Joseph Klock Jr

South Florida Litigators Win Contract Case in Philadelphia

A defunct auto racing team may have a new lease on Le Mans now that a couple of Coral Gables litigators won their case in Philadelphia.

The U.S. Court of Appeals for the Third Circuit ruled Aug. 13 that T-Mobile U.S.A. owes Vici Racing more than $7 million for breaching a three-year sponsorship agreement after less than a year.

VICI RACING, APPELLANT, V. T-MOBILE U.S.A., APPELLEE

Case nos.: 13-1615, 13-1780

Date: Aug. 13, 2014

Case type: Contract

Court: U.S. Court of Appeals for the Third Circuit

Author of opinion: U.S. District Judge Michael M. Baylson

Lawyers for petitioner: Joseph P. Klock Jr. and Juan C. Antorcha, Rasco Klock Perez & Nieto, Coral Gables, and Christopher D. Loizides, Law Office of Christopher D. Loizides, Wilmington, Del.

Lawyers for respondent: John D. Lowery and Gavin W. Skok, Riddell Williams, Seattle; James C. Martin and Colin E. Wrabley, Reed Smith, Pittsburgh, and Peter J. Walsh Jr. and Jennifer C. Wasson, Wilmington, Del., Potter Anderson & Corroon

Panel: Baylson and U.S. Circuit Judges Thomas L. Ambro and Joseph A. Greenaway Jr.

Originating court: U.S. District Court for the District of Delaware

The appellate court affirmed a $7 million award by a federal judge in Wilmington, Del., and vacated her decision denying a second award.

When the dust settles in trial court, former race car driver Ron Meixner may gain at least $8 million, including prejudgment interest, for a total of $15 million or more. T-Mobile is also responsible for over $1 million in attorney fees.

The crux of the dispute was how to interpret and contextualize a three-line clause in the sponsorship agreement involving T-Mobile serving the telematics needs of German automakers Volkswagen, Audi and Porsche. Telematics refers to wireless information transfer systems.

Vici Racing argued the provision required Meixner to use his connections to help T-Mobile get exclusive deals, which he did. T-Mobile argued it required him to guarantee the business, worth an estimated $160 million, the clause was essential to the deal, and Meixner was in breach.

Late Expectations

“Our analysis on both sides could not have been more different,” said Joe Klock, the lead attorney for Vici, Meixner’s racing team. He said a Delaware federal magistrate tried to mediate a settlement but T-Mobile refused to negotiate.

“They thought the case was absolute garbage,” said Klock, of Rasco Klock Perez & Nieto in Coral Gables. “Apparently it was $8 million to $20 million worth of garbage.”

Klock and Juan Carlos Antorcha, another Rasco Klock partner, got involved in the lawsuit after it was filed in Delaware, the predetermined forum. A Miami colleague had referred Meixner to the firm because as a little guy going up against a telecom giant, “he needed an assertive approach,” Klock said.

Meixner, once a “leading endurance driver” according to Vici’s website, dreams of fielding his Porsche again, according to his lawyer.

“The client went out of business because he was relying on this money to operate,” Klock said. “He breathes it, he eats it, he sleeps it. He’ll get back in the game if we have a further recovery.”

In March 2009 Meixner was looking for a sponsor for the 2009-2011 American Le Mans series.

“The way this business works, when you sponsor cars you get their business,” a T-Mobile executive quoted Meixner as saying during a preliminary meeting.

Another T-Mobile executive estimated the sponsorship value at more than $160 million if it was part of a “package deal” with the telematics business from the three automakers. T-Mobile agreed to pay $1 million in 2009 and $7 million in both 2010 and 2011.

“If they fall behind or don’t deliver the telematics business [T-Mobile] would have an out for years two and three of the deal,” that executive said in an analysis of the Vici deal that the trial judge later cited.

T-Mobile paid Vici $1 million. An accident at a Connecticut track sidelined the team’s Porsche 911 in July 2009.

There were no more payments. Vici filed a notice of default in January 2010. Two days later T-Mobile canceled the contract for nonperformance.

Philadelphia

When he entered the case, Klock recalled a rule from Steel Hector & Davis, where he was the longtime managing partner.

“Any kind of really complicated commercial contract has to be reviewed by litigators,” he said. “At the end of the day, if something unpleasant hits the fan, the people arguing are not corporate lawyers but litigators.”

He realized T-Mobile’s goal of selling telematics wasn’t spelled out in the Vici sponsorship pact.

The only reference to this purportedly essential term appears in Section 5.8: “Vici agrees to allow [T-Mobile] to supply wireless connectivity for the Porsche, Audi and VW telematics programs beginning in model year 2011.”

In her Feb. 8, 2013, ruling, U.S. District Judge Sue L. Robinson observed that the clause “did not define telematics, … VW, Audi or model year, nor did any other section of the contract illuminate what this provision might entail.”

“The court will not rely upon the meaning inferred from such an obscure provision to illuminate the contract’s overall scheme or plan,” Robinson wrote.

The judge ordered T-Mobile to pay $7 million for the 2010 season, but decided Vici’s failure to prove mitigation of damages cost it the $7 million payment for 2011.

Both sides appealed to the Third Circuit in Philadelphia.

Klock, who grew up in that historic city, and Antorcha prepared for oral argument by reading the judges’ bios, listening to audios of previous panels and speaking to local lawyers.

Arguing before the court was pleasant, Klock said. “There’s no sense whatsoever of any kind of home-towning.”

Despite a last-minute substitution for one judge, the prep work paid off.

At the court’s direction, Robinson is considering Vici’s expectation damages for the third year of the deal. There will be no argument over Vici’s failure to mitigate damages “in view of our holding that T-Mobile waived this issue.”

T-Mobile has retained the powerhouse firm Proskauer Rose but Klock isn’t worried.

“They basically did not put on any kind of damage case,” he said. “There’s nothing in the record to help them.”

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