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Nbn Broadcasting, Inc. v. Sheridan Broadcasting Networks, Inc.

United States District Court, W.D. Pennsylvania

March 31, 2015




I. Introduction

This matter is before the court upon a Renewed Motion for Summary Judgment filed by Plaintiff NBN Broadcasting, Inc. ("NBN") (ECF No. 106). In its motion, NBN seeks summary judgment with respect to a counterclaim for breach of fiduciary duty and several affirmative defenses raised by Defendants Sheridan Broadcasting Networks, Inc. ("Sheridan"), Ronald Davenport, Sr. ("Davenport Sr.), Jerry Lopes ("Lopes"), and Ronald Davenport, Jr. ("Davenport Jr.) (collectively, "Defendants") in their Amended Answer (ECF No. 43). For the reasons which follow, Plaintiff's motion will be granted in part and denied in part.

II. Factual Background

The crux of this action concerns the propriety of reimbursement payments made by the American Urban Radio Network ("AURN") to its majority partner, Sheridan, for certain authorized expenses. Although the factual background underlying this action is complex, much of the content of the parties' concise statements of material fact has little bearing on the instant motion for summary judgment. Consequently, only those facts deemed necessary to resolution of that motion are recounted herein.[1]

AURN is a general partnership formed under Pennsylvania law. See ECF No. 108 ¶ 13. Sheridan is the majority partner in AURN, with a 51% ownership interest. Id . ¶ 15. NBN, with a 49% interest, is the minority partner. Id.

Pursuant to AURN's Partnership Agreement, control over AURN's management and operations is exercised by a Management Committee composed of two representatives appointed by NBN and two appointed by Sheridan. Id . ¶ 18. At all relevant times, Defendants Davenport Sr. and Lopes served as Sheridan's representatives. Id . ¶ 24. NBN representatives are Chesley Maddox-Dorsey ("Maddox-Dorsey) and Arthur Benjamin ("Benjamin"). Id . ¶ 23. In the event of a tied vote, the Partnership Agreement gives Davenport Sr. the power to appoint a temporary fifth member to break the tie. Id . ¶ 19.

Since 2008, all of AURN's radio programming has been supplied by Sheridan. Id . ¶ 29. The AURN Partnership Agreement provides that either partner may be reimbursed from AURN for the "actual costs" of supplying AURN's radio programming. Id . ¶ 27. Checks issued by AURN for reimbursement costs must be signed by one representative of each partner. Id . ¶ 32. As the content provider for AURN, Sheridan sought monthly reimbursement from AURN for its "Programming Costs" and a portion of its corporate overhead, couched in terms of "General and Administrative ("G&A") Expenses." Id . ¶¶ 34-35. Prior to 2008, Sheridan included a portion of certain employee salaries in the G&A expenses that it requested from AURN, apparently based on the amount of time that those employees actually spent providing services to AURN. Id . ¶¶ 41-42. However, in late 2007, Sheridan changed its methodology for calculating the amount of those reimbursement costs. Id . ¶ 58. Pursuant to the new methodology, Sheridan pooled all of the revenue from all of its various subsidiaries and divisions, including AURN, and then allocated its total corporate overhead to each of those subsidiaries based upon the percentage of revenue that each subsidiary contributed to the pool. Id . ¶ 61. This resulted in Sheridan seeking significantly higher reimbursement payments from AURN. Id . ¶ 67.

NBN immediately objected to Sheridan's new methodology for calculating reimbursement costs. Id . ¶ 70. NBN initially refused to co-sign reimbursement checks for the increased amounts invoiced by Sheridan. Id . ¶ 79. In 2008 and 2009, NBN resumed co-signing monthly reimbursement checks, but capped the amount of each payment at $175, 000. Id . In 2010 and 2011, NBN co-signed reimbursement checks in an amount that was capped at $200, 000 per month. Id . In 2012, NBN began co-signing checks for the full invoiced amounts, but noted on each check that the payment was being made "under protest." ECF No. 111 ¶ 202. NBN characterizes the capped payments for less than the full invoiced amount as an attempt to "compromise and resolve the issue." Id . Sheridan, in response, contends that NBN's failure to pay the actual invoiced amounts represents a breach of NBN's fiduciary duties to its partner. ECF No. 111 ¶ 79. This alleged breach forms the basis for Sheridan's counterclaim.

III. Standard of Review

Summary judgment may only be granted where the moving party shows that there is no genuine dispute as to any material fact, and that a judgment as a matter of law is warranted. FED. R. CIV. P. 56(a). Pursuant to Federal Rule of Civil Procedure 56, the court must enter summary judgment against a party who fails to make a showing sufficient to establish an element essential to his or her case, and on which he or she will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In evaluating the evidence, the court must interpret the facts in the light most favorable to the nonmoving party, drawing all reasonable inferences in his or her favor. EWatson v. Abington Twp., 478 F.3d 144, 147 (3d Cir. 2007). The burden is initially on the moving party to demonstrate that the evidence contained in the record does not create a genuine issue of material fact. Conoshenti v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 140 (3d Cir. 2004). A dispute is "genuine" if the evidence is such that a reasonable trier of fact could render a finding in favor of the nonmoving party. McGreevy v. Stroup, 413 F.3d 359, 363 (3d Cir. 2005). Where the nonmoving party will bear the burden of proof at trial, the moving party may meet its burden by showing that the admissible evidence contained in the record would be insufficient to carry the nonmoving party's burden of proof. Celotex Corp., 477 U.S. at 322. Once the moving party satisfies its burden, the burden shifts to the nonmoving party, who must go beyond his or her pleadings and designate specific facts by the use of affidavits, depositions, admissions or answers to interrogatories showing that there is a genuine issue of material fact for trial. Id. at 324. The nonmoving party cannot defeat a well-supported motion for summary judgment by simply reasserting unsupported factual allegations contained in his or her pleadings. Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir. 1989).

IV. Discussion

A. Counterclaim: Breach of Fiduciary Duty

In its amended complaint, NBN accuses Sheridan of improperly attempting to shift Sheridan's corporate overhead and employee salary expenses to AURN for the sole benefit of Sheridan. NBN maintains that Sheridan's actions represent impermissible self-dealing and ...

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