United States Court of Appeals
For the First Circuit
No. 08-2414
AMERICAN LEASE INSURANCE AGENCY CORPORATION,
Plaintiff, Appellant,
A.I. CREDIT CONSUMER DISCOUNT COMPANY,
Third Party Defendant, Appellant,
v.
BALBOA CAPITAL CORPORATION,
Defendant/Third Party Plaintiff, Appellee,
BALBOA LIFE & CASUALTY COMPANY,
Third Party Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Michael A. Ponsor, U.S. District Judge]
Before
Torruella, Circuit Judge,
Tashima,* Senior Circuit Judge,
and Lipez, Circuit Judge.
James C. Donnelly, Jr., with whom Michael R. Christy and
Mirick, O'Connell, DeMallie & Lougee, LLP, were on brief for
appellants.
Alan A. Heller, with whom Heller, Horowitz & Feit, P.C., was
on brief for appellee Balboa Capital Corporation.
August 26, 2009
*
Of the Ninth Circuit, sitting by designation.
TORRUELLA, Circuit Judge. This diversity case involves
a set of contracts between four corporations, who all agree that
New York law governs this action. On one side is defendant-
appellee Balboa Capital Corporation ("BCC"), who provides and
finances equipment leases for small businesses, and third-party
defendant-appellee Balboa Life & Casualty Company ("Balboa Life"),1
the parent company of the insurance provider Balboa Insurance
Company ("Balboa Insurance").2 On the other side are plaintiff-
appellant American Lease Insurance ("ALI") and third-party
defendant-appellant A.I. Credit Consumer Discount Company
("AICCDC"), both of whom contracted with BCC to insure BCC's
equipment for lessees who did not have their own insurance. ALI
and AICCDC are represented by the same counsel and their positions
are united.
This case comes to us following cross-motions for summary
judgment. The district court agreed with BCC's interpretation of
the agreements at issue in this case and granted summary judgment
in its favor. After careful consideration, we reverse and remand.
1
The similarity of this name and BCC's is coincidental.
2
Neither the insurer nor the parent company submitted a brief in
this appeal.
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I. Background
A. Relevant Documents and Relationship of Parties
BCC leases commercial equipment and provides commercial
equipment lease financing services to business lessee customers
throughout the United States. Under its standard equipment lease,
BCC requires its lessees to obtain property and liability insurance
coverage on the leased equipment and designate BCC as the loss
payee and additional insured. When a lessee fails to obtain or
maintain insurance, BCC protects its property interests as owner
and lessor of the equipment by procuring insurance for the
equipment in BCC's own name and naming BCC as policy owner and sole
insured. It then bills the lessee for the insurance cost,
including premiums and a service fee.
ALI is a licensed insurance agency that provides
equipment lease insurance programs to equipment lease financing
companies such as BCC. On October 2, 2006, ALI and BCC entered
into an initial six-month lease insurance agreement ("Original
Program Agreement") which would cover existing leases and any new
leases begun after October 2, 2006. Under the agreement, ALI was
appointed to serve as BCC's "Insurance Manager," with duties
including monitoring insurance coverage on leases, communicating
with lessees, processing evidence of lessees who had obtained
alternative coverage, and issuing coverage on leases when lessees
failed to obtain their own coverage. ALI also was required in
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certain situations to cancel lease insurance, such as when a lessee
failed to pay its insurance charges or when a lessee obtained other
insurance that satisfied certain agreed-upon criteria.
In setting up the Original Program Agreement, ALI acted
as agent for Balboa Insurance, a subsidiary of Balboa Life. Balboa
Insurance was the actual issuer of the insurance policy ("Insurance
Policy") to BCC. BCC agreed to renew its agreement with ALI in
April 2007. This agreement ("Program Agreement"), effective on
April 2, 2007, is one of the central documents in this dispute.
