Opinion
Cause No. EV-99-48-C H/H.
December 4, 2000.
ENTRY ON PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT
Plaintiff Bristol-Myers Squibb Company has sued defendant IKON Office Solutions, Inc. for a declaratory judgment as to rights and obligations arising from Bristol-Myers' cancellation of a contract for copying services and the lease of copying equipment for Bristol-Myers' facilities in Evansville, Indiana. Plaintiff Bristol-Myers has moved for partial summary judgment as to (a) whether it was entitled to cancel the contract and (b) whether IKON had a "right of first refusal" to match the proposal of a competitor to whom Bristol-Myers had turned for its copying needs on a nationwide basis. As explained below, the court grants Bristol-Myers' motion for summary judgment because the written contract unambiguously gives Bristol-Myers the right to cancel the contract, and it unambiguously does not give IKON the claimed right of first refusal.
Bristol-Myers' motion to strike IKON's surreply brief is denied. The surreply was authorized by Local Rule 56.1(d) because Bristol-Myers' reply brief included objections to the admissibility of evidence submitted by IKON. Basic fairness requires that the party offering evidence be given an opportunity to respond to an objection.
I. Standard for Summary Judgment
Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). A party seeking summary judgment bears the initial responsibility of informing the court of the basis for the motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The interpretation of a written instrument like a contract is often suitable for summary judgment, at least if the court can construe the instrument without extrinsic evidence. See, e.g, T.H.E. Insurance Co. v. City of Alton, 227 F.3d 802, 805 (7th Cir. 2000) (applying Illinois law to insurance contract); Church v. General Motors Corp., 74 F.3d 795, 798-99 (7th Cir. 1996) (applying Illinois law); Rauser v. LTV Electrosystems, Inc., 437 F.2d 800,803 (7th Cir. 1971) (applying Indiana law).
Once a properly supported motion for summary judgment is made, the party who bears the burden of proof on a particular issue raised by the motion cannot resist that motion by merely resting on its pleadings. Rather, the party opposing the motion must affirmatively demonstrate, by specific factual allegations, that there is a genuine issue of material fact which requires trial. Celotex, 477 U.S. at 324. A genuine issue for trial exists when there is sufficient evidence favoring the nonmovant for a reasonable jury to return a verdict for that party, giving that party the benefit of all conflicts in the evidence and all reasonable inferences from the evidence. See id. at 323-25.
II. Undisputed Facts
On December 22, 1995, plaintiff Bristol-Myers Squibb Company entered into a lease agreement ("the contract") with Modern Business Systems, which is now known as defendant IKON Office Solutions, Inc. (IKON). The contract required IKON to provide copier equipment and services to Bristol-Myers' Mead Johnson Nutritional Facilities in the Evansville area. The contract consists of a pre-printed form and a typed addendum. The contract provides that the length of the contract is five years and that it shall be governed by the laws of the State of Missouri. The relevant specific language is set forth below where the court discusses the relevant issues.
In late 1996, Bristol-Myers' corporate offices began to seek bids for the provision of copying equipment and services to all Bristol-Myers locations in the United States. On September 22, 1997, after choosing a successful bidder for the national contract, Bristol-Myers notified IKON by letter that it was terminating the Evansville contract at the end of the year. On September 25, 1997, IKON notified Bristol-Myers that it believed the contract could not be cancelled, and it demanded payment for the remaining months left in the contract. Additional facts are stated below, applying the standard for determining facts relevant to summary judgment.
III. Discussion
Bristol-Myers' motion for summary judgment presents two principal issues: whether the terms of the contract allow Bristol-Myers to cancel the contract, and whether IKON was entitled to a right of first refusal before Bristol-Myers contracted with anyone else.
The parties agree that Missouri law controls interpretation of this contract. "The cardinal rule in the interpretation of a contract is to ascertain the intention of the parties and to give effect to that intention. Where there is no ambiguity in the contract the intention of the parties is to be gathered from it and it alone, and it becomes the duty of the court and not the jury to state its clear meaning." J. E. Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261, 264 (Mo. 1973); accord, e.g., Peterson v. Continental Boiler Works, Inc., 783 S.W.2d 896, 901 (Mo. 1990); Edgewater Health Care, Inc. v. Health Systems Management, Inc., 752 S.W.2d 860, 865 (Mo.App. 1988); Wilson v. General Mortgage Co., 638 S.W.2d 821, 823 (Mo.App. 1982).
In determining whether a contract is ambiguous, the court must look at the disputed language in the context of the entire contract. Jim Carlson Construction, Inc. v. Bailey, 769 S.W.2d 480, 482 (Mo.App. 1989); accord, United States v. Green Acres Enterprises, Inc., 86 F.3d 130, 133 (8th Cir. 1996) (applying Missouri law). A contract is ambiguous when it is susceptible to two or more interpretations and its meaning is unclear. Page v. Green, 758 S.W.2d 173, 175 (Mo.App. 1988). Thus, if reasonable people may fairly and honestly differ as to the construction of terms because the terms are susceptible to more than one meaning, the contract is ambiguous. Follman Properties Co. v. John Henry Foster Co., 872 S.W.2d 499, 501 (Mo.App. 1994).
