» Massachusetts Bay Transportation Authority v. Clear Channel Outdoor, Inc. (Lawyers Weekly No. 09-017-18)

Massachusetts Bay Transportation Authority v. Clear Channel Outdoor, Inc. (Lawyers Weekly No. 09-017-18)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1884CV00268-BLS2
____________________
MASSACHUSETTS BAY TRANSPORTATION AUTHORITY
v.
CLEAR CHANNEL OUTDOOR, INC.
____________________
MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR PRELIMINARY INJUNCTION
This lawsuit arises from the imminent expiration of a 15-year license agreement under which Clear Channel Outdoor, Inc., has been operating billboards on property owned by the Massachusetts Bay Transportation Authority. The MBTA recently issued a request for responses by parties willing to enter into a six month license to operate the same billboards after the current license expires. The MBTA received bids from Outfront Media LLC, which agreed to enter into a six-month license, and Clear Channel, which refused to accept a term that short. The MBTA disqualified Clear Channel. It then awarded a six-month license to Outfront Media.
The MBTA brought this suit seeking declarations that its request for responses was lawful, Clear Channel is not entitled to enforce its right of first refusal, and Clear Channel is contractually obligated to transfer the disputed billboards as well as whatever permits are needed to operate the billboards to the MBTA.
Clear Channel has asserted counterclaims alleging that the MBTA breached the existing contract by offering a new license on terms that are not commercially reasonable and by not allowing Clear Channel to exercise its contractual right of first refusal, and that Clear Channel therefore has no contractual obligation to transfer the billboard structures to the MBTA at the end of the current license term.
The MBTA now seeks a preliminary injunction that would bar Clear Channel from interfering with any use of the billboards on MBTA property, or terminating or otherwise disposing of its existing permits for billboards on MBTA property. Clear Channel seeks a preliminary injunction that would bar the MBTA from proceeding with the new license it has issued to Outfront Media or otherwise interfering with Clear Channel’s ownership of billboard structures and associated permits. The Court will ALLOW the MBTA’s motion and DENY Clear Channel’s motion.
– 2 –
1. Legal Background.
1.1. The Public Interest in MBTA Advertising Revenues. The MBTA is a governmental entity, established by the Legislature as a “political subdivision of the commonwealth” that consists of 65 cities and towns within the MBTA’s service area. G.L. c. 161A, § 2 (political subdivision) & § 1 (defining the cities and towns within the “area constituting the authority”). The MBTA is now governed by the board of directors of the Massachusetts Department of Transportation. Id. § 3.
“The MBTA’s essential function is to provide mass transportation services” in the greater Boston metropolitan area. See Massachusetts Bay Transp. Auth. v. City of Somerville, 451 Mass. 80, 86 (2008).
The MBTA obtains most of its operating funds from taxes collected by the Commonwealth, fares paid by people who use the MBTA’s services, and assessments on cities and towns. See Boston Globe Media Partners, LLC v. Retirement Bd. of Mass. Bay Transp. Auth. Ret. Fund, Suffolk Sup. Ct. no. 1484CV01624, 33 Mass. L. Rptr. 374, 2016 WL 915300, at *9 (Mass. Super. Ct. 2016) (Salinger, J.); G.L. c. 10, § 35T (requiring portion of state sales tax revenue, plus assessments on cities and towns within the MBTA, to be deposited in Massachusetts Bay Transportation Authority State and Local Contribution Fund and disbursed to MBTA); G.L. c. 161A, § 9 (providing for assessments on cities and towns within the MBTA).
In addition, the Legislature has directed the MBTA to “establish and implement policies that provide for the maximization of nontransportation revenues from all sources.” G.L. c. 161A, § 11. For example, the Legislature has authorized the MBTA “[t]o sell, lease or otherwise contract for advertising in or on the facilities of the authority.” Id. § 3(n).
