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Massachusetts Bay Transportation Authority v. Clear Channel Outdoor, Inc.

Superior Court of Massachusetts, Suffolk, Business Litigation Session

February 23, 2018


          File Date: February 26, 2018


          Kenneth W. Salinger, Justice of the Superior Court

         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.

         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 S.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 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 nontransportation 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, 331-32 (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, 646-47 (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 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 the property to the MBTA. This obligation was subject to the condition that Clear Channel had "secure[d] 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 ...

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