Does an “agreement to agree” establish an enforceable contract?  Not if it fails to provide objective criteria for a court to enforce material terms, according to the Albany County Commercial Division’s decision in Media Logic USA, LLC v. Prinova US, LLC.[1]  But all may not be lost for plaintiffs spurned by a promise to do business, as Justice Richard M. Platkin explains how promissory estoppel may provide an alternative avenue for relief.  In the same opinion, a discovery-related allegation of unlawful recording prompted Justice Platkin to determine the scope of Illinois’s eavesdropping statute, explaining that it does not prohibit recording (and use thereof) of a participant’s own conversation, and does not apply at all to conversations recorded in New York.

Background

Media Logic USA, LLC (“Media Logic”) is an Albany-based marketing agency.[2]  For many years, Media Logic’s clients included non-party DSM, a company in the food ingredients industry.[3]  In August 2017, one of DSM’s direct competitors, Prinova US, LLC (“Prinova”) reached out to Media Logic through a consultant to inquire about Media Logic’s interest in providing services to Prinova (and, implicitly, dropping DSM as a client for 2018).[4]   In the following months, Prinova engaged in more serious negotiations with Media Logic, although it postponed a “kick-off” meeting originally schedule for December 2017.[5]

Meanwhile, DSM had advanced Media Logic $625,000 for a 2018 marketing campaign.[6]  Thus, in late December 2017, Media Logic found itself “in the ‘uncomfortable position’ of either having to firm-up Prinova and part ways with DSM, or stay the course with DSM.’”[7]  Finally, on December 27, 2017, Prinova emailed Media Logic that it was “all good with hiring [Media Logic].”[8]  Media Logic then advised DSM that it was resigning from its engagement and returned the advance.[9]

Media Logic and Prinova had a kick-off meeting on January 17, 2018 in Illinois.[10]  On February 21, Media Logic emailed Prinova a “Letter of Understanding” (LOU) that was signed by Media Logic and that called for Prinova to spend at least $500,000 per year with Media Logic, primarily in “project fees.”[11]  Prinova responded that the “letter looks good” and then signed it on March 1, 2018.[12]  Separate from the LOU, Media Logic sent Prinova a 3-Year Strategic Marketing Roadmap (“Roadmap”) and a Project Planning Budget (“Budget”).[13]  Neither the Budget nor the Roadmap were incorporated or otherwise made part of the LOU.[14]

From March to September 2018, Media Logic and Prinova had a successful business relationship in which Media Logic undertook 38 marketing projects for Prinova.[15]  Generally, each of the projects began with an agreement between the parties to commence the project.  If the project was identical or sufficiently similar to a project included in the Budget, Media Logic charged the corresponding fee from the Budget.  For projects with a different scope relative to the projects in the Budget, Media Logic used the fee estimate in the Budget as a starting point and adjusted from there, subject to Prinova’s approval.  And for projects sufficiently different from a project in the Budget, Media Logic would quote a price to Prinova for approval before beginning work.[16]  According to the decision, through this process, Prinova paid approximately $360,000 for the 38 projects undertaken in 2018 and was generally satisfied with the work.[17]

The harmonious relationship abruptly ended when Prinova halted all marketing spending in late summer 2018.[18]  The Prinova executive who had retained Media Logic soon left the company, and, on October 4, 2018, Prinova directed Media Logic to put all work on hold.[19]  In January 2019, Prinova wrote to Media Logic that it was time to “part ways,” and then confirmed its intention to “move on” in a phone call the following week.[20]

Eight days later, Media Logic sued Prinova, asserting two causes of action: (1) breach of the LOU; and (2) promissory estoppel.[21]  It sought to recover the minimum agency fees of $500,000 from the LOU, and alleged at least $500,000 in damages based on its return of the advance from DSM to undertake projects for Prinova.[22]

In the course of discovery, Media Logic produced 13 audio recordings of meetings with Prinova.[23]  Prinova contends that the recordings were made in violation of an Illinois eavesdropping statute, and amended its answer to assert an eavesdropping counterclaim against Media Logic.[24]

Media Logic moved for summary judgment on its claims, and for dismissal of Prinova’s eavesdropping counterclaim.  Prinova cross-moved for dismissal of Media Logic’s claims.

Letter of Understanding Not Enforceable

Justice Platkin dismissed Media Logic’s claim for a breach of the LOU on the basis that the LOU was insufficiently definite to constitute an enforceable contract.[25] The Court’s analysis focused on the pricing terms.  In opposing a prior motion to dismiss, Media Logic had argued that the LOU’s pricing terms were established by custom and practice in the marketing industry around the use of master services agreement, the parties’ negotiations preceding the LOU (including the Roadmap and Budget), and the parties’ course of conduct.[26]  In declining to dismiss the claim at the outset, the Court expressed hope that discovery would clarify the issues.[27]

Discovery did not fill in the gaps in Media Logic’s claims.  As the Court noted, Media Logic “effectively abandoned its reliance on industry custom and practice” at the summary judgment stage.[28]  And its motion also did not rely on the Budget and Roadmap as a source of objective pricing criteria.[29]

That left Media Logic to rely on the course of conduct to establish the LOU’s pricing terms.[30]  On that point, Justice Platkin found no evidence to materially dispute that each project was the result of a distinct agreement to proceed (with varying degrees of reliance on the Budget).[31]  This reduced the LOU to merely “an agreement to agree,” which “is unworkable and unenforceable without an objective method of supplying the missing term or breaking the impasse.”[32]  Given that pricing is “a highly material term in most contracts, but particularly in an agreement purporting to impose a minimum annual spending requirement,” the lack of clear pricing terms meant that the LOU “provides no objective criteria by which the Court can enforce Prinova’s promise to spend a minimum of $500,000 per year on such services.”[33]  Thus, the Court found “that the LOU lacks sufficient definiteness so as to be capable of judicial enforcement.”[34]  Accordingly, it granted Prinova’s cross-motion and dismissed Media Logic’s claim for a breach of the LOU.