However, a contract is not ambiguous merely because the parties disagree over its meaning or because the parties do not agree on how the contract controls their respective rights and obligations. J. E. Hathman, Inc., 491 S.W.2d at 264; Peterson v. Continental Boiler Works, 783 S.W.2d at 901. Whether an ambiguity exists in the contract is a question of law that must be decided before determination of the allegedly ambiguous language is undertaken upon evidence. Phillips v. Authorized Investors Group, Inc., 625 S.W.2d 917, 919 (Mo.App. 1981); accord, United States v. Green Acres Enterprises, Inc., 86 F.3d at 133 (applying Missouri law).
In this case, the back side of the preprinted contract states: "This lease is noncancelable." However, the front page has a space for "Other Options and Conditions," and it bears typewriting that says: "See Addendum #1 for terms and conditions." Addendum #1 includes the following provision:
Throughout the length of the 5 year contract, Modern Business Systems [i.e., IKON] will consider renegotiation of the cost per copy pricing to match competitor bids to Bristol-Myers Squibb Corporate Office. Cancellation penalty is 25% of the remaining equipment portion of the contract:
1 year into contract $142,560 2 years into contract $106.920 3 years into contract $ 71,280 4 years into contract $ 35,640
Approximately $32,000 penalty to cancel Xerox rentals can be rolled into the cost per copy at any time during the contract. The cost per copy increase will be determined by how many months remain in the contract. If the contract is canceled for any reason, Bristol-Myers Squibb will be responsible for the remaining portion of the money sent to Xerox, to be added to the cancellation penalty.
There is a plain conflict between the printed form — the lease is noncancellable — and the typewritten addendum that spells out cancellation penalties on the plain assumption that the contract may be "canceled for any reason."
Thus, IKON's printed form assures IKON that the contract will not be cancelled, and the addendum takes that promise away. Under Missouri law, if there is an irreconcilable conflict between a preprinted provision of a contract and the typewritten portion of the same contract, the typewritten portion will prevail. See House of Lloyd, Inc. v. Director of Revenue, 824 S.W.2d 914, 923 (Mo. 1992) ("When there is a conflict between the typewritten and preprinted language in a contract, the typewritten will prevail as the true intent of the parties."), citing Century 21-Andrews Realty, Inc. v. Adams, 691 S.W.2d 511, 512 (Mo.App. 1985); accord, National Heater Co. v. Corrigan Co. Mech. Contractors, Inc., 482 F.2d 87, 89-90 (8th Cir. 1973) (applying Missouri law, "the written or typewritten provisions of the contract control over the printed provisions"); Hayward v. Taylor, 807 S.W.2d 171, 173 (Mo.App. 1991); Restatement (Second) of Contracts § 203(d) (1981) ("separately negotiated or added terms are given greater weight than standardized terms or other terms not separately negotiated"). Under this well-established principle of Missouri law for construing contracts, the addendum controls and resolves the apparent conflict as a matter of law. Bristol-Myers was identified as a "Major Account" and obviously negotiated specific terms that allowed it to cancel the contract, as long as it pays the assigned penalty. IKON cannot now rely on the printed terms of its contract form after it negotiated a different term with its customer in the addendum.
The Supreme Court of Missouri later overruled the decision in House of Lloyd on an issue of state tax law not relevant here. See Sipco, Inc. v. Director of Revenue, 875 S.W.2d 539, 542 (Mo. 1994).
Even if the conflict between the printed form and the typewritten addendum were addressed as an "ambiguity" in the contract, Missouri would treat it as a "patent ambiguity" that should be resolved, if possible, within the four corners of the document. See Lutsky v. Blue Cross Hospital Services, Inc., 695 S.W.2d 870, 875 n. 8 (Mo. 1985). In other words, construing the instrument as a whole, using ordinary and well-established principles of interpretation, the typewritten addendum controls over the conflicting printed term.
IKON also contends that even if the lease could be cancelled, the lease gave it a right of first refusal, a right to match any competitor's better offer if Bristol-Myers intended to cancel IKON's lease and replace it with another. Under Missouri law, a right of first refusal limits the right of an owner to dispose freely of his property by compelling him to offer it first to the party who has the right of first refusal. E.g., Allison v. Agribank, FCB, 949 S.W.2d 182, 187 (Mo.App. 1997); Unlimited Equipment Lines, Inc. v. Graphic Arts Centre, Inc., 889 S.W.2d 926, 935 (Mo.App. 1994). This right prevents the owner from immediately accepting a third party's offer to contract. An owner who accepts a third party's offer, without making an offer to the holder of the right of first refusal, breaches a duty to the holder for which the holder can recover damages or obtain specific performance. Unlimited Equipment, 889 S.W.2d at 935. Although a right of first refusal is most frequently given in connection with the sale or lease of real estate, it can be given with respect to any matter which is subject to contract. Id. at 932; see also, e.g., IBP, Inc. v. Glickman, 187 F.3d 974, 975-76 (8th Cir. 1999) (discussing right of first refusal for bid on cattle); In re Food Barn Stores, Inc., 107 F.3d 558, 567-68 (8th Cir. 1997) (discussing right of first refusal for lease, equipment, fixtures, and inventory of supermarket).
