Filed D.C. Superior court 08/05/2020 09:22am Clerk of the Court IN THE SUPERIOR COURT OF THE DISTRICT OF COLUMBIA CIVIL DIVISION TS MEDIA INC., et al., Plaintiffs, 2018 CA 001247 B ¥ PUBLIC BROADCASTIN Defendant. SERVICE, Judge Yvonne Williams ORDER GRANTING MOTION IN LIMINE NO. 7 AND GRANTING MOTION FOR Before the Court is Counter-Plaintiff Public Broadcasting Service’s (“PBS”) Opposed Motion in Limine No, 7 to Exclude Arguments and Evidence Regarding the Remaining Affirmative Defenses of Counter-Defendant TS Media, Inc. (“Motion in Limine No. 7”), filed on December 23, 2019. Counter-Defendant TS Media, Inc. (“TS Media”) filed an Opposition to the Motion in Limine No. 7 on January 2, 2020,' On March 20, 2020, TS Media filed an additional Brief Concerning Equitable Defenses. PBS filed an Opposition to the Brief on April 24, 2020. Also before the Court is PBS's Motion for Liquidated Damages and Entry of Judgment (“Motion for Liquidated Damages”), filed on March 20, 2020. TS Media filed an Opposition to the Motion for Liquidated Damages on May 29, 2020, On June 6, 2020, PBS filed its Reply. For the following reasons, the Motion in Limine No. 7 shall be GRANTED, and the Motion for Liquidated Damages shall be GRANTED. 1. BACKGROUND TS Media and PBS entered into an agreement in 2002 to produce and distribute the television show Tavis Smiley, a nightly television show featuring Tavis Smiley as its host. TS " On January 13, 2020, the Court entered the Omnibus Order on Motions in Limine, inter alia, holding Motion in imine No. 7 in abeyance.Media Compl. 4-5. In November of each year, the parties entered into negotiations to renew their contractual agreement. The final contract was entered in November 2017, renewing Tavis Smiley for a 15 season to commence in January 2018 (“Season 15 Contract”). PBS Am. Countercl. $f] 4-8 Around the time the parties entered into the Season 15 Contract, PBS received an anonymous complaint that alleged that Mr. Smiley had engaged in sexual misconduct. Id. 16- 18. PBS hired outside counsel, Mitchell, Silberberg & Knupp LLP (“MSK”) on November 22, 2017 to conduct an investigation (“MSK Investigation”) of the allegations, Jd. § 18, On December 13, 2017, PBS suspended the Tavis Smiley show pursuant to Paragraph 9.1 of the Season 15 Contract, which provides that “PBS shall have the right to schedule, reschedule, preempt or cancel the Program for any reason.” /d. 431. On February 20, 2018, TS Media filed this lawsuit (the “Complaint”) against PBS alleging a claim for breach of contract based on the MSK Investigation. On March 20, 2018, PBS terminated the Season 13, 14, and 15 Contracts with TS Media pursuant to Paragraph 15.5 (the “Morals Clause”) through written notice provided to TS Media. /d. 450. Paragraph 15.5 provides: Producer shall not commit any act or do anything which might tend to bring Producer into public disrepute, contempt, scandal or ridicule, or which might tend to reflect unfavorably on PBS, any station broadcasting or scheduled to broadcast a program, any licensee of PBS, any sponsor of the program, or to injure the success of any use of the Program. Producer agrees that these same “morals” standards shall apply to all talent hired, retained or utilized by Producer to work on, or in connection with, the Program (“Program Personnel”), including, but not limited to the talent to be featured in the Program. In the event the Producer or any Program Personnel violates this clause, PBS shall have the right to immediately terminate this Agreement upon giving written notice to Producer of same. In the event of any such termination, Producer shall promptly return to PBS any amounts paid by PBS to Producer hereunder,Joint Trial Exs. 7, 24. The Standard Terms and Conditions provides that “[tJhe Agreement is governed by the law of the Commonwealth of Virginia applicable to contracts performed entirely therein.” PBS Am. Counterel. 