## Facts

- Oak Ridge FM owned the station assets for WOKI–FM and entered related agreements with Dick Broadcasting Company of Tennessee (DBC).
- Oak Ridge FM granted DBC a right of first refusal (ROFR) to purchase WOKI–FM’s station assets.
- The ROFR permitted assignment by DBC only with Oak Ridge FM’s written consent, but did not state any standard for granting or withholding consent.
- Separate agreements (a time brokerage agreement and a consulting agreement) were assignable without consent.
- DBC agreed to sell most of its radio-station assets to Citadel for $300 million and sought to assign, among other items, the ROFR (and also the other agreements) to Citadel.
- Oak Ridge FM refused to consent to assignment of the ROFR and also refused to consent to assignment of the other two agreements.
- DBC closed its transaction with Citadel without assigning these agreements and sued for breach of contract and breach of the implied covenant of good faith and fair dealing.

## Issues

1. When a contract permits assignment only “with consent” but is silent on the standard for withholding consent, does the implied covenant of good faith and fair dealing limit the non-assigning party’s discretion?
2. If so, is the non-assigning party required to act in good faith and in a commercially reasonable manner in deciding whether to consent?
3. Did disputed facts about the reasons for withholding consent preclude summary judgment?

## Decision

- The Tennessee Supreme Court held that, where a contract allows assignment with the non-assigning party’s consent and is silent on the standard for withholding consent, the implied covenant of good faith and fair dealing applies.
- The Court adopted a “good faith and commercially reasonable” standard for the non-assigning party’s consent decision in that circumstance.
- The Court concluded genuine issues of material fact existed as to whether Oak Ridge FM acted in good faith and in a commercially reasonable manner, making summary judgment improper.
- The Court affirmed the appellate court’s vacatur of summary judgment and remanded for further proceedings.

## Legal Principles

- Tennessee law implies a covenant of good faith and fair dealing in every contract, governing performance and the exercise of contractual discretion without enlarging the contract’s substantive terms.
- A consent-to-assignment clause that is silent on the standard for withholding consent triggers the implied covenant to supply a default limitation on discretion.
- Under that default rule, the non-assigning party must decide whether to consent in good faith and in a commercially reasonable manner.
- Parties may displace this default by expressly stating that consent may be withheld in sole discretion or for any reason; such intent must be explicit.
- Whether conduct satisfies good faith and commercial reasonableness is typically fact-dependent and may be unsuitable for resolution on summary judgment when material disputes exist.

## Conclusion

The Tennessee Supreme Court ruled that when a contract requires a non-assigning party’s consent to assignment but provides no standard for withholding consent, the implied covenant of good faith and fair dealing requires the refusal decision to be made in good faith and in a commercially reasonable manner; factual disputes about that conduct required remand.


Dick Broad. Co. of Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653 (Tenn. 2013)