In order to avoid the risk and expense of financing this
insurance itself, BCC also entered into a six-month agreement
("Original Finance Agreement") on October 2, 2006 to finance the
Insurance Policy through AICCDC. Under this agreement, AICCDC
would advance the insurance premiums (owed to Balboa Insurance) and
insurance manager fees (owed to ALI). These funds were gradually
recouped from the insurance charges BCC billed to its individual
lessees and then sent to AICCDC. AICCDC also received a finance
charge ("FINCO charge") as compensation. BCC, thus, did not have
to dedicate any capital to maintaining this insurance. In fact,
BCC earned money on the deal: it is designated as subcontractor in
the Program Agreement, with duties to transfer data on lessees and
bill and collect insurance charges on the covered leases, and it is
compensated for these services. In April 2007, BCC renewed its
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agreement with AICCDC. This agreement ("Finance Agreement"),
effective on April 2, 2007 as well, is also at issue in this case.
Both the Finance Agreement and the Program Agreement were
set to renew automatically at one-month intervals. But either side
could terminate without cause by providing written notice at least
ten days prior to the next renewal date.3 In the event of such
termination, however, § 21(b) of the Program Agreement provides
that:
the Insured Lessor [BCC] agrees that all
Coverage effective prior to termination shall
remain in effect with the Insurance Company
[Balboa Insurance]. The Insurance Manager
[ALI] shall not thereafter cancel Coverage
with respect to any Lease of Equipment that is
subject to Coverage at the time of termination
of this Agreement, except as provided in this
Agreement or the Insurance Policy.
Similarly, § 14 of the Finance Agreement provides that
following termination without cause, "this Agreement shall continue
in full force and effect with respect to Leases which remain
subject to Coverage at the time of termination of this Agreement."
Section V of the Insurance Policy, which is referred to
in § 21(b), sets forth basic provisions for termination and is
entitled "How Coverage May be Voided or Canceled." Section V.2
covers "How YOU [BCC] may cancel this Policy," and § V.3 covers
3
That is, ALI (in § 21(b) of the Program Agreement) or AICCDC (in
§ 14 of the Finance Agreement) could terminate without cause, and
BCC could terminate either agreement without cause.
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"How WE [Balboa Insurance] may cancel this Policy." Both sections
contain near-identical language: first, the cancelling party must,
at least ninety days in advance, send "written notice of when the
cancellation will be effective." Following cancellation, "coverage
on Covered Equipment issued prior [to] the effective date of [the]
cancellation of [this] Policy will remain in effect until
individually canceled as provided in Section V, paragraph 1 above
or until termination of each lease agreement of Covered Equipment."
Sections V.2 and V.3, respectively, refer to the
individual cancellations that are provided by § V.1, entitled "What
happens if YOUR [BCC's] LESSEE has other coverage." Because of the
timeframe of this dispute, the relevant paragraph is § V.1(b),
which covers time "Before a Loss4 [i.e. damage to, or theft of,
leased equipment], and six months or more after the date coverage
commences under this Policy." § V.1(b) provides that "If OUR Agent
[ALI] is notified" timely
that there is other specific insurance on the
individual Covered Equipment that meets all
the requirements in YOUR [BCC's] lease
agreement, as determined by YOU [BCC], OUR
[Balboa Insurance's] coverage will be canceled
as of [one of two date calculations]; and in
either case all related unearned premiums as
of such cancellation date will be refunded to
YOU [BCC].
4
According to the sixth paragraph of "Definitions" in the
Insurance Policy, "Loss" means "Theft, damage or destruction of
Covered Equipment."
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Approximately half of BCC's lessees opted to use the
default insurance system provided by the BCC-ALI-AICCDC agreements.
B. The Instant Dispute
The instant dispute was set in motion because BCC
eventually found another insurance company willing to handle the
entire insurance operation itself at a lower cost. On October 15,
2007, BCC sent ninety-day termination notices (the notice required
by the Insurance Policy) to ALI, AICCDC, and Balboa Insurance,
terminating their respective agreements effective January 15, 2008.
Apparently realizing that only ten days' notice was required under
the Program and Finance agreements, BCC then notified ALI (on
November 1) and AICCDC (on November 5) by letter that it wished to
terminate those agreements without cause. Thereafter, BCC sent ALI
1452 separate cancellation notices for each of the leases then
being managed by ALI covered under the Insurance Policy.