4] 15. On October 12, 2018, PBS countersued, alleging that TS Media breached the Morals Clauses in the Season 13, 14, and 15 Contracts and engaged in financial misconduct. Id. §¥ 44-62. On December 23, 2019, PBS filed Motion in Limine No. 7, secking to exclude TS Media's affirmative defenses. TS Media filed an Opposition to the Motion in Limine No. 7 on January 2, 2020, asserting that it should be able to plead its affirmative defenses under Virginia law. Before trial, on January 13, 2020, the Court entered an Omnibus Order ruling on the parties’ fourteen motions in limine, holding Motion in Limine No. 7 in abeyance until after trial Trial in this matter began on February 10, 2020 and concluded on March 4, 2020. Upon deliberation, the jury found: (1) PBS did not breach the Season 15 Contract; (2) TS Media breached the Morals Clause in both the Season 13 and Season 14 Contracts; and (3) TS Media breached the Savings and Underwriting provisions of the Season 13 and Season 14 Contraets. See Verdict Form Questions 1, 3-5, 7. For the Season 13 Contract, the jury awarded PBS $366,757 in Cost Savings and $577,956 in Net Corporate Underwriting, for a total of $944,713 in damages. For the Season 14 Contract, the jury awarded PBS $417,051 in Cost Savings and $124,942 in Net Corporate Underwriting, or a total of $541,993 in damages. TS Media asserts that Virginia law allows it to plead the affirmative defenses of unclean hands and laches to reduce the damages owed to PBS, See generally TSM Br. PBS argues that these affirmative defenses are not available to TS Media because PBS's claims are purely legal breach of contract claims, PBS’s Motion for Liquidated Damages asserts that, since the affirmative defenses are not available to TS Media, PBS is entitled to $1,900,000 in liquidateddamages under the Season 13 and 14 Contracts plus the jury’s award of $702,898 for Net Corporate Underwriting under the Season 13 and 14 Contracts, Mot. for Liquidated Damages at 4. PBS further explains that the jury award for Cost Savings is subsumed in the $1,900,000 liquidated damages amount, but the award for Net Corporate Underwriting is not, Id. at 3 DISCUSSION The aforementioned facts establish the basis of this Court's analysis, With these facts in consideration, the Court now turns to the applicability of the equitable defenses and the Motion for Liquidated Damages. A, APPLICABILITY OF EQUITABLE DEFENSES TS Media alleges that, despite the jury’s findings, Virginia law permits TS Media to plead the equitable defenses of unclean hands and laches to defeat PBS's breach of contract claims, TS Media Br. at 1. PBS argues that equitable defenses do not apply to actions at law for contract damages; and even if they did apply, TS Media has failed to prove that the defenses apply in this case. See generally PBS Opp'n to TS Media Br. TS Media relies on Va. Code. Ann. § 8.01-422 to assert that the equitable defenses of unclean hands and laches apply to PBS’s breach of contract claims, TS Media Br. at 2~4. Section 8.01-422 provides: Inany action on a contract, the defendant may file a pleading, alleging any matter which would entitle him to relief in equity, in whole or in part, against the obligation of the contract; or, ifthe contract be by deed, alleging any such matter arising under the contract, existing before its execution, or any such mistake therein, or in the execution thereof, or any such other matter as would entitle him to such relief in equity; and in either case alleging the amount to which he is entitled by reason of the matters contained in the pleading. Ifthe amount claimed by the defendant exceed the amount of the plainiff’s claim the court may, in a proper case, give judgment in favor of the defendant for such excessVa. Code Ann, § 8.01-422 (emphasis added). This statute details the recoupment defense, or the off-setting of damages. See Rosenbloom v. Integrated Sec. Sys., Inc., 73 Va. Cit. 71, 75 (Va Ct 2007). Recoupment is an equitable defense that serves to reduce or eliminate a plaintiff's claim where “it would be inequitable for the debtor to enjoy the benefits of that transaction without also meeting its obligations.” /d, at 76, To plead a recoupment defense, Section 8.01- 422 requires a defendant to specify a dollar amount he is entitled to, as against the plaintiff's monetary obligation. Va. Code Ann, § 8.01-422, While TS Media argues that the purpose of Section 8.01-422 is to enlarge the number of defenses available to a defendant, it fails to sufficiently show that recoupment applicable in this case, particularly when it has plead unclean hands and laches instead. TS Media Br. at 3. TS Media does not claim