The MBTA is therefore “required by statute to maximize its revenues from commercial advertising,” including outdoor advertising on billboards and similar structures. MBTA v. Somerville, 451 Mass. at 86-87. This is because the “income that the MBTA generates, directly or indirectly, from commercial advertising in and on MBTA facilities and properties … is used by the MBTA to help defray the costs of its transportation operations.” Id. at 86. “These revenues also affect the fares charged by the MBTA, for the MBTA is generally to take ‘all necessary steps to maximize
– 3 –
nontransportation revenues … before implementing fare increases.’ ” Id. at 87, quoting G.L. c. 161A, § 11. In sum, “[r]evenue raised through advertisements is statutorily integrated with the MBTA’s ability to provide mass transportation services, its essential function.” Id. at 87.
The Supreme Judicial Court has determined that any interference with the MBTA’s “ability to raise revenue” through commercial advertising on its property “would interfere with action that is related to the MBTA’s essential function.” Id.
1.2. Standards for Granting Preliminary Injunctive Relief. The MBTA and Clear Channel are seeking preliminary injunctions to enforce contractual rights allegedly established their 2003 license agreement regarding the use of billboard structures located on MBTA property. The parties’ current dispute arises from the MBTA’s solicitation of bids for and awarding of a new license. The MBTA contends that the bid process and award will help achieve the statutorily-mandated policy of maximizing non-transportation revenues discussed above. See G.L. c. 161A, § 11.
Under these circumstances, to obtain preliminary injunctive relief the moving party must prove that (1) it is likely to succeed on the merits of its claims, and (2) the requested relief will promote or at least will not adversely affect the public interest. See LeClair v. Town of Norwell, 430 Mass. 328, 331-332 (1999).
Unlike in lawsuits involving purely private interests, “a showing of irreparable harm is not required” because the MBTA is seeking “to enforce a statute or a declared policy of the Legislature.” Id. at 331 (designer selection statute); accord Fordyce v. Town of Hanover, 457 Mass. 248, 255 n.10 (2010) (public bidding statutes); Edwards v. City of Boston, 408 Mass. 643, 646-647 (1990) (uniform procurement act); Commonwealth v. Mass. CRINC, 392 Mass. 79, 89 (1984) (enforcement of bottle bill).
2. Findings of Fact. The Court makes the following findings based on the portions of the affidavits submitted by the parties that it finds credible, and on reasonable inferences it has drawn from those facts.
The Court does not credit Clear Channel’s affidavits to the extent they contain opinions regarding the commercial reasonableness of the MBTA’s recent request for responses for a new billboard license, or to the extent that they contain any other statements or opinions that are inconsistent with any of the findings or analysis in
– 4 –
this decision. In deciding a motion supported by sworn affidavits, “the weight and credibility to be accorded those affidavits are within the judge’s discretion” and “[t]he judge need not believe such affidavits even if they are undisputed.” Commonwealth v. Furr, 454 Mass. 101, 106 (2009). An affidavit “is a form of sworn testimony the credibility of which is to be determined by the judge.” Psy-Ed Corp. v. Klein, 62 Mass. App. Ct. 110, 114, rev. denied, 442 Mass. 1114 (2004).
2.1. The Existing License. In 2003 the MBTA granted Clear Channel a 15-year license to operate billboards on MBTA property. That license will expire on March 3, 2018.1 The written license agreement also includes the following provisions, among others.
Clear Channel agreed to pay the MBTA 20 percent of the gross revenues that Clear Channel receives in exchange for providing outdoor advertising on most of the licensed billboards, and to pay 40 percent of gross revenues for a few other billboards, all subject to certain minimum guarantees. In practice, over the 15-year life of this contract Clear Channel has paid the MBTA roughly 34 percent of the gross revenue generated by these billboards, because the minimum annual guarantee has exceeded 20 percent of revenue each year.
The 2003 license provides (in ¶ 10) that if Clear Channel wanted to continue to use the billboard structures after the 15-year license term ended, and the MBTA “at its discretion” agreed, then Clear Channel would continue to have a license to use the billboards on a month-to-month basis. That month-to-month use could be terminated by either party at any time on sixty-days advance written notice. And the terms of the continuing month-to-month license would otherwise be the same as the 2003 license, except that the guaranteed minimum fee would increase by the same percentage increase in the specified consumer price index.
