Pickett v. Integrated Health Services, Inc. (In Re Integrated Health Services, Inc.)

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit
4-11-2007
Integrated Health v. Abe Briarwood Corp
Precedential or Non-Precedential: Non-Precedential
Docket No. 06-2279
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 06-2279
IN RE: INTEGRATED HEALTH SERVICES, INC., et al,
Debtors
C. TAYLOR PICKETT,
Appellant
v.
INTEGRATED HEALTH SERVICES, INC.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
D.C. Civil No. 04-cv-00354
District Judge: The Honorable Gregory M. Sleet
Submitted Under Third Circuit LAR 34.1(a)
March 27, 2007
Before: RENDELL, BARRY, and CHAGARES, Circuit Judges
(Filed: April 11, 2007)
OPINION
BARRY, Circuit Judge
Appellant, C. Taylor Pickett, appeals from a final order of the District Court
affirming the Bankruptcy Court’s grant of summary judgment to Integrated Health
Services, Inc. (“Integrated Health”).1 For the following reasons, we will affirm the order
of the District Court.
I.
In 1993, Integrated Health joined Caves Valley Golf Club as a corporate member.
It paid $75,000 and was issued stock certificates in the club. Pursuant to the club’s
bylaws, the stock certificates and membership cannot be sold or assigned without consent.
Pickett served as Integrated Health’s Executive Vice President and Chief Financial
Officer. According to Pickett, in recognition of his service to the company, in December
1998 Integrated Health transferred “all of its rights, title and interests in and to the
Membership” to him. Appellant’s Br. at 6. That transfer was memorialized by a March
24, 1999 memo from Robert N. Elkins, Integrated Health’s Chief Executive Officer and
President, which stated:
This memorandum confirms the agreement between you and IHS regarding
the Caves Valley membership. IHS has assigned to you all its rights, title,
and interest related to the membership. You shall remain the IHS
designated member unless you resign the membership or you are terminated
for cause. You shall be personally responsible for all dues, fees and
assessments (to the extent not paid by IHS as reimbursable business
expenses), including all capital charges assessed by Caves Valley.
I appreciate all of your continuing efforts on behalf of IHS.
1
As purchaser of the stock of Integrated Health, which filed for Chapter 11
bankruptcy in 2000, Abe Briarwood Corp. is Integrated Health’s successor-in-interest and
appellee in this action.
2
Ohio App. at 85 (“Elkins Memo”). Pickett did not take possession of the stock certificates in
the club or report the transfer as income or executive compensation.
On February 2, 2000, Integrated Health filed for relief under Chapter 11 of the
Bankruptcy Code. In its filings with the Bankruptcy Court, which were signed by Pickett
as its Chief Financial Officer, Integrated Health included the membership in Caves Valley
Golf Club as a long-term asset.
Pickett remained with Integrated Health until December 31, 2001. At that time,
Pickett and the company executed an agreement in which he “waive[d], relinquishe[d],
release[d], acquit[ted], and forever discharge[d] the IHS Group from any and all claims . .
. arising out of or in any manner connected with [his] agreements with the IHS Group up
to the date on which this Agreement is fully executed.” App. at 246 (“Letter Agreement”).
Following this parting of the ways, Pickett continued to use the golf club and pay the
annual dues required for membership. In August 2002, Integrated Health asked the club
to remove Pickett as its corporate designee.
Pickett brought this action in Bankruptcy Court seeking a declaratory judgment
that he is the owner of the membership and therefore that it is not part of Integrated
Health’s bankruptcy estate. By Opinion and Order dated January 9, 2004, the Bankruptcy
Court granted summary judgment for Integrated Health. See Pickett v. Integrated Health
Servs., Inc. (In re Integrated Health Servs., Inc.), 304 B.R. 101 (Bankr. D. Del. 2004).
The Court ruled that the Elkins Memo is ambiguous and that the evidence clearly shows
3
that the parties did not intend to assign the membership to Pickett. It found Pickett’s
remaining arguments meritless. Pickett appealed and the District Court affirmed the
Bankruptcy Court’s order.
We have jurisdiction pursuant to 28 U.S.C. §§ 158(d) and 1291. Our review of the
District Court’s order affirming the grant of summary judgment is plenary. See Rosen v.
Bezner, 996 F.2d 1527, 1530 & n.2 (3d Cir. 1993). We “may affirm the district court’s
order if, when viewing the evidence in the light most favorable to the non-moving party,
there is ‘no genuine issue as to any material fact and the moving party is entitled to
judgment as a matter of law.’ ” Reese Bros., Inc. v. United States, 447 F.3d 229, 232 (3d
Cir. 2006) (quoting Fed. R. Civ. P. 56(c)).
II.
Pursuant to Maryland law,2 the validity and scope of a purported assignment is
determined by analyzing the intent of the parties, which is done by considering what
reasonable persons in the position of the parties would have thought the language of the
agreement at issue meant. Hernandez v. Suburban Hosp. Ass’n, 572 A.2d 144, 147 (Md.
1990); James v. Goldberg, 261 A.2d 753, 757 (Md. 1970). Considering the agreement as
a whole, if that construction yields a single unambiguous interpretation, the Court must
give effect to that plain meaning. See Turner v. Turner, 809 A.2d 18, 49 (Md. Ct. Spec.
