Opinion
Civil No. 03-223 (JBS).
December 3, 2003
Walter B. Dennen, Esq., AIMINO DENNEN, LLC, Woodbury, NJ, Attorney for Plaintiff.
Diane Sullivan, Esq., Thomas Kane, Esq., DECHERT LLP, Princeton Pike Corporate Center, Princeton, NJ, Attorneys for Defendant.
OPINION
In this diversity jurisdiction case, plaintiff Reifsneider Transportation, Inc. ("RTI") filed a complaint against defendant Stepan Company ("Stepan") on January 17, 2003, alleging that Stepan breached the "Term" provision of their Service Agreement ("Agreement") prior to the expiration of a twelve-month renewal term and without prior notice. Defendant filed this present motion to dismiss, pursuant to Fed.R.Civ.P. 12(b)(6), asserting that plaintiff cannot state a claim for relief because the Agreement was terminable at will. For the reasons discussed herein, this Court finds that defendant's motion must be denied because the Term provision unambiguously requires sixty-days notice and a twelve-month term, and therefore, plaintiff has raised a legal claim.
I. BACKGROUND
Plaintiff RTI is a Pennsylvania corporation engaged in the business of transportation and disposal of non-hazardous liquid waste. (See Pl.'s Br. at 1.) Defendant Stepan is a Delaware corporation that operates the Fieldsboro facility in Fieldsboro, New Jersey. (Compl. ¶ 1.) On February 24, 1999, RTI and Stepan entered into a Service Agreement with an effective date of January 1, 1999, for the transportation and disposal of waste material from the Fieldsboro Facility. (See Compl. ¶ 4.)
At issue in Stepan's motion to dismiss is the Term provision in their Agreement, which states:
This Agreement is for a term commencing on the effective date stated and continuing until 24 months after effective date and shall be renewed without further action by either party for a 12 month term, but may be terminated at the initial term or any 12 month extension by either party, by not less than sixty days prior written notice (Certified Mail).
(See Service Agreement No. RTI-0901, Def.'s Br., Ex. A at 2.) It is undisputed that the parties did not provide notice of termination prior to the expiration of the initial twenty-four month term ending on December 31, 2000, or the expiration of the first twelve month automatic renewal ending on December 31, 2001. (Compl. ¶ 6.) After the first renewal period, in April 2002, Stepan notified RTI of its intention to terminate the Agreement. (Compl. ¶ 7.) On or about April 12, 2002, Stepan terminated the service provided by RTI to the Fieldsboro Facility. (Id.)
RTI filed the present complaint in the New Jersey Superior Court, Gloucester County, on November 15, 2002, alleging that Stepan breached their Agreement because it terminated the Agreement prior to the expiration of a twelve-month renewal term without sixty-days notice. (See Pl.'s Br. at 2.) Stepan removed this action to this Court on January 17, 2003, asserting diversity jurisdiction. (Id.) Stepan then filed this motion to dismiss on May 2, 2003, arguing that the Agreement was terminable at will after the first renewal period. The case was transferred to the undersigned on May 29, 2003, and the Court is now prepared to issue its ruling.
II. DISCUSSION
A. Standard for a Motion to Dismiss
A Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief may be granted must be denied "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). A district court must accept any and all reasonable inferences derived from those facts. Unger v. Nat'l Residents Corp. v. Exxon Co., U.S.A., 761 F. Supp. 1100, 1107 (D.N.J. 1991); Gutman v. Howard Sav. Bank, 748 F. Supp. 254, 260 (D.N.J. 1990). Further, the court must view all allegations in the Complaint in the light most favorable to the plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Jordan v. Fox, Rothschild, O'Brien Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).