Clear Channel agreed (in ¶ 4.1 of the contract) that at the end of its license term it would transfer ownership of all of its structures located on T property to the MBTA. This obligation was subject to the condition that Clear Channel had “secure[d] 1 The parties previously submitted two different versions of their license, one stating that it after March 3, and the other saying March 5. At oral argument the MBTA represented that the parties have now agreed that the existing license term ends on March 3, 2018.
– 5 –
the full and complete enjoyment of all rights granted by this License” for the original 15-year contract term. The contract provided that if the contract were terminated early, then Clear Channel would remove its structures from MBTA property.
The parties also agreed (in ¶ 4.2) what would happen if the MBTA opted not to extend the existing license. The contract provides that the MBTA may solicit bids or offers for a license of the billboard structures that are the subject of Clear Channel’s existing license. It specifies that the MBTA retains full discretion to solicit such bids or offers “under such terms and conditions” that the MBTA decides are “in the best interests of the MBTA.”
And the parties agreed that Clear Channel would have a right of first refusal as part of any bidding process for a successor license to use the billboard structures. The contract specifies that Clear Channel’s “right of first refusal is expressly conditioned on” Clear Channel “making an initial bid or offer in response to the MBTA’s solicitation and/or request for offers.” If Clear Channel satisfies this condition precedent, then before awarding any bid, or accepting any proposal to license the billboard structures, the MBTA must provide notice to Clear Channel “of all material terms and conditions offered by any such third person’s bid or proposal.” Clear Channel would then have three days “to notify the MBTA that it accepts each and every term and condition offered by such third person.” If Clear Channel were to do so, then the 2003 contract requires that Clear Channel “shall be awarded and be bound by a license with the same terms and conditions” offered by the other bidder.
Clear Channel has obtained from the Massachusetts Office of Outdoor Advertising all permits necessary to operate the MBTA billboards that are covered by the 2003 license. Some of these permits are for so-called “non-conforming” but “grandfathered” billboards that do not comply with current state or federal regulations but may nonetheless be permitted because they have been “continuously permitted … and utilized since their erection.” See 700 C.M.R. § 3.01 (definition of non-conforming and/or grandfathered sign).
2.2. The RFR Process. The MBTA retained a consultant in 2017 to help analyze how the MBTA could best maximize the revenues it earns from its billboard
– 6 –
assets. The consultant advised that Clear Channel’s current license fee is “among the lowest in revenue return in the public sector.” It also told the MBTA that other public sector entities with similar billboard license arrangements “have minimum revenue share thresholds of 50% of gross revenues with some being as high as 70%.”
The MBTA decided that it did not want to extend Clear Channel’s existing license because the license fee was far too low. It also decided that it did not want to enter into a long-term license at this time, because it first wanted to evaluate the feasibility of converting existing static billboards to digital billboards.
The MBTA decided to seek proposals for a six-month contract, that the MBTA could extend in its discretion, in order to give it time to study the feasibility of digital billboards and to issue a new request for proposals for a digital contract if the MBTA decided that would be the best way to maximize its non-transportation revenues.
On November 29, 2017, the MBTA released Request for Response No. 150-17 (the “RFR”), which sought proposals to license and operate static billboards on MBTA properties.
The RFR specifies various terms for the new license. It proposes a license that would last for six months,2 with additional three-month terms available at the MBTA’s discretion. It explicitly requires that the new licensee must agree that, at the end of the license term, it will transfer all then-existing permits, advertising contracts, and related agreements for the billboards to the MBTA or its designee. The RFR also requires bidders to offer to pay the MBTA at least fifty percent of gross billboard revenues, and includes detailed requirements for information-sharing and reporting.
