Antitrust Law Daily Wrap Up, PRIVACY—Fed. Cl.: Contestant loses “FTC Robocall Challenge” breach of contract claim, (Aug 4, 2015)

By Greg Hammond, J.D.

An FTC Robocall Challenge contestant was precluded from bringing breach of contract claims against the FTC, the U.S. Court of Federal Claims has decided. In granting the FTC’s cross-motion for summary judgment, the court determined that the government did not materially breach the contest’s unilateral contract, and the exculpatory clauses were valid absent fraud, bad faith, gross mistake, or irregularity (Frankel v. U.S., July 31, 2015, Wheeler, T.).

Pursuant to the America COMPETES Reauthorization Act of 2010, the FTC created the “FTC Robocall Challenge,” in which participants would invent innovative solutions to block illegal robocalls on landlines and mobile phones. The maker of the “best overall solution” would receive a $50,000 prize. David Frankel participated in the contest, but did not win. He eventually filed a complaint in the U.S. Court of Federal Claims, asserting claims for breach of contract and injunctive relief.

Frankel and the FTC filed cross-motions for summary judgment on the breach of contract claims. The main issue to be decided, according to the court, was whether Frankel can avoid the exculpatory clauses found in the contract which state that the FTC is released from liability in disputes arising from contestants’ participation in the challenge, and also that the decisions of the judges are final and binding. In order to prevail on the breach of contract claim, Frankel was required to show a material breach in the form of fraud, bad faith, gross mistake, or irregularity.

The parties agreed that a unilateral contract was formed between Frankel and the FTC when Frankel accepted the offer embodied in the competition by submitting an entry. Frankel, however, claims that the FTC breached that contract when it winnowed down the pool of submissions, instead of assigning scores based on three different categories. The court concluded that none of the events that occurred during the course of the judging process indicated the contest was conducted unfairly or with malicious intent. The court also found that the FTC representatives acted within their discretion when electing to narrow the submissions to those they felt best satisfied the criteria, and when evaluating and selecting the winning proposals. Lastly, Frankel conceded that the conduct did not amount to fraud, bad faith, gross mistake, or irregularity, which would have warranted a finding of material breach.

Next, the court concluded that Frankel agreed to be bound by the decisions of the judges by entering the contest, and understood that the FTC would not be subject to liability for issues arising from his participation in the contest. To allow Frankel to proceed with his claims absent evidence fraud, bad faith, gross mistake, or irregularity would not only negate the explicit terms of the contract, according to the court, but would also open the door for every other participant to challenge the decisions of judges in future contests. Frankel’s breach of contract claim was therefore precluded by the exculpation clauses contained in the contest rules.

The case number is 13-546C.

Attorneys: David Frankel, pro se. Meen Geu Oh, U.S. Department of Justice.

Cases: ConsumerProtection Privacy FederalTradeCommissionNews