanted Wolf to honor his contractual commitments.

Unlike legal remedies, which most often are monetary damage awards, a prayer to a court for equitable relief, which, again, is what ABC sought here, involves a request that the court require the opposing party, through injunction, to either do or not do something. In this case, ABC wanted Wolf to honor his contractual commitments and return to work for them.

The court was reluctant to grant this request. Why? Because the 13th Amendment specifically prohibits forced servitude (i.e., slavery) – and this is particularly so in personal services contracts such as the ones between Wolf and his employer.

Even though Wolf would have likely received remuneration for his work, forcing him to work for ABC over CBS would have been tantamount to giving a person no choice over the circumstances of their labor. As a matter of public policy, this was (and still is) out of the question for courts.

Incidentally, another reason for declining specific performance injunctions in personal-service contracts is the inherent complications that would arise in policing enforcement of such an imposition.

For example, imagine that the court did require that Wolf return to work for ABC. Would Wolf be expected to have a great attitude and put forth his best effort in his duties there?

Probably not – but how much effort would be “enough” to meet his legal obligations? Managing such legal expectations would be a nightmare of subjectivity and this is yet another reason why courts generally do not entertain such proposals.

In the alternative to specific performance requirements, what about a “negative injunction” that doesn’t require Wolf to return to work for ABC, but instead simply prohibits him from working for CBS? After all, if Wolf is guilty of breaching his contract, shouldn’t he be stopped from enjoying the fruits of his breach by working for CBS without penalty? Would such a remedy be feasible?

In some cases, the answer is yes. Courts have imposed negative injunctions of this kind in the past, where a party breaches a contract and accepts employment elsewhere during the term of their original agreement. However, in the Wolf case, the court declined to impose a negative injunction.

Why? Because at the time Wolf began his work for CBS, his contract with ABC had already ended. It’s not as if he unilaterally cut his agreed work with ABC short to jump ship and go work for CBS. No, Wolf saw his agreement with ABC through to the end, even if he did act in bad faith with respect to his future employment dealings.

The court was reluctant, after Wolf’s original contract had already concluded, to tell him that he could not work for CBS as he had agreed. They felt that doing so would unreasonably deprive Wolf of his livelihood and his ability to work.

While no injunctive relief was granted for ABC in this case, it’s worth noting that one dissenting judge argued a 90-day injunction prohibiting Wolf’s work with CBS would have been appropriate since ABC was denied the full benefit of their 90-day right-of-first-refusal period by Wolf in his clever (i.e., sneaky) contract arrangements with CBS. But, of course, this opinion was not shared by the majority.

What did that mean for ABC, then? Were they completely without recourse and forced to just accept the fact that Wolf had breached his employment contract with them? Actually, no.

The original case was resolved without prejudice. In their opinion, the judges for the New York Court of Appeals noted that, while injunctive relief was not found to be appropriate, ABC was still free to pursue legal remedies (i.e., monetary damage awards) against Wolf in a subsequent suit.

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With Contracts Like ABC v. Wolf, Simpler Is Often Better

The moral of the story is that, while forcing action against a party might not be defensible, compensatory damages might instead be a more appropriate aim. However, I would argue that there is an even larger lesson to be learned regarding contracts here. In the ABC/Wolf contract, for some reason the parties felt it necessary to include window intervals for good faith and right of first refusal, with 90-day periods and 45-day periods, and endless loopholes through which headaches could emerge, as clearly happened here.

If the parties were amenable to it, a much simpler arrangement would have abated a lot of problems here. For example, stipulations that required a) good-faith negotiation throughout the entire term of the contract, b) exclusive negotiations throughout entire term of the contract, and c) noncompete with right-of-first refusal on any offers received throughout the entire term of the contract would have made a lot more sense here. It likely would have prevented this litigation in the first place.

So when drafting contracts, it is important to think about the implications of overly complex terms and language. Simpler is generally better, to the extent the circumstances allow.

Gary Deel

Dr. Gary Deel is a Faculty Member with the Wallace E. Boston School of Business. He holds an A.S. and a B.S. in Space Studies, a B.S. in Psychology, a J.D. in Law, and a Ph.D. in Hospitality/Business Management. Gary teaches human resources and employment law classes for the University, the University of Central Florida, Colorado State University and others.

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