When the MBTA issued this RFR it reasonably anticipated that, if the new license were awarded to a company other than Clear Channel, the new licensee would be able to procure all necessary new permits from the Massachusetts Office of
2 In its counterclaim, Clear Channel expressly alleges that “the RFR proposes a license term of six months.” By law, Clear Channel is bound by its own factual allegations. See G.L. c. 231, § 87 (allegations “[i]n any civil action pleadings … shall bind the party marking them”). This statute provides that “facts admitted in pleadings” are “conclusive upon” the party making them. Adiletto v. Brockton Cut Sole Corp., 322 Mass. 110, 112 (1947).
– 7 –
Outdoor Advertising to operate the licensed billboards either before the new license takes effect or shortly thereafter. The Court credits the testimony by the MBTA’s Deputy Director of Advertising that the MBTA understands and anticipates that a new licensee would be able to obtain permits for all of the licensed billboard sites even if they are non-conforming but grandfathered sites.3
The MBTA received two bids, one from Outfront Media LLC and one from Clear Channel.
Outfront agreed to accept all material terms set forth in the RFR. It offered to pay the MBTA 52.5 percent of gross billboard revenues during the contract term.
Clear Channel did not agree to the MBTA’s terms. To the contrary, Clear Channel indicated that it would not sign any new license with a six-month term and that it would not agree to transfer billboard permits to the MBTA or its designee at the end of the new license terms. Instead, Clear Channel proposed negotiating a longer term and proposed that it would transfer only new permits that it acquired during the term of the new license.
The MBTA informed Clear Channel that its proposal was not responsive because Clear Channel did not agree to comply with all terms and conditions specified in the RFR. The MBTA gave Clear Channel an opportunity to amend its bid to accept the six-month and permit-turnover requirements. Clear Channel declined to do so.
The MBTA then disqualified Clear Channel’s bid for failure to comply with material requirements.
On January 26, 2018, the MBTA awarded a new six-month license to Outfront Media. This license will take effect on March 4, 2018, immediately after Clear Channel’s existing license ends. The Court finds that both the MBTA and Outfront Media anticipate that whenever the new license terminates, Outfront Media will have obtained and thus will have to transfer to the MBTA or its designee permits to operate all of the licensed billboards.
3 See Declaration of Yanni Poulakis, ¶¶ 37-41. Clear Channel’s assertion during oral argument that the MBTA presented no evidence on this point is incorrect.
– 8 –
The MBTA never gave Clear Channel any opportunity to exercise its right of first refusal. On the other hand, Clear Channel had already made clear that it would not accept the six-month and permit-transfer terms of Outfront’s proposal.
3. Likelihood of Success on the Merits. The Court concludes that: (i) the MBTA is likely to succeed on its claim that its request for responses was lawful, and Clear Channel is unlikely to succeed on its counterclaim that the RFR was commercially unreasonable and breached the implied covenant of good faith and fair dealing; (ii) the MBTA is likely to succeed on its claim that Clear Channel did not satisfy a condition precedent to the exercise of its right of first refusal, and Clear Channel is unlikely to succeed on its claim that the MBTA has committed a breach of contract by not giving Clear Channel the opportunity to exercise that right of first refusal; and (iii) the MBTA is likely to succeed on its claim that Clear Channel must comply with its contractual obligation to transfer the billboard structures to the MBTA.
3.1. Commercial Reasonableness of the Request for Responses. Clear Channel asserts that the MBTA violated its implied covenant of good faith and fair dealing by issuing a Request for Responses that included commercially unreasonable terms in a bad faith attempt to deprive Clear Channel of any meaningful opportunity to exercise its contractual right of first refusal. The Court is not convinced that Clear Channel has any likelihood of succeeding on this claim. To the contrary, the MBTA is likely to succeed in winning a declaration that its RFR is and was lawful.
3.1.1. The MBTA’s Duty to Offer Reasonable Terms. Like all contracts in Massachusetts, the parties’ 2003 license agreement includes an implied covenant of good faith and fair dealing. See, e.g., Weiler v. PortfolioScope, Inc., 469 Mass. 75, 82 (2014). This implied covenant provides “that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract….” Id., quoting Druker v. Roland Wm. Jutras Assocs., Inc., 370 Mass. 383, 385, 348 N.E.2d 763 (1976).
