IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
August 17, 2011
GLOBAL ENERGYCONSULTANTS, LLC,
HOLTEC INTERNATIONAL, INC., ET AL, DEFENDANTS.
The opinion of the court was delivered by: Eduardo C. Robreno, J.
On December 16, 2008, Plaintiff Global Energy Consultants LLC ("GEC"
or "Plaintiff") initiated this action against Defendants Holtec
Manufacturing, Inc. and Holtec Manufacturing Division, Inc. ("Holtec"
or "Defendant"),*fn1 asserting claims of breach of
contract arising out of Holtec's alleged breach of a non-circumvention
agreement between the parties. Defendant brings a Partial Motion for
Summary Judgment as to Plaintiff's remaining claims.*fn2
For the reasons set forth below, the Court will grant
Defendant's Motion for Partial Summary Judgment.
In September of 2001, GEC approached Holtec with an invitation to join a team that GEC was creating to pursue spent nuclear fuel ("SNF") storage projects in Europe. (Plf.'s Part. Mot. Summ. J., Ex. 1 (Letters from GEC to Defendants).) Before learning the details of this invitation, GEC had Holtec sign confidentiality and non-circumvention agreements ("Agreement"). (Plf.'s Part. Mot. Summ. J., Ex. 2 (Letter from Defendant and GEC).) Pursuant to the contract GEC would provide information, concepts, and ideas: to assist the parties in their evaluation of a possible business relationship with each other related to various possible businesses, and arrangements; and during the conduct of such business resulting from said evaluations or other considerations...
(Diehl Decl. Ex. 8.) The Agreement also included a noncircumvention clause:
Each party acknowledges that Holtec and GEC may be in similar businesses, and are not constrained by this Agreement with respect to other business activities except solely to the extent of the express prohibitions contained herein. Each party further agrees to not circumvent the other party, or to circumvent the other party to the other party's clients without written authorization. (Id. at ¶ 8.)
Following the signing of the Agreement, GEC sent to Holtec a brief overview of the proposal and an "Executive Summary" of GEC's Business Plan. (Plf.'s Part. Mot. Summ. J., Ex. 3.) Mr. Thomas Jones, President of GEC, explained to Holtec that he had developed a concept of an international SNF storage facility with an initial focus on three countries, including Ukraine and Switzerland. However, GEC's plan for an international SNF storage facility did not ultimately materialize.
GEC alleges that Holtec used the information that GEC provided, as well as GEC's contacts and efforts to obtain contracts for SNF storage within Ukraine and Switzerland. GEC alleges that these actions are a breach of their Agreement.
In Defendant's Partial Motion for Summary Judgment, Defendant argues that it is entitled to judgment as a matter of law because the parties' Agreement is unenforceable. (See generally Def. Part. Mot. Summ. J., Docket No. 56.) Plaintiff responds that the Agreement is enforceable because it is not ambiguous or indefinite. (See generally Plf.'s Resp., Docket No. 94.) For the reasons below, Defendant's Partial Motion for Summary Judgment will be granted because the parties' Agreement is unenforceable as a matter of law.
1. Motion for Summary Judgment under Rule 56 Summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). "A motion for summary judgment will not be defeated by 'the mere existence' of some disputed facts, but will be denied when there is a genuine issue of material fact." Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir. 2009) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)). A fact is "material" if proof of its existence or nonexistence might affect the outcome of the litigation, and a dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248.
In undertaking this analysis, the court views the facts in the light most favorable to the nonmoving party. "After making all reasonable inferences in the nonmoving party's favor, there is a genuine issue of material fact if a reasonable jury could find for the nonmoving party." Pignataro v. Port Auth. of N.Y. & N.J., 593 F.3d 265, 268 (3d Cir. 2010) (citing Reliance Ins. Co. v. Moessner, 121 F.3d 895, 900 (3d Cir. 1997)). While the moving party bears the initial burden of showing the absence of a genuine issue of material fact, meeting this obligation shifts the burden to the nonmoving party who must "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 250.
