Opinion
Index EFCA2020000025
04-03-2020
MODERN MARKETING CONCEPTS, INC., Plaintiff, v. GAF MATERIALS LLC, Defendant
PLAINTIFF: HINMAN, HOWARD & KATTELL, LLP BY: ALBERT J. MILLUS, JR., ESQ. DEFENDANT: HANCOCK ESTABROOK, LLP BY: DANIEL B. BERMAN, ESQ.
Unpublished Opinion
PLAINTIFF: HINMAN, HOWARD & KATTELL, LLP BY: ALBERT J. MILLUS, JR., ESQ.
DEFENDANT: HANCOCK ESTABROOK, LLP BY: DANIEL B. BERMAN, ESQ.
DECISION & ORDER
HON. OLIVER N. BLAISE. III. J.S.C.
Before the court is defendant's motion to dismiss plaintiffs complaint pursuant to GPLR § 3211 (a) (1). There is no dispute between the parties about the factual underpinnings of the case, and both sides agree that resolution of their dispute is a matter of contractual interpretation for the court to resolve. The court concurs with that assessment and, for the reasons set forth below, grants defendant's motion to dismiss the complaint.
BACKGROUND
Plaintiff, Modern Marketing Concepts, Inc., is in the business of providing marketing services. Defendant, GAF Materials LLC, manufactures and supplies building materials. On January 7, 2015, the parties entered a "Master Professional Services Agreement" (hereinafter "the Master Agreement") whereby plaintiff would provide defendant with technical, development and other consulting services, the timing, scope and cost of which would be set out in separate documents including individual purchase orders, a statement of work, or a release under a blanket purchase order, collectively called "Authorizations" (defendant's exhibit 2 [Master Agreement, Article 1.1]). Additionally, the Master Agreement was subject to GAF's General Terms and Conditions for Service Agreements (hereinafter the "General T&Cs") (defendant's exhibit 2 [annexed to the Master Agreement as Exhibit B thereto]). The key provisions of the Master Agreement and General T&Cs will be set forth below as part of the court's discussion of the issues presented.
The initial term of the Master Agreement ran for just shy of three years, from the date of signing on January 7, 2015 through and including November 1, 2018. Neither party took any action to terminate the Master Agreement, so it was automatically renewed for a one-year Renewal Term starting November 1, 2018 and due to expire on November 1, 2019,
The parties use November 1 for the start/end of the various terms, together with a termination date of October 31, 2019. However, the Master Agreement states the Initial Term runs through and including November 1 meaning the start date of any subsequent term would be November 2 and the termination date would be November 1. That said, whether the Master Agreement terminated October 31 or November 1 is of no significance to the resolution of this dispute.
On April 18, 2017, the parties entered an Authorization known as "Statement of Work #003" (hereinafter "SOW#3"), the term of which was three years, meaning it was due to expire on April 17, 2020.
On July 12, 2019, defendant sent a letter to plaintiff stating that it was exercising its right not to renew the Master Agreement for an additional one-year period and, as such, said Master Agreement would terminate effective as of October 31, 2019 (defendant's exhibit 3). Additionally, defendant's letter stated "[p]ursuant to Section 4(b) of the General T&Cs, termination of the Agreement pursuant to Article 6 of the Agreement serves as termination of all Authorizations. Accordingly, the SOW[#3] shall also terminate effective as of the Termination Date" (defendant's exhibit 3).
Plaintiff accepted defendant's termination of the Master Agreement, but disputes that the July 12, 2019 letter terminated the open Authorization under SOW#3, which was scheduled to continue until April 17, 2020.
On January 6, 2020, plaintiff commenced this litigation seeking to recover damages allegedly caused as a result of the purported termination of SOW#3. On February 11, 2020, in lieu of an answer, defendant filed this motion to dismiss the complaint The court heard oral argument of counsel on March 13, 2020, DISCUSSION
Defendant's motion to dismiss the complaint on the ground that the action is barred by documentary evidence "[m]ay be appropriately granted only where the documentary evidence utterly refutes plaintiffs factual allegations, conclusively establishing a defense as a matter of law [citation omitted]" (Goshen v Mutual Life Ins. Co. of N. Y., 98 N.Y.2d 314, 326 [2002]). Also applicable are the basic concepts applicable to contract interpretation including that a court must determine as a matter of law whether the contract terms are unambiguous or “[l]ack a definite and precise meaning and provide a reasonable basis for a difference of opinion [citations omitted]" (Capital Dist. Enters., LLC v. Windsor Dev. of Albany, Inc., 53 A.D.3d 767, 770 [3d Dept 2008]). "If a relevant ambiguity is found, then it cannot be said that the documentary evidence conclusively establishes a defense as a matter of law and a motion to dismiss on the basis of such evidence cannot be granted [citations omitted]" (Weston v Cornell Univ., 56 A.D.3d 1074 [3d Dept 2008]).
