American Electronic Components, Inc. v. Agere Systems, Inc.

Opinions of the United
2009 Decisions States Court of Appeals
for the Third Circuit
6-15-2009
Amer Elec Components v. Agere Sys Inc
Precedential or Non-Precedential: Non-Precedential
Docket No. 08-1832
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 08-1832
___________
AMERICAN ELECTRONIC COMPONENTS, INC.,
Appellant
v.
AGERE SYSTEMS, INC.
____________________________________
On Appeal from the United States District Court
for the District of New Jersey
D.C. Civil Action No. 06-cv-04288
District Judge: Honorable Susan D. Wigenton
____________________________________
Submitted Pursuant to Third Circuit LAR 34.1(a)
April 16, 2009
Before: McKEE, SMITH, and VAN ANTWERPEN, Circuit Judges
(Opinion filed: June 15, 2009)
OPINION
SMITH, J., Circuit Judge.
This appeal presents primarily a question of contract construction. American
Electronic Components, Inc. (“AECI”) sued Agere Systems, Inc. (“Agere”) for an alleged
breach of contract. AECI claimed that it was due a commission on a sale of surplus
equipment that was owned by Agere. The District Court granted summary judgment on
behalf of Agere. For the following reasons, we will affirm.
I.
Agere, a maker of communication chips and other telecommunications equipment,
and AECI, an electronic parts distributer, entered into a three-year contract on January 1,
2001.1 The non-exclusive contract identifies AECI as a technical sales representative for,
among other things, the marketing and selling of Agere’s surplus equipment. The
contract provided that:
[Agere] may have the need to sell surplus capital equipment, as designated by
[Agere], to outside third parties. As used herein, “Surplus Capital Equipment”
or “Equipment” includes various types of semiconductor manufacturing
equipment and related sub assemblies. [Agere] shall determine what
Equipment is Surplus. . . . [AECI] agrees to act as [Agere]’s technical sales
representative in the marketing and selling of Equipment to third parties in
accordance with the terms and conditions set forth in this agreement.
Although the contract does not define the term “designate,” AECI employees
testified in their depositions that the designation process often begins with general
discussions, but that Agere eventually authorizes, in writing, AECI to sell particular
equipment. The contract also provided that Agere may use other companies to sell its
equipment, and both parties recognize that the contract allowed Agere to sell its own
equipment.
1
We note that the parties had a long-standing relationship prior to the 2001
contract.
2
As to AECI’s remuneration,2 the contract stated that: “[AECI] shall receive from
[Agere] a percentage of the complete sale price for each item of Equipment sold to a third
party by [AECI].”
The current dispute concerns whether Agere owes AECI a commission for the
2001 sale of surplus equipment from Agere’s Madrid, Spain subsidiary (“Madrid
equipment”). In June 2001, Chuck Novak, Agere’s employee responsible for the
disposition and sale of surplus equipment, informed AECI that the Madrid subsidiary was
closing, and that he (Novak) would “be in charge of,” “handle,” and “spearhead” the sale
of the subsidiary’s surplus equipment. The parties dispute whether Novak told AECI to
find buyers for the equipment or to merely inform him if anyone expressed an interest in
the type of equipment being sold in Madrid. Nevertheless, Agere sent AECI spreadsheets
that listed the Madrid equipment, and AECI employees traveled to Spain with Novak to
inspect and make a videotape of the Madrid equipment. Agere never, however, provided
written authorization for AECI to sell the Madrid equipment.
AECI subsequently referred to Agere potential purchasers for the Madrid
equipment. One particular buyer was Advanced Technology Services, Inc. (“ATSI”).
AG Semiconductor Limited (“AG”), however, ultimately purchased the Madrid
equipment. There is some uncertainty regarding the relationship between AG and ATSI,
2
The contract also provides that, in certain situations, AECI can purchase the
designated surplus equipment and then sell it to a third party. That provision is not at
issue in this case.
3
and AECI maintains that ATSI was the actual buyer due to a partnership and/or
investment relationship that it had with AG. AG’s managing director and CFO, however,
signed an affidavit stating that ATSI was not a partner of nor had an investment interest
in AG. Further, there is no dispute that Agere alone handled the sale of the Madrid
equipment to AG.
AECI nevertheless believes that it is owed a commission because: (1) it expended
substantial time and effort to find a buyer for the Madrid equipment; or alternatively (2)
Agere allegedly designated the Madrid equipment for AECI to sell and cut it out of the
deal at the last minute. AECI thus filed a complaint for breach of contract and breach of
the implied covenant of good faith and fair dealing in New Jersey state court. Agere
properly removed the case to the United States District Court for the District of New
Jersey, and after engaging in discovery, Agere moved for summary judgment. The
District Court granted the motion, finding no genuine issue of material fact. The District
Court determined that the contract required AECI to consummate the sale of the
equipment to a third party in order to be eligible for a commission. Although AECI
rendered assistance to Agere, it did not consummate the sale, and was thus not eligible for
a commission. The District Court also determined that Agere did not designate the
Madrid equipment for AECI to sell.
