Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_04-cv-06111/USCOURTS-caed-1_04-cv-06111-5/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

CFM CASE NO. CV-F-04-6111 DLB

Plaintiff, DECISION ON PAYMENT GUARANTEE

vs. AND OPTIONS FOR ADDITIONAL

COMPENSATIONS ISSUES

MITTS TELECASTING COMPANY (Hearing date: December 21, 2006)

Defendants.

(And Related Actions)

 /

On December 21, 2006, the Court entertained oral argument, on the record, in Department Eight

of the Eastern District Courthouse, Fresno Division. Pursuant to the stipulation of counsel and parties,

the following ORDER is binding.

APPEARANCES

Appearing on behalf of Papas Telecasting of the Midlands and Pappas Telecasting of Central

Nebraska were counsel Matthew Dunne and John “Griff” Johnson.

Appearing on behalf of Thomas F. Mitts, M.D., Mitts Telecasting Company, and Colins

Broadcasting Corporation were counsel Leslie H. Wiesenfelder and Michael Basile.

ISSUES FOR COURT DETERMINATION

Based on the failure of the payment guarantee due to impossibility/illegality (a stipulated

assumption for the purposes of the December 21, 2006 hearing only), and in light of the many

agreements made by the parties after the December 16, 2005 settlement conference, is any immediate

Case 1:04-cv-06111-DLB Document 100 Filed 12/22/06 Page 1 of 4
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adjustment due to Dr. Mitts, MTC and Colins Broadcasting Corporation?

If yes, in what form, and in what amount?

In a jointly submitted letter date December 19, 2006, counsel agreed that if additional

compensation were due Dr. Mitts, MTC and CBC, that the Court had one or more of six designated

options available to it.

MATTERS REVIEWED AND CONSIDERED

In addition to the more than two hours of oral argument and on-the-record discussion, the

following documents were reviewed and considered:

1. The 78 page transcript of settlement conference arguments dated December 16, 2005.

2. A 20-page letter, undated, from Attorney Matthew Dunne, along with Attachments A-K.

3. A 20-page letter, dated November 17, 2006 from Attorney Leslie H. Wiesenfelder, along 

 with Attachments A-C.

4. Multiple clarification e-mails from and to all counsel, and from and to the Court.

5. A 3-page joint letter dated December 19, 2006 from Counsel Dunne and Wiesenfelder.

DECISION

The Court finds that there has been a substantial and unanticipated change of position by both

sides to this litigation that has caused, and will continue to cause, substantial delay in brining this

litigation to a full and final closure. The causative change (the agreement on this change is limited to

the December 21, 2006 hearing and the instant order) is that there is now a total failure of the payment

guarantee.

It was the clear expectation of all parties that the initial payments of $609,000 PLUS 1/3 of the

purchase price of KXVO of $625,000 PLUS 1/3 of the purchase price of KSNB of $1,066,000, for a

total of $1,172,666 would be paid in a short period after the December 16, 2006 settlement conference.

However, it was further expected that those monies would go toward the payment of personally

guaranteed (by Dr. Mitts) loans in the approximate amount of $1,300,000. (In other words, the monies

would not have been allowed to be used at the discretion of Dr. Mitts). It was further understood that

all of the interest on the outstanding loans would be paid by the Pappas side of the litigation (Pappas

continues to pay the interest now). The delay causes Pappas to continue to pay the interest on the sizable

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loans, while the personal risk remains with Dr. Mitts, naturally affecting his ability to borrow monies

on other potential business matters wholly unrelated to the instant litigation. This issue clearly affects

Dr. Mitts a great deal more than the delay affects the Pappas side of the litigation. In addition, both

Pappas and Mitts are equally harmed in that neither wishes to continue with the other in any business

dealings, yet are both forced to nonetheless. In addition, Mitts continues to bear the burden of managing

the stations, however he continued to be paid the sums of $2500 per month per station for that burden.

Finally, Dr. Mitts will not have the ultimate amount of approximately one million dollars for an

indeterminite duration of time, monies that are at his sole discretion available to him personally.

The inequities caused by the delay because of the evaporation of the payment guarantees have

been shared, but not equally. The balance weighs heavier against Dr. Mitts, and an adjustment is

therefore appropriate.

The first two options listed at Page 2 of the December 19, 2006 joint letter, namely a suggested

increase from $2500 to $10,000 per month on the KXVO station, and a suggested increase from $2500

to $8000 per month on the KSNB station constitute an invitation to the Court to speculate in assessing

the potential added monthly worth. The invitation is declined.

The third option, namely to re-characterize the $609,000 payment from ordinary income to

capital gain is conditionally granted. This Court is not making a ruling on the legality or effect of the

tax consequences to any party. Dr. Mitts must accept the following condition in writing on or before

January 10, 2007 for the Court grant on this third option to take affect: that Dr. Mitts will agree to

indemnify the Pappas side of this litigation from any civil or criminal risks for any tax claims made

against and party to this litigation as a result of the reclassification which Mitts requests and which this

Court is granting. In sum, the reclassification is conditioned on its not costing the Pappas side of the

litigation anything more than the $609,000 payment.

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Concerning the fourth, fifth and sixth options, the Court grants the fourth and sixth options. The

Pappas side of the litigation will make three separate 12.5% advances of the respective purchase prices

fro KXVO and KSNB at intervals of 12, 18 and 24 months from the date the Settlement Agreement is

executed. The advances will not cease upon the closing of either transaction.

 IT IS SO ORDERED.

Dated: December 22, 2006 /s/ Lawrence J. O'Neill 

b9ed48 UNITED STATES MAGISTRATE JUDGE

Case 1:04-cv-06111-DLB Document 100 Filed 12/22/06 Page 4 of 4