Promissory Estoppel Claim Allowed to Proceed

Media Logic’s promissory estoppel claim fared better.  As the Court noted, a claim for promissory estoppel requires “(i) a sufficiently clear and unambiguous promise; (ii) reasonable reliance on the promise; and (iii) injury caused by the reliance.”[35]  The doctrine is limited, however, “to cases where the promisee suffered an unconscionable injury.”[36]

Prinova contended that it did not make a clear and unambiguous promise to Media Logic.  Rather, it argued, there was only a “general understanding” of the conditions required for Media Logic to resign from its work for DSM in favor of a new engagement with Prinova.[37]  Justice Platkin rejected this argument, pointing to testimony that Media Logic “told [Prinova] that Media logic would ‘need a 3-year commitment of $500,000 per year in agency fees’” before it could drop DSM in favor of Prinova.[38]  Prinova’s internal documents confirmed that its executive team was aware that Media Logic needed a certain level of commitment before it would walk away from DSM.[39]

Prinova also argued that Media Logic’s reliance was unreasonable. The Court rejected this argument, finding that the reasonableness of Media Logic’s actions was an issue for trial.  The Court also rejected Prinova’s argument that Media Logic’s injury was not unconscionable as a matter of law.[40]  With disputed issues of fact surrounding three major elements of the promissory estoppel claim, Justice Platkin denied Prinova’s motion for summary judgment.[41]

Illinois’s Eavesdropping Law Does Not Prohibit Participants From Recording

Justice Platkin next turned to the eavesdropping claim that arose during discovery.  To resolve this claim, Justice Platkin undertook an in-depth analysis of the Illinois eavesdropping statute to determine that none of the conversations recorded by Media Logic were “private conversations” within the meaning of the statute, and therefore were not covered by the statute’s prohibition on recording.[42]

The Illinois eavesdropping statute prohibits recording of “private conversations,” defined as conversations where at least one participant “‘intended the communication to be of a private nature under circumstances reasonably justifying that expectation.’”[43]  The “private conversations” requirement was added in 2014, after the Illinois Supreme Court struck down a previous statute on First Amendment grounds.[44]

Although the meaning of “private conversations” in the context of the 2014 statute has not been fully defined, “the Illinois Supreme Court consistently has held that there can be no legitimate expectation of privacy from recording where the person making the recording is a party to the conversation.”[45]  Because each of the 13 recordings was recorded by a party to the conversation, and not disseminated beyond Media Logic (except through disclosure in discovery), the Court was “bound by the clear and controlling precedent of the Supreme Court of Illinois to conclude that Media Logic’s recordings fall outside the ambit of the eavesdropping statute because Prinova lacked a justifiable expectation that the recorded conversations would be private from Media Logic.”[46]

In addition to finding the eavesdropping statute inapplicable to the recordings, Justice Platkin also noted that Prinova could not show any damages from the recordings.  As the Court noted, “Media Logic has never based its claims on the recordings or even sought to use the recordings in this litigation.”[47]  As to punitive damages, the Court found that the recordings “were made in a good-faith, but mistaken, belief that the one-party consent allowed in New York is the law of all fifty states.”[48]  Thus, both because the law did not cover the recordings and because there were no damages, the Court dismissed Prinova’s eavesdropping claims.

New York Law Applies to the Recording of Conversations in New York

After concluding that the eavesdropping claims should be dismissed on the merits under Illinois law, the Court added that New York law actually applied to the subset of recordings made by Media Logic employees while in New York (on the phone with Prinova employees located in Illinois).  To reach this conclusion, the Court applied New York’s well-established “interest analysis” test to determine the proper law to apply.[49]

Under New York’s “interest analysis” approach to choice of law, the law of the jurisdiction where a tort occurred will generally apply if the law “regulate[s] primary conduct.”[50]  Since an eavesdropping statute regulates primary conduct (rather than loss allocation), the Court concluded that New York’s single-party consent law with respect to recording conversations should apply to recordings made by a person located in New York, even if other participants in the conversation are located in a state where all parties must consent.[51]

Conclusion

The thorough resolution of summary judgment motions in Media Logic USA, LLC v. Prinova emphasizes the hazard of relying on an “agreement to agree.”  Without objective criteria for material terms—particularly with respect to price—a court may refuse to enforce such an agreement, even if other terms are precise.  A plaintiff may have an opportunity to recover on a theory of promissory estoppel, however, if it can, among other things, show losses due to reasonable reliance on a sufficiently clear promise to do business in the future.

Separately, Media Logic analyzed the limits of the reach of single-party consent eavesdropping statutes.  For conversations recorded in New York, according to the Court, such statutes do not apply.  And with respect to Illinois’s statute in particular, even if it applies, the Court found that it does not prevent a participant in a conversation from recording for their own use.