Fifth Circuit Orders Yahoo to Cough Up $4.4 Million

NEW ORLEANS (CN) — The Fifth Circuit ordered Yahoo to pay a Dallas insurer $4.4 million for backing out of a deal to offer $1 billion to anyone who could correctly pick all 63 winners in 2014’s NCAA Men’s Basketball Tournament.

Yahoo owes plaintiff SCA Promotions a cancellation penalty of 50 percent of the $11 million contract, the three-judge panel said Monday.

Yahoo paid SCA $1.1 million by January 2014, and SCA was bound to pay any contestant with a perfect bracket the $1 billion prize. Yahoo later entered into a similar arrangement with Quicken Loans and Berkshire Hathaway for a similar $1 billion bracket contest. It then terminated the deal with SCA and demanded return of its $1.1 million.

SCA sued Yahoo in February 2014 for the rest of the money. Yahoo fired back with breach of contract counterclaims, resulting in the trial court granting Yahoo summary judgment and awarding it $550,000.

The Fifth Circuit disagreed, reversing Yahoo’s summary judgment, vacating the award and reversing the trial court’s denial of SCA’s motion for summary judgment on its breach of contract claim. It ordered Yahoo to pay the remaining $4.4 million cancellation penalty and remanded to the trial court to award “appropriate attorneys fees and interest” to SCA.

Fifth Circuit Judge Edith Brown Clement, writing for the panel, was not persuaded by Yahoo’s argument that the “50 percent of the fee” contract language applies only to the $1.1 million it had already paid or that it only owes $550,000.

“It is clear to us that ‘50 percent of the fee’ means 50 percent of the $11 million contract fee,” the 11-page opinion states. “This interpretation is consistent with the plain language and structure of the cancellation fees provision, as well as with several other provisions of the contract.”

Nor was Clement persuaded by Yahoo’s argument that SCA breached confidentiality by disclosing the contest to Buffet and Berkshire Hathaway. She agreed with the trial court’s determination that SCA did not violate the “plain language” of the provisions.

“Yahoo does not argue that it designated any information confidential,” the opinion states. “Yahoo argues – for the first time on appeal – that the concept was ‘Yahoo Data.’ But ‘arguments not raised before the district court are waived and cannot be raised for the first time on appeal.’”

Clement also disagreed with Yahoo’s claim that SCA failed to obtain coverage for the full prize amount, concluding it was excused from that obligation.

“As the district court explained, SCA’s coverage obligation was unambiguously conditioned on Yahoo first providing the official promotion rules for the underwriter’s review and approval,” the opinion states. “SCA did not breach the contract by failing to finalize coverage because Yahoo did not provide the official promotion rules before it canceled the contract.”

Yahoo sold its core Internet assets to Verizon in June for $4.5 billion. Verizon declined to comment on the ruling.

Jeff Tillotson, SCA’s Dallas-based attorney, said he was ecstatic with the Fifth Circuit ruling, which “came down to a very simple reading” of the agreement.

“It made my day,” Tillotson told Texas Lawyer. “The Fifth Circuit agreed with us, wiped out the refund to Yahoo and put money in our pocket.”

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