Here, defendant argues the Master Agreement and General T&Cs are clear and unambiguous. Plaintiff disagrees and presents two separate arguments in an attempt to create an ambiguity in the relevant contract language that will be discussed below.
The parties agree that the court's determination hinges on the interpretation of Article 6 of the Master Agreement and section 4 of the General T&Cs, with which the court agrees. Article 6 of the Master Agreement, entitled "Term," provides in its entirety as follows:
[t]his Agreement shall commence on the Effective Date and, unless earlier terminated as provided herein, shall remain in full force and effect to and including November 1, 2018 (the 'Initial Term1). Thereafter it shall renew for successive one (1) year periods (each a 'Renewal Term'), unless in each case, either party notifies the other of its intention not to renew this Agreement at least ninety (90) days prior to the expiration of the Initial Term or the then applicable Renewal Term. Notwithstanding anything to the contrary, in the event that the Services under an Authorization are not completed by the termination or expiration of this Agreement, in its sole discretion, GAF can elect to extend the term of this Agreement solely with respect to such Authorization until the completion of such Services by notifying Company of such election. The Initial Term and any such Renewal Term(s) shall be collectively referred to herein as the 'Term.' Subject to Section 4(b) of the General T&Cs, each Authorization shall be effective as of the start date of Services set forth therein and shall remain in full force and effect until the completion of all Services under [sic] to be provided under such Authorization, unless terminated earlier in accordance with Sections 3 or 4 of the General T&Cs.(defendant's exhibit 2, p 3).
Section 4 of the General T&Cs states in its entirety as follows:
4. Termination for Cause, (a) Each party reserves the right to terminate the Agreement or any Authorization and all of its obligations and liabilities thereunder by written notice to the other party if: (a) the other party breaches any of the terms or conditions thereof and fails to cure the same to the terminating party's reasonable satisfaction within ninety (90) days of the date of the terminating party's written notice specifying the nature of such breach; (b) the other party is adjudicated a bankrupt or if a petition under the Bankruptcy Act is filed by it; (c) a petition under the Bankruptcy Act is filed against the other party and is not vacated within thirty (30) days; (d) the other party makes an assignment for the benefit of its creditors; (e) a receiver of all or any portion of the other party's property is appointed; or (f) any action under any law for the relief of debtors is taken by or with respect to the other party* After receipt of a notice of termination by GAF hereunder, Company shall immediately stop work as directed in the termination notice.
(b) Termination of any Authorization for whatever reason will not terminate any other Authorization or the Agreement. Termination of the Agreement pursuant to Article 6 of the Agreement, or Sections 3 and 4 hereunder, shall serve as termination of all Authorizations,(defendant's exhibit 2, p 7).
Initially, the court will focus on the following provisions of Article 6 of the Master Agreement which state as follows:
Notwithstanding anything to the contrary, in the event that the Services under an Authorization are not completed by the termination or expiration of this Agreement, in its sole discretion, GAF can elect to extend the term of this Agreement solely with respect to such Authorization until the completion of such Services by notifying Company of such election, .,, .
Subject to Section 4(b) of the General T&Cs, each Authorization shall be effective as of the start date of Services set forth therein and shall remain in full force and effect until the completion of all Services under [sic] to be provided under such Authorization, unless terminated earlier in accordance with Sections 3 or 4 of the General T&Cs.(defendant's exhibits, p 3).
Under the first of the foregoing provisions, defendant clearly has the right to extend the work on any Authorization that remains uncompleted at the time the Master Agreement terminates. Under the second of the foregoing provisions, each Authorization remains an open project until the work thereon is completed or the project is terminated pursuant to sections 3 or 4 of the General T&Cs.
Section 3 of the General T&Cs is blank, and the parties agree that it has no applicability to resolution of their dispute.
Section 4 of the General T&Cs, which is entitled "Termination for Cause," is divided into two parts. Section 4(a) outlines the parties' right to terminate the Master Agreement or any open Authorizations should various financial crises (e.g., bankruptcy, insolvency, receivership) befall the other. Section 4(b), which is specifically referenced in the last clause of Article 6, deals with termination of active Authorizations or the Master Agreement. Specifically, section 4(b) of the General T&Cs states that:
[t]ermination of any Authorization for whatever reason will not terminate any other Authorization or the Agreement. Termination of the Agreement pursuant to Article 6 of the Agreement, or Sections 3 and 4 hereunder, shall serve as termination of all Authorizations."(defendant's exhibit 2, p 7).
Thus, the first sentence of section 4(b) explains that termination of a particular project will not necessarily or automatically terminate any other projects or the entire Master Agreement. The second sentence of section 4(b) states that termination of the Master Agreement under Article 6, or under section 4 of the General T&Cs, will terminate all projects in progress.
Again, the cross references between Article 6 of the Master Agreement and section 4 (b) of the General T&Cs are noteworthy and meaningful.
Termination under section 4 of the General T&Cs must refer to section 4(a), which deals with grounds for ending the Master Agreement, whereas section 4(b) deals with consequences of ending Authorizations or the Master Agreement.
