Lewis Broadcasting Corp. v. Phoenix Broadcasting Partners

On January 19, 1994, Lewis Broadcasting Corporation (Lewis) (plaintiff) loaned $650,000 to Gulf Atlantic Media of Georgia, Inc. (Gulf). The loan documents included a promissory note, a security agreement, and an option agreement. In the security agreement, Gulf gave Lewis a security interest in all of its radio stations’ operating assets except their Federal Communications Commission (FCC) licenses, which required the FCC’s approval to transfer or assign. In the option agreement, Gulf gave Lewis the option to purchase the radio stations’ assets, including the FCC licenses subject to FCC-approval, upon Gulf’s default for $650,000, less any amount outstanding on the loan. Phoenix Broadcasting Partners (Phoenix) (defendant) subsequently acquired Gulf. Phoenix defaulted on the loan. Accordingly, Lewis notified Phoenix of its intent to exercise the option. Phoenix refused to honor the option. Thus, Lewis sued Phoenix for specific performance of the option agreement. Phoenix moved for summary judgment. The trial court found that the option agreement impermissibly restrained Phoenix’s right to redeem the collateral upon default and granted Phoenix’s motion. On appeal, Lewis argued that the option agreement was enforceable. Lewis additionally contended that Phoenix did not have a right of redemption to the FCC licenses, which were not covered by the security agreement. In turn, Lewis argued that the option agreement was enforceable as to the FCC licenses, even if not enforceable as to the radio stations’ assets.