Dalton v. Cellular South, Inc. (In Re Dalton)

Case: 14-60226 Document: 00512808031 Page: 1 Date Filed: 10/20/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-60226 United States Court of Appeals
Summary Calendar Fifth Circuit
FILED
October 20, 2014
In the Matter of: GREGORY SCOTT DALTON, Lyle W. Cayce
Clerk
Debtor
------------------------------
GREGORY SCOTT DALTON, doing business as Louisville Electronics,
Appellant
v.
CELLULAR SOUTH, INCORPORATED,
Appellee
Appeal from the United States District Court
for the Northern District of Mississippi
USDC No. 1:13-CV-107
Before BENAVIDES, SOUTHWICK, and COSTA, Circuit Judges.
PER CURIAM:*
*Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
Case: 14-60226 Document: 00512808031 Page: 2 Date Filed: 10/20/2014
No. 14-60226
This action involves the termination of an agency relationship between
Gregory Scott Dalton (“Dalton”) and Cellular South, Inc. (“Cellular South”).
The case was originally brought by Cellular South in the Circuit Court of
Winston County, Mississippi to seek a declaratory judgment that Cellular
South had complied with the agency agreement (“Agreement”) between Dalton
and Cellular South when it terminated the Agreement, and that it owed
nothing further to Dalton. Dalton counterclaimed for wrongful termination.
Both parties filed for summary judgment, and the court granted summary
judgment to Cellular South. On appeal, the Mississippi Supreme Court
reversed on the grounds that the Agreement was ambiguous, and remanded to
the lower court for fact-finding by a jury. Dalton then filed for bankruptcy, and
the case was removed to bankruptcy court. The bankruptcy court conducted a
bench trial and found that Cellular South had not breached the Agreement
when it terminated the Agreement, and that even if a breach had occurred,
that Dalton failed to establish a claim for damages. It granted declaratory
relief to Cellular South and dismissed Dalton’s counterclaim. The district court
affirmed the determination of the bankruptcy court. Dalton now appeals.
When reviewing the decision of a district court that sits as an appellate
court in review of a bankruptcy court, we apply “the same standards of review
to the bankruptcy court’s findings of fact and conclusions of law as applied by
the district court.” In re Gerhardt, 348 F.3d 89, 91 (5th Cir. 2003). We review
findings of fact for clear error and conclusions of law de novo. Id. While the
question of whether a contract is ambiguous is a question of law to be reviewed
de novo, a finding of fact as to the parties’ intent to resolve that ambiguity is
reviewed for clear error. See McLane Foodservice, Inc. v. Table Rock Rests.,
L.L.C., 736 F.3d 375, 377 (5th Cir. 2013). Because the Mississippi Supreme
Court found that the Agreement was ambiguous and that “[w]hether [Cellular
South] honored or breached the contract [was] a task for a jury,” Dalton v.
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Cellular South, Inc., 20 So. 3d 1227, 1233 (Miss. 2009), the question before the
bankruptcy court and district court was a factual question that we review for
clear error.
The following provisions of the Agreement are at issue in the termination
of Dalton’s agency:
3.1 Term: The term of the Agreement shall be one year,
commencing on the date specified in Exhibit D of this Agreement,
unless otherwise terminated or renewed pursuant to the
provisions hereinafter provided. Cellular [South] is cognizant of
the increasing value of the Agency relationship to a successful
AGENT and therefore will terminate a successful Agency
relationship only if Cellular [South] determines that the
continuation of the Agency relationship would be detrimental to
the overall well being [sic], reputation and goodwill of Cellular
[South].
3.3 Renewal: This Agreement shall be automatically renewed for
one-year terms unless terminated as herein provided.
3.4 Default: In the event AGENT fails to perform any of its
obligations under this Agreement and such failure continues
unremedied for a period of thirty (30) days after written notice is
given by Cellular [South] to AGENT, then Cellular [South] may
thereupon elect to cancel and terminate this Agreement, which
termination shall be effective immediately upon the expiration of
said thirty-day period.
3.5 Termination: Either party may terminate this Agreement by
giving the other party written notice of its desire to terminate at
least thirty (30) days prior to the intended date of termination.
Further, Cellular [South] shall have the right to terminate
this Agreement effective upon written notice if:
A) AGENT makes an assignment for the benefit of creditors;
B) An order for relief under Title 11 of the United States
Code is entered by any United State [sic] Court against
AGENT;
C) A trustee or receiver of any substantial part of the
AGENT’s assets is appointed by any Court; or
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D) AGENT (1) has made any material misrepresentation or
omission in its application to establish any agency
relationship with Cellular [South] or AGENT (or any
principal thereof) is convicted of or pleads no contest to a
felony or other crime of [sic] offense that is likely in Cellular
[South]’s sole opinion to adversely affect the reputation of
Cellular [South] or its affiliated companies or the goodwill
associated with the [trademarks and service marks,
symbols, and/or logos and other identifying indicia]; (2)
attempts to make an unauthorized assignment of this
Agreement; (3) receives a notice of violation of the terms or
conditions of any license or permit required by AGENT or its
employees in the conduct of AGENT’s Cellular Telephone
Service business and fails to correct such violation; (4) fails
to comply with any provision of this Agreement, or any tariff
relating to Cellular Telephone Service and does not correct
such failure within thirty (30) days after written notice of
such failure to comply is delivered to AGENT; or (5) fails to
comply with any material provisions of this Agreement, or
any tariff relating to Cellular Telephone Service, whether or
not such failures to comply are corrected after notice thereof
is delivered to AGENT.
