New York Supreme Court, Appellate Division, September 29, 2009

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  • New York appellate court orders dismissal of all of Dan Rather’s claims against CBS and Viacom, including breach of contract and fraud, relating to CBS’s removal of Rather as anchor following the broadcast of a program about President Bush’s service in the Texas Air National Guard

CBS anchor Dan Rather sued CBS, Viacom and individual defendants for, among other things, breach of contract, breach of fiduciary duty, and fraud. Rather alleged that CBS violated his employment contract by removing him as anchor of The CBS Evening News, not accelerating payment of all amounts due under the agreement , and preventing him from seeking another position, following a controversial 2004 broadcast about President Bush’s service in the Texas Air National Guard.

The trial court granted defendants’ motions 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. The appellate court held that the complaint should be dismissed in its entirety.

Specifically, the appellate court held that the trial court erred in denying defendants’ motion to dismiss the breach of contract claim. According to the court, Rather’s employment agreement required CBS, if he were removed as anchor from The CBS Evening News, to assign him to 60 Minutes or to 60 Minutes II or else accelerate his compensation payments. The appellate court held that CBS complied with the agreement’s “pay or play” provision because it continued to pay Rather his compensation of $6 million per year and assigned him to 60 Minutes II. According to the court, the employment agreement did not require that CBS actually use his services or broadcast any program featuring Rather, as long as it assigned him to one of the other programs and continued to pay him the applicable compensation. The court found the “pay or play” provision in the contract was not modified by the acceleration provision because that provision included the prefatory clause “[e]xcept as otherwise specified in this Agreement.” The court also found that Rather’s claim for damages for loss of reputation was not actionable because it would be speculative to conclude that any action taken by CBS alone would have substantially affected his market value at the time, given the criticism resulting from the 2004 broadcast.

The court also held that the trial court erred by denying defendants’ motion to dismiss Rather’s claim for breach of fiduciary duty because employers do not owe employees a fiduciary duty, notwithstanding Rather’s four decade employment with CBS and his services as “the public face of CBS News.”

The appellate court affirmed dismissal of Rather’s fraud claims against CBS, although the trial court erred in its rationale for dismissal. Rather alleged that various misrepresentations, such as promises by CBS to publicly defend his reputation and to conduct an independent investigation into the 2004 broadcast, 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 alleged he suffered money and reputation damages and, but for CBS’s fraud, he could have had more remunerative employment. The court affirmed dismissal of Rather’s fraud claim because he failed to allege pecuniary loss and any evidence of future earnings from an alternative contractual bargain was speculative

Finally, the court held that dismissal of Rather’s claim of tortious interference with contract as against CBS and Viacom was proper, finding Viacom was not a proper party to the action as it carries no liability for the old Viacom after Viacom’s 2005 split into a new Viacom and CBS, and that the “economic interest” doctrine exempted CBS from liability.