ALI rejected these notices and filed suit in the United
States District Court for the District of Massachusetts in late
November 2007. It later filed an amended complaint on December 10,
2007, asking for a declaratory judgment that the Program Agreement
remain in force. BCC filed a third-party action against AICCDC,
which joined the litigation and filed counterclaims in May 2008.
By informal agreement, BCC continued the Program and Finance
Agreements until April 9, 2008, when it ceased performing any
obligations under those agreements. Without BCC's subcontractor
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services, ALI claims that it was unable to continue managing
insurance and canceled insurance on the 1259 remaining covered
leases.
All three parties sought declaratory relief and claimed
breach of contract and unjust enrichment. Both sides filed summary
judgment motions and stipulated to an undisputed set of material
facts. The district court denied the summary judgment motions of
ALI and AICCDC as to all claims, and granted summary judgment in
favor of BCC, declaring that BCC had a right to cancel its existing
insurance coverage and that it was entitled to damages.5 ALI and
AICCDC appeal, claiming that the district court erred in its
interpretation of the contractual language at issue here and that
it failed to recognize and apply the implied covenant of good faith
and fair dealing.
II. Discussion
A. Standard of Review
Whether under summary judgment or a case stated,
determinations of law are reviewed de novo. See Bunch v. W.R.
Grace & Co., 555 F.3d 1, 3 & n.4 (1st Cir. 2009) (holding that in
5
There is some confusion about the exact procedure that the
district court used in ruling on the cross-motions for summary
judgment. The transcript of the summary judgment hearing indicates
that both parties may have sought to have the dispute adjudicated
as a "case stated." However, the order below seems to treat the
cross-motions as simply cross-motions for summary judgment, rather
than as a case stated. The distinction is irrelevant for our
purposes because our result depends only on matters of law.
-8-
reviewing a case stated, "[t]he district court's legal conclusions
are, of course, subject to de novo review") (citation omitted).6
"According to New York law, construction of an agreement presents
a question of law." Fleet Nat'l Bank v. Gray (In re Bankvest
Capital Corp.), 375 F.3d 51, 63 (1st Cir. 2004). Thus, we review
the issue of contract interpretation presented here de novo. See
id.
B. New York Contract Law
Although "[t]he fundamental, neutral precept of contract
interpretation is that agreements are construed in accord with the
parties' intent[,] . . . [t]he best evidence of what parties to a
written agreement intend is what they say in their writing."
Greenfield v. Philles Records, Inc., 780 N.E.2d 166, 170 (N.Y.
2002) (internal citations and quotations omitted). "A familiar and
eminently sensible proposition of law is that, when parties set
down their agreement in a clear, complete document, their writing
should as a rule be enforced according to its terms." W.W.W.
Assocs., Inc. v. Giancontieri, 566 N.E.2d 639, 642 (N.Y. 1990).
Thus, "[e]vidence outside the four corners of the document as to
what was really intended but unstated or misstated is generally
6
BCC's argues that in reviewing a case stated, we should apply a
clearly erroneous standard of review. This argument is unavailing.
We are reviewing the district court's interpretation of contractual
language, which is a legal conclusion subject to de novo review.
-9-
inadmissible to add to or vary the writing." Id. (internal
citations omitted).
In addition, when sophisticated commercial parties such
as those in this litigation include a merger clause in their
contract, its purpose "is 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." Primex
Int'l Corp. v. Wal-Mart Stores, Inc., 679 N.E.2d 624, 627 (N.Y.