that it is entitled to an amount in damages. Moreover, the jury found that TS Media did not suffer damages because PBS did not breach its agreement with TS Media. Verdict Form Questions 1-2. As such, there is no balance to offset and the Court cannot apply the recoupment defense. TS Media also fails to provide any case law to support it proposition that Section 8.01- 422 negates the cases which hold that unclean hands and laches are inapplicable to breach of contract actions at law. Under Virginia law, the equitable defenses of unclean hands and laches generally are not available in actions at law for breach of contract damages. Vienna Metro LLC v. Pulte Home Corp, 786 F. Supp. 24 1076, 1084 (E.D. Va. 2011) (finding both unclean hands and, laches inapplicable to legal claim of breach of contract); see also Grenco Real Estate Inv. Trust v, Nathaniel Greene Dev. Corp., 218 Va, 228, 233 (1977) (ruling that an action to enforce a purely legal claim, as opposed to an equitable right, was not subject to the equitable defense of laches).As noted above, PBS alleged, and the jury found, that TS Media breached the Morals Clause, Savings, and Underwriting provisions of both the Season 13 and Season 14 Contracts. See Verdict Form Questions 3-5, 7, PBS's claims are purely legal breach of contract claims, and ion that the PBS is not seeking equitable relief. This Court is unconvinced by TS Media’s posit Virginia Courts in Vienna Metro LLC and Grenco were simply unaware of the existence of Va. Code Ann. Section 8.01-422, as the principles of recoupment differ from those of unclean hands, and laches. TS Media’s Br. at 4. As such, the equitable defenses of unclean hands and laches are inapplicable to PBS’s contract damages, and the Court grants PBS’s Motion in Limine No, 7, See Vienna Metro LLC, 786 F. Supp. 2d at 1084. Because the Court determines that the equitable defenses of unclean hands and laches cannot be applied to the circumstances in this case, itis not necessary to determine whether TS Media has sufficiently proved these defenses. B. LIQUIDATED DAMAGES ‘The Court now turns to PBS's request for liquidated damages and its entitlement to the jury’s award, Parties to a contract may agree in advance about the amount to be paid as compensation for loss or injury which may result from a breach of the contract “when the actual damages contemplated at the time of the agreement are uncertain and difficult to determine with exactness and when the amount fixed is not out of all proportion to the probable loss.” Q ‘Brian v. Langley Sch., 256 Va. $47, $51 (1998). A liquidated damages clause will be construed as an unenforceable penalty “when the damage resulting from a breach of contract is susceptible of definite measurement, or where the stipulated amount would be grossly in excess of actual damages.” Brooks v. Bankson, 248 Va. 197, 208, 445 S.E.2d 473, 479 (1994) (citing Taylor, 233 Va, at 75, 353 S.E.2d at 747). The party opposing the validity of the liquidated damages clause bears the burden of proof on the issue of whether the damages resulting from the breach aresusceptible of definite measurement or that the stipulated damages are grossly in excess of the actual damages suffered by the nonbreaching party. O'Brian, 256 Va. at 551. Here, the Morals Clause included in the Season 13 and 14 Contracts provides that, “In the event the Producer or any Program Personnel violates this clause, PBS shall have the right to immediately terminate this Agreement upon giving written notice to Producer of same, /in the event of any such termination, Producer shall promptly return to PBS any amounts paid by PBS to Producer.” Joint Trial Exs. 7, 24 (emphasis added). The jury found that TS Media violated the Morals Clause in both the Season 13 and 14 Contracts, Verdict Form Questions 3-4. PBS paid $1,000,000 to TS Media under the Season 13 Contract and $900,000 under the Season 14 5. 