When Reed Exhibitions announced yesterday that they are ‘postponing’ (I’m guessing forever) the gargantuan Eastern Sports And Outdoor Show, they may have shot themselves in the contractual foot with the litigation equivalent of a .505 Gibbs. Why? Because they pulled the rug out from under more than 1,200 vendors, who’ve each paid thousands of dollars in booth fees and travel expenses. Reed has promised to refund their booth rental fees, but . . .

That won’t pay the vendors back for their travel expenses and lost business opportunities. The show is estimated to generate $44 million in direct spending from vendors and attendees, and $80 million in lost revenue for the local economy.

There’s already talk of a class-action lawsuit against Reed Exhibitions. As everything does, the success or failure of such litigation will all come down to the fine print. Class certification is almost a no-brainer, since there are so many potential plaintiffs (the vendors) and they’re all suing the same defendant (Reed) for the same act at the same time (canceling/postponing the show) and all under the same theory of liability (breach of contract.) The only thing that each vendor/plaintiff would have to individually prove is the amount of their damages.

Reed has already promised to refund many millions of dollars in booth rental fees. They’ll claim that this puts the vendor/plaintiffs in the position they would be in if they’d never signed up for the show at all. But this won’t be enough to make the vendor/plaintiffs whole. 1,200 vendors gave up other sales opportunities and shelled out big bucks on travel and lodging, and they stand to lose much more than just their rental fees now that the show is canceled, I mean ‘postponed.’ Forever.

Specific Performance

Since this is a written contract entered into with mutual consideration, the vendor/plaintiffs could attempt to force Reed into ‘specific performance’ of Reed’s contractual obligations and force them to have the show, under the original conditions that the vendors expected. Reed wouldn’t be allowed to ban MSRs or put the kibosh on the whole ‘tactical’ section of the show floor.

This just won’t happen, because it’s a bad idea all around. Reed’s name is mud in the sporting industry, and they’ll be lucky if they’re even organizing high school reunions after this debacle. The damage is done and nobody trusts Reed any more, so nobody will sue for specific performance. Even if the show was a success (as if) the vendors would still be out their lost business opportunities and travel expenses from the February show.

Expectancy Damages

The vendor/plaintiffs are more likely to sue Reed for money damages for their lost profits from the canceled show. These are known as ‘expectancy’ damages, and they’re often tricky to calculate. Each vendor would have to present reasonable evidence of what profits he probably would have made at the show, minus the profits they did make when they had to stay home. The vendors have a duty to mitigate their own losses by seeking other business opportunities, and those profits from whatever few sales they made at home would be deducted from the damages.

Under this theory, the vendor/plaintiffs cannot also sue for their lost travel expenses, since those expenses would have been required anyway, to make the profits they expected to make at the show.

This is the most likely object of any litigation, and the sum of all the vendors’ lost profits for the show is probably huge. Half a million people attend the Eastern Sports And Outdoor Show, and 1,200 vendors expected to make thousands (or tens of thousands) of dollars each. This lawsuit would likely bankrupt Reed Exhibitions: very few companies can afford a judgment in the tens of millions.

Read The Fine Print

None of these outcomes are guaranteed. Reed may have written themselves an escape clause in their contract with the show’s sponsors and vendors, giving them the right to cancel the show under specified conditions. Natural disasters and acts of war are almost always written into these escape clauses, but ‘we don’t want to offend Chuck Schumer‘ or ‘we feel butthurt that some vendors boycotted us’ are almost never included.

On the other hand, some event contracts do allow a promoter to cancel the event event if too many vendors withdraw and the show seems destined for failure no matter what the promoter does.

Imagine if Ozzy, Metallica and Rage Against The Machine all backed out of Lollapalooza XIX for valid health reasons; the promoter would probably pull the plug on the remaining acts.

This would let Reed pin the blame on Cabelas and other vendors who took a stand early, but it’s not likely to succeed because it was Reed’s unilateral actions (banning MSRs and the ‘tactical’ section, probably a breach of contract in their own right) and not unforeseen causes, which prompted the boycotts and major vendor cancellations.

If there’s an escape clause that allows Reed to cancel the whole show because of vendor cancellations, the other vendors are probably SOL.

Locals Get Screwed Either Way

The vendors might take Reed deep and hit them with a huge class-action judgment or settlement. Even if they do, it will be cold comfort to the Harrisburg economy and hospitality industry, whose hotels and restaurants are going to lose tens of millions of dollars. Reed has no contractual duties to them at all, so they can’t sue Reed no matter how much money they lose. I have only sympathy in mind when I note that it does truly suck to be them right now. They have no remedy.

Vendors: Email us!

We’d love to pore over the Reed vendor contract and read the tea leaves for ourselves. If any show vendors are willing to fax or email me a cooy, please call Farago at 401-835-5054 or email him at [email protected]. We’ll keep you anonymous unless you tell us to print your names.

RELATED ARTICLESMORE FROM AUTHOR

28 COMMENTS

  1. Hmmmm…. I am starting to pop some popcorn, because this could get interesting. I guess Reed will be doing more work on “the continent”. Not sure who would use them after this debacle?

    • They have 4 events over the next 2 months in the US, mostly groups that wouldn’t care about MSRs except for maybe a video game convention in Boston.

      • That’s Pax East, hosted by Penny-Arcade.com and the community that has grown up around them. They’re basically the cultural epicenter for video games.

