Appellate court dismisses Dan Rather’s lawsuit against CBS


More than two years after Dan Rather filed a $70-million lawsuit against CBS for breach of contract and fraud, a New York Supreme Court appellate division has tossed out his claim.

The ruling, handed down today, dismissed Rather’s claims that CBS News broke his contract and committed fraud by sidelining him in the wake of a controversial story he reported about President George W. Bush’s Vietnam-era service in the Texas Air Guard.

Here is much of the opinion:

Rather v. CBS Corp.
Supreme Court of New York
Appelate Division, First Department
September 29, 2009


This action asserting breach of contract and related tort claims arises out of a September 8, 2004 broadcast that plaintiff Dan Rather narrated on the CBS 60 Minutes II television program about then President George W. Bush’s service in the Texas Air National Guard. Rather alleges that CBS disavowed the broadcast after it was attacked by Bush supporters, and fraudulently induced him to apologize personally for the broadcast on national television as well as to remain silent as to his belief that the broadcast was true. Rather alleges that, following President Bush’s re-election, CBS informed him that he would be removed as anchor of the CBS Evening News. Rather claims that although his employment agreement required that, in the event he was removed as anchor, CBS would make him a regular correspondent on 60 Minutes or immediately pay all amounts due under the agreement and release him to work elsewhere, CBS kept him on the payroll while denying him the opportunity to cover important news stories until May 2006 when it terminated his contract, effective June 2006.

Rather commenced this action against CBS Corporation, Viacom Inc., and individual defendants Leslie Moonves, Sumner Redstone and Andrew Heyward in September 2007. He asserted, inter alia, claims of breach of contract and breach of fiduciary duty against CBS; claims of fraud against CBS and the individual defendants and a claim of tortious inducement of breach of contract against Viacom and the individual defendants.

Now, Rather appeals and defendants CBS Corporation and Viacom Inc. cross-appeal from orders entered by Supreme Court on April 11, 2008 and September 25, 2008, which granted defendants’ motion to dismiss the claims for fraud, breach of the implied covenant of good faith and fair dealing and tortious interference with contract, and denied defendants’ motion to dismiss the claims for breach of contract and breach of fiduciary duty.

For the reasons set forth below, this Court finds that the motion court erred in denying the defendants’ motion to dismiss the claims for breach of contract and breach of fiduciary duty, and [*3]therefore we find the complaint must be dismissed in its entirety. . . .

At the outset, we find that Supreme Court erred in declining to dismiss Rather’s breach of contract claim against CBS. Rather alleges that he delivered his last broadcast as anchor of the CBS Evening News on March 9, 2005, and that, since he was only nominally assigned to 60 Minutes II and then 60 Minutes, he should have received the remainder of his compensation under the agreement in March 2005. Rather claims that, in effect, CBS “warehoused” him, and that, when he was finally terminated and paid in June 2006, CBS did not compensate him for the 15 months “when he could have worked elsewhere.” This claim attempts to gloss over the fact that Rather continued to be compensated at his normal CBS salary of approximately $6 million a year until June 2006 when the compensation was accelerated upon termination, consistent with his contract.

Contractually, CBS was under no obligation to “use [Rather’s] services or to broadcast any program” so long as it continued to pay him the applicable compensation. This “pay or play” provision of the original 1979 employment agreement was specifically reaffirmed in the 2002 Amendment to the employment agreement.

That Amendment also provided, in subparagraph 1(g), that if CBS removed Rather as anchor or co-anchor of the CBS Evening News and failed to assign him as a correspondent on 60 Minutes II or another mutually agreed upon position, the agreement would be terminated, Rather would be free to seek employment elsewhere, and CBS would pay him immediately the remainder of his weekly compensation through November 25, 2006.

We agree that subparagraph 1(g) must be read together with the subparagraph 1(f), which provided that if CBS removed Rather from the CBS Evening News, it would assign him to 60 Minutes II “as a full-time Correspondent,” and if 60 Minutes II were canceled, it would assign him to 60 Minutes as a correspondent “to perform services on a regular basis.” However, this construction does not render any language of the agreement inoperative, since, consistent with the “pay or play” clause, neither subparagraph 1(g) nor 1(f) requires that CBS actually use Rather’s services or broadcast any programs on which he appears, but simply retains the option of accelerating the payment of his compensation under the agreement if he is not assigned to [*4]either program.

It is clear that subparagraph 1(g) applies only to a situation where CBS removed Rather as anchor of CBS Evening News and then failed to assign him “as a Correspondent on 60 Minutes II.” The amended complaint alleges that when Rather no longer performed anchor duties at CBS, he was assigned to 60 Minutes II. Thus, Rather implicitly concedes that CBS fully complied with subparagraph 1(g).

Supreme Court erred in finding that subparagraph 1(g) modified the “pay or play” provision when it ignored the initial prefatory clause to the rest of that subparagraph, which states “[e]xcept as otherwise specified in this Agreement.” As the defendants correctly assert, the seven words are crucial because they require subparagraph 1(g) to be read together with the “pay or play” provision, and thus, subparagraph 1(g) cannot modify the “pay or play” provision to mean that CBS must utilize Rather in accordance with some specific standard by featuring him in a sufficient number or types of broadcasts. As the defendants aptly observed, “the notion that a network would cede to a reporter editorial authority to decide what stories will be aired is absurd.”

Rather’s claim for lost business opportunities due to CBS’s failure to release him to seek other employment is insufficiently supported. Since, according to Rather’s own allegations, an immediate result of the September 8, 2004 broadcast was criticism that he was biased against Bush, it would be speculative to conclude that any action taken by CBS would have alone substantially affected his market value at that time. Rather’s claim for damages for loss of reputation arising from the alleged breach of contract is not actionable. Dember Constr. Corp. v. Staten Is. Mall, 56 A.D.2d 768, 392 N.Y.S.2d 299 (1st Dept. 1977).

