SCA Promotions, Incorporated v. Yahoo!, Incorporat

Case: 15-11254 Document: 00514124106 Page: 1 Date Filed: 08/21/2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 15-11254 FILED
August 21, 2017
SCA PROMOTIONS, INCORPORATED, Lyle W. Cayce
Clerk
Plaintiff - Appellant Cross-Appellee
v.
YAHOO!, INCORPORATED,
Defendant - Appellee Cross-Appellant
Appeals from the United States District Court
for the Northern District of Texas
Before STEWART, Chief Judge, and JONES and CLEMENT, Circuit Judges.
EDITH BROWN CLEMENT, Circuit Judge:
SCA Promotions, Inc. (“SCA”) brought a breach of contract suit against
Yahoo!, Inc. (“Yahoo”), alleging that Yahoo failed to pay contractual
cancellation fees. Yahoo brought various counterclaims. The district court
granted Yahoo’s motion for summary judgment and denied SCA’s motion for
summary judgment on SCA’s breach of contract claim. It granted SCA’s motion
for summary judgment and denied Yahoo’s motion for summary judgment on
all of Yahoo’s counterclaims. The district court later amended its judgment and
awarded $550,000 to Yahoo. We REVERSE the district court’s summary
judgment in favor of Yahoo as to SCA’s breach of contract claim and VACATE
the award; we also REVERSE the district court’s denial of SCA’s motion for
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summary judgment as to its breach of contract claim and RENDER judgment
in favor of SCA in the amount of $4.4 million. We REMAND for the district
court to award appropriate attorneys’ fees and interest to SCA. We DISMISS
as MOOT SCA’s appeal of the district court’s order amending the judgment.
We AFFIRM the district court’s grant of summary judgment to SCA and denial
of summary judgment to Yahoo as to Yahoo’s counterclaims.
I
Yahoo wanted to sponsor a perfect bracket contest in connection with the
2014 NCAA Men’s Basketball Tournament, with a $1 billion prize for any
contestant who correctly predicted the winner of all 63 games (“Contest”). SCA
provides risk management for marketing and prize promotions. Yahoo and
SCA negotiated terms and eventually executed Contingent Prize Contract
#70816 (“Contract”). The Contract was dated and signed by SCA on December
27, 2013; Yahoo signed the Contract on January 2, 2014. In return for a fee,
SCA agreed to pay the $1 billion prize if any contestant won the Contest and
to obtain underwriting coverage “to cover full payment of the prize
amount . . . from providers with an A.M. Best rating of A+.” Yahoo was
responsible for preparing the Contest’s Official Promotion Rules, “subject to
the Promotion underwriter’s review and approval, which shall not be
unreasonably withheld, and which shall be provided no later than January 3,
2014.” The Contract provided for 10 million entries and referred to invoices
regarding the contract fee.
Two invoices, dated December 27, 2013, were attached to the Contract
with continuous pagination. According to the second invoice, the contract fee
was $11 million. Yahoo owed an initial deposit of $1.1 million to SCA “[o]n or
before December 31, 2013”; the remaining $9.9 million was due to SCA “[o]n or
before February 15, 2014.” The Contract also provided for up to 20 million
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additional entries, with a fee of 25 cents per entry, to be separately invoiced if
incurred.
The Contract permitted Yahoo to cancel the Contract, with cancellation
fees that varied according to when Yahoo cancelled. Section 2(k) of Exhibit A
of the Contract (“Cancellation Fees Provision”) provided as follows:
Cancellation fees: Upon notice to SCA to be provided no later than
fifteen (15) minutes to Tip-Off of the initial game, Yahoo may
cancel the contract. In the event the contract is cancelled, Yahoo
will be entitled to a refund of all amounts paid to SCA subject to
the cancellation fees set forth in this paragraph. The parties hereto
stipulate that the contract shall be signed on or before December
31, 2013. Should the signed contract be cancelled after that time
and before January 15, 2014 a cancellation penalty of 25% of the
fee will be paid to SCA. Should the signed contract be cancelled
between January 16, 2014 and February 15, 2014, a cancellation
penalty of 50% of the fee will be paid to SCA by Sponsor. Should
the signed contract be cancelled after February 16, 2014, a
cancellation penalty of 75% of the fee will be paid to SCA by
Sponsor.
The Contract also contained a provision that limited the parties’ liability to
each other “to the amount of fees paid by Sponsor [Yahoo] hereunder”
(“Limitation of Liability Provision”).
