Associated/ACC International, Ltd. v. Dupont Flooring Systems Franchise Co.

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
1-12-2004
Assoc ACC Intl Ltd v. DuPont Flooring Sys
Precedential or Non-Precedential: Non-Precedential
Docket No. 03-1593
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Recommended Citation
"Assoc ACC Intl Ltd v. DuPont Flooring Sys" (2004). 2004 Decisions. Paper 1097.
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NOT PRECEDENTIAL
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 03-1593
ASSOCIATED/ACC
INTERNATIONAL, LTD,
Appellant
v.
DUPONT FLOORING SYSTEMS
FRANCHISE COMPANY, INC.;
DUPONT COMMERCIAL FLOORING
SYSTEMS INC.; DUPONT FLOORING
SYSTEMS, INC.
_________________________
On Appeal from the United States District Court
for the District of Delaware
District Judge: The Honorable Joseph J. Farnan, Jr.
(D.C. No. 99-CV-00803)
_________________________
Submitted pursuant to Third Circuit LAR 34.1(a)
on January 9, 2004
Before: BARRY and SMITH, Circuit Judges,
and POLLAK, District Judge*
(Filed: January 12, 2004)
____________________
*
The Honorable Louis H. Pollak, Senior District Judge for the Eastern District of
Pennsylvania, sitting by designation.
OPINION OF THE COURT
_____________________
SMITH, Circuit Judge.
Plaintiff Associated/ACC International, Ltd. (“Associated”) initiated this diversity
suit alleging breach of contract, tortious interference with that contract, fraud, and
defamation against DuPont Flooring Systems Franchise Co., Inc., DuPont Commercial
Flooring Systems, Inc., and DuPont Flooring Systems, Inc. (“DuPont Defendants”).1
The contract at issue was executed on September 17, 1998, establishing Associated
as a franchisee of DuPont Flooring Systems Co., Inc. Exhibit four to the franchise
agreement, titled Special Stipulations, detailed additional provisions unique to the
Associated franchisee agreement including the “Handling of Business Leads.” Under this
provision the parties agreed that
[Associated] and [DuPont Flooring Systems Franchise Co., Inc.] shall, as
set forth below, share leads that they uncover to business in these market
segments. It is not intended or expected that [Associated] or Owned
Operation shall forgo or refrain from bidding on any business they feel
competent to handle; rather, the purpose of this exchange of leads is to
insure that each client receives the best possible service from DuPont
Flooring Systems and its franchise members.
(a) All Owned Operations locations will be informed of [Associated’s]
status as a National Retail Store Specialist and will be encouraged to
inform [Associated] of leads that they uncover involving business in
this segment, with the exception of business involving relationships
strategic to its business . . . .
1
The District Court properly exercised jurisdiction pursuant to 28 U.S.C. § 1332. We
have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291.
2
An “Owned Operation” is a DuPont owned local store.
The relationship between Associated and the DuPont Defendants deteriorated and
Associated filed the present lawsuit on November 23, 1999. Associated claimed that: (1)
the DuPont Defendants breached their contract by failing to adequately encourage Owned
Operations to share leads with Associated; (2) the DuPont Defendants made fraudulent
and/or negligent misrepresentations during and prior to contract negotiations; (3) DuPont
Commercial Flooring Systems, Inc. and Dupont Flooring Systems, Inc. tortiously
interfered with the contract between Associated and DuPont Flooring Systems Franchise
Co.; and (4) Dupont Flooring Systems, Inc. defamed Associated. Defendants
counterclaimed for defamation and breach of contract, and sought to have the contract
terminated.
The DuPont Defendants filed a motion for summary judgment on all of
Associated’s claims as well as the DuPont Defendants’ counterclaims.2 The District
Court granted summary judgment in favor of the DuPont Defendants on all counts on
March 28, 2002. The District Court rejected Associated’s claim that the term
“encourage” was ambiguous and found that the DuPont Defendants had submitted
sufficient evidence to show that they had not breached their contract with Associated. In
addition, the District Court concluded that Associated’s fraudulent misrepresentation
2
Associated does not challenge on appeal the District Court’s grant of summary
judgment in favor of the DuPont Defendants’ breach of contract counterclaim. The
District Court denied the DuPont Defendants’ motion for summary judgment on their
defamation counterclaim.
3
claim could not survive summary judgment because Associated’s reliance on allegedly
fraudulent misstatements made by DuPont officials as to the definition of “encourage,”
was not justifiable in light of the unambiguous contract provision. Subsequently, the
District Court entered a final judgment order, granting the DuPont Defendants $27,154.95
in damages, plus interest at a rate of eighteen percent per annum, on January 28, 2003.3
Associated filed a timely notice of appeal on February 21, 2003.4
I.
We exercise plenary review over the District Court’s grant of summary judgment,
applying the same standard as the District Court. Kane v. BOC Group, Inc., 234 F.3d 160,
162 (3d Cir. 2000). Summary judgment is appropriate where “there is no genuine issue
as to any material fact and . . . the moving party is entitled to a judgment as a matter of
law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Fed. R. Civ. Proc. 56(c). A
genuine issue of material fact exists where the “evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986).
