Opinion
603545/06.
Decided September 21, 2007.
Kasowitz, Benson, Torres, Friedman LLP, New York, NY, Daniel P. Goldberg, Esq. Zachary Mazin, Esq. Vinson Elkins LLP, New York, NY, Steven Paradise, Esq. Michael S. Davi, Esq. Debbie E. Green, Esq., for Plaintiffs: For Defendants.
This action arises as a result of the Second Amendment to an ATM Placement Agreement entered into by plaintiff Duane Reade and defendant Cardtronics as of December 2003 (the Arrangement). Duane Reade originally moved for an Order: (i) enforcing an exclusive forum selection agreement; and (ii) pursuant to CPLR 6311, enjoining Cardtronics from pursuing an action it initiated in the District of Harris County Texas (the Texas Action). Cardtronics cross-moved for an Order: (i) dismissing this action in favor of the Texas Action; or (ii) staying this action pending the outcome of that Texas Action. Cardtronics cross-moved, in the alternative, to dismiss the complaint, pursuant to CPLR 3211(a)(7), for failure to state a cause of action upon which relief can be granted. Duane Reade cross-cross-moved for an Order, pursuant to CPLR 3212 and 3211(c), granting partial summary judgment as to liability, and a declaration of the meaning of a particular section of the Arrangement.
I have been advised that the Texas Action has been discontinued by stipulation. Thus, the remaining motions before me are: (i) Cardtronics' motion to dismiss the complaint; and (ii) Duane Reade's motion for partial summary judgment as to liability, and a declaration of the meaning of applicable language in the Arrangement.
Cardtronics' motion is based solely upon interpretation of the contract language at issue, the proofs provided are as complete as they would be on an outright summary judgment motion under CPLR 3212, there are no general pertinent factual issues outstanding, and Cardtronics has responded to the motion for partial summary judgment. I will, thus, treat Cardtronics' motion as a cross motion for summary judgment.
According to the complaint, on or about July 14, 1999, the American Express Travel Related Services Company, Inc. (AMEX) and Duane Reade entered into an "ATM Placement Agreement," which provided for the placement of AMEX automated teller machines (ATMs) in Duane Reade stores. On or about March 2001, AMEX and Duane Reade executed an amendment to the ATM Placement Agreement, titled "First Amendment to Licensed Space for ATMs Agreement."Subsequently, on or about August 8, 2003, AMEX sold, transferred, and assigned the ATM Placement Agreement to Cardtronics. On December 19, 2003, Cardtronics and Duane Reade executed the Second Amendment (herein, as defined above, the Arrangement), to the original ATM Placement
Agreement, extending the life of the ATM Placement Agreement through 2014. The Arrangement modified several provisions of the original ATM Placement Agreement and added several new ones, including a provision concerning "Bank Branding" of the Cardtronics ATMs located in Duane Reade stores. Both parties have acknowledged at oral argument, and asserted in their memoranda, that the language of the Arrangement is unambiguous. Nonetheless, the following pertinent part of a provision is at the heart of the instant dispute:
Both parties acknowledge that a "Bank Branding" arrangement with a large well known financial institution (a "bank") covering and affecting the ATMs will benefit Duane Reade by increasing foot-traffic in the affected store locations. "Bank Branding" means permitting a bank to so mark or brand an ATM such that to any person using that ATM it will appear to be owned or operated by that bank, notwithstanding the fact that the ATM continues to be owned, managed and operated by Cardtronics. Additionally, the bank's customers will be able to use any such branded ATM without paying any surcharge. In recognition of these lost surcharge transactions and to preclude any loss of fees payable to Duane Reade hereunder, as of the date any Bank Branding arrangement becomes effective, Cardtronics will determine the number of surcharged transactions conducted by said bank's customers during the immediately preceding month at all of the ATMs covered by such arrangement (the "Branding Surcharge Transactions") and thereafter through the term of this Agreement on a monthly basis will credit Duane Reade with the full amount of the Branding Surcharge Transactions.
ATM Placement Agreement, Second Amendment, ¶ 11.
