Does Reed Exhibitions Have A Lawsuit Target On Its Back?

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 guntruth@me.com. We’ll keep you anonymous unless you tell us to print your names.