Yahoo paid the initial $1.1 million deposit to SCA on January 13, 2014.
On January 21, 2014, Quicken Loans Inc. (“Quicken”) revealed that it was
sponsoring a similar $1 billion perfect bracket contest with Warren Buffett and
Berkshire Hathaway (“Quicken Contest”). Yahoo and Quicken agreed that
Yahoo would co-sponsor the Quicken Contest. Yahoo then cancelled the
Contract with SCA on January 27, 2014, demanding repayment of the $1.1
million initial deposit and “the cancellation of the . . . Contract without penalty
to Yahoo on or before February 7, 2014.”
SCA brought suit against Yahoo for breach of contract, alleging that
Yahoo owed SCA $4.4 million. It argued that Yahoo owed $5.5 million in
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cancellation fees pursuant to the Contract—50 percent of the $11 million
contract fee—minus the $1.1 million initial deposit Yahoo already paid. Yahoo
brought multiple counterclaims, alleging, among other things, that SCA
breached a previous agreement’s confidentiality provision as well as the
Contract’s requirement to obtain risk coverage.
After the close of discovery, SCA and Yahoo cross-moved for summary
judgment. The district court granted summary judgment to Yahoo and denied
summary judgment to SCA on SCA’s breach of contract claim, and it granted
summary judgment to SCA and denied summary judgment to Yahoo on all of
Yahoo’s counterclaims. The district court issued its final judgment and
dismissed all claims with prejudice.
Yahoo then moved the district court to alter or amend its judgment
pursuant to Federal Rule of Civil Procedure 60(a), arguing that the district
court made a clerical mistake by not awarding Yahoo a $550,000 refund. The
district court granted Yahoo’s motion and amended its final judgment
accordingly. SCA and Yahoo timely appealed.
II
This court reviews de novo an order granting summary judgment,
“applying the same standard as the district court.” Vela v. City of Houston, 276
F.3d 659, 666 (5th Cir. 2001). Summary judgment is appropriate “if the movant
shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.’” Fed. R. Civ. P. 56(a).
“The interpretation of a contract—including whether the contract is
ambiguous—is a question of law, which we review de novo.” McLane
Foodservice, Inc. v. Table Rock Restaurants, L.L.C., 736 F.3d 375, 377 (5th Cir.
2013) (citing Prescott v. Northlake Christian Sch., 369 F.3d 491, 495 (5th Cir.
2004)). “If the contract is ambiguous, then ‘the determination of the parties’
intent through the extrinsic evidence is a question of fact.’” Prescott, 369 F.3d
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at 495 (quoting Watkins v. Petro-Search, Inc., 689 F.2d 537, 538 (5th Cir.
1982)).
III
SCA appeals the district court’s rulings: (1) granting summary judgment
to Yahoo regarding SCA’s breach of contract claim; (2) denying summary
judgment to SCA regarding SCA’s breach of contract claim; and (3) granting
Yahoo’s Rule 60(a) motion to amend the final judgment to include a $550,000
award to Yahoo. The primary issue is the proper interpretation of the Contract
and the meaning of the Cancellation Fees Provision. We hold that SCA’s
interpretation of the Cancellation Fees Provision is reasonable, and that the
Contract is not ambiguous because Yahoo fails to provide a reasonable
alternate interpretation. We REVERSE the district court’s grant of summary
judgment to Yahoo and VACATE its award to Yahoo, REVERSE the district
court’s denial of summary judgment to SCA, and RENDER judgment in favor
of SCA on its breach of contract claim. We also DISMISS as MOOT SCA’s
appeal of the district court’s Rule 60(a) order.
Yahoo appeals the district court’s rulings regarding only two of its
counterclaims: (1) breach of the confidentiality provision in a previous
agreement; and (2) breach of the Contract’s coverage requirement. We
AFFIRM the district court’s judgment as to Yahoo’s counterclaims.
A
Because Yahoo cancelled the Contract on January 27, 2014, the
applicable clause in the Cancellation Fees Provision provides that “a
cancellation penalty of 50% of the fee will be paid to SCA by Sponsor [Yahoo].”
The parties dispute the meaning of “50% of the fee.” SCA argues that the
cancellation fee is $5.5 million because “50% of the fee” means 50 percent of
the $11 million contract fee. Yahoo argues that the cancellation fee is $550,000
because “50% of the fee” means 50 percent of the $1.1 million that Yahoo had
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already paid to SCA when Yahoo cancelled the Contract. The district court held
that Yahoo’s interpretation of the Cancellation Fees Provision is correct. We
disagree and hold that “50% of the fee” means 50 percent of the $11 million
contract fee.
