HotJobs Wins Round in Battle With AOL

America Online Inc.’s Digital City subsidiary must carry ads from HotJobs.com whether it likes it or not, since a Virginia judge granted a preliminary injunction in the jobs board’s case against Digital City.

“It is hereby ordered that, pending trial of this suit on the merits, the parties shall perform the advertising agreement between them according to its terms,” wrote Judge R. Terrence Ney, of the Circuit Court for Fairfax County, Va.

HotJobs.com (HOTJ) is hailing the decision as a landmark, because it shows, according to HotJobs.com, that AOL (AOL) can’t get away with kicking around smaller companies, simply canceling agreements when a better deal comes along.

“How many other people has AOL done this to?” said Richard Johnson, chief executive officer of HotJobs.com “It’s like the wild West where one guy owns the town, and owns the sheriff, until Clint Eastwood rides into town.”

The judge wrote: “If an injunction is not issued, other Internet advertising providers may conclude that they may breach contracts with their advertisers with impunity if a “better deal” presents itself, because their advertisers have no meaningful remedy given the difficulty of proving money damages with specificity.”

AOL, for its part, is sticking to its guns. “We believe Digital City’s actions were fully justified, and we do intend to appeal,” said Wendy Goldberg, a spokesperson for AOL.

The dispute stems from an $540,000 advertising agreement that HotJobs.com struck with DCI back in October 1999, which called for job listings from HotJobs.com to appear on multiple AOL properties over a one-year period. But, after DCI’s parent company, AOL (AOL), entered into an exclusive agreement with HotJobs.com competitor, Monster.com, in December, DCI sought to cancel the agreement with HotJobs.com. HotJobs.com filed suit, alleging breach of contract, in December.

Digital City (DCI) based its action on a phrase in the contract that reads: “DCI reserves the right to cancel and remove at any time any Advertisement for any reason upon thirty (30) days’ advance written notice to Advertiser (or upon such shorter notice as may be designated by DCI in the event that DCI believes in good faith that further display of the Advertisement will expose DCI to liability or other adverse consequences).”

The whole case revolves around that phrase. Does it mean that DCI can cancel the whole contract with 30 days written notice, or does it simply mean that DCI can yank any individual advertisement it deems to be inappropriate? Although the case isn;t yet resolved, Judge Ney, in granting the preliminary injunction, said he thinks the second seems more likely.

“The contract appears unambiguous,” he wrote. “Where the parties have used the phrase ‘terminate the Agreement’ to refer to a complete cessation of the business relationship, it defies logic to accept the assertion that ‘cancel and remove. . .any Advertisement’ also refers to a complete cessation on the business relationship.”

Perhaps most interestingly, HotJobs.com argued, and the judge agreed, that DCI should be forced to carry its ads now because it would be incredibly difficult to determine the proper amount of damages caused by halting the ads, should HotJobs.com eventually win the case. That’s because, HotJobs.com argued, the advertising opportunity on DCI is unique and not duplicable, even if HotJobs.com was able to reach just as many eyeballs on other Web sites.

“The testimony of the witnesses — HotJobs.com’ expert, Peter Sealey, in particular — leads the court to conclude that there is no other available advertising opportunity that is economically interchangeable with the HotJobs.com-DCI agreement, which would place HotJobs.com advertisements and job listings on Web sites some part of which are visited by 78 percent of Internet users,” the judge wrote.

It’s not clear exactly what this means for Monster.com, the HotJobs.com competitor and subsidiary of TMP Worldwide. (TMPW). The company in December said it thought the lawsuit would have no effect on its relationship with AOL, and it reiterated that statement today. But, clearly, if Digital City must run jobs listings from HotJobs.com under this injunction, Monster.com doesn’t have the four-year exclusive deal with AOL that it expected.

“As far as I’m concerned, we’re not violated yet,” said Jim Treacy, executive vice president and chief operating officer for TMP Worldwide. “I don’t think the litigation is done. I’m thrilled with our relationship with the giant of the Internet, and I certainly wouldn’t want to be fighting with them.”