1997). Even when a merger clause is present, extrinsic evidence
may still be used to shed light on the meaning of existing terms,
but such evidence is only admissible when the language of the
contract is ambiguous on its face. See R/S Assocs. v. N.Y. Job
Dev. Auth., 771 N.E.2d 240, 242-43 (N.Y. 2002). However,
"'[e]xtrinsic and parol evidence is not admissible to create an
ambiguity in a written agreement which is complete and clear and
unambiguous upon its face.'" Id. at 242 (quoting W.W.W. Assocs.,
566 N.E.2d at 639). "A contract is unambiguous if the language it
uses has a definite and precise meaning, unattended by danger of
misconception in the purport of the [agreement] itself, and
concerning which there is no reasonable basis for a difference of
opinion." Greenfield, 780 N.E.2d at 170-171 (internal citations
and quotations omitted) (alteration in original). Finally,
"[w]hether a contract is ambiguous is a question of law. . . ." S.
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Rd. Assocs. LLC, v. Int'l Bus. Machs. Corp., 826 N.E.2d 806, 809
(N.Y. 2005).7
1. ALI and BCC
At its core, the dispute between ALI and BCC centers
around the language contained in § 21(b) of the Program Agreement,
which covers termination without cause. Section 21(b) reads as
follows:
[1] Either party may terminate this Agreement
at the end of the initial term or any
successive one (1) month term without cause
upon ten (10) days' prior written notice to
the other party. [2] In the event of such
termination, the Insured Lessor [BCC] agrees
that all Coverage effective prior to
termination shall remain in effect with the
Insurance Company [Balboa Insurance]. [3] The
Insurance Manager [ALI] shall not thereafter
cancel Coverage with respect to any Lease of
Equipment that is subject to Coverage at the
time of termination of this Agreement, except
as provided in this Agreement or the Insurance
Policy.
Neither ALI nor BCC disputes that, pursuant to the first
sentence of § 21(b), BCC was allowed to terminate its agreement
with ALI without cause, as it did through its November 1, 2007
7
BCC also argues that this court should construe the Program and
Finance Agreements against their respective drafters, ALI and
AICCDC. But this rule is only applied in cases of ambiguity.
Jacobson v. Sassower, 489 N.E.2d 1283, 1284 (N.Y. 1985) ("In cases
of doubt or ambiguity, a contract must be construed most strongly
against the party who prepared it. . . ." (internal citation
omitted)). There is no ambiguity here; thus, we do not apply this
rule.
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termination letter. However, ALI and BCC dispute the legal effect
of the second and third sentences of § 21(b).
ALI argues that the second and third sentences of § 21(b)
unambiguously establish that any existing coverage would survive
termination of the Program Agreement. According to ALI, the second
sentence is addressed to BCC and prevents BCC from doing exactly
what it has done here -- it is a categorical prohibition on
cancellation of any coverage managed by ALI prior to the
termination of the Program Agreement.8 With respect to the third
sentence, ALI argues that it is addressed to ALI and "reinforces
the protection of BCC's interest by preventing ALI from cancelling
existing coverage and thereby leaving BCC uninsured in the event
the Program Agreement is terminated." ALI maintains that nothing
in the third sentence, even its references to the Insurance Policy,
alters the plain meaning of the second sentence. Further, because
the Program Agreement contains a merger clause, ALI states that we
cannot look to the Insurance Policy or other extrinsic evidence to
interpret the second sentence of § 21(b).
For its part, BCC maintains that the district court
correctly held that the Program Agreement was ambiguous and that
8
According to ALI, this makes sense: although most of ALI's work
in setting up insurance on leases comes up-front, its payment is a
"straight line" over the life of the lease as insurance premium
payments come in. These sentences, ALI maintains, protect its time
investment and ensure that it gets the benefit of its bargain, even
after BCC terminates without cause.
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the Insurance Policy supplies requisite clarification.
Alternatively, BCC argues that even if the Program Agreement is
unambiguous, it is still proper to look to the Insurance Policy
because it was recognized and incorporated by the third sentence.
With respect to the Insurance Policy, BCC argues that § V.1(b)9
allows BCC to cancel coverage for all leases "no matter how this
other coverage came about, who provided the notification or who the
named insured is or will be." Specifically, it contends that the
1452 individual cancellation notices it sent to ALI are notices
"that there is other specific insurance on the individual Covered
Equipment" which meets BCC's own criteria, as determined by BCC.10
9
As noted above, § V.1 is entitled "What happens if YOUR LESSEE
has other coverage" and § V.1(b) provides that when ALI is timely
notified
that there is other specific insurance on the individual
Covered Equipment that meets all the requirements in YOUR
[BCC's] lease agreement, as determined by YOU [BCC], OUR
[Balboa Insurance's] coverage will be canceled as of [one
of two date calculations]; and in either case all related
unearned premiums as of such cancellation date will be
refunded to YOU [BCC].