The MBTA has an obligation under the implied covenant to protect Clear Channel’s “ability to exercise its Right of First Refusal in an effective manner.” Uno Restaurants, Inc. v. Boston Kenmore Realty Corp., 441 Mass. 376, 381 (2004). In other words, the MBTA “was prohibited from obstructing” Clear Channel’s right
– 9 –
of first refusal. Id. at 384. For example, the MBTA would violate the implied covenant of good faith if it solicited offers that include a “poison pill” provision designed solely to discourage Clear Channel from exercising its right of first refusal. See, e.g. Beckett v. Jewish Cemetery Ass’n of Mass., Middlesex Sup. Ct. Civ. no. 2007-1670-A, 28 Mass. L. Rptr. 100, 2011 WL 831676, * 5-*6 (Mass. Sup. Ct. 2011) (Wilkins, J.); David A. Bramble, Inc. v. Thomas, 914 A.2d 136, 149 (Md. 2007); Kennedy v. Dawson, 989 P.2d 390, 396-397 (Mont. 1999).
This does not mean that the MBTA was required to solicit offers on terms to which Clear Channel was willing to agree. To the contrary, the license agreement between Clear Channel and the MBTA specifies, in the same right-of-first-refusal provision upon which Clear Channel relies, that the MBTA could “publish a solicitation of bids” to license the billboards after Clear Channel’s contract expires “under such terms and conditions deemed to be in the best interests of the MBTA.”
This express contractual term is consistent with the common law rules that govern rights of first refusal. As courts in other jurisdictions have explained, “the owner of property subject to a right of first refusal remains master of the conditions under which he will relinquish his interest, as long as those conditions are commercially reasonable, imposed in good faith, and not specifically designed to defeat the preemptive rights.” Roeland v. Trucano, 214 P.3d 343, 350 (Alaska 2009), quoting West Texas Transmission, LP v. Enron Corp., 907 F.2d 1554, 1563 (5th Cir.1990) (applying Texas law).
Clear Channel’s assertion that two particular terms of the RFR were not commercially reasonable, were not imposed in good faith, and thus must have been designed to defeat Clear Channel’s right of first refusal is not convincing.
3.1.2. The Six-Month Term. To begin with, Clear Channel complains that the MBTA proposed a new license with a six-month term, rather than a license with a much longer duration. Clear Channel asserts that a six-month term is not commercially reasonable because a new licensee would not have sufficient time to obtain permits for the signs or to market and sign contracts for advertising on the signs, and could not secure more valuable, longer term contracts for the signs.
– 10 –
If these criticisms were true, they would merely suggest that Clear Channel would have an unfair advantage in performing under a six-month extension—not an unfair disadvantage—because it already has permits for the signs, and (according to Clear Channel) it has already entered into long-term contracts that extend beyond the termination of its existing license agreement.
In any case, Outfront Media has agreed to a six-month license. It will therefore be hard for Clear Channel to establish that the MBTA’s request for responses was a charade, rather than a good faith effort to enter into a short, six-month lease of the billboards for reasons that make sense to the MBTA and Outfront even if they make no sense to Clear Channel. Clear Channel is unlikely to be able to show that terms that a competitor has agreed to accept are commercially unreasonable.
Furthermore, Clear Channel previously agreed, in the 2003 license, that come March 2018 Clear Channel could continue to operate under the existing license on a month-to-month basis if both side agreed. Given that Clear Channel previously agreed to potential month-to-month extensions, it is unlikely to succeed in proving that a six-month extension is designed solely to frustrate Clear Channel’s ability to exercise its right of first refusal.
The Court concludes that the MBTA is likely to succeed in proving that it acted in good faith to impose the six-month term, because it expects to need a relatively short amount of time to evaluate whether to seek to convert any existing billboard structures to electronic, digital displays. Clear Channel is therefore unlikely to succeed in showing that this provision was included in the RFR in bad faith, as a poison pill designed only to convince Clear Channel not to bid and therefore not to exercise its right of first refusal.