AECI appeals.
4
II.
We have jurisdiction pursuant to 28 U.S.C. § 1291 and exercise plenary review
over orders granting summary judgment. Elliot & Frantz, Inc. v. Ingersoll-Rand Co., 457
F.3d 312, 318 (3d Cir. 2006). We will affirm such orders if our review reveals that
“‘there is no genuine issue of material fact and that the moving party is entitled to
judgment as a matter of law.’” Id. (quoting Fed. R. Civ. P. 56(c)). A material fact is one
that would affect the outcome of the lawsuit, and a dispute is genuine if “evidence exists
from which a rational person could conclude that the position of the person with the
burden of proof on the disputed issue is correct.” Clark v. Modern Group Ltd., 9 F.3d
321, 326 (3d Cir. 1993).
Because the contract between Agere and AECI is written, we are bound by its
terms, and our role is to “enforce [the contract] as written and not to make a better
contract for either of the parties.” Vanguard Telecomms., Inc. v. S. New England Tel.
Co., 900 F.2d 645, 651 (3d Cir. 1990) (quoting Klacik v. Kovacs, 268 A.2d 305, 307 (N.J.
Super. Ct. App. Div. 1970)) (internal quotation marks omitted).3 Nevertheless, in
determining whether any of the contract’s terms are ambiguous, we may, in addition to
reviewing the language of the contract, consider “the conduct of the parties that reflects
their understanding of the contract’s meaning.” Teamsters Indus. Employees Welfare
3
It is undisputed that New Jersey substantive law applies in this case. See
Cooper Labs., Inc. v. Int’l Surplus Lines Ins. Co., 802 F.2d 667, 672 (3d Cir. 1986).
5
Fund v. Rolls-Royce Motor Cars, Inc., 989 F.2d 132, 135 (3d Cir. 1993).
As the District Court determined, the contract clearly sets forth when AECI is
owed a commission: when AECI consummated a sale of equipment that was designated
by Agere. Thus, only factual disputes bearing on issues embedded in that statement are
material. No such disputes exist here.
AECI argues that summary judgment is not appropriate because the parties dispute
whether: (1) Chuck Novak told AECI to “find a buyer” for the Madrid equipment; (2)
AECI expended substantial effort to find a buyer for the equipment; and (3) AECI found
the company that ultimately bought the equipment. That AECI concentrates on these
disputes is unsurprising, as it claims that it acted as Agere’s broker and is thus owed a
commission for merely finding a buyer for the Madrid equipment. This argument is
unavailing, as the contract specifically identifies AECI as a “technical sales
representative” and limits AECI’s entitlement to a commission to situations where it
actually sold the designated equipment. Holding that the contract gave AECI a right to
commissions for finding a buyer “would require us to enlarge our role from contract
construction to contract reformation, a role we decline to assume under the facts of this
case.” Vanguard, 900 F.2d at 651-52. Thus, whether Chuck Novak told AECI to find a
buyer, and whether AECI expended resources to—and did in fact—find a buyer for the
Madrid equipment, are not material to whether AECI is owed a commission.
The record also supports the District Court’s determination that Agere did not
6
designate the Madrid equipment for AECI to sell. AECI argues that Agere implicitly
designated the equipment through its actions. The contract does not define “designate,”
but there is no dispute that it is Agere’s practice to designate in writing its surplus
equipment for AECI to sell. See Teamsters, 989 F.2d at 135 (stating that courts may look
at course of performance to interpret a contract). AECI concedes that Agere did not “sign
off” on the designation of the Madrid equipment for sale. It thus cannot be genuinely
disputed that Agere did not designate the Madrid equipment.
Finally, there is not sufficient evidence for a reasonable jury to conclude that
Agere should be required to pay AECI a commission because Agere improperly
prevented AECI from fulfilling the contract’s condition precedent—consummating the
sale. AECI correctly asserts that a party may not escape contractual liability by relying on
the failure of a condition precedent where the party wrongfully prevented the
performance of that condition. See Creek Ranch, Inc. v. N.J. Tpk. Auth., 383 A.2d 110,
116 (N.J. 1978). The record does not support this conclusion here, especially as Agere
never designated the Madrid equipment for AECI to sell, and because Chuck Novak of
Agere told AECI that he would be handling the sale of the equipment. The facts that
AECI located potential buyers for the Madrid equipment and that Agere eventually sold
the equipment do not lead to the inference that Agere engaged in some sort of subterfuge
to prevent AECI from earning a commission. Further, the non-exclusive contract allows
7
Agere to sell its own equipment.4
For the reasons stated above, we will affirm the District Court’s order granting
summary judgment on behalf of Agere.
4
Based on the conclusions reached above, we also find that summary
judgment was appropriate on AECI’s claim for breach of the implied covenant of good
faith and fair dealing.
8