## Facts

- Arbitron, Inc. licensed copyrighted radio listener-demographics data to radio stations.
- In 1997, Arbitron and Tralyn Broadcasting, Inc. entered a five-year station license agreement for one Gulfport, Mississippi station (WLUN-FM, later WLNF-FM) at $1,729.57 per month.
- The agreement included an escalation clause providing that if Tralyn or a successor acquired or controlled additional stations, Arbitron “may redetermine its Gross Annual Rate for the Data.”
- The escalation clause did not specify a formula or objective method for calculating the revised rate.
- Tralyn was acquired by JMD, Inc., which controlled multiple stations in the same market, and JMD did not initially notify Arbitron of the acquisition.
- After learning of the acquisition, Arbitron invoked the escalation clause and invoiced a higher monthly fee based on the expanded station group.
- JMD refused to pay the increased charges, asserting the escalation clause was too indefinite to enforce.
- Arbitron sued for breach of contract in the Southern District of New York; the district court granted summary judgment for JMD, treating the escalation clause as an unenforceable agreement to agree.

## Issues

1. Under New York law, is a contractual clause that authorizes one party to unilaterally redetermine a future price, without a stated formula, unenforceably vague or an invalid “agreement to agree”?
2. If such a unilateral price-setting delegation is enforceable, what limits constrain the discretion of the price-setting party?

## Decision

- The Second Circuit vacated the grant of summary judgment for JMD and remanded.
- The court held the escalation clause was enforceable because it delegated price-setting authority to Arbitron “with unmistakable clarity.”
- The court rejected the view that the clause was an unenforceable agreement to agree merely because it lacked a pricing formula.
- The court indicated that Arbitron’s exercise of delegated pricing discretion remained subject to the implied covenant of good faith and fair dealing, leaving related factual questions for proceedings on remand.

## Legal Principles

- A contract is not void for indefiniteness solely because it permits a material term (including price) to be set in the future, if the contract clearly assigns that determination to one party.
- An “agreement to agree” is typically unenforceable where a material term is left to future negotiation without an agreed decisionmaker or mechanism.
- When a contract grants unilateral discretion to set or adjust a term, New York law constrains that discretion through the implied covenant of good faith and fair dealing (and, where applicable, analogous commercial reasonableness standards).

## Conclusion

The Second Circuit held that New York law permits parties to confer unilateral future price-setting authority through clear contractual language; the escalation clause was therefore enforceable, and the case was remanded to consider whether the price adjustment was exercised consistently with good-faith obligations.


Arbitron, Inc. v. Tralyn Broad., Inc., 400 F.3d 130 (2d Cir. 2005)