When the second sentence of section 4(b) of the General T&Cs is read in conjunction with Article 6 of the Master Agreement, there are two possible outcomes for an open Authorization at the time the Master Agreement ends, both of which inure to defendant's benefit. The first outcome is that any pending Authorizations terminate at the time the Master Agreement ends pursuant to section 4(b) of the General T&Cs. The second outcome is that work on open Authorizations can continue beyond the end of the Master Agreement, but only if defendant wants them to. Since there is no dispute that defendant provided timely notice to terminate the Master Agreement and, in doing so, properly exercised its right not to continue the open Authorization (SOW #3) beyond the termination date of the Master Agreement, the court concludes that the contract is unambiguous.
In its motion papers, plaintiff insists that the last sentence of Article 6 of the Master Agreement, which provides that Authorizations are to remain in effect until the work thereunder is completed, is controlling unless the Master Agreement was terminated pursuant to section 4 of the General T&Cs, more specifically section 4(a), which covers termination for cause. Reduced to its essence, plaintiffs argument is that defendant could cancel SOW#3 before its natural end date only z/defendant had terminated the Master Agreement for cause. The problem with plaintiffs interpretation is that it ignores the proviso in Article 6 that gives defendant "sole discretion" to extend an uncompleted Authorization beyond the term of the Master Agreement, as well as the last sentence of section 4(b) of the General T&Cs, which specifically states that "[germination of the Agreement pursuant to Article 6 of the Agreement... shall serve as termination of all Authorizations" (defendant's exhibit 2, p 7 [emphasis added]). Plaintiffs reading of the Master Agreement ignores the "sole discretion" language of Article 6, whereas defendant's reading, and the court's, harmonizes that provision of Article 6 of the Master Agreement and the second sentence of section 4(b) of the General T&Cs.
At oral argument, plaintiff advanced an additional theory, ostensibly in response to defendant's reply papers, to support its position. Plaintiff points out that the Authorization at issue (SOW#3) has its own thirty-six month term and ninety day notice requirement for termination (Millus affirmation, exhibit C). According to plaintiff, these temporal elements are independent of the provisions in Article 6 of the Master Agreement and section 4(b) of the General T&Cs. Plaintiff asserts the only situation that would permit the Authorization to be terminated before its specified end date would be termination for cause under section 4(a) of the General T&Cs. Thus, a notice to terminate the Authorization would essentially be a notice of nonrenewal (i.e., advance notice that work will continue under the Authorization until its end date, but no further).
At oral argument, plaintiffs counsel posited that the "sole discretion" clause of Article 6 grants defendant the right to continue an Authorization beyond its expiration date, even over plaintiffs objection. The court does not read the "sole discretion" clause to give defendant such authority. Article 6 grants defendant the right to extend work under an Authorization until its completion. Plaintiffs interpretation would create a notice of compelled renewal for a specified term, as opposed to an extension until the work on a specific project was completed.
Plaintiffs argument is unavailing for two reasons. First, nowhere do the Master Agreement or General T&Cs make any reference to, or allowance for, the time limits stated in an Authorization to be controlling. To the contrary, Article 6 of the Master Agreement and section 4(b) of the General T&Cs, which as noted above cross-reference each other, are specific about the circumstances of how and when Authorizations will expire. Under plaintiffs theory, Authorizations would become co-equal to, if not greater than, the controlling instrument, namely the Master Agreement and General T&Cs. Clearly, the Authorization was issued pursuant, and subject, to the Master Agreement and General T&Cs, not the other way around. Second, plaintiffs argument ignores the fact that defendant provided more than 90 days' notice to terminate the Authorization in its July 12, 2019 letter, which is in compliance with the language of SOW#3 allowing either party to terminate on at least ninety days' notice prior to the end of the applicable term (Millus affirmation, ex C, p 4).
SOW#3's states it "[e]xpressly incorporates the terms and conditions of the Master Professional Services Agreement ("Agreement") entered into between [the parties] on January 7, 2015" (Millus affirmation, exhibit C, p 1).
CONCLUSION
Based on the foregoing, defendant's motion to dismiss pursuant to CPLR § 3211 (a) (1) is GRANTED and the complaint is DISMISSED.
All papers submitted in connection with this motion, and all prior pleadings, have been electronically filed with the Broome County Clerk through the NYSCEF System:
1. Defendant's Notice of Motion to Dismiss Complaint filed February 11, 2020;
2. Affirmation in Support of Motion to Dismiss of Daniel B. Berman, Esq. dated February 11, 2020, with exhibits;
3. Memorandum of Law in Support of GAF's Motion to Dismiss the Complaint undated;
4. Affirmation in Opposition of Albert J. Millus, Jr., Esq., dated March 6, 2020;
5. Plaintiffs Brief in Opposition to Motion to Dismiss dated March 6, 2020; and
6. Reply Memorandum of Law in Further Support of GAF's Motion to Dismiss the Complaint dated March 11, 2020.