The parties agree that Texas substantive law governs this dispute.
Under Texas law, we must first determine “whether the contract is enforceable
as written, without resort to parol evidence.” McLane, 736 F.3d at 377 (citing
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003)). “The primary
objective of the reviewing court is to ascertain the intentions of the parties as
expressed in the contract.” Id. (citing Lopez v. Munos, Hockema & Reed, L.L.P.,
22 S.W.3d 857, 861 (Tex. 2000)). The panel must “examine the entire contract”
to “harmonize and give effect to all of its provisions so that none will be
rendered meaningless.” Id. at 377–78 (internal quotation marks omitted)
(quoting Webster, 128 S.W.3d at 229). “No single provision taken alone will be
given controlling effect; rather, all the provisions must be considered with
reference to the whole instrument.” Webster, 128 S.W.3d at 229. “We give
[contractual] terms their plain, ordinary and generally accepted meaning
unless the instrument shows that the parties used them in a technical or
different sense.” Heritage Res., Inc. v. NationsBank, Co., 939 S.W.2d 118, 121
(Tex. 1996).
Before interpreting the meaning of “50% of the fee,” it is necessary to
determine whether the two invoices setting the contract fee and due dates are
part of the Contract. The district court determined that “the Contract’s terms
do not expressly set an $11 million fee.” According to the district court,
“[n]owhere does the Contract specify or identify the invoices, when they will be
paid, or otherwise provide that the fee is $11 million.” But the Contract
references “invoice(s)” several times, and it provides that “[t]his contract,
including exhibits and attachments, represents the entire final agreement
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between Sponsor [Yahoo] and SCA, and supersedes any prior agreement, oral
or written.” Although the Contract does not explicitly identify the invoices to
which it refers, two invoices are attached to the Contract with pagination
continuous with the rest of the Contract. The attached invoices are dated
December 27, 2013—the same date as the Contract itself and before Yahoo
signed the Contract on January 2, 2014. It is clear from the Contract’s terms
that the invoices are part of the Contract. See In re 24R, Inc., 324 S.W.3d 564,
567 (Tex. 2010) (“Documents incorporated into a contract by reference become
part of that contract.”). Accordingly, the district court’s conclusion that the
Contract does not specify an $11 million fee was in error.
It is clear to us that “50% of the fee” means 50 percent of the $11 million
contract fee. This interpretation is consistent with the plain language and
structure of the Cancellation Fees Provision, as well as with several other
provisions of the Contract.
First, the plain reading of the relevant clause is that “the fee” refers to
the “contract fee” the parties agreed to in the Contract. The Contract provides
that the contract fee was $11 million, as set forth in the second attached
invoice. The plain reading is thus that “the fee” means the $11 million contract
fee.
Second, the Cancellation Fees Provision repeatedly states that “a
cancellation penalty . . . will be paid to SCA by Sponsor [Yahoo].” If “50% of the
fee” means 50 percent of the fees already paid, there is no situation in which a
cancellation fee “will be paid” to SCA by Yahoo. Yahoo’s interpretation would
thus render this language meaningless. SCA’s interpretation would give effect
to this forward-looking language because “a cancellation penalty . . . will be
paid to SCA by Sponsor [Yahoo]” if “the fee” means the $11 million contract
fee.
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Third, SCA’s interpretation would still give meaning to the refunds
clause in the Cancellation Fees Provision. Yahoo would not have to pay
cancellation fees in addition to whatever amount it already paid. Previous
payments count towards the cancellation fees.
Finally, the Limitation of Liability Provision does not alter this
straightforward interpretation of the Cancellation Fees Provision. The
Limitation of Liability Provision generally limits the parties’ liability to each
other “to the amount of fees paid by Sponsor [Yahoo] hereunder” and is set
forth in the indemnification context. “No single provision taken alone will be
given controlling effect.” Webster, 128 S.W.3d at 229. If the Contract limits
Yahoo’s liability to whatever it already paid to SCA, the provisions imposing a
duty of payment on Yahoo are meaningless. In this context, it is sensible to
read the Limitation of Liability Provision to limit the parties’ liability “to the
amount of fees [to be] paid by Sponsor [Yahoo] hereunder.” 1 Furthermore, even
if the Limitation of Liability Provision and the Cancellation Fees Provision are
inconsistent, the more specific Cancellation Fees Provision controls. See
Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133–34 (Tex. 1994) (explaining
that a “more specific [contract] provision will control” a general contract
provision).