2. The Non-Circumvention Provision is Indefinite And Therefore Unenforceable Under the Terms of the Agreement.
Under the terms of the Agreement, Massachusetts substantive law applies. (Diehl Decl. Ex. 1 ¶ 7.) "To state a claim for breach of contract under Massachusetts law, a plaintiff must allege, at a minimum, that there was a valid contract, that the defendant breached its duties under the contractual agreement, and that the breach caused the plaintiff damage." Guckenberger v. Boston Univ., 957 F. Supp. 306, 316 (D. Mass. 1997) (citing Loranger Const. Corp. v. E.F. Hauserman, Co., 294 N.E.2d 453, 454 (Mass. App. Ct. 1973)). "Plaintiffs have the burden of proving the existence of a contract." Moore v. La-Z-Boy, Inc., 639 F. Supp. 2d 136, 140 (D. Mass. 2009) (citing Canney v. New England Tel. & Tel. Co., 228 N.E.2d 723 (Mass. 1967)). "Whether a purported contract contains the necessary elements for enforceability is (ordinarily) a question of law reserved for the court." Moore, 639 F. Supp. 2d at 140 (quoting Schwanbeck v. Federal-Mogul Corp., 592 N.E.2d 1289 (Mass. 1992)).
"It is axiomatic that to create an enforceable contract, there must be an agreement between the parties on the material terms of that contract, and the parties must have a present intention to be bound by that agreement." Situation Mgmt. Sys., Inc. v. Malouf, Inc., 724 N.E.2d 699 (Mass. 2000); see also Moore, 639 F. Supp. 2d at 140. "All of the essential terms of a contract must be sufficiently definite so that the nature and extent of the obligations of the parties can be ascertained. However, a contract is not to be held unenforceable 'if, when applied to the transaction and construed in the light of the attending circumstances,' the meaning can be ascertained with reasonable certainty." Simons v. American Dry Ginger Ale Co., 140 N.E.2d 649 (Mass. 1957) (quoting Cygan, 96 N.E.2d 702 (Mass. 1951)); see also Cape Oil Delivery, Inc. v. Hayes, 20 Mass. L. Rep. 469 (Mass. Super. Ct. 2005). Although "unspecified terms will not necessarily preclude the formation of a binding contract," Situation Mgmt., 724 N.E.2d 699, "[i]t is essential to the existence of a contract that its nature and the extent of its obligations be certain. This rule has been long established," Caggiano v. Marchegiano, 99 N.E.2d 861 (Mass. 1951).
Further, in "the leading case of [Cygan], the court said '[a] contract is not to be struck down because one of its material provisions is stated in broad and general terms if, when applied to the transaction and construed in the light of the attending circumstances, the meaning to be attributed to it can be interpreted with reasonable certainty so that the rights and obligations of the parties can be fixed and determined.'" United Liquors, Inc. v. Carillon Importers, Ltd., 893 F.2d 1, 2 (1st Cir. 1989) (quoting Cygan, 96 N.E.2d at 703). "While in some cases, it is appropriate for the court to supply a missing term negotiated by the parties, but mistakenly omitted from their agreement, it may do so only when the terms of the contract are otherwise unambiguous." Moore, 639 F. Supp. 2d at 141 (citing Diamond Crystal Brands, Inc. v. Backleaf, LLC, 803 N.E.2d 744 (Mass. App. Ct. 2004)).
"'The difficulty here is that the [agreement] sued on is silent as to material matters important in its interpretation for the ascertainment of the obligations of the parties . . . . Many of the essential terms necessarily involved in the proposed undertaking are not set forth and without them no enforceable contract is shown.'" Moore, 639 F. Supp. 2d at 141 (quoting Geo. W. Wilcox, Inc. v. Shell E. Petroleum Prods., Inc., 186 N.E. 562 (Mass. 1933)). "Construction and enforcement of the agreement without these essential terms would be futile, and [the court] cannot supply these provisions without writing a contract for the parties which they themselves did not make." Moore, 639 F. Supp. 2d at 141 (quoting Held v. Zamparelli, 431 N.E.2d 961 (Mass. App. Ct. 1982)).
