Comtide Holdings, LLC v. Booth Creek Management Corp.

NOT RECOMMENDED FOR PUBLICATION
File Name: 09a0456n.06
No. 08-3767
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT FILED
Jul 02, 2009
LEONARD GREEN, Clerk
COMTIDE HOLDINGS, LLC,
Plaintiff-Appellant,
v. On Appeal from the United States
District Court for the Southern
BOOTH CREEK MANAGEMENT CORP., District of Ohio.
Defendant-Appellee.
/
BEFORE: RYAN, GIBBONS, and SUTTON, Circuit Judges.
RYAN, Circuit Judge. The plaintiff, Comtide Holdings, LLC, asks that we
reverse the district court’s judgment dismissing the case for failure to state an actionable
claim. We agree that the district court erred and we will reverse the judgment for the
defendant.
I.
In 2004, the defendant, Booth Creek Management Corp., contacted J. Daniel
Schmidt, the sole owner and principal of Comtide Holdings, LLC, about selling his auto
dealership in Ohio. Although Schmidt was not interested in selling his dealership, he
agreed to help Booth Creek find another dealership to buy.
On March 9, 2005, Schmidt and Booth Creek agreed in writing that if Schmidt found
a dealership within the twelve-month term of the agreement that Booth Creek later
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purchased, Booth Creek would pay Schmidt five percent of the purchase price of the
dealership. Paragraph 5 of the agreement, certainly not a model of clarity, states:
CLOSING. Broker shall receive reasonable notice of closing. The
BROKER's fee referred to in Paragraph 4 above is payable in full to the
BROKER only upon closing of the escrow/settlement account and payment
of the consideration to the SELLER, and the BROKER shall be paid his fee
when such consideration is paid, if BUYER buys from, invests in, or
manages operations for any SELLER during the term of this agreement, or
within twelve (12) months after the termination of this agreement if the
BUYER was advised of the SELLER by Broker before termination of this
agreement and before BUYER learns of such SELLER from any other
source.
(Emphasis added.)
Schmidt introduced Booth Creek to the owner of Berlin City, a New England
dealership, and negotiations between Booth Creek and Berlin City soon followed. Schmidt
alleges that Booth Creek and Berlin City agreed to the material terms of their sale by June
2005, a little over three months after the Schmidt/Booth Creek brokerage agreement was
signed. Schmidt also alleges that Booth Creek and Berlin City signed formal transaction
documents for the sale of the dealership on March 2 and March 7, 2007. On August 1,
2007, twenty-nine months after Schmidt and Booth Creek signed their brokerage
agreement, Booth Creek and Berlin City closed their deal and Booth Creek purchased
Berlin City for $86,000,000.
On August 13, 2007, Booth Creek informed Schmidt that it did not intend to pay him
a commission. Schmidt assigned his contractual rights to Comtide, which then initiated suit
in the Court of Common Pleas of Franklin County, Ohio, demanding $4,300,000, or five
percent of the $86,000,000 sale. Booth Creek removed the suit to federal court on the
basis of diversity jurisdiction and moved the district court to dismiss Comtide’s complaint
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under Fed. R. Civ. P. 12(b)(6). The district court granted the motion, and Comtide now
appeals.
II.
We review de novo the district court’s judgment granting a Rule 12(b)(6) motion to
dismiss. CBC Companies, Inc. v. Equifax, Inc., 561 F.3d 569, 571 (6th Cir. 2009).
Dismissal is appropriate when a plaintiff fails to state a claim upon which relief can be
granted. Fed. R. Civ. P. 12(b)(6). We assume the factual allegations in the complaint are
true and construe the complaint in the light most favorable to the plaintiff. Bassett v. Nat’l
Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008).
The district court held that the contractual language concerning Schmidt’s broker’s
commission clearly and unambiguously requires judgment for the defendant. Whether a
contractual term is ambiguous is a question of law, Astor v. International Business
Machines Corp., 7 F.3d 533, 539 (6th Cir. 1993), and so, we review de novo the district
court’s finding that the contractual language is clear and unambiguous, North American
Specialty Insurance Co. v. Myers, 111 F.3d 1273, 1278 (6th Cir. 1997).