        The guys who guide that ship are “apolitically liberal” (if you can call it that) and their total reaction to recent events was a more-in-sorrow-than-anger complaint about the NRA’s initial reaction blaming video games. (Which honestly was a serious strategic blunder on the NRA’s part.) They don’t care and don’t see their pixel guns having anything to do with real guns, their freedom, ultimate right to speak, etc.

        • Yeah that’s the main reason I quit online gaming.

          I mean I always ended up in the guild/clan/wing with the Vietnam – Iraq/Afganistan war so we had actual military tactics in play in PVP so we always won which meant we got hassled by a lot of other players to join so we let them and then one night it turns out we have a school teacher from the UK who was scandalized that as we blew stuff up in game we talked about guns in our wing and I kind of lost interest.

  3. No doubt that Reed’s damaged their brand, at least in the US. Nobody would trust them to run a show where any of the source material could be considered “controversial” because of the potential loss.

    Yeah, they shot themselves in the foot with a Howitzer.

  4. Oh, I’m sure they could pick up some sweet government contracts. Sort of a payback for sucking off the liberal democrat establishment.

  5. I can see the vendors having a case for suit to cover the cost of expenses that were incurred directly related to participation in the expo. However, there was no guarantee on the part of Reed of the vendor making any sales whatsoever at the venue. Sure, common sense tells us that they all would have sold something, but you can’t quantify that number. If they could successfully sue for lost sales, then one could make the jump from there that had Reed cancelled the show a year or two ago, long before anyone paid to participate, the vendors would still have grounds to sue because Reed not holding the show represents a loss in potential sales. Of course, that is ridiculous because no organization has the burden to do anything to facilitate the sales or revenue of any other organization. Unless, of course, Reed agreed in a binding contract to guarantee some level of sales. Reed would have been incredibly stupid to do that. That is just my take.

    • I’m not a lawyer, or even particularly privy to these sorts of things. However, I imagine if a company had been there for say, the past 3 shows, and they made 5, 10, and 15 thousand respectively, they could say they were expecting to make 20, or even middle it and say 10,000.

      • True, they could estimate based on last years sales figures. However, the crux of the matter is that they are not guaranteed any sales at the expo and if Reed never held the show to begin with, they would not have had the opportunity for those sales at all. I don’t think Reed has a financial responsibility to any of the vendors beyond the participation fees and any expenses already incurred in direct relation to participation in the event.

  6. How does a company in the business of shows even begin to think that the whole “No MSR’s” thing would have ended well..in any way? Could they be that universally stupid? Or was it just one moron who did not want to cave after a stupid decision? How can they think no MSR’s would fly in anyway? Have they not seen the same type of backlash when a writer or personality, entity, whatever.. decries or implies civilians shouldn’t or couldn’t have this or use that modern sporting rifles. Or use them for their sports, or their hunting..take your pick. Morons.

    • I think it’s cultural. See also: then-British-controlled Smith & Wesson willingly prostrating itself for the Clinton administration gun agenda. See further: Piers “self-defense is murder” Morgan’s deeply held views on the subject. Both of those played out about as well in America as Reed Exhibition’s “principled stand” on MSRs for a hunting show.

      They don’t get it and are *shocked* when it blows up in their face.

  7. Reed is left holding the bag (their own).

    Exhibitors were fully justified in withdrawing from the event considering that Reed suddenly and unilaterally changed the conditions of their contract i.e; what could and could not be displayed, hawked, offered, advertised, etc.

    Bankruptcy is too good for them.

    Maybe Piers Morgan will bail them out.

  8. I’d be shocked if the Reed contracts did not exclude claims for incidental and consequantial damages, and I wouldn’t be surprised if compensatory damages were limited.

    • Ralph beat me to it. However, I have gotten around limitations of liability clauses by showing intentional conduct (repudiation) or arguing gross negligence, which is here.

  9. I feel for Harrisburg but hopefully this is a warning to all the Dicks SG, and Reeds out there not to side with the liberal elite on gun control…don’t pull a Reed!

  12. I draft contracts all the time, and there is boilerplate language in almost every contract that limits warranties and remedies available. I would be shocked if that wasn’t the case here.

    • I hope a vendor out there can hook us up with a copy of the contract so we can see for ourselves. Contracts aren’t my area of practice; would you be interested in helping us parse out the contract if/when we get a look at it?

  13. Interesting post. Even if Reed changed their decision at this point far too many show visitors or guests will not show up. I hope the lawsuit goes big!

  14. Reed deserves it for their stance, and any vendor that didn’t pull out and got screwed deserves it for being an accomplice to cowardice.

  15. I hope none of the Reed haters own any S&W weapons. Not that I like Reed, but S&W seems to be doing just fine these days thanks to people who don’t care that S&W sold out to the Clinton Admin to ‘settle’ the various anti-gun lawsuits at the time. I personally don’t own any S&W product and never will. Nice link above about S&W telling Reed to FOAD though – incredibly ironic considering their own past behavior. Will you still hate Reed next year or will you let them get away with it once your memory fades?

    • S&W was sold to NEW owners after their self inflicted fiasco with the Clinton gun banners in the 2000. The boycotts almost broke the company. Tomkins PLC sold Smith & Wesson to the Saf-T-Hammer Corporation. The new company, Smith and Wesson Holding Corp., publicly renounced the Clinton Admin agreement.

  17. Whatever it costs, it’s chump change to Bloomberg, who will probably compensate them for what may just have been his idea in the first place.

    Of course, if that could be proved, he might be liable for tortious interference with contract, but I’m not holding my breath.

Comments are closed.