2
Applying Delaware choice of law rules, the Bankruptcy Court determined that
Maryland law should be used to determine the validity and scope of the Elkins Memo.
Neither party disputes this finding.
4
Ohio App. 2002); B & P Enters. v. Overland Equip. Co., 758 A.2d 1026, 1037 (Md. Ct. Spec.
App. 2000). If the language is susceptible to more than one construction, then the Court
may use extrinsic evidence, including the “subsequent conduct of the parties[,] as an aid
to its interpretation.” Globe Home Improvement Co. v. McCarty, 105 A.2d 216, 218 (Md.
1954); see also Solomon’s Marina, Inc. v. Rogers, 156 A.2d 432, 434 (Md.
1959); Evergreen Amusement Corp. v. Milstead, 112 A.2d 901, 903 (Md. 1955). The
Court may construe an ambiguous agreement when no disputed facts are at issue.
See Pac. Indem. Co. v. Interstate Fire & Cas. Co., 488 A.2d 486, 489 (Md. 1985);
cf. Teamsters Indus. Employees Welfare Fund v. Rolls-Royce Motor Cars, Inc., 989 F.2d
132, 137 (3d Cir. 1993).
III.
Pickett argues that the Bankruptcy Court erred in holding that the Elkins Memo is
ambiguous.3 Further, he contends that even if it were deemed to be ambiguous, the
evidence shows that the parties intended it to be an unqualified assignment of all of
Integrated Health’s interest in the club. We disagree.
First, we agree with the Bankruptcy Court that the Elkins Memo is ambiguous.4
Although, as Pickett points out, the Memo says that “IHS has assigned to you all its
3
The District Court order from which Pickett appeals simply “holds that the
bankruptcy court’s order of April 19 was the proper disposition regarding the outstanding
motions.” App. at 11.
4
Although Pickett alleges that the club membership was initially assigned to him in
December 1998, he relies solely on the Elkins Memo in support of that assignment.
5
rights, title, and interest related to the membership,” it further provides that “[y]ou shall
remain the IHS designated member unless you resign the membership or you are
terminated for cause.” App. at 85 (emphasis added). As the Bankruptcy Court pointed
out, “[w]hile the use of the word ‘assigns’ would normally indicate an intent to give away
the Membership, the phrase ‘corporate designee’ implies that there was only an intent to
allow the use of the corporate membership for a specified time,” Pickett, 304 B.R. at
107–08, especially as the Memo provides for two instances in which Integrated Health
could effectively strip Pickett of his membership rights. Given these contradictory
phrases, we find that the Elkins Memo is not susceptible to being read in an unambiguous
fashion.
Second, we agree with the Bankruptcy Court that the extrinsic evidence shows that
the parties understood the Elkins Memo as providing something other than an assignment
of all of Integrated Health’s rights in the club.
First, membership in the club is not assignable without the club’s consent.
Although this restriction is not dispositive, see Pickett, 304 B.R. at 106–07, it is certainly
a factor which weighs against reading the Elkins Memo as providing for an assignment,
especially as neither party sought the consent of the club, App. at B88–89.
The actions of both parties subsequent to the dissemination of the Elkins Memo
also clearly reveal an understanding of the Memo’s limited scope. Integrated Health
continued to include the membership as a long-term asset on its books, even in
6
bankruptcy court schedules signed by Pickett himself. Furthermore, Pickett did not take
possession of the stock certificates or list the assignment as income or executive
compensation in the company’s public filings. All of these actions and inactions show an
understanding by the parties that Integrated Health retained ownership of the club
membership following the dissemination of the Memo.5
Finally, although both parties discuss at length the effect of the Letter Agreement
on the rights conferred by the Elkins Memo, given that the Memo did not assign the rights
in the club to Pickett we see no reason to address this or related issues.6 We agree with
the Bankruptcy Court that the remainder of Pickett’s arguments are without merit.
IV.
For the foregoing reasons, we will affirm the order of the District Court.
5
Despite the strength of the evidence supporting a narrow reading of the rights
conferred by the Elkins Memo, Pickett contends that the Bankruptcy Court erred in
finding that no assignment took place. According to Pickett, the Court “ignored the only
summary judgment evidence regarding the intent of the parties to the Elkins Memo”—his
affidavit. Appellant’s Br. at 12. In that affidavit, Pickett states that the intent of the Memo
“was to permanently assign and convey to me all of IHS’s rights, title and interests in and
to the Membership, including, without limitation, all privileges and benefits thereto.”
App. at 144. The Court found this affidavit to be irrelevant because “his testimony as to a
legal conclusion . . . is [not] proper[] evidence on that point” and was, regardless, “not
compelling.” App. at B146. We find no error.
6
In his Complaint, Pickett asserts that he is the owner of the membership or,
alternatively, that Integrated Health is equitably estopped from changing its position in
this litigation. He does not assert that the Elkins Memo created contract rights which have
been subsequently breached by Integrated Health. App. at 80–82; see Pickett, 304 B.R. at
110 & n.2. We see no reason to address such arguments on this appeal.
7