We will apply Ohio contract law because a federal court sitting in diversity applies
the substantive law of the forum state. See Gahafer v. Ford Motor Co., 328 F.3d 859, 861
(6th Cir. 2003). In Ohio, a contract is ambiguous “where the language of [the] contract is
reasonably susceptible of more than one interpretation.” Brown v. Columbus All-Breed
Training Club, 789 N.E.2d 648, 653 (Ohio Ct. App. 2003). When a contract is deemed
ambiguous, the meaning of the contract—that is to say, the intent of the parties—is a
factual question ordinarily proved by extrinsic evidence. Shifrin v. Forest City Enters., Inc.,
597 N.E.2d 499, 501 (Ohio 1992).
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The district court held, and the defendant agrees, that Schmidt did not earn a
commission because under the terms of the brokerage agreement, Schmidt would be
entitled to a commission only if a deal for the purchase and sale of a dealership located
by Schmidt was closed within twenty-four months of March 9, 2005. Since the deal closed
on August 1, 2007, twenty-nine months after the brokerage agreement was entered,
Schmidt had no claim for a commission.
Schmidt’s position is that under Paragraph 5 of the brokerage agreement he is
entitled to the five percent commission as long as 1) Schmidt introduced the seller to Booth
Creek within the twelve month period of the contract, and 2) Booth Creek purchased the
dealership within twelve months after that, regardless of when the sale closed. In other
words, Schmidt interprets the term, “buys” to mean something other than “closing,” and
argues that for all intents and purposes, Booth Creek bought Berlin City before the twenty-
four-month period expired.
III.
This court’s duty is to decide whether the language of Paragraph 5 is clear and
unambiguous—that is to say, free from contrary reasonable interpretations. The district
court stated that “[t]he contract at issue is perfectly clear. . . . could not be clearer.” But
what is “perfectly clear” to the district court is hopelessly abstruse to us.
One plausible interpretation of Paragraph 5 is that the parties intended Schmidt to
have earned the commission 1) only if he introduced Booth Creek to a dealership for sale
within twelve months of March 9, 2005, 2) Booth Creek made a deal to buy the dealership,
and 3) a deal closed “the escrow/settlement account and pa[id] [] the consideration to
SELLER” within twenty-four months of March 9, 2005.
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Another reasonable interpretation is that Schmidt would have earned his
commission if he had introduced Booth Creek to a dealership/seller within twelve months
of March 9, 2005, and Booth Creek “b[ought] from, invest[ed] in, or manage[d]” that
dealership within twenty-four months of March 9, 2005. In this interpretation, Schmidt
would have earned his commission at one date, and would be entitled to receive payment
of it at a later date (closing).
It seems clear that Schmidt’s right to a commission is conditioned, at the very least,
upon Booth Creek “buy[ing]” the Berlin City dealership within twenty-four months of March
9, 2005. What is unclear, however, is what the parties intended “buy[ing]” to mean. Did
they mean the point at which an agreement to purchase the dealership was formed, or did
they instead mean the point when the deal was closed and the consideration paid? Put
differently, did they mean that Schmidt was entitled to claim a commission provided that
Booth Creek bought the Berlin City dealership within twenty-four months of March 9, 2005,
but was not entitled to actually receive it, until the closing took place; or, did they mean he
was entitled to receive his fee and was entitled to payment of the fee at the time of closing?
The language of Paragraph 5 is confusing and ambiguous. It requires interpretation
and fact finding as to what the parties intended. The purchase agreements and other
extrinsic evidence may shed some light on what the parties intended “buys from” to mean,
and what, if any, other condition applied to Schmidt’s entitlement to his fee. The district
court granted the motion to dismiss before Comtide had an opportunity to discover the
purchase agreements and depose any witnesses who might properly shed light upon the
intention of the parties.
IV.
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We hold that the contract is ambiguous as a matter of law and that the judgment as
a matter of law for the defendant was inappropriate. Consequently, we REVERSE the
district court’s judgment and REMAND for further proceedings.