Opinion
22-CV-6957 (VF)
10-24-2023
OPINION & ORDER
VALERIE FIGUEREDO, UNITED STATES MAGISTRATE JUDGE.
Plaintiff Edgewood Partners Insurance Center Inc. ("EPIC"), as successor in interest to Integro USA, Inc., commenced this action against Defendant PPD Development, L.P. ("PPD") for breach of contract. Defendant moved for summary judgment on Plaintiffs two breach-of-contract claims pursuant to Federal Rule of Civil Procedure 56. On September 27, 2023, the Court issued an opinion and order denying Defendant's motion, only as it pertained to Plaintiff's second breach-of-contract claim in the Amended Complaint. See ECF No. 51. What remains before the Court is Defendant's motion for summary judgment concerning Plaintiffs first cause of action-a breach-of-contract claim based on a failure to pay. For the reasons that follow, Defendant's motion is GRANTED as it pertains to Count I in the Amended Complaint.
Page citations herein to documents filed on ECF are to the original pagination in the document. Citations to PPD's Local Civil Rule 56.1 Statement of Facts (“R. 56.1 Statement”), located at ECF No. 28, reflect only the undisputed, material facts contained therein.
On September 27, 2023, the Court issued an opinion and order denying Defendant PPD's motion for summary judgment as it pertains to EPIC's second cause of action in the Amended Complaint. See ECF No. 51. In that decision, the Court provided a full recitation of the factual and procedural background in this case, as well as the applicable legal standard for a motion for summary judgment. See id. at 2-8. The Court presumes the parties' familiarity with that opinion and does not restate the relevant background information or legal principles herein. On October 16, 2023, the Court heard oral argument on Defendant's motion for summary judgment as it pertains to Plaintiff's first cause of action for breach of contract. See ECF No. 53 (“Tr.”).
DISCUSSION
In June of 2019, PPD entered into a Consulting Agreement (the “Agreement”) with Integro USA Inc., to which EPIC is the successor in interest. R. 56.1 Statement ¶ 4; see also ECF No. 29-1 (the “Agreement”). The only dispute between the parties as it relates to Plaintiff's first breach-of-contract claim concerns the calculation of the 2021 success fee in the Agreement. More specifically, the parties' dispute concerns the proper calculation of the [REDACTED] a term used in the Agreement to determine the success fee, if any, EPIC is owed. For the reasons explained below, the term [REDACTED] in the Agreement is unambiguous and is defined in the Agreement consistent with PPD's interpretation. Because the 2021 success fee, properly calculated, was negative, the amount PPD owed EPIC was reduced by $501,974, leaving $105,287 owed to EPIC for 2020 and 2021 consulting fees. ECF No. 27 (“Def.'s Br.”) at 6. PPD has paid $105,287 and it therefore owes nothing more to EPIC.
The Agreement outlines the procedure for calculation of the 2021 success fee, and the parties do not dispute that the 2021 success fee is calculated by comparing two numbers: [REDACTED] See R. 56.1 Statement ¶ 7; Agreement at Exhibit 1 ¶¶ 2-3. How both of those contractual terms are calculated is explained in the Agreement. In other words, both the [REDACTED] and [REDACTED] are “defined terms”-meaning that “the parties set forth exactly what they meant in the body of the contract itself.” Quintel Comms., Inc. v. Federal Transtel, Inc., 142 F.Supp.2d 476, 482 (S.D.N.Y. 2001). The parties' dispute, however, is limited to how the [REDACTED] should be calculated.
The [REDACTED] is calculated, in part, by using the [REDACTED] This is evident from the text of the Agreement. The Agreement requires that the calculation for 2021 begin with the [REDACTED] As the Agreement provides, the [REDACTED] for 2020 is [REDACTED] Agreement at Exhibit 1 ¶ 2. The Agreement then plainly states that [REDACTED] Id. In other words, the is calculated by applying an inflationary adjustment to the “ [REDACTED].”
