Terry Bienstock and Silverback Media were a part of a joint venture for mobile media advertising. Bienstock was to provide industry contracts, while Silverback Media’s role was to provide necessary technical resources (Reder, Darrow, Melvin, ; Chang, 2015). The parties signed an agreement for Mobilactive Media, a limited liability company. The agreement also outlined that the business should not include Silverback’s and its subsidiaries’ North American non-video based mobile and online marketing businesses, and would not engage in business activities that permit and augment “interactive video programming and advertising content across multiple platforms” (Reder, Darrow, Melvin, ; Chang, 2015). IssueThe joint venture experienced little success, and Silverback offered to buy out Bienstock’s share.
Bienstock declined, and members of Silverback decided to commit less time and effort towards the joint venture. Silverback continued to operate independently of the joint venture, buying other companies that were comparable to Mobilactive, while never presenting these opportunities to Mobilactive. After Bienstock learned of these endeavors, he sent Silverback a letter reminding them of the terms of their agreements. Silverback once again attempted to dissolve the joint venture, and Bienstock declined. Silverback was reorganized and merged into another company soon after, and Bienstock informed its successor of his claim against Silverback for breach of the agreement and breach of fiduciary duty.
ArgumentsThe court first examined whether a material breach occurred, which would excuse Silverback from the original contract. Silverback claimed that Bienstock failed to make his initial capital contribution in full, thereby breaching the agreement. The court examines five factors: (1) The degree to which the party is affected by the benefit that was expected, (2) the degree the injured party can be reimbursed for the witheld benefit, (3) the extent to which the party failing to perform will be penalized, (4) the possibility that the party performing insufficiently will redeem his failure, and (5) the extent to which the performance of the failing party satisfies the principles of good faith and fair dealing (Reder, Darrow, Melvin, & Chang, 2015). To demonstrate breach of contract, Bienstock must demonstrate existence of a contract, the breach of an obligation outlined in the contract, and the resulting damages suffered. Bienstock claims that Silverback established a competing business, diverted acquisition opportunities away from Mobilactive, and refused to use Mobilactive as the exclusive vehicle for business engagements in North America.
In regards to breach of fiduciary duties, Silverback claimed a dismissal should apply since it is a duplication of the prior breach of contract claims.ConclusionThe court concluded that Bienstock’s failure to contribute the full amount of his initial capital was insignificant, as he committed other resources to the joint venture, and Silverback itself failed to meet the agreed upon requirements. The court also ruled that the evidence demonstrates that Silverback infringed on the joint venture agreement by providing “interactive advertising content in North America through mobile platforms independently of Mobilactive” (Reder, Darrow, Melvin, ; Chang, 2015).
The court did not rule to dismiss the breach of fiduciary claims since the joint venture agreement explicitly provided requirements related to the fiduciary duties of the Mobilactive members. Furthermore, they found that Silverback usurped several opportunities on its own behalf instead of sharing them with Mobilactive. The court ruled in favor of Bienstock in regards to breach of contract and breach of fiduciary duty, and denied Silverback’s counterclaim for disbanding of Mobilactive. Silverback entered into an agreement with Bienstock to work together, combining their resources in order to have a successful business. 1 Corinthians 1:10-11 says, “I appeal to you, brothers, by the name of our Lord Jesus Christ, that all of you agree, and that there be no divisions among you, but that you be united in the same mind and the same judgment.
For it has been reported to me by Chloe’s people that there is quarreling among you, my brothers” (The Holy Bible, 2016). There should be no quarreling among parties who are all trying to achieve the same goal.