Carat had entered merger talks with IMS and then scooped up the agency's largest client, New Line Cinema.
The case was decided in New York State Supreme Court today.
Neil Aronstam, president of IMS, said Carat signed an agreement on paper in October 1999 "neither to solicit nor engage our clients for year" while the two agencies discussed the possibility of merging. Mr. Aronstam said Carat initiated the talks because they wanted a shop with a movie studio client. IMS had had the media account of New Line Cinema for 15 years. At the time the client was billing more than $100 million in business at the shop.
IMS alleged that during the merger negotiations, Carat was made privvy to the commission fees the shop charged New Line to handle media. The fees were 3.95% of total billings.
New Line launched an agency review the following summer and invited a group of agencies, including Carat and the incumbent IMS to the pitch. According to the complaint, Carat proposed a compensation fee of 3% to handle the New Line business, intentionally undercutting IMS's fee. Carat won the account shortly afterward.
Misled by Carat
"New Line was misled by the people at Carat," Mr. Aronstam said. "Our conversations with Carat were a confidential discussion. That's why we signed a nondisclosure agreement and certainly nondisclosure means keep it a secret."
"It's a good day for the good guys," said IMS lawyer Bruce Fader. "The judged 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. The only question he put to the jury was, Is there damage to my client, and if so, how much? They came back and said yes, there is damage to the plaintiff."
The jury voted unanimously to award $6.8 million plus prejudgment interest that will be added later, the dollar amount to be determined by the judge. Mr. Fader speculated that the interest would add about $1 million to figure. The original lawsuit called for damages of $30 million.
Executives at Carat could not be reached at press time.
"The judge made some findings earlier in the case, in the middle of the trial, we think those are wrong and we plan to appeal," said Abe Skoff, a lawyer representing Aegis and Carat in the suit. Mr. Skoff said his clients will filed the appeal soon.