10
BCC also argues that its interpretation of § 21(b) should
prevail based on the history of the agreement. The same language
appeared in the Original Program Agreement. According to BCC, both
parties agreed that their initial relationship was a six-month
trial period, with both sides free to walk away after six months.
BCC contends that its view of the language makes more sense in this
case, because it would allow both parties to be free fairly quickly
of obligations on termination. We need not reach this question,
however -- the Original Program Agreement is extrinsic evidence for
the interpretation of the Program Agreement. As we have noted
above, "extrinsic and parol evidence is not admissible to create an
ambiguity in a written agreement which is complete and clear and
unambiguous upon its face." W.W.W. Assocs., 566 N.E.2d at 642.
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We disagree with BCC and conclude that § 21(b) of the
Program Agreement is unambiguous. By its plain terms, the second
sentence states that coverage will continue even if BCC cancels
without cause. The third sentence does not place a limit on BCC's
obligation under the second sentence; rather it is phrased as a
condition on ALI's behavior (and not BCC's) and speaks to ALI's
continuing obligation to BCC if either party were to terminate
without cause.11 Also, while BCC is correct that the Insurance
Policy is expressly incorporated by the Program Agreement, see
CooperVision, Inc. v. Intek Integration Techs., Inc., 794 N.Y.S.2d
812, 819 (N.Y. Sup. 2005) ("The well settled rule is that 'a
reference by the contracting parties to an extraneous writing for
a particular purpose makes it a part of their agreement only for
the purpose specified.'") (quoting Guerini Stone Co. v. P.J. Carlin
Constr. Co., 240 U.S. 264, 277 (1916)), the Insurance Policy's
legal effect is incorporated only to the extent that it details
particular circumstances where ALI is exempt from its obligation to
Because we find no ambiguity in the Program Agreement, we do not
consider the earlier agreement.
11
Once again, the third sentence of § 21(b) states that the
"Insurance Manager [ALI] shall not thereafter cancel
Coverage . . . except as provided in this Agreement or the
Insurance Policy." ALI is the grammatical subject.
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continue coverage post-termination as specified by third sentence
in § 21(b).12
Even if we were to consider the Insurance Policy more
broadly, BCC's reading would still fail because it contravenes the
intent of the parties as expressed by the Insurance Policy's plain
language. Specifically, § V.1 is addressed to individual lessees,
not to BCC, ALI, or Balboa Insurance.13 Further, § V contains two
separate provisions that deal with cancellation of the agreement by
BCC (§ V.2 entitled "How YOU may cancel this Policy") and by Balboa
Insurance (§ V.3 entitled "How WE may cancel this Policy").14 Under
both cancellation provisions, leases insured by Balboa Insurance
12
The Insurance Policy is an agreement between Balboa Insurance
and BCC, but ALI acts as Balboa Insurance's agent, and so has
obligations under the Policy.
13
Even without the aid of § 21(b) of the Program Agreement, the
parties' intent that § V.1 govern only individual lessees is clear
from the respective section titles of §§ V.1 and V.2. And as
mentioned above, § V.2 expressly requires that coverage prior to
cancellation will remain in effect until "individually canceled."
The phrase "individually canceled" is inconsistent with an en
masse, wholesale termination of the agreement with respect to the
1452 existing leases. The language "meets all the requirements in
YOUR [BCC] lease agreement, as determined by YOU [BCC]," as set
forth in § V.1(b) of the Insurance Policy, simply allows BCC final
say over its own insurance criteria.