3.1.3. The Permit Transfer Provision. In addition, Clear Channel argues that it was unfair for the MBTA to require that any company wishing to bid on a new license must agree that, at the end of the license term, it will transfer to the MBTA all permits to operate billboard or sign structures on MBTA property. Clear Channel reasons that because it holds permits for all the existing MBTA structures, including some that are non-conforming but grandfathered, and a new licensee would necessarily start out with no permits for these structures, it necessarily follows that
– 11 –
this requirement would unfairly force Clear Channel to relinquish something of great value that a new licensee does not have and cannot transfer. Once again, the Court is not persuaded.
As the Court found above, when it issued the RFR the MBTA reasonably anticipated and expected that any new licensee would be able to procure all necessary new permits to operate the licensed billboards, even with respect to structures that are non-conforming but grandfathered.
Thus, Clear Channel is unlikely to succeed in proving that the MBTA intended to unfairly disadvantage Clear Channel by including the permit-transfer condition in the RFR. To the contrary, it appears that the MBTA reasonably expects that by the end of the six-month term any new licensee would be in the same position as Clear Channel would be, i.e. holding permits to operate all of the billboard structures (including the non-conforming, grandfathered ones) that it would have to transfer to the MBTA or its designee at the conclusion of the new license term, as an agreed-upon condition of the license. The mere fact that Clear Channel has permits in place today, and Outfront does not, does not show that the permit-transfer condition is a bad faith attempt to disadvantage Clear Channel.
3.2. Clear Channel’s Right of First Refusal. The MBTA is likely to succeed on its claim that Clear Channel is not entitled to enforce its contractual right of first refusal because it did not satisfy a contractual condition precedent.
The 2003 license agreement provides that Clear Channel’s “right of first refusal is expressly conditioned on [Clear Channel] making an initial bid or offer in response to the MBTA’s solicitation and/or request for offers.”
The Court concludes that this provision unambiguously established a condition precedent to the exercise of Clear Channel’s right of first approval, the meaning of which is a question of law for the Court to decide. See generally Seaco Ins. Co. v. Barbosa, 435 Mass. 772, 779 (2002) (“If a contract … is unambiguous, its interpretation is a question of law that is appropriate for a judge to decide on summary judgment.”); Eigerman v. Putnam Investments, Inc., 450 Mass. 281, 287 (2007) (“Whether a contract is ambiguous is also a question of law.”); Indus Partners, LLC v. Intelligroup, Inc., 77 Mass. App. Ct. 793, 795 (2010) (“ambiguity is not created
– 12 –
simply because a controversy exists between parties, each favoring an interpretation contrary to the other’s.”) (Quoting Jefferson Ins. Co. v. Holyoke, 23 Mass. App. Ct. 472, 475 (1987)).
3.2.1. The Condition Requires a Responsive Bid. The Court construes this provision to mean that Clear Channel was required, as a condition of being able to exercise its right of first refusal, to submit a bid that was responsive to the MBTA’s RFR, in the sense that Clear Channel made a bid in which it agreed to accept all material terms and conditions set forth in the RFR.
Under Massachusetts law any government entity that undertakes a public bidding process must “consider only those bids that conform to the specifications issued,” even if the bidding process is not required or governed by statute. Cataldo Ambulance Service, Inc. v. Chelsea, 426 Mass. 383, 388 (1998) (imposing such a condition as a matter of common law “in the interest of fairness,” even though the Uniform Procurement Act exempts contracts for ambulance service from the statute’s requirements; see id. at 384 n.3, G.L. c. 30B, § 1(24)). After all, the whole point of a competitive bidding process “is ‘to establish genuine and open competition after due public advertisement in the letting of contracts for … (public) work, to prevent favoritism in awarding such contracts and to secure honest methods of letting contracts in the public interests.’ ” Datatrol Inc. v. State Purchasing Agent, 379 Mass. 679, 696 (1980), quoting Morse v. Boston, 253 Mass. 247, 252 (1925).