In an effort to avoid the unambiguous text of the Agreement, EPIC raises numerous arguments, none of which has merit. First, EPIC argues that PPD's calculation of the [REDACTED] [REDACTED] is incorrect because it relies on [REDACTED], rather than [REDACTED] See Tr. at 16, 19-20, 22-23, 26. EPIC claims that the [REDACTED] is "always" calculated by using the [REDACTED] See Id. at 23, 26. But this argument is wholly untethered from the text of the Agreement. Nothing in the Agreement supports an interpretation that the [REDACTED] is calculated using the [REDACTED]. To the contrary the Agreement explicitly states that the [REDACTED]” See Agreement at Exhibit 1 ¶ 2. The Agreement thus plainly relies on the [REDACTED] .
Next, EPIC argues that the term “[REDACTED]” in the Agreement is ambiguous because the Agreement uses that term inconsistently in different provisions-sometimes [REDACTED] is used by the parties to refer to a "total cost number" and other times it is used to refer to the "difference between two total cost numbers." See ECF No. 38 ("Pl.'s Br.") at 6, 12-16. According to EPIC, PPD's calculation of the 2021 success fee improperly "assumes that every use of '[REDACTED] [in the Agreement] refers to a difference number . . . not recognizing the multiple instances in which it refers to a total cost" number. Id. at 17. To support this argument, EPIC points to the example calculation hi Annex 1 of the Agreement. See id. 12, 16-18, 21. EPIC contends that the example calculation in Annex 1 of the Agreement shows that “[REDACTED]”as used hi Paragraph 2 of Exhibit 1, is ambiguous, because the inflationary adjustment in the sample calculation hi Annex 1 was applied to a "total cost number," specifically, the '[REDACTED]|' Id. at 18; see also Agreement at Annex 1.
To be sure, Annex 1 does apply the inflationary adjustment to a total cost number-the [REDACTED] See Agreement at Annex 1. Further, and consistent with the text of Paragraph 2 of Exhibit 1, Annex 1 illustrates that the [REDACTED] is “ [REDACTED]” see id. at Exhibit 1 ¶ 2, or [REDACTED] in the example in Annex 1, see id. At Annex 1. But the parties dispute concerns what happens at the next step in the calculation, in determining the . Paragraph 2 of Exhibit 1 states that the “ [REDACTED] ” Id. at Exhibit 1 ¶ 2. Annex 1 does not provide a sample calculation of the [REDACTED]; its sample calculation ends in 2020. Accordingly, nothing in Annex 1 contradicts the unambiguous instruction in Paragraph 2 of Exhibit 1.
EPIC also argues that PPD's interpretation of the term “[REDACTED] ” was not intended by the parties because it would lead to the absurd result that EPIC would be expected to double PPD's savings each year after negatively adjusting for inflation in order to earn a success fee. Pl.'s Br. at 19-20. The parties' intent, however, is “derived from the plain meaning of the language employed in the agreement[].” See Homeward Residential, Inc. v. Sand Canyon Corp., 298 F.R.D. 116, 128 (S.D.N.Y. 2014) (citation and internal quotation marks omitted). And, here, that intent is evident from the Agreement's unambiguous definition of the term TCOC Savings Target.
Moreover, “only contracts that very nearly produce the opposite effect of what the parties likely desired will be held to be absurd.” Wiseman v. ING Groep, N.V., No. 16-CV-07587 (AJN), 2017 WL 4712417, at *6 (S.D.N.Y. Sept. 28, 2017) (citations omitted). EPIC has not demonstrated that calculating the [REDACTED] as indicated in Paragraph 2 of Exhibit 1 would yield an absurd result. To the contrary, and as PPD explains, the calculation outlined in Paragraph 2 of Exhibit 1 would incentivize EPIC to provide PPD with the same savings in 2021 as it provided in 2020, after accounting for inflation, ensuring that PPD paid less for strategic benefits year-over-year. See ECF No. 45 (“Def.'s Reply”) at 8; see also Tr. at 37. It makes good business sense for PPD to have negotiated and ensured that it received the “same benefit” for EPIC's services each year. See Tr. at 37. That result is far from absurd.