The contract does not use any language establishing a right of first refusal. The disputed portion of the contract here was set forth above. As the foundation for its claimed right of first refusal, IKON relies on the sentence stating "Throughout the length of the 5 year contract, Modern Business Systems will consider renegotiation of the cost per copy pricing to match competitor bids to Bristol-Myers Squibb Corporate Office." Nothing in this language grants IKON a right of first refusal. Stating that IKON "will consider renegotiation of the cost per copy pricing to match competitor bids" does not impose or imply any obligation on Bristol-Myers to do or to refrain from doing anything. It does not require Bristol-Myers to disclose to IKON any competing bids. IKON does not provide to this court any Missouri authority indicating that language comparable to this has been held by any Missouri court to create a right of first refusal.
Missouri cases recognizing rights of first refusal all appear to have involved much more explicit language than the language in the IKON — Bristol-Myers lease. See, e.g., Lake Cable, Inc. v. Trittler, 914 S.W.2d 431, 433 (Mo.App. 1996) ("in the event of the shareholder's death Lake Cable (or shareholder, if Lake Cable elected not to do so) shall have a first option . . . to purchase any or all of the common stock of such decedent, at a price to be determined by the same method hereinabove provided"); Nickels v. Cohn, 764 S.W.2d 124, 131 (Mo.App. 1989) ("if the Grantee desires at any time to sell this property he shall first give the parties' three sons 15 days notice of his desire so to sell and if within said 15 days they or any one or more of them shall desire to purchase said property he or they shall have the right to do so upon the payment to the Grantee [of] a sum equal to the original cost of $38,500.00. . . ."); Gilmore v. Letcher, 508 S.W.2d 257, 258 (Mo.App. 1974) ("No sale of said lot shall be consummated without giving at least 15 days' written notice to Grantor, and the owners of the two lots adjoining said lot on the sides, of the terms thereof; and any of them shall have the right to buy said lot on such terms."). In addition to the absence of any language actually granting a right of first refusal, the contract in this case also lacks essential terms of a right of first refusal, such as a deadline for exercise of the right.
To support its claim of a right of first refusal, IKON contends that if the language on willingness to consider renegotiation is not treated as a right of first refusal, it becomes meaningless. As IKON points out, "the parties to any contract are free to discuss the possibility of renegotiation of contract terms at any time, without a specific clause to that effect in the contract." Def. Br. at 18-19. There remains, however, a difference between the parties' right to renegotiate a contract with one another, and the stated willingness to consider matching competing bids. Moreover, nothing in contract law in Missouri or elsewhere prevents the parties from restating the obvious or from assuring one another of their willingness to talk with one another over the course of a contract. Missouri principles of contract interpretation require this court to give those words their ordinary meaning. The ordinary meaning of the words is not ambiguous. By these words, IKON expressed only a willingness to renegotiate its prices during the term of the lease if Bristol-Myers obtained a lower competing bid for its corporate office. This language cannot be stretched to create a legally enforceable right of first refusal.
IKON has submitted parol evidence indicating that the parties negotiated these terms and, when viewed in the light reasonably most favorable to IKON, certainly talked with one another about the possibility of a right of first refusal. That evidence is not admissible, however, to create a right of first refusal that the parties chose not to include in their written agreement. See, e.g., Deschler v. Brown Williamson Tobacco Co., 797 F.2d 695, 696 (8th Cir. 1986) (applying Missouri law); Emerick v. Mutual Benefit Life Ins. Co., 756 S.W.2d 513, 522 (Mo. 1988).
The terms of the parties' written contract are not ambiguous in any respect material here. Bristol-Myers was entitled to cancel the contract (which subjects it to paying the cancellation fee), and the contract did not give IKON a right of first refusal on the Bristol-Myers national contract or an Evansville exception to that contract. Accordingly, Bristol-Myers' Motion for Partial Summary Judgment is hereby granted. This court declares that under the December 22, 1995, lease agreement and the addendum to that lease, Bristol-Myers had the unconditional right to terminate the lease, subject only to the payment of the appropriate cancellation fee.
In its answer, IKON has denied that $106,920 satisfies Bristol-Myers' cancellation obligation under the contract. Since it is unclear at this stage of the litigation whether the parties agree on the amount of the cancellation fee, the court is not entering final judgment at this time. Plaintiff has demanded a jury trial in its complaint. Therefore, the matter of the proper amount of the cancellation fee will be determined at a trial on damages set for Tuesday, January 23, 2001, commencing at 9:00 a.m., Evansville time, in Room 301 of the Federal Building in Evansville, Indiana. The parties are directed to appear before Magistrate Judge William G. Hussmann, Jr., for a status conference on Tuesday, January 9, 2001, at 3:30 p.m., Evansville time, in Room 328.
So ordered.