It would make little business sense for the parties to have agreed in their 2003 license agreement that Clear Channel must participate in the bid process as a condition for exercising its right of first refusal, but that a non-responsive bid in which Clear Channel rejects material terms of the RFR would count as participation. And the Court must construe this contract in manner that gives it “effect as … rational business instrument[s]” and that “will carry out the intent of the parties.” Robert and Ardis James Foundation v. Meyers, 474 Mass. 181, 188 (2016)) (quoting Starr v. Fordham, 420 Mass. 178, 192 (1995)).
Furthermore, “[t]o allow a bidder to furnish his own specifications for any material part of the contract in question would destroy genuine and fair competition and be subversive of the public interests.” Datatrol, 379 Mass. at 697, quoting Sweezy
– 13 –
v. City of Malden, 273 Mass. 536, 542 (1931). Thus, reading this provision in the manner advocated by Clear Channel would violate the principle that the Court must construe the parties’ contract in a manner that would promote and be consistent with the public interest, not in a way that subverts the public interest. See Department of Revenue v. Estate of Shea, 71 Mass. App. Ct. 696, 702, rev. denied, 451 Mass. 1109 (2008); Restatement (Second) of Contracts § 207 (1981).
3.2.2. Clear Channel’s Bid Was Not Responsive. Although Clear Channel submitted a bid in response to the MBTA’s recent RFR, Clear Channel expressly stated that it would not agree to a six-month license term and would not agree to transfer to the MBTA or its designee at the end of the license term any then-existing permits to operate the billboard structures. The terms that Clear Channel refused to accept were both material.
The MBTA gave Clear Channel a second chance to submit a responsive bid that would accept all of the material terms established in the RFR. Clear Channel refused to do so.
As a result, Clear Channel forfeited its right of first refusal. The submission of a responsive bid accepting all material terms of the MBTA’s RFR was a contractual condition precedent to the exercise of that right. The condition was not satisfied.
Clear Channel argues that “even if the 2003 License silently demanded a fully acquiescent response, Clear Channel was still within its rights to take the exceptions it did” because the terms it declined to accept were commercially unreasonable and designed in bad faith to keep Clear Channel from exercising its right of first refusal. This argument fails for the reasons discussed above. The MBTA is likely to succeed in showing that the six-month term and the permit-transfer requirement were commercially reasonable and not unfair to Clear Channel.
3.3. Clear Channel’s Obligation to Transfer the Billboards. The MBTA is likely to succeed on its claim to enforce Clear Channel’s contractual obligation to transfer the existing billboard structures to the MBTA at the end of the current license term. Conversely, Clear Channel is unlikely to succeed on its counterclaim that this contract provision is unenforceable.
– 14 –
Clear Channel correctly notes that, under ¶ 4.1(a) of the 2003 license agreement, its obligation to transfer the billboard structures is only triggered “in the event that” Clear Channel “secures the full and complete enjoyment of all rights granted by this License” for the full fifteen year contract term.
Based on this language, Clear Channel then argues that it never enjoyed all rights granted by this License because the MBTA never gave Clear Channel an opportunity to exercise its contractual right of first refusal.
Clear Channel is unlikely to prevail on this issue. Clear Channel never had any right under the 2003 license agreement to exercise a right of first refusal without first submitting a fully responsive bid, which never occurred. As explained above, the right of first refusal was subject to a condition precedent, that Clear Channel submit a bid in which it agreed to accept all material terms and conditions set forth in the MBTA’s request for responses. Clear Channel never satisfied that condition. As a result, the first refusal provision never ripened into a right that Clear Channel was entitled to exercise. Cf. Louis M. Herman Co. v. Gallagher Elec. Co., 334 Mass. 652, 654 (1956) (where approval of architect and engineer was condition precedent to order becoming a contract, lack of such approval meant that order never ripened into a contract).
Since it appears likely that the MBTA will succeed in enforcing Clear Channel’s contractual obligation to transfer the billboard structures, it follows that the MBTA could likely show that any deliberate attempt by Clear Channel to interfere with the continued use of those structures by the MBTA’s new licensee for outdoor advertising—either by dismantling, removing, or otherwise disposing of the structures themselves, or by terminating Clear Channel’s existing permits to use those structures for outdoor advertising before the MBTA or its new license have a reasonable opportunity to seek and obtain new permits—would violate the implied covenant of good faith and fair dealing.