14
As noted above, §§ V.2 and V.3 of the Insurance Policy both
state that following written notice of cancellation:
coverage on Covered Equipment issued prior [to] the
effective date of [the] cancellation of [this] Policy
will remain in effect until individually canceled as
provided in Section V, paragraph 1 above or until
termination of each lease agreement of Covered Equipment.
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(with ALI as agent and manager) are to continue after termination
of the overall policy. Both provisions thus contemplate a
continuation of the status quo -- just as do the Program and
Finance Agreements. This is consistent with ALI's claim that the
contracts were structured to fully compensate ALI for its front-
loaded work.15 The parties included two sections clearly designed
to cover each side's cancellation, as indicated by the titles of
each section and their language.
BCC's interpretation is especially unpersuasive when we
read § V of the Insurance Policy alongside § 21(b) of the Program
Agreement. BCC's obligations (if any) under § V.1(b) must remain
consistent with the second sentence of § 21(b). It would be
inconsistent with that sentence to allow BCC to effect 1452
individual terminations under § V.1(b), and it would frustrate the
purpose of that sentence to give BCC an alternative means of
cancellation under the Insurance Policy. Instead, it is clear that
the Insurance Policy is only referenced to ensure that ALI's
existing managerial obligations continue even after a prospective
termination.
15
BCC argues that this reading cannot be correct because it would
mean that Balboa Insurance would have to continue its coverage on
existing leases in the event that Balboa Insurance canceled the
Insurance Policy. This is a non sequitur -- ALI, as manager, would
have the same interest in being paid in full for its work,
regardless of whether BCC or Balboa Insurance canceled.
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Thus, we agree with ALI that a proper construction of the
Program Agreement and the Insurance Policy does not allow BCC to
unilaterally cancel individual insurance policies, and any existing
coverage would survive termination of the Program Agreement.
2. AICCDC and BCC
We turn next to the relationship between AICCDC and BCC.
The Finance Agreement is nominally separate from the Program
Agreement and the Insurance Policy. We construe the three
documents together because they were part of the same transaction.16
See This Is Me, Inc. v. Taylor, 157 F.3d 139, 143 (2d Cir. 1998)
(noting that "[u]nder New York law, all writings forming part of a
single transaction are to be read together" and approving jury
instruction that "New York law requires that all writings which
form part of a single transaction and are designed to effectuate
the same purpose be read together, even though they were executed
on different dates and were not all between the same parties").
The relevant provision of the Finance Agreement is § 14,
entitled "Termination." Most of the language in § 14 explicitly
covers termination for cause. It is clear that the first sentence
authorizes termination by either side without cause given ten days
notice, similar to the Program Agreement. And, similar to the
Program Agreement, § 14 of the Finance Agreement also contains a
16
Though the logic of the Finance Agreement stands on its own, we
are influenced in our reading by the other agreements.
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continuation proviso: in case of termination without cause, "this
Agreement shall continue in full force and effect with respect to
Leases which remain subject to Coverage at the time of termination
of this Agreement" ("Continuation Proviso").
The parties disagree about the effect of the lengthy
final sentence of the paragraph which provides as follows:
Whenever any party notifies the other party of
the termination of this Agreement, upon the
effective date of such termination . . . :
(a) AICCDC shall pay in immediately available
funds to Insured Lessor the unearned portion
of the Insurance Charges remitted by Insured
Lessor to AICCDC for all then existing
Coverage, and
(b) Insured Lessor shall pay to the AICCDC in
immediately available funds to the extent that
Insurance Charges are earned prior to such
date:
(i) all such Insurance Charges, less
Subcontractor Fees, collected from Lessees
prior to such date and not previously
remitted, and
(ii) all such Insurance Charges, less
Subcontractor Fees, collected on or after such
date, which shall be remitted to AICCDC
promptly upon such receipt.
That is, each party will return any unearned money and will be
entitled to any money earned up to that point.
BCC argues that, the Continuation Proviso
notwithstanding, the language of the final sentence -- "Whenever
any party notifies the other party of the termination of this
Agreement" -- controls in this case because the Agreement has been
terminated, and therefore both parties must reconcile their
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finances in accordance with the rest of the final sentence. Thus,
BCC argues, § 14 clearly contemplates a clean and simple
termination of the agreement.
