Clause & Effect

The U.S. District Court for the Southern District of New York overturned a jury verdict that EMI Music Marketing was liable to a record company in a distribution deal dispute based on the label's counterclaim of promissory estoppel. EMI Music Marketing v. Avatar Records Inc., 361 F. Supp. 2d 362. EMI entered into an agreement to exclusively distribute Avatar's product in the United States for 3 years. But after Avatar became indebted to EMI Music for over $1 million, Avatar's president Larry Robinson proposed restructuring as well as extending the distribution deal for a year. EMI Music terminated the discussions and filed suit. The court granted summary judgment for EMI Music on, among other causes of action, its claim of breach of contract. The court also granted summary judgment for EMI Music on Avatar's counterclaims of breach of implied covenant of good faith and fair dealing and for unfair competition before sending the case to a jury, which awarded Avatar $25,000 in compensatory damages.

Granting EMI Music's for a judgment in its favor as a matter of law, the district court noted: “In order to hold EMI liable under the doctrine of promissory estoppel, Avatar would have had to prove by a preponderance of the evidence that EMI made an explicit promise that was clear and unambiguous; that Avatar reasonably relied on that promise; that such reliance was foreseeable; and that Avatar sustained injury by reason of its reliance.” (Avatar claimed that EMI Music's vice president of finance, Giulio Proietto, had told Larry Robinson that EMI Music had approved his proposed changes in the distribution agreement.)