II.
3
The judgment awarded defendants two-thirds of their claimed $388,433.17 attorneys’
fees and costs.
4
Associated’s brief addresses only the District Court’s grant of summary judgment on
the issues of defendants’ breach of contract and fraudulent and/or negligent
misrepresentation. Our analysis is therefore limited to those issues. Laborers’ Int’l Union
of N. Am. v. Foster Wheeler Corp., 26 F.3d 375, 398 (3d Cir. 1994) (“An issue is waived
unless a party raises it in its opening brief . . . .”).
4
As the Supreme Court of Delaware explained, “[i]t is an elementary canon of
contract construction that the intent of the parties must be ascertained from the language
of the contract.” Citadel Holding Corp. v. Roven, 603 A.2d 818, 822 (Del. 1992) (citing
Myers v. Myers, 408 A.2d 279 (Del. 1979)); DuPont v. Wilmington Trust Co., 45 A.2d
510 (Del.Ch. 1946)).5 Where the language is unambiguous, the Court may not look
beyond the language of the contract. Capital Mgmt. Co. v. Brown, 813 A.2d 1094, 1097
(Del. 2002). Language is unambiguous where “a reasonable person in the position of
either party would have no expectations inconsistent with the contract language.” Eagle
Industries, Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997).
Associated contends that the term “encourage” is ambiguous because it can mean
both the meaning ascribed by the District Court–“to spur on” or “to stimulate” an
individual to act–and “to impel,” “to push,” “to force.” We disagree. A reasonable
person would expect that the term “encourage” means “to spur on” or “to stimulate.”
This is the term’s common and ordinary usage. Because we find the term to be
unambiguous, we decline to consider any extrinsic evidence regarding its meaning.
Capital Mgmt., 813 A.2d at 1097.
We then turn to the question of whether, on this definition of encourage,
defendants are entitled to summary judgment. Summary judgment must be entered
5
The parties agree that the contract is governed by Delaware law.
5
against a party who bears the burden of proof at trial but fails to establish the existence of
evidence necessary for an essential element of that case. Celotex, 477 U.S. at 322. Here,
Associated must show that defendants actually breached the contract by failing to
encourage Owned Operations to turn over business leads, applying the ordinary definition
of “encourage.” Associated asserts that the fact that it received no viable leads from
defendants is proof that the defendants did not adequately encourage its Owned
Operations to forward leads. Associated, however, did not provide any factual basis for a
connection between the lack of leads and defendants’ alleged lack of encouragement. Out
Front Prod., Inc. v. Magid, 748 F.2d 166, 172 (3d Cir. 1984)(“a party resisting the motion
cannot expect to rely merely on bare assertions, conclusory allegations or suspicions.”)
(emphasis omitted). Defendants, in contrast, put forward evidence that they did
encourage their Owned Operations to turn over leads. This consisted primarily of a
memo from the Dupont Defendants to their Owned Operations location managers,
announcing the relationship established between the DuPont Defendants and Associated.
The memo explained how and why the Owned Operations managers should turn over new
business leads to Associated. Additionally, the DuPont Defendants informed suppliers of
the new relationship, outlined the relationship in its newsletter, provided Associated a
chance to speak with defendants’ entire network, and explained the relationship between
the DuPont Defendants and Associated at their national meeting.6 Associated has
6
Federal Rule of Civil Procedure 56(a) specifically allows answers to interrogatories to
be used in support of a motion for summary judgment. We therefore reject Associated’s
6
provided no evidence which disputes these facts. The District Court’s grant of summary
judgment in defendants’ favor was therefore proper.
III.
Associated next claims that statements made by Ron Rose, President of DuPont
Flooring Systems Franchise Co., Inc., during negotiations for the contract in question
were false and fraudulently misled plaintiff as to the meaning of the term “encourage.”
Because we find the term “encourage” to be unambiguous, we reject Associated’s
fraudulent misrepresentation claim.
One element of the prima facie case for fraudulent misrepresentation is that
Associated’s reliance on the alleged misrepresentations must be justifiable reliance. Lord
v. Souder, 748 A.2d 393, 402 (Del. 2000). In light of our holding that the term
“encourage” is unambiguous, Associated’s claim must fail. We agree with the District
Court that “[i]t was unreasonable for [p]laintiff to have simply accepted Mr. Rose’s
alleged representations as to the meaning of ‘encouraged,’ when such interpretation
contradicts the meaning that an ordinary person would ascribe to it.” Because any
reliance on a novel interpretation of “encouraged” was unreasonable, Associated could
not establish a prima facie case. Lord, 748 A.2d at 402. We therefore affirm the District
Court’s grant of summary judgment in favor of the defendants on Associated’s fraudulent
misrepresentation claim. Celotex, 477 U.S. at 322.
contention that the District Court erred in relying on defendants’ answer to plaintiff’s
interrogatories. Fed. R. Civ. Proc. 56(a).
7
For the foregoing reasons, we will affirm the judgment of the District Court.
TO THE CLERK:
Please file the foregoing opinion.
By the Court,
/s/ D. Brooks Smith
Circuit Judge
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