Rather’s cause of action for breach of fiduciary duty must also be dismissed. Supreme Court held that the issue of “whether a fiduciary duty has been created in the course of the long relationship between Rather and CBS is really a question of fact.” Previously, the court determined that “the length of [Rather’s] contractual relationship with [CBS], and the nature of the service that [Rather] performed under his contracts” created an issue of fact that could not be resolved on motion. This was error.

Rather claims that his “four-decade history” with CBS constituted a “special relationship that imposed fiduciary duties upon CBS toward [Rather].” The law in this Department, and indeed enunciated in every reported appellate-division-level case, is that employment relationships do not create fiduciary relationships. Simply put, “[the employer] did not owe plaintiff, as employee, a fiduciary duty.” . . .

We affirm dismissal of Rather’s fraud claims against CBS and the individual defendants although we find that Supreme Court erred in its rationale for the dismissal as it also erred in rejecting the defendants’ other challenges to the fraud claim. . . .

Rather alleges that various misrepresentations ( e.g., promises to publicly defend his reputation and to conduct an independent investigation into the 2004 broadcast, and assurances that CBS intended to use his talents fully and to extend his contract, which was due to expire on November 25, 2006) induced him to remain silent about his role in the broadcast and to remain with CBS, where he was allegedly “warehoused” until the completion of his contract. As a result, he alleges he suffered money and reputation damages. Relying on Rather’s well-footnoted appellate brief, this Court was already cognizant of his argument that, following the completion of his CBS contract, his compensation at HDNet was less than the $4 million a year established as an approximate market rate for comparable journalists. However, for reasons set forth here, this information was not required for our analysis, and the lack of it was not the reason for affirming dismissal. . . .

Rather’s claim that, but for CBS’ fraud, he could have had more remunerative employment than that which he ultimately obtained at HDNet is unavailing. “[T]he loss of an alternative contractual bargain […] cannot serve as a basis for fraud or misrepresentation damages because the loss of the bargain was undeterminable and speculative.'” Lama, 88 N.Y.2d at 422, [further citation omitted].

Rather claims, based on his value and the value of similar professionals in the industry, that he would have been paid $4 million annually from 2005 through 2010. However, while claiming that he had an “agreement-in-principle” with CBS in the summer of 2004 to extend his contract, he alleges in the amended complaint that he had an unwritten “proposal” that “contemplated” a contract extension, and the terms of the proposal were compensation of $4 million for the first 19 months and $2 million annually thereafter. Rather admits that, the broadcast and its aftermath aside, CBS was already contemplating that he would step down from the anchor position in 2006 and assume a reduced role. . . .

Even if Rather pled pecuniary loss sufficiently to satisfy the Lama standard, his claim would nonetheless fail. Although allegations that defendants made statements to the general public, for example, that they falsely blamed Rather for alleged errors in the broadcast, may constitute a defamation claim [citations omitted], they are time-barred. Furthermore, Rather’s claim of under-use merely recasts his breach of contract claim in terms of fraud. . . .

Even if Rather had alleged “a breach of duty which is collateral or extraneous to the contract between the parties” Krantz v Chateau Stores of Canada . . . , he failed to adequately allege damages.

To the extent Rather claims that he should have been released from the agreement earlier to pursue other opportunities, this claim is duplicative of his breach of contract claim. . . . Similarly, Rather’s claim for breach of the implied covenant of good faith and fair dealing was properly dismissed by Supreme Court for being duplicative of his breach of contract claim. . . .

Finally, Supreme Court properly dismissed the claim of tortious interference with a contract as against CBS and Viacom. First, CBS asserts correctly that Viacom is not a proper party to this action. . . . Second, as to the claim against CBS, the court correctly applied the economic interest doctrine to dismiss this claim against the corporate defendant. . . . Rather’s bare allegations of malice do not suffice to bring the claim under an exception to the economic interest rule. . . . Since on appeal, Rather has not addressed his argument as to this cause of action to the individual defendants, we deem the argument abandoned. In any event, there is no particularized pleading of allegations that the acts committed by the individual corporate employees were either beyond the scope of their employment or motivated by their desire for personal gain. . . .

Accordingly, the judgment of the Supreme Court, New York County (Ira Gammerman, J.H.O.), entered April 14, 2008, should be modified, on the law, to grant the motion to dismiss the causes of action for breach of contract and breach of fiduciary duty, and otherwise affirmed, with costs. Judgment, same court and J.H.O., entered September 30, 2008, dismissing the amended complaint as against Viacom, Inc. and dismissing the causes of action for fraud and tortious interference with contract as against CBS Corporation, and bringing up for review an order, same court and J.H.O., entered September 23, 2008, which granted CBS and Viacom’s motion to the extent it sought to dismiss the causes of action for fraud and tortious interference with contract and denied the motion to the extent it sought to dismiss the cause of action for breach of fiduciary duty, should be modified, on the law, to dismiss the remaining causes of action against CBS, and otherwise affirmed, with costs. Plaintiff’s appeals from the aforesaid orders should be dismissed, without costs, as subsumed in the appeals from the respective judgments. The Clerk is directed to enter judgment in favor of [*9]defendant CBS dismissing the amended complaint as against it.

All concur.

[UPDATE: Note that Rather was still claiming that the false CBS story was true. I have not seen anything yet on whether Rather will appeal to the New York Court of Appeals, but it won’t surprise me if he does.]

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