It is not necessary for the plaintiff to plead evidence, and it is not necessary to plead the facts that serve as the basis for the claim. Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3d Cir. 1977); In re Midlantic Corp. Shareholder Litigation, 758 F. Supp. 226, 230 (D.N.J. 1990). The question before the court is not whether plaintiffs will ultimately prevail; rather, it is whether they can prove any set of facts in support of their claims that would entitle them to relief. Hishon v. King Spalding, 467 U.S. 69, 73 (1984). Therefore, in deciding a motion to dismiss, a court should look to the face of the complaint and decide whether, taking all of the allegations of fact as true and construing them in a light most favorable to the nonmovant, plaintiff's allegations state a legal claim.Markowitz, 906 F.2d at 103. Only the allegations in the complaint, matters of public record, orders, and exhibits attached to the complaint matter, are taken into consideration. Chester County Intermediate Unit v. Pennsylvania Blue Shield, 896 F.2d 808, 812 (3d Cir. 1990).
B. Analysis
RTI alleges that Stepan breached their Agreement by terminating it on April 12, 2002, without sixty-days notice and without completing its twelve-month term. (See Pl.'s Br. at 3.) Stepan argues that the Agreement unambiguously provides for one automatic twelve-month extension, and, therefore, because that extension ended on December 31, 2001, Stepan was able to terminate the Agreement at will at any time thereafter. (See Def.'s Br. at 3.)
Stepan has also argued that, if ambiguity in the Term provision is found, the clause must be construed against RTI as drafter of the contract pursuant to the doctrine of contra preferentem. (Def.'s Br. at 4.) Because the court finds no ambiguity, the Court need not address this argument herein.
Under New Jersey law, the court determines whether a contract term is ambiguous. See Guardian Life Ins. Co. v. Goduti-Moore, 36 F. Supp. 2d 657, 662 (D.N.J. 1999) (citingNester v. O'Donnell, 301 N.J. Super. 210 (App.Div. 1997);Horn v. Mazda Motor of Am., 265 N.J. Super. 47, 60 n. 5 (App. Div. 1993); Kaufman v. Provident Life Cas. Ins. Co., 828 F. Supp. 275, 282-83 (D.N.J. 1992) (holding that "[c]onstruction of contracts is a question of law"), aff'd, 993 F.2d 877 (3d Cir. 1993)). A contract is ambiguous if its terms "are susceptible to at least two reasonable alternative interpretations." Kaufman, 828 F. Supp. at 283; Mellon Bank N.S. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1011 (3d Cir. 1980).
In determining whether an ambiguity exists, New Jersey law permits consideration of "the contract language, the meanings suggested by counsel, and the extrinsic evidence offered in support of each interpretation." American Cyanamid v. Fermenta Animal Health Co., 54 F.3d 177, 181 (3d Cir. 1995) (applying New Jersey contract law). A contract term which is unambiguous when accorded the commonly understood meaning of its words cannot be disregarded unless the extrinsic evidence is such as might cause a reasonable fact finder to understand the text differently.American Cyanamid, 54 F.3d at 182. Also, the court must endeavor to give effect to all terms in a contract "and the construction which gives a reasonable meaning to all its provisions will be preferred to one which leaves a portion of the writing useless or inexplicable." Linan-Faye Constr. Co. v. Housing Auth., 995 F. Supp. 520, 524 (D.N.J. 1998) (quotingPrather v. American Motorists Ins. Co., 2 N.J. 496, 502 (1949)).
If a contract is determined to be unambiguous, the construction of the written agreement is a matter of law to be decided by the court. Michaels v. Brookchester, Inc., 26 N.J. 379, 387 (1958). Where the meaning of a contract provision is "uncertain or ambiguous and depends upon parol evidence admitted in aid of interpretation, however, the meaning of the doubtful provision should be left to the jury." Garden State Buildings v. First Fidelity Bank, 305 N.J. Super. 510, 525 (App.Div. 1997) (quoting Michaels, 26 N.J. at 387). On a motion to dismiss, thus, the court must determine if the terms of the Agreement are unambiguous or are subject to dispute.
The Term provision in the Agreement consists of two components, a notification component and a duration component. The notification language is located at the end of the provision and requires notification "by either party, by not less than sixty days prior written notice (Certified Mail)." This requirement is unambiguous; furthermore, the Complaint and Stepan's Brief, (Def.'s Br. at 3), clearly indicate that no written notice of termination was given by Stepan when it decided to terminate the Agreement in April 2002. Plaintiff has raised a legal claim under the notification component because Stepan unilaterally breached in April 2002 without giving sixty-days notice.
