Aegis Group-owned Carat USA faces a fine of over $7 million (€7.2m; £4.5m) after being found guilty of breach of contract, misuse of trade secrets, unlawful interference with business relations and unfair competition.
The damages were awarded in a suit filed by New York media agency Independent Media Services, which held merger talks with Carat in 1999.
At the centre of the legal action is the $125m media account of New Line Cinema. IMS handled these duties for fifteen years, until Carat triumphed in a 2001 review – reputedly breaking an agreement between the two not to compete for each other’s business.
IMS also alleges that Carat won the review using information gleaned during the merger talks. Specifically, it is claimed that Carat discovered IMS's commission charge on the account was 3.95% of billings, then undercut that amount by offering 3% in the review.
Carat denies these charges, arguing that New Line told pitching agencies what it was paying and insisted on a 3% limit.
According to IMS lawyer Bruce Fader, such arguments were rejected. “The judge ruled as a matter of law that the evidence of the defendant's breech was so overwhelming that there was no issue to put to the jury as to their liability,” he revealed.
“The only question he put to the jury was, ‘Is there damage to my client, and if so, how much?’”
The jury’s unanimous answer, arrived at in under two hours, was “yes”, awarding damages of $6.8m plus pre-judgement interest to be added by the judge (expected to be around $1m). Nevertheless, this is far below the $30m the suit originally demanded.
Data sourced from: multiple sources; additional content by WARC staff