182:11-18: Contract, See Hague Trial Testimony 177:12-178: 8. Therefore, PBS is seeking a return of this $1,900,000 in liquidated damages. Mot. for Liquidated Damages at 1. The Court determines that the amount sought by PBS in liquidated damages is reasonable because it is the amount it paid to produce Season 13 and Season 14 of the Tavis Smiley show. Additionally, such damages caused by Mr. Smiley's breach of the Morals Clause would be difficult to determine with exactness. See O'Brian, 256 Va. at 551. As such, pursuant to the liquidated damages provision, TS Media is liable to PBS in the amount of $1,900,000 in liquidated damages for its breach of the Morals Clause in the Season 13 and 14 Contracts. The Motion for Liquidated Damages also seeks a final judgment regarding the amounts awarded by the jury. Mot. for Liquidated Damages at 3 While TS Media argues that an award of Cost Savings and Net Corporate Underwriting in addition to the liquidated damages would result in an unjustified windfall to PBS, the Court disagrees. PBS indicates that the jury award for Cost Savings, $366,757 for Season 13 and $417,051 for Season 14, is already subsumed in the $1,900,000 liquidated damages amount. Jd. “Savings” is defined in paragraph 5.2 of the Season13 and 14 Contracts as the difference between PBS's approved budget for the Tavis Smiley show and the actual cost of production, See Joint Trial Exs. 7, 24. This excess paid by PBS in the approved budget is included in the liquidated damages amount because the liquidated damages provision mandates a return of “any amounts paid” by PBS, Joint Trial Exs. 7, 24. However, PBS explai that the award for Net Corporate Underwriting, $577,956 for Season 13 and $124,942 for Season 14, is not counted in the liquidated damages amount. Exhibit C of the Season 13 and 14 Contracts states that PBS is entitled to recei 50% of Net Corporate Underwriting from TS Media, which is defined as “any and all revenue received by or on behalf of the parties from any corporate Underwriter less only a ‘Finder's Fee."” Joint Trial Exs. 7, 24. Thus, TS Media received this amount from corporate underwriters, not from PBS. /d. As a result, the jury award for Net Corporate Underwriting is not included in the $1,900,000 TS Media received from PBS and owed under the liquidated damages provision. /d. PBS is entitled to $702,898 for Net Corporate Underwriting in addition to the $1,900,000 in liquidated damages. II, CONCLUSION Applying Virginia law, the Court concludes the equitable defenses of unclean hands and laches are not applicable to PBS’s purely legal breach of contract claims. Although Va. Code Ann, Section 8.01-422 may permit a defendant to plead recoupment in a breach of contract case, that provision is not applicable here, Thus, PBS’s Motion in Limine No, 7 shall be granted. Since TS Media’s equitable defenses must fail, the Court also concludes that PBS is entitled to $1,900,000 in liquidated damages, pursuant to Paragraph 15.5 of the Season 13 and 14 Contracts. While the jury award for Cost Savings is subsumed in the liquidated damages amount, the award for Net Corporate Underwriting is not. As such, The Court grants PBS’s Motion for LiquidatedDamages and awards PBS $1,900,000 in liquidated damages plus $702,898 for Net Corporate Underwriting; a total amount of $2,602,898. Accordingly, it is on this $* day of August 2020, hereby, ORDERED that PBS’s Motion in Limine No. 7 to Exclude Arguments and Evidence Regarding the Remaining Affirmative Defenses of Counter-Defendant TS Media, Ine. shall be GRANTED; and it is further ORDERED that PBS's Motion for Liquidated Damages and Entry of Judgment shall be GRANTED); and it is further ORDERED that judgment in the amount of $2,602,898 shall be awarded in favor of Counter-Plaintiff PBS and against Counter-Defendant TS Media. IT IS SO ORDERED. Date: August 5, 2020Copies to: Grace E. Speights Morgan, Lewis & Bockius LLP 1111 Pennsylvania Ave. NW Washington, DC 20004 Counsel for PBS W. Brad Nes Morgan, Lewis & Bockius LLP 1111 Pennsylvania Ave. NW Washington, DC 20004 Counsel for PBS Amanda B. Robinson Morgan, Lewis & Bockius LLP 1111 Pennsylvania Ave, NW Washington, DC 20004 Counsel for PBS Jeffrey D. Robinson Lewis Baach Kaufmann Middlemiss PLLC 1101 New York Ave, NW, Suite 1000 Washington, DC 20003 Counsel for TS Media Ronald S. Sullivan, Jr. 6 Everett St., Suite $116 Cambridge, MA 02138 Counsel for TS Media John K, Rubiner Freeman, Mathis & Gary LLP 50 South Hope Street, Suite 2200 Los Angeles, CA 90071 Counsel for TS Media Waleed Nassar Lewis Baach Kaufmann Middlemiss PLLC 1101 New York Ave. NW, Suite 1000 Washington, DC 20005 Counsel for TS Media 10