The Mississippi Supreme Court found that these provisions conflicted with
each other and were ambiguous when read together:
Clause 3.1 calls for a one-year term and restricts the right of
[Cellular South] to terminate the agreement as to “a successful
AGENT” and “a successful Agency relationship.” Clause 3.3 allows
for automatic one-year renewals. Clause 3.5 allows either party to
terminate at will. Clause 3.4 and the unnumbered paragraph
following clause 3.5 allow [Cellular South] to terminate with cause
under certain circumstances. Thus, reasonable minds could reach
different conclusions after reading the whole contract, in
discerning the intent of the parties, while giving effect to each
separate clause.
Id. at 1233. Finding that “[o]nce a contract is found to be ambiguous, resolution
of any uncertainties will be against the drafter of the contract,” id. at 1232, the
court then found that the contract language “require[d] the use of parol or
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extrinsic evidence to determine if Dalton is eligible for 3.1 consideration, as 3.1
applies only to ‘a successful AGENT’ with ‘a successful Agency relationship’
which cannot be determined within the four corners of the contract,” id. at
1233. On this basis, the court found that the lower court had erred in holding
that the contract was unambiguous. Id. at 1235. The court also found that the
lower court had erred in granting summary judgment to Cellular South on the
basis of Cellular South’s one affidavit from its president and Chief Executive
Officer, Victor Hugo “Hu” Meena, which the court found to be “conclusory” and
“self-serving” and thus “insufficient as a basis to grant summary judgment,”
id. at 1233-34 (citing Wallace v. Tex. Tech Univ., 80 F.3d 1042, 1047 (5th Cir.
1996); Hubbard v. Wansley, 954 So. 2d 951, 965-66 (Miss. 2007); Burton v.
Choctaw Cnty., 730 So. 2d 1, 9 (Miss. 1997)), especially considering the need to
view the evidence in the light most favorable to the non-moving party at the
summary judgment stage, id. at 1234 (citing Daniels v. GNB, Inc., 629 So. 2d
595, 599 (Miss. 1993)).
Dalton argues that the bankruptcy court and district court committed
clear error by not following the rulings of the Mississippi Supreme Court. We
agree with the district court that Dalton’s interpretation of the Mississippi
Supreme Court’s ruling is incorrect. The bankruptcy court was tasked with
making a factual determination as to whether Cellular South terminated
Dalton’s agency in compliance with the Agreement. The bankruptcy court
heard evidence—including in-court testimony by Dalton and Meena—and
determined that Cellular South’s reasons for terminating its entire agency
program, including Dalton’s agency, complied with the Agreement. Unlike the
Mississippi Supreme Court, the bankruptcy court was not bound to view the
evidence in the light most favorable to Dalton. See Reeves v. Sanderson
Plumbing Prods., Inc., 530 U.S. 133, 150-51 (2000) (clarifying that making
credibility determinations and weighing evidence are not for the summary
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judgment and judgment as a matter of law stages, but rather jury functions).
Thus, it was appropriate for the bankruptcy court to consider Meena’s
affidavit, along with his testimony at trial and the other evidence presented,
to come to its conclusions.
On appeal, Dalton argues that, under Section 3.1 of the Agreement,
Cellular South could terminate his agency only if it made a determination that
a continuation of his specific agency would be detrimental to the overall well-
being, reputation, and goodwill of Cellular South. He argues that it was clear
error for the lower courts to rule in favor of Cellular South without any
evidence that his specific agency was detrimental to the overall well-being,
reputation, and goodwill of Cellular South. However, the bankruptcy court
made a determination as to the entire agency program, of which Dalton was a
part. Specifically, the court found that the decision was rooted in, inter alia,
administrative burdens of managing agents and excessive “churn” (rate of
customer loss) among customers of agents compared to customers through
company-owned stores and online outlets. Because there was a sufficient basis
for terminating the Agreement under Section 3.1, we find it inapposite that
Meena believed the Agreement was terminable at will. We find that Dalton
has not met its burden of showing that the factual findings are clearly
erroneous. See Griffin v. Mo. Pac. R.R. Co., 413 F.2d 9, 13 (5th Cir. 1969).
Because we find that there was no clear error by the district court as to
the contract interpretation issue, we need not consider the damages issue.
The district court’s decision is AFFIRMED.
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