Vertex Surgical, Inc. v. Paradigm Biodevices, Inc.

Not for Publication in West’s Federal Reporter
United States Court of Appeals
For the First Circuit
No. 09-1934
VERTEX SURGICAL, INC.,
Plaintiff, Appellant,
v.
PARADIGM BIODEVICES, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Douglas P. Woodlock, U.S. District Judge]
Before
Boudin, Circuit Judge,
Souter, Associate Justice,*
and Howard, Circuit Judge.
Barbara H. Kramer, with whom Mitchell A. Kramer and Kramer &
Kramer, LLP were on brief, for appellant.
Thomas E. Kenney, with whom Robert R. Pierce and Pierce &
Mandell, P.C. were on brief, for appellee.
August 4, 2010
*
The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
SOUTER, Associate Justice. The appellee Paradigm
Biodevices, Inc. does business in Massachusetts producing and
distributing medical equipment. It contracted with a Georgia
corporation, the plaintiff-appellant Vertex Surgical, Inc., to act
as a sales representative in Georgia and portions of nearby states.
The written contract had both a choice of law clause
(Massachusetts) and a forum selection provision (Massachusetts
federal court). When Paradigm terminated the agreement, Vertex
charged it with breach and sued in the district court for
Massachusetts, claiming among other things that Paradigm had
violated the Georgia Wholesale Distribution Act, Ga. Code Ann.
§§ 10-1-700 et seq., which requires payment of sales commissions
within 30 days after termination of a contract like the one in
question, and provides penalties for failure. The Act further
declares that its provisions “may not be waived,” and directs that
“the courts of this state shall not recognize any purported
waiver.” Ga. Code Ann. § 10-1-703.
Vertex moved for summary judgment on the Georgia
statutory claim, which the district court understood to depend on
whether the Georgia law “can affect the rights of the parties,
given the Agreement’s choice of Massachusetts law to govern the
terms of the Agreement.” The court concluded that it could not:
the statute “ultimately attempts to provide further regulation of
the terms set out in the Agreement” and “[s]uch regulation by
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Georgia law is barred by the Agreement’s choice to have
‘Massachusetts law exclusively . . . govern all terms of this
Agreement.’” Notwithstanding the Georgia statute’s non-waiver
provision, the district court concluded that applicable
Massachusetts choice of law rules did allow for an effective waiver
by a clause choosing the law of a state other than Georgia, and it
granted summary judgement on the point sua sponte to Paradigm. On
this de novo review, Rosario v. Dept. of Army, 607 F.3d 241, 246
(1st Cir. 2010), we think the omission of a preliminary step in the
analysis undermines the district court’s reasoning, and we thus
vacate and remand.
The court’s analysis rests on the premise that Vertex
waived the benefit of the Georgia statute by agreeing to the
contract’s choice of law provision. It relied primarily on a case
in which we construed a choice of law clause covering an
“[a]greement and the rights and obligations of the parties
[t]hereto,” Northeast Data Sys., Inc. v. McDonnell Douglas Computer
Sys. Co., 986 F.2d 607, 609 (1st Cir. 1993), thus assuming that the
provision used here extends to any issue that may arise in
litigation following a claimed breach. The parties’ choice of law
clause, however, fell short of such plenary scope.1
1
There is no question that it was proper for the district
court to determine the meaning of the contractual terms; absent a
question of extrinsic fact requiring trial (there being none raised
here), Massachusetts law treats contract construction as an issue
for the court. Teragram Corp. v. Marketwatch.com, Inc., 444 F.3d
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Both the choice of law and forum selection provisions
occurred in §25.1 of the written agreement. As for choice of law,
the parties agreed that “Massachusetts law exclusively shall govern
all terms of this Agreement, including this paragraph.”
“Agreement” is not a defined term, but its meaning is indicated by
the contract’s title, “Independent Agent Agreement,” and an
integration clause stating that “[t]his Agreement contains the
entire agreement . . . between the parties.” We therefore conclude
that “Agreement” capitalized refers to what the parties signed,
with the consequence that “terms” refers to words used in the
document, and that law “govern[ing]” them speaks to the source of
rules used to determine their meaning. Matters apart from
construing “terms” are ostensibly left alone, including any choice
of law issue about the applicability of post-breach statutory
obligations imposed by a state other than Massachusetts having an
interest in the contractual relationship of principal and sales
agent.
This reading is confirmed by contrasting the scope of the
choice of law clause (“all terms of this Agreement”) with that of
the immediately preceding forum selection clause: “all disputes in
any way relating to, arising under, connected with, or incident to
1, 9 (1st Cir. 2006).
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this Agreement.”2 Obviously, the phrase “relating to, arising
under, connected with, or incident to this Agreement” covers a lot
more ground than “terms of this Agreement,” and the textual
contrast within the one contract paragraph makes a rather forceful
case for reading “terms” as “written terms” and leaving the law
governing other issues (like statutory post-termination
obligations) untouched by the contracting parties. This reading is
also consistent with Jacobson v. Mailboxes Etc. U.S.A., Inc., 419
Mass. 572, 580 n.9, 646 N.E.2d 741, 746 n.9 (1995), in which the
Supreme Judicial Court of Massachusetts explained that a choice of
law provision stating “only that the agreement is to be governed
and construed by California law . . . does not purport to bar the
application of [Massachusetts statutory law] to the parties’
dealings.”3
2
The forum selection clause requires that all such disputes
be brought in federal district court in Boston if possible, or in
the Commonwealth’s courts if federal subject matter jurisdiction is
wanting.
3
Our own decision in Northeast Data Systems is
distinguishable for two reasons. First, as in Jacobson, the narrow
choice of law provision in the parties’ contract here “does not
state that the rights of the parties are to be governed by
[Massachusetts] law,” 419 Mass. at 580 n.9, 646 N.E.2d at 746 n.9;
see also Valley Juice Ltd., Inc. v. Evian Waters of France, Inc.,
87 F.3d 604, 612 (2d Cir. 1996). And second, Northeast Data
Systems “was concerned only with a chapter 93A claim under
Massachusetts law, which (critically) contains no anti-waiver
provision.” New England Surfaces v. E.I. Du Pont de Nemours & Co.,
546 F.3d 1, 9 (1st Cir. 2008).
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The choice of law provision here does not bar application
of the Georgia statute and therefore does not constitute a
contractual waiver by Vertex of its provision. This leaves open
the question whether a Massachusetts court would, in the absence of
a contractual waiver, recognize and enforce the Georgia statute, a
question involving Massachusetts choice of law principles and the
related questions of how it might construe and what effect it might
give to the Georgia statute’s anti-waiver provisions. Although
technically we do not defer to a district court on the meaning of
the law of the state in which it sits, we nevertheless think it
would be helpful for the district court to consider this set of
issues in the first instance, possibly aided by more complete
briefing in light of our resolution of the main issue decided by
the district court. To allow for that consideration, we vacate the
order of summary judgment for Paradigm on the Georgia statutory
claim and remand the case to the district court. Costs are taxed
in favor of Vertex Surgical, Inc.
So ordered.
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