In sum, EPIC has not pointed to any ambiguity in how the Agreement defines the term [REDACTED]. Consequently, EPIC's reliance on trade usage-specifically, that it is industry standard to use a total cost number to calculate the [REDACTED] - is misplaced. See Tr. at 16, 34. “[W]here the terms of a contract are clear and unambiguous, the intent of the parties must be found within the four corners of the contract.” Lebetkin v. Giray, No. 18-CV-8170 (DLC), 2020 WL 1445752, at *7 (S.D.N.Y. Mar. 25, 2020) (quoting Tomhannock, LLC v. Roustabout Res., LLC, 33 N.Y.3d 1080, 1082 (2019)); see also JA Apparel Corp. v. Abboud, 568 F.3d 390, 397 (2d Cir. 2009) (only where “the contract language creates ambiguity” may “extrinsic evidence as to the parties' intent” be “properly considered”) (citations omitted).
Further, as PPD points out, see Tr. at 14, the Agreement contains an integration clause at Section 12(F), which prohibits the introduction of any extrinsic evidence, including trade usage. See Oquendo v. CCC Terek, 111 F.Supp.3d 389, 412 (S.D.N.Y. 2015) (“New York courts interpret integration clauses ‘to require full application of the parol evidence rule in order to bar the introduction of extrinsic evidence to vary or contradict the terms of the writing.”') (quoting Primex Int'l Corp. v. Wal-Mart Stores, Inc., 89 N.Y.2d 594, 599 (N.Y. 1997)).
Based on the Agreement's unambiguous language, the method for calculating the 2021 Success Fee is as follows At step one, the [REDACTED] Agreement at Exhibit 1 ¶ 2. [REDACTED] is defined as “[REDACTED]” Id. Using EPIC's figures, the [REDACTED]. See ECF No. 29-2 at 1. Multiplying that number by the inflationary adjustment of [REDACTED] -a number not disputed by EPIC (see id.)-yields a [REDACTED]
The numbers used in the following calculation are taken from the spreadsheet provided to EPIC by PPD. ECF No. 29-2. EPIC does not contest the validity of the spreadsheet, or the accuracy of the figures contained therein. See Pl.'s Br. at 9.
At the last step of the calculation, the Agreement requires a comparison between the [REDACTED] and the [REDACTED]. See Agreement at Exhibit 1 ¶ 3. If EPIC's [REDACTED] is greater than the [REDACTED], EPIC is entitled to a success fee which is “[REDACTED]" Id. Accepting EPIC's math, the [REDACTED], and that amount increased to. [REDACTED] See ECF No. 29-2 at 1. Stated differently, PPD suffered a cost increase of [REDACTED] between 2020 and 2021. At the last step, the [REDACTED] figure ([REDACTED]) is compared to the [REDACTED]. Agreement at Exhibit 1 ¶ 3. [REDACTED] is less than the [REDACTED] the Agreement requires that EPICS fee be “[REDACTED] "Id. at Exhibit 1 ¶ 3(a).
The [REDACTED] applies and thus the annual base consulting fee-which the parties do not dispute is [REDACTED] see Pl.'s Response to R. 56.1 Statement ¶ 20- [REDACTED] That calculation yields $501,974-the amount by which EPIC's fee must be reduced. See Agreement at Exhibit 1 ¶ 3(a). Therefore, as PPD correctly asserts, see Def's Br. at 10, according to the calculation laid out in the Agreement, EPIC is not owed any additional monies.
CONCLUSION
For the foregoing reasons, Defendant's motion for summary judgment is GRANTED as to Count I of the Amended Complaint. The Clerk of Court is respectfully directed to file this Opinion under seal and viewing levels are temporarily restricted to Plaintiff, Defendant, and the Court. The parties shall submit proposed redactions to this Opinion by November 3, 2023. The Court will review those redactions and subsequently file a redacted copy of the Opinion on the public docket.
SO ORDERED.