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JOEL POPKIN & CO. v. WHARTON ECONOMETRIC FORECASTI

February 19, 1987

Joel Popkin and Co., Plaintiff,
v.
Wharton Econometric Forecasting Associates, Inc., et al., Defendants



The opinion of the court was delivered by: HARRIS

 MEMORANDUM OPINION

 This matter is before the Court on plaintiff's motion for partial summary judgment pursuant to Fed. R. Civ. P. 56 as to Count One of the complaint, and for an entry of final judgment as to Count One pursuant to Fed. R. Civ. P. 54, and defendants' cross-motion for summary judgment as to all counts of the complaint. Upon careful consideration of the pleadings and exhibits and the entire record, the Court grants in part and denies in part both motions.

 Background

 This action arises from an alleged breach of contract by defendant of a consulting agreement between the parties. Plaintiff Joel Popkin and Company (JPC), and its president, Joel Popkin, are in the business of economic consulting. Defendant Wharton Econometric Forecasting Associates, Inc. (Wharton), is in the business of economic forecasting. Defendant Ziff-Davis Publishing Co., Inc., had an indirect controlling interest in Wharton, and allegedly guaranteed its obligations to JPC. JPC and Wharton entered into a consulting agreement (hereinafter referred to as the Agreement) on May 8, 1981, pursuant to which plaintiff was to provide consulting services to assist in the development and marketing of defendant's proposed new Models for providing econometric forecasts of the prices of certain key commodities and key economic sectors. Under the first part of the Agreement, plaintiff delivered to defendant certain information and specifications for the Models. There is no dispute that plaintiff was paid fully for this portion of the work.

 The second part of the Agreement, and the area of alleged breach, was for "Ongoing Model Support Functions." See Section 4 This phase began after the completion of part one, with "the commencement of forecasting services to Wharton's clients using the Models . . . ." Section 3.1. This phase began in November of 1981. The Agreement provides that "[plaintiff] shall provide up to 72 working days per each twelve-month period thereafter in support of the Industrial Service Division or other divisions offering the Models." Section 3. During compensation negotiations, plaintiff originally sought a large percentage of the profits after the Model development period, rather than a flat fee. However, the negotiations resulted in a compensation provision which entitled plaintiff to five percent of the net profits received by defendant, see Section 3.3(ii), and to

 
a support fee, payable quarterly, for each twelve-month period in which [plaintiff] shall be required to supply support services. For the first twelve-month period, the total support fee shall be $ 45,000. The fee for each subsequent twelve-month period shall be increased by the percentage increase in the GNP deflator during the immediately preceding four calendar quarters.

 Section 3.3(i) (emphasis added).

 It is this provision which is in dispute. As the venture has not shown a profit, no royalty has been paid under Section 3.3(ii). Until the events of late July 1984 which gave rise to this suit, defendant Wharton always paid plaintiff, on a quarterly basis, the fee for support services. The contract term was for ten years, which period was thereafter to continue from year to year unless either party gave 90 days' notice. See Section 6.1. In addition, certain rights of termination, and obligations upon their exercise, were provided. See Sections 6.2, 6.3. One such provision was a non-competition clause by JPC. Section 7.

 Defendant Wharton states that it changed, added to, and deleted many of the specifications for the Models provided by JPC. Defendants also state that from its very inception, the Industry Services proved to be a financial failure and Wharton consistently lost substantial sums on that service. A new president, Bruce Lippke, was named for defendant Wharton. Due to the failure of defendant's Industry Services division, Lippke, on more than one occasion, requested plaintiff to renegotiate the compensation provision of Section 3.3(i). Plaintiff declined to renegotiate this provision, but promised to increase its marketing input. Despite these added efforts, the division continued to fail.

 On July 25, 1984, Lippke wrote a "confidential" letter to Joel Popkin. The letter noted the lack of improvement in the finances and growth of the Industry Services Division, and stated that defendant would have to make "further changes to reduce [the] losses," although he "would prefer to maintain some form of cooperative efforts with [plaintiff] . . . at a much reduced level of support and compensation."

 On July 26, Lippke sent another letter to plaintiff. Citing the differences between the Models as contemplated under the Agreement and their final form (which, defendant Wharton maintained, reduced plaintiff's role in providing ongoing support functions), Wharton gave notice that the support services would no longer be required and that the support fee specified in Section 3.3(i) would not be paid after the quarter that was to end in October. Defendant did, however, recognize its obligation under the royalty provision, although due to the lack of profits no actual royalties have been paid. The letter concluded by Lippke's stating that "if you wish to pursue such a course [of restructuring their contractual relationship] we propose that the Agreement be amended." A proposed amendment was attached.

 Plaintiff filed this action on the basis of breach of contract and conversion. The breach of contract claim is based on defendant's alleged anticipatory breach of the Agreement by indicating it would not pay the support fee for the rest of the term of the Agreement. Plaintiff demands the entire support fee sum of $ 332,019. Plaintiff also alleges that defendants have violated provisions of the Agreement requiring that if defendants terminate the contract, Wharton shall cease offering services or products using the Models and to return to JPC a copy of the models documentation. See Sections 6.2, 6.3. Plaintiff bases its claim of conversion on the allegation that defendants are keeping the Models and continuing to sell service based upon them to the public.

 Discussion

 I. The Breach of Contract Claim

 Both JPC and Wharton move for summary judgment on the breach of contract claim, each claiming that the unambiguous language of the Agreement supports its position. *fn1" For reasons discussed below, the Court concludes that JPC is entitled to partial summary judgment under any one of three different analyses. First, Wharton breached the unambiguous language of the Agreement by failing to pay the full support fee for a 12-month period during which JPC provided support services. Second, Wharton anticipatorily breached the unambiguous language of the Agreement by notifying JPC that Wharton would no longer require support services, and would no longer pay the annual support fee. Finally, to the ...


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