By 2005, the parties had agreed that JP Morgan Chase (Chase) would be the Branding Bank under the Arrangement. Cardtronics began to install or upgrade the ATMs in Duane Reade stores in the first quarter of 2005. In June of 2005, Cardtronics and Duane Reade disagreed as to the amount of fees due under the Arrangement. Specifically, Cardtronics maintained that it was required to make a determination of the Branding Surcharge
Transactions amount only once, for the month immediately preceding the Arrangement (i.e., February 2005), and pay that amount, each month, for the duration of the ATM Placement Agreement. Duane Reade, meanwhile, maintained that Cardtronics was required to pay for the actual number of Branding Surcharge Transactions in each month immediately preceding payment.
Contracts are to be interpreted from the intention of the parties, as derived from the language of the contract, and where that language is plain and unambiguous, extrinsic circumstances should not be considered to determine the intention of the parties. Lopez v Fernandito's Antique, 305 AD2d 218, 219 (1st Dept 2003). This does not mean, of course, that common sense should be disregarded in favor of formalistic literalism; in all events, the essence of the contract should be preserved. Reiss v Financial Performance Corp., 279 AD2d 13, 19 (1st Dept 2000); see also Aron v Gillman, 309 NY 157, 163 (1955).
Here, the Arrangement states that Cardtronics will determine "the number of surcharged transactions" conducted by Chase "customers during the immediately preceding month at all of the ATMs covered by such arrangement." As the very basis of the Arrangement is that there would no longer be "surcharged transactions" for Chase customers after the effective date, there is but one interpretation available: that this refers to the month before the effective date of the Arrangement, and not to subsequent months in which there are no such "surcharged transactions." Stated more simply, after the effective date, there was, presumably, no longer any such thing as a "surcharged transaction" for Chase customers; the number of surcharged transactions would always, thereafter, be zero.
Moreover, the payment method under the Arrangement is that Cardtronics "through the term of this [Arrangement] on a monthly basis will credit Duane Reade with the full amount of the Branding Surcharge Transactions." The "Branding Surcharge Transactions" is defined as "the number of surcharged transactions conducted by said bank's customers during the immediately preceding month at all of the ATMs covered by such arrangement." If there are no "surcharged transactions," there can be no "full amount of the Branding Surcharge Transactions." Thus, the amount of the payment, by the plain meaning of the Arrangement, is the amount determined in that one calculation of the number of surcharged transactions in the month immediately preceding the effective date of the Arrangement. No other interpretation gives meaning to the terms, or, indeed, the paragraph as a whole. Acme Supply Co. v City of New York, 39 AD3d 331, 332 (1st Dept 2007) ("[a]n interpretation that gives effect to all the terms of an agreement is preferable to one that ignores terms or accords them an unreasonable interpretation" [citation and internal quotation marks omitted]).
It is also notable that the calculation was to be of "the number of surcharged transactions conducted by said bank's customers during the immediately preceding month," whereas payment for those lost transactions was to be "on a monthly basis." If both calculation and payment were both to have been on a monthly basis, the Arrangement would have, or should have, so stated. Two Guys from Harrison-N.Y. v S.F.R. Realty Assoc., 63 NY2d 396, 403 (1984) ("[i]n construing a contract, one of a court's goals is to avoid an interpretation that would leave contractual clauses meaningless" [citations omitted]). The proper interpretation is one that gives different meanings to "immediately preceding month" and "monthly basis." HSBC Bank USA v National Equity Corp., 279 AD2d 251, 253 (1st Dept 2001) ("the rule is that where two seemingly conflicting contract provisions reasonably can be reconciled, a court is required to do so and to give both effect" [citations and internal quotation marks omitted]).
