Paradama Productions, doing business as AMA Pro Racing (“AMA”), sponsored various professional Supercross racing events. Supercross racing is championship dirt track stadium motorcycle racing. AMA promoted its races through promotional contracts with promoters such as Clear Channel Communications (“Clear Channel”).
Several years before its promotional contract with Clear Channel was set to expire, AMA began negotiating a new contract. While negotiating with Clear Channel, AMA also began discussions with three other promoters, including JamSports and Entertainment, LLC. (“JamSports”). AMA’s negotiations with JamSports progressed to the point that AMA and JamSports signed a letter of intent regarding a contract to promote the AMA-sanctioned supercross race series for a period covering seven seasons. Among other things, the letter of intent provided that AMA would negotiate exclusively with JamSports regarding the promotional contract for a 90 day period.
Thereafter, Clear Channel, which had knowledge of exclusivity provision of the letter of intent, continued to pursue a promotional contract with AMA. During the exclusivity period, Clear Channel proposed the terms of a deal to AMA, sent letters and e-mails to AMA regarding such deal, and initiated meetings and telephone communications with AMA, in an all-out effort to obtain the promotional contract. When Clear Channel was successful in obtaining the contract after the exclusivity period expired, JamSports filed suit alleging tortious interference with prospective economic advantage and tortious interference with contract.
As a defense to both claims, Clear Channel argued that an entity that is competing for prospective business, and is doing so lawfully, cannot be held liable for tortious interference with prospective economic advantage or contract. The so-called “competition privilege” entitles a firm “to divert business from [its] competitors generally as well as from one’s particular competitors provided one’s intent is, at least in part, to further one’s business and is not solely motivated by spite or ill will.”
While the court found that the competition privilege precluded JamSports from pursuing its claim for tortious interference with prospective economic advantage, the court held the competition privilege was not a defense to a claim for tortious interference with contract. In so finding, the court noted that while generally there is nothing wrong with one entity trying to take a client from another, a party can engage in such competitive action only so long as it does not precipitate a breach of contract between the client and the party’s competitor. Thus, since Clear Channel’s activities resulted in AMA breaching the letter of intent with JamSports, Clear Channel had tortiously interfered with JamSports’ contract.
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