4. Public Interest. The MBTA has demonstrated that the preliminary injunctive relief that it seeks would promote the public interest, and that the preliminary relief sought by Clear Channel would adversely affect the public interest.
– 15 –
The MBTA determined that the public interest is best served by soliciting proposals for, awarding, and implementing a six-month license to use billboard structures on its property, because doing so is the best way for the MBTA to comply with its statutory mandate to maximize the revenues generated from outdoor advertising. The Court finds that this determination had a reasonable basis in fact, was neither arbitrary nor capricious, and does not appear to be the result of any unlawful action.
Such a determination by a government entity “that the public interest is better served” by the action that some other party seeks to enjoin “should not be second guessed by a court,” except where that other party can shows that the determination was the result of “illegal or arbitrary action.” Siemens Bldg. Technologies, Inc. v. Division of Capital Asset Management, 439 Mass. 759, 765 (2003) (affirming denial of injunction sought by disappointed bidder because injunction barring contract award would adversely affect the public interest).
Since Clear Channel “has not overcome the substantial public interest that would be adversely affected” if the MBTA’s request for a preliminary injunction were denied or Clear Channel’s motion were granted, the Court “need not address at length the likelihood of irreparable harm” to either party. Id. Indeed, as explained above, in a case like this the issuance of a preliminary injunction turns on the parties’ likelihood of success and what furthers the public interest, without considering claims of irreparable harm. See, e.g., Fordyce v. Town of Hanover, 457 Mass. 248, 255 n.10 (2010); LeClair v. Town of Norwell, 430 Mass. 328, 331-332 (1999).
5. Summary as to Appropriate Relief. For the reasons discussed above, the Court concludes in the exercise of its discretion that it will deny Clear Channel’s motion for a preliminary injunction but allow the preliminary relief sought by the MBTA. Cf. Lightlab Imaging, Inc. v. Axsun Technologies, Inc., 469 Mass. 181, 194 (2014) (“Trial judges have broad discretion to grant or deny injunctive relief.”).
Clear Channel is not entitled to a preliminary injunction because it is unlikely to succeed on the merits of its counterclaims. See Fordyce, 457 Mass. at 266-267 (vacating preliminary injunction because plaintiffs were “unlikely to succeed on the merits”).
– 16 –
Conversely, the MBTA is likely to succeed on its claims and the limited relief it seeks by way of preliminary injunction would be in the public interest because it would allow the MBTA and Outfront Media to implement their new license agreement, including by seeking new permits to use the billboard structures on MBTA property for outdoor advertising.
Since the MBTA is likely to succeed on its claim that Clear Channel is obligated to transfer the billboard structures to the MBTA as of March 4, it makes sense to enjoin Clear Channel from dismantling, removing, disposing of, or interfering with any use of those structures.
At oral argument Clear Channel made clear that it does not oppose the other relief sought by the MBTA in its preliminary injunction motion, because it agrees that both the public interest and the interests of all parties are best served by Clear Channel keeping its current permits for using the disputed structures in place. If Clear Channel were ultimately to prevail on its counterclaims, it would all of its existing permits still to be in place. The Court concludes that it is in the public interest that Clear Channel be enjoined from doing anything to terminate or dispose of those permits, in part so that the MBTA and its new licensee will have a reasonable opportunity to seek new permits before the existing ones lapse or are revoked by the permitting authority.
The MBTA need not post any bond, since “[n]o such security shall be required … of a political subdivision of the Commonwealth.” Mass. R. Civ. P. 65(c).
ORDER
The motion for preliminary injunction filed by the Massachusetts Bay Transportation Authority is ALLOWED. The preliminary injunction motion filed by Clear Channel Outdoor, Inc., is DENIED.
February 23, 2018
___________________________
Kenneth W. Salinger
Justice of the Superior Court