Duane Reade's proffered interpretation would either completely obviate the cited language, or, alternatively, call upon the court to read "surcharged transactions" to mean "transactions that would have been surcharged." Again, such an interpretation would render the term "surcharged transactions" meaningless. See Yoi-Lee Realty Corp. v 177th Street Realty Assoc., 208 AD2d 185, 190 (1st Dept 1995) ("contracts should be construed to give force and effect to their provisions and not in a manner so as to render them meaningless" [citations omitted]); see also God's Battalion of Prayer Pentecostal Church v Miele Assoc., 6 NY3d 371, 374 (2006) (contracts should be read to give effect to all provisions).
Duane Reade also argues that the language of the Arrangement is prospective, referring to the fact that "the bank's customers will be able to use any such branded ATM without paying any surcharge (emphasis added)." Duane Reade concludes that this means that the "recognition of these lost surcharge transactions" must also be prospective. This argument is without merit. There is nothing new or novel about offering a fixed continued payment in exchange for a potential continued payment. If the lost surcharge transactions are prospective, it does not follow that the compensation for those potential losses must be calculated as they arise. For example, nary a lawsuit would ever be resolved if defendants were required to recalculate actual losses of plaintiffs indefinitely into the future. Rather, payment for prospective losses are settled by a pre-calculated payment. Such is the norm, and not the exception. Compare Restatement (Second) of Torts: Damages For Past, Present And Prospective Harms § 910 ("[o]ne injured by the tort of another is entitled to recover damages from the other for all harm, past, present and prospective, legally caused by the tort" [emphasis added]).
Finally, the phrase "the full amount of the Branding Surcharge Transactions" is an indication that Cardtronics' interpretation is rational. The use of the phrase "the full amount" is a clear attempt to avoid the payment of partial amounts, or variations in the amounts payable. Thus, the indication is that there may be times when the number of transactions conducted by Chase's customers might be less than (or more than) the number used to determine the Branding Surcharge Transactions amount. The Arrangement, then, attempts to regularize the amount payable, and not to offer month-to-month variations, as suggested by Duane Reade. I have considered Duane Reade's remaining arguments, and find them to be without merit. Duane Reade's motion for summary judgment as to liability is denied.
Cardtronics' motion to dismiss the complaint for failure to state a claim is granted with regard to the first cause of action for breach of contract. With regard to the second cause of action, however, the motion to dismiss is denied. CPLR 3001 states that "[t]he supreme court may render a declaratory judgment . . . as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed." Ergo, if the claim for declaratory judgment, as presented by Duane Reade, is justiciable, the motion to dismiss for failure to state a claim should be denied. Barry v Ready Reference Publ. Co., 25 AD2d 827, 827 (1st Dept 1966) (principal purpose of declaratory judgment is to provide for "the complete and final settlement of the rights and legal relations of the parties with respect to the matters in controversy"). Here, the parties disagree as to performance and payment obligations under the Arrangement. As a result, the matter is justiciable, and rendering a declaratory judgment would not be superfluous or unnecessary. Kalisch-Jarcho v City of New York, 72 NY2d 727, 731 (1988).
Partial summary judgment should be granted declaring that the meaning of paragraph 11 of the Second Amendment (executed December 19, 2003) to the original ATM Placement Agreement (executed on or about July 14, 1999) is that Cardtronics was obligated to determine the number of actual surcharged transactions conducted by JP Morgan Chase customers at all of the ATMs covered by the Second Amendment (which was defined therein as the "Branding Surcharge Transactions") during the month immediately preceding the effective date of the Second Amendment (i.e., February 2005), and pay the amount so determined thereafter through the remaining term of the ATM Placement Agreement, on a monthly basis, to Duane Reade.
Accordingly, it is hereby
ORDERED that the motion of defendant Cardtronics, LP for summary judgment dismissing the complaint is granted to the extent that the first cause of action for breach of contract is dismissed, and it is otherwise denied; and it is further
ORDERED that the prong of the cross motion of plaintiff Duane Reade seeking partial summary judgment as to liability is denied; and it is further
ORDERED that the prong of the cross motion of plaintiff Duane Reade for summary judgment declaring the meaning of paragraph 11 of the Second Amendment (executed December 19, 2003) to the original ATM Placement Agreement (executed on or about July 14, 1999), is granted.
Settle judgment.