SCA offers a reasonably clear interpretation of the Cancellation Fees
Provision that is consistent with the Contract as a whole. Yahoo fails to provide
a reasonable alternate interpretation. We thus conclude that “the fee” in the
Cancellation Fees Provision refers to the $11 million contract fee.
1 This interpretation would also allow liability for any fees incurred if Yahoo accepted
additional entries to the contest beyond the initial 10 million. If the Contract explicitly set
$11 million as the liability limit, it would insulate Yahoo from its obligation to pay the agreed-
upon 25 cents per additional entry.
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B
The district court granted summary judgment to SCA and denied
summary judgment to Yahoo on all of Yahoo’s counterclaims. Yahoo appeals
the district court’s decision as to only two of its counterclaims: (1) its claim that
SCA breached the confidentiality provision in Yahoo’s Vendor Master Terms
and Conditions (“VMTC”); and (2) its claim that SCA breached the Contract
because it did not finalize coverage for the contest. We AFFIRM.
First, Yahoo argues that SCA breached the confidentiality provision in
the VMTC by disclosing the Contest to Buffett and Berkshire Hathaway
without first obtaining Yahoo’s authorization or binding Berkshire Hathaway
to a confidentiality agreement. The district court determined that, even if the
VMTC applied, “SCA did not violate its plain language.” We agree. Section 5
of the VMTC (“Confidentiality Provision”) prohibits disclosing “Confidential
Information” to “any person or entity.” The Confidentiality Provision defines
“Yahoo Confidential Information” as “any information . . . that is designated as
‘Confidential,’ ‘Proprietary,’ or some similar designation.” The Confidentiality
Provision also states that “[n]otwithstanding the foregoing, Yahoo Confidential
Information includes the terms of the Agreement and Yahoo Data.” Yahoo does
not argue that it designated any information confidential. 2 Yahoo argues—for
the first time on appeal—that the Concept was “Yahoo Data.” But “arguments
not raised before the district court are waived and cannot be raised for the first
time on appeal.” LeMaire v. La. Dep’t of Transp. & Dev., 480 F.3d 383, 387 (5th
Cir. 2007). SCA did not breach the Confidentiality Provision because any
information that SCA disclosed to Berkshire Hathaway was not confidential
information within the meaning of the Confidentiality Provision.
2 Yahoo argues that “SCA was aware of Yahoo’s designation of the Concept as
confidential information.” But Yahoo does not argue that it actually designated any
information confidential.
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Second, Yahoo argues that SCA breached Section 4(h) of the Contract
because it did not obtain coverage for the full prize amount. Section 4(h)
provides that:
SCA represents and warrants that it will obtain the coverage
necessary to cover full payment of the prize amount as exhibited
in this contract from providers with an A.M. Best rating of A+ and
will authorize the payment of said funds directly to Sponsor as a
loss-payee and SCA shall provide Sponsor a certificate evidencing
such designation as a loss-payee within ten calendar (10) days of
the Effective Date of this Agreement.
Ten days from the December 27, 2013 effective date of the Contract was
January 6, 2014. It is undisputed that SCA did not finalize coverage with D.
E. Shaw or another underwriter for the full prize amount by that date or before
Yahoo cancelled the Contract. But SCA was excused from this obligation. As
the district court explained, SCA’s coverage obligation was unambiguously
conditioned on Yahoo first providing the Official Promotion Rules for the
underwriter’s review and approval. SCA did not breach the Contract by failing
to finalize coverage because Yahoo did not provide the Official Promotion Rules
before it cancelled the Contract.
IV
We REVERSE the district court’s summary judgment in favor of Yahoo
as to SCA’s breach of contract claim and VACATE the award. We REVERSE
the district court’s denial of SCA’s motion for summary judgment as to its
breach of contract claim and RENDER judgment in favor of SCA in the amount
of $4.4 million. 3 We REMAND for the district court to award appropriate
attorneys’ fees and interest to SCA. We also DISMISS as MOOT SCA’s appeal
of the district court’s Rule 60(a) order. As to Yahoo’s counterclaims, we
3 We subtract Yahoo’s $1.1 million initial deposit from the $5.5 million cancellation
fee.
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AFFIRM the district court’s grant of summary judgment to SCA; we also
AFFIRM the district court’s denial of summary judgment to Yahoo.
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