Arguing against this reading, AICCDC contends that the
Continuation Proviso would be rendered meaningless under BCC's
reading of the final sentence. However, AICCDC argues that the
Continuation Proviso can be reconciled with the final sentence by
noting that the final sentence has effect only "upon the effective
date of such termination." Because the Continuation Proviso states
that "this Agreement shall continue in full force and effect with
respect to Leases which remain subject to Coverage at the time of
termination of this Agreement," there never is a termination with
respect to leases covered at the time of the overall Agreement's
termination, and the provisions of the final sentence are never
triggered. That is, AICCDC sees termination without cause under
§ 14 as prospective only, covering new leases but leaving
undisturbed existing leases.
We agree with AICCDC's reading of § 14. "In construing
a contract, one of a court's goals is to avoid an interpretation
that would leave contractual clauses meaningless." Two Guys from
Harrison-N.Y., Inc. v. S.F.R. Realty Assocs., 472 N.E.2d 315, 318
(N.Y. 1984) (internal citations omitted); see also Galli v. Metz,
973 F.2d 145, 149 (2d Cir. 1992) (noting that "[u]nder New York law
an interpretation of a contract that has the effect of rendering at
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least one clause superfluous or meaningless . . . is not preferred
and will be avoided if possible" and that "an interpretation that
gives a reasonable and effective meaning to all terms of a contract
is generally preferred to one that leaves a part unreasonable or of
no effect") (internal citations and quotations omitted); God's
Battalion of Prayer Pentecostal Church, Inc. v. Miele Assocs., LLP,
845 N.E.2d 1265, 1267 (N.Y. 2006) ("A contract should be read to
give effect to all its provisions.") (internal quotations omitted).
BCC's reading of § 14 would render the Continuation Proviso
meaningless surplusage and would call its inclusion in the document
into serious question. AICCDC's reading leaves the "Whenever"
clause with meaning: it applies in cases of termination for cause.
AICCDC's reading is also consonant with our interpretation of the
Program Agreement.
Moreover, when general language, such as the "Whenever"
clause (which on its face covers termination for or without cause)
is in conflict with more specific language, such as the
Continuation Proviso (which on its face applies only in case of
termination without cause), the specific language controls. See
Muzak Corp. v. Hotel Taft Corp., 133 N.E.2d 688, 689 (N.Y. 1956);
Bank of Tokyo-Mitsubishi, Ltd., New York Branch v. Kvaerner a.s.,
671 N.Y.S.2d 905, 910 (N.Y. App. Div. 1998) (same); see also
William Higgins & Sons, Inc. v. New York, 231 N.E.2d 285, 286 (N.Y.
-20-
1967) ("A specific provision will not be set aside in favor of a
catchall clause.").
C. Good Faith and Fair Dealing
We need not reach ALI and AICCDC's claim that BCC
breached the implied covenant of good faith and fair dealing
because under New York law it is duplicative of a breach of
contract claim. See Engelhard Corp. v. Research Corp., 702
N.Y.S.2d 255, 256 (N.Y. App. Div. 2000) ("The cause of action for
breach of the implied covenant of good faith and fair dealing was
properly dismissed as duplicative of the breach of contract
claim."); see also In re Houbigant, Inc., 914 F. Supp. 964, 989
(S.D.N.Y. 1995) ("A duty of good faith and fair dealing is implicit
in every contract. However, a breach of that duty will be
dismissed as redundant where the conduct allegedly violating the
implied covenant is also the predicate for a claim for breach of
covenant of an express provision of the underlying contract.").
III. Conclusion
For the foregoing reasons, we hold that, as a matter of
law and without reliance on any facts beyond those stipulated to by
both parties, the district court's grant of summary judgment in
favor of BCC was in error. Instead, we conclude that ALI and
AICCDC were entitled to summary judgment. We therefore reverse the
district court's ruling and remand for entry of summary judgment
and calculation of damages consistent with this opinion.
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Reversed and Remanded.
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