America Online Inc.’s Digital City subsidiary must carry
ads from HotJobs.com whether it likes
it or not, since a Virginia judge granted a preliminary injunction in the
jobs board’s case against Digital City.
“It is hereby ordered that, pending trial of this suit on the merits, the
parties shall perform the advertising agreement between them according to
its terms,” wrote Judge R. Terrence Ney, of the Circuit Court for Fairfax
County, Va.
HotJobs.com (HOTJ)
is hailing the decision as a landmark, because it shows, according to
HotJobs.com, that AOL (AOL)
can’t get away with kicking around smaller companies, simply canceling
agreements when a better deal comes along.
“How many other people has AOL done this to?” said Richard Johnson, chief
executive officer of HotJobs.com “It’s like the wild West where one guy
owns the town, and owns the sheriff, until Clint Eastwood rides into town.”
The judge wrote: “If an injunction is not issued, other Internet
advertising providers may conclude that they may breach contracts with
their advertisers with impunity if a “better deal” presents itself, because
their advertisers have no meaningful remedy given the difficulty of proving
money damages with specificity.”
AOL, for its part, is sticking to its guns. “We believe Digital City’s
actions were fully justified, and we do intend to appeal,” said Wendy
Goldberg, a spokesperson for AOL.
The dispute stems from an $540,000 advertising agreement that HotJobs.com
struck with DCI back in October 1999, which called for job listings from
HotJobs.com to appear on multiple AOL properties over a one-year period.
But, after DCI’s parent company, AOL (AOL),
entered into an exclusive agreement with HotJobs.com competitor,
Monster.com, in December, DCI sought to cancel the agreement with HotJobs.com. HotJobs.com filed suit, alleging breach of contract, in December.
Digital City (DCI) based its action on a phrase in the contract that reads: “DCI reserves
the right to cancel and remove at any time any Advertisement for any reason
upon thirty (30) days’ advance written notice to Advertiser (or upon such
shorter notice as may be designated by DCI in the event that DCI believes
in good faith that further display of the Advertisement will expose DCI to
liability or other adverse consequences).”
The whole case revolves around that phrase. Does it mean that DCI can
cancel the whole contract with 30 days written notice, or does it simply
mean that DCI can yank any individual advertisement it deems to be
inappropriate? Although the case isn;t yet resolved, Judge Ney, in granting
the preliminary injunction, said he thinks the second seems more likely.
“The contract appears unambiguous,” he wrote. “Where the parties have used
the phrase ‘terminate the Agreement’ to refer to a complete cessation of
the business relationship, it defies logic to accept the assertion that
‘cancel and remove. . .any Advertisement’ also refers to a complete
cessation on the business relationship.”
Perhaps most interestingly, HotJobs.com argued, and the judge agreed, that
DCI should be forced to carry its ads now because it would be incredibly
difficult to determine the proper amount of damages caused by halting the
ads, should HotJobs.com eventually win the case. That’s because,
HotJobs.com argued, the advertising opportunity on DCI is unique and not
duplicable, even if HotJobs.com was able to reach just as many eyeballs on
other Web sites.
“The testimony of the witnesses — HotJobs.com’ expert, Pe
ter Sealey,
in particular — leads the court to conclude that there is no other
available advertising opportunity that is economically interchangeable with
the HotJobs.com-DCI agreement, which would place HotJobs.com advertisements
and job listings on Web sites some part of which are visited by 78 percent
of Internet users,” the judge wrote.
It’s not clear exactly what this means for Monster.com, the HotJobs.com
competitor and subsidiary of TMP Worldwide. (TMPW). The company in December said it thought the lawsuit would have no effect
on its relationship with AOL, and it reiterated that statement today. But,
clearly, if Digital City must run jobs listings from HotJobs.com under this
injunction, Monster.com doesn’t have the four-year exclusive deal with AOL
that it expected.
“As far as I’m concerned, we’re not violated yet,” said Jim Treacy,
executive vice president and chief operating officer for TMP Worldwide. “I
don’t think the litigation is done. I’m thrilled with our relationship with
the giant of the Internet, and I certainly wouldn’t want to be fighting
with them.”
