Lawsuit claims CATS advertising company failed to make some payments, others not in full

CHARLOTTE, N.C. (WBTV) - Across Charlotte, transit vehicles are swathed in all types of marketing. Buses, trains, streetcars, and their respective pickup and drop-off areas are effective places to advertise.

That advertising money can mean big bucks to help pay for transit services, but the City of Charlotte is suing an advertising company and claims they owe the city more than $1 million.

In 2016, the City of Charlotte signed a contract with an advertising company to manage ads for the Charlotte Area Transit System (CATS). According to the lawsuit, things went well for several years but the lawsuit alleged the company, Vector Media Holding Corp., stopped making payments in the Spring of 2020.

“The five-year Contract required Vector to make Guaranteed Minimum Revenue Payments (“Guaranteed Payments”) to the City every month. After making regular payments for 44 months, Vector made none in April, May, June, and July 2020. Vector resumed making payments in August 2020, but at arbitrarially [sic] reduced amounts,” according to the lawsuit.

Less than two years later, the city claims the money once again stopped coming in altogether.

“Vector then again stopped making payments in January 2022, as an unfair tactic in negotiations with the City over the outstanding underpayments.”

The city and Vector agreed to a set payment schedule for monthly advertising according to the lawsuit.

“The amounts of the Guaranteed Payments were expressly set out in the Proposal as follows:

• a. $120,833.33 per month in Contract Year 1 (August 2016— July 2017);
• b. $125,000.00 per month in Contract Year 2 (August 2017— July 2018);
• c. $128,500.00 per month in Contract Year 3 (August 2018— July 2019);
• d. $133,900.00 per month in Contract Year 4 (August 2019— July 2020); and
• e. $141,666.67 per month in Contract Year 5 (August 2020— July 2021),” according to the lawsuit.

Those proposed payments equal millions of dollars.

“The Contract obligated Vector to make a total of $1,606,800.00 in Guaranteed Payments to the City for Contract Year 4 and $1,700,000.00 in Guaranteed Payments to the City in Contract Year 5, for a total of $3,306,800.00,” according to the suit.

A Vector spokesperson provided WBTV with a statement about the lawsuit and said they hope to resolve the disputes outside of court. The company also cites CATS internal changes and challenges as contributing factors.

“This lawsuit stems from the pandemic period, transit service cuts and a dispute over related contract terms. While the well documented leadership changes at CATS have made this dispute challenging to resolve, we remain hopeful that a fair resolution can be reached outside of court,” according to the spokesperson.

According to Vector’s statement, the disputes between the city and the company aren’t typical and say that over more than two decades the company has not had payment problems with another transit system.

“In 25 years of operation, Vector Media has worked fairly, transparently, and productively with over 30 transit authorities nationwide and has never had a legal or payment issue. To the contrary, Vector has received numerous letters of recommendation and referrals from transit authority and other partners, including from CATS,” according to the statement.

Still, the city claims in the lawsuit that the payments did not meet what was agreed upon when the contract was signed.

“Vector’s payments to the City for Contract Years 4 and 5 totaled only $2,766,833.21. Vector’s shortfall in Guaranteed Payments for Contract Years 4 and 5 was $539,966.79,” according to the suit.

The city also claims Vector breached another section of the contract.

“... The parties agreed that advertisements placed by Vector could remain on the City’s assets under certain circumstances beyond the expiration of the Contract (the “Carry Over” advertisements),” according to the suit.

The revenues from the ‘carry over’ advertising were to be split 60/40, with the larger sum going to the city, and the remaining to Vector, according to the suit. The lawsuit alleges Vector stopped making ‘carry over’ payments despite receiving approximately $1.63m in revenue between January and July of 2022.

“The Contract entitles the City to at least 60% of the revenue for those Carry Over advertisements—an estimated $980,737.20,” according to the suit.

The city is now asking the courts to rule in its favor and has several requests including:

“a. ... awarding damages for Vector’s breach of contract for failure to make Guaranteed Payments in an amount to be proven at trial, but not less than $539,966.79;

b. judgment in favor of the City and against Vector on the Second Claim of the Complaint, awarding damages for Vector’s breach of contract for failure to make required revenue payments for Carry Over advertisements in an amount to be proven at trial, but not less than $980,737.29, plus costs;

c. an award of costs, fees, and pre-judgment interest to the City;

d. a trial by jury on all issues so triable, and

e. granting such other and further relief as the Court deems just and proper,” the lawsuit reads.

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