This Court finds that the duration language is also unambiguous. The Agreement allows that after the initial twenty-four month term "[the contact] shall be renewed without further action by either party for a 12 month term." (See Service Agreement No. RTI-0901, Def.'s Br., Ex. A at 2) (emphasis added). Stepan argues that the Agreement calls for a single twelve month term, so that the Agreement was binding for a maximum of thirty-six months. Stepan points to the indefinite article "a" as a limitation on automatic renewals under the Agreement. RTI, on the other hand, contends that after the initial term expires, the contact renews for additional twelve-month terms as an evergreen contract because the clause continues by stating that the contract "may be terminated at the end of the initial term orany 12 month extension by either party." (See Service Agreement No. RTI-0901, Def.'s Br., Ex. A at 2) (emphasis added).
Black's Law Dictionary defines an evergreen contract as a contract that renews itself from one term to the next in the absence of contrary notice by one of the parties. Black's Law Dictionary 312 (7th ed. 1999).
This Court finds that the word "any" establishes that the parties intended that the contract last longer than one twelve-month extension if no action was taken to terminate it. Therefore, "a twelve month term" is the length of each successive term, not a limitation on the length of the whole Agreement. This Court thus finds that the Term provision allows the Agreement to remain evergreen for an indefinite number of twelve-month terms, unless written notice is given at least sixty days before termination.
Stepan urges this Court to accept an unnatural reading of the notification requirement; namely, that the sixty-day notification requirement applied to the initial twenty-four month term and the first twelve-month renewal term, but somehow expired thereafter. Moreover, the Court notes that, if Stepan was correct, the notification clause would be superfluous as to the twelve-month renewal term, since the contract would automatically expire without notice at its end. Instead, the Agreement called for sixty-days notice prior to the end of the first twelve-month extension, unambiguously implying that the Agreement renews if not terminated upon such timely notice. The notification component coexisted with the duration component, and while they are distinct, it is apparent they were drafted to be inter-related.
Additionally, Stepan's argument that if RTI had wanted an unlimited number of renewal periods, it could have expressly provided for such in the Agreement, is unavailing because the Agreement did provide for such. The Agreement could have included language fixing the term to thirty-six months, but it did not do so. By using the "any 12 month extension" language, the parties agreed that this Agreement would remain in effect indefinitely for subsequent one-year terms, unless a party timely notifies the other in writing of its intent to terminate.
The Complaint thus alleges that the present term was fixed to expire on December 31, 2002, and that Stepan was, therefore, obligated to RTI until this date. Either party could have sent a written notification to the other party sixty days prior to December 31, 2002, and therefore, been released from the Agreement. The Complaint alleges that Stepan terminated in April 2002, without giving sixty-days notice, which is contradiction to the notification component. The allegation that Stepan did not adhere to the duration requirement because Stepan terminated the contract before December 31, 2002, states a claim for breach on contract upon which relief may be granted.
Stepan's brief indicates that this allegation will be disputed if the case is not dismissed upon the present motion, as Stepan will seek to prove that it gave timely written notice at an earlier date during the first twelve-month extension period in 2001. (Def. Br. at 2 n. 2.)
Thus, because the Court finds that the Term provision unambiguously requires a twelve-month renewal term and sixty-days notice, plaintiff's breach of contract claim may proceed, and this Court will deny defendant's motion to dismiss.
III. CONCLUSION
For the reasons set forth above, defendant's motion to dismiss is denied. The accompanying Order is entered.
ORDER
This matter having come before the Court upon the motion of defendant Stepan Company to dismiss, pursuant to Rule 12(b)(6), Fed.R.Civ.P., [Docket Item No. 7-1], and the Court having considered the parties' written submissions; for good cause shown; and for the reasons expressed in the Opinion of today's date;
IT IS this ____ day of December, 2003 herebyORDERED that the motion to dismiss of Defendant Stepan Company, [Docket Item No. 7-1], be, and hereby is, DENIED.