"[I]nchoate language, which both anticipates a final agreement and is imperfect in material respects, fails to bind the parties." Jones v. Consol. Rail Corp., 597 N.E.2d 1375 (Mass. App. Ct. 1992); see Buker v. Nat'l Mgmt. Corp., 448 N.E.2d 1299 (Mass. App. Ct. 1983) (defendant's oral promise to "work things out" was too vague to form a contract); Moore, 639 F. Supp. 2d at 141 (citing Brookhaven Hous. Coal. v. Solomon, 583 F.2d 584, 593-94 (2d Cir. 1978) (town's promise to "provide whatever programs would be necessary" unenforceable for lack of specificity)); Cabot Corp. v. AVX Corp., 863 N.E.2d 503 (Mass. 2007) (a "contract" to purchase an unspecified amount of goods is "not a contract at all"); PSMG Int'l, Inc. v. Nodine's Smokehouse, Inc., 2009 U.S. Dist. LEXIS 102296, 9-10 (D. Mass. Nov. 3, 2009)(finding that a "contract" to provide "all documentation necessary" was too vague to operate as a binding contract); United Liquors, Inc. v. Carillon Importers, Ltd., 893 F.2d 1, 2 (1st Cir. 1989) (finding that the term "longer" and "mutually agreed upon" were too indefinite to enforce a contract); but see Cygan, 96 N.E.2d at 703 (construing a contract to mean "reasonable compensation" where the terms "additional compensation" if defendants "got on their feet" was too indefinite).
Here, the non-circumvention clause in the Agreement between GEC and the Holtec Companies is indefinite. It states: "Each party further agrees not to circumvent the other party, or to circumvent the other party to the other party's clients without written authorization." (Diehl Decl. Exs. 8 and 11, ¶ 8.) Significantly, the term "circumvention" is not defined. Its meaning is also not clarified by the Agreement. There are no examples of what constitutes circumvention.
The term "circumvention" is as ambiguous as the word "necessary" which the the courts in Brookhaven and PSMG found to be too ambiguous to be enforceable as the parties' obligations were unclear under the contract. Brookhaven, 583 F.2d at 593-94; PSMG, 2009 U.S. Dist. LEXIS 102296 at 9-10. Further, a Connecticut court has considered a non-circumvention contract such as the Agreement at issue here and critically noted that the meaning of the term circumvent, without further definition, is "nebulous." See Consumer Incentive Serv. v. Memberworks, Inc., CV990362655, 2003 Conn. Super. LEXIS 3381, at *15 (Conn. Super. Ct. Dec. 8, 2003).*fn4
While the term "circumvention" is by itself indefinite, the parties' changing understanding of what constitutes "circumvention" further proves that the term is indefinite. Pittsfield & N.A.R. Corp. v. Boston & A.R. Co., 260 Mass. 390, 398 (1927) (citation omitted)(finding that "there is no surer way to find out what parties meant, than to see what they have done.") Significantly, not even GEC, who drafted the Agreement, can provide a certain and constant definition of "circumvention." GEC's representatives' testimony (Diehl Decl. Ex. 2, Jones Dep. Tr. at 112:8-113:12; 132:18-135:12; 138:21-139:2; 190:25-192:25; 248:21-249:24; 295:25-296:13; 298:5-11) and interrogatory responses (Id. Ex. 28, ¶ 5) demonstrate that GEC considered communications or negotiations by the Holtec Companies with a third party in pursuit of SNF storage opportunities in Europe to be "circumvention." (Id. Ex. 29-33.) However, in response to the Holtec Companies' summary judgment motion on the statute of limitations issue (doc. no. 33), GEC changed its definition of "circumvention." According to GEC's new understanding, the "direct contacts and negotiations [by Holtec] could not be considered circumvention." (doc. no. 48 at p. 9.)*fn5
GEC points to courts that have found non-circumvention agreements to be enforceable. However, in these cases, the meaning of circumvention and the prohibited actions were clear from the agreement. Eden Hannon & Co. v. Sumitomo Trust & Banking Co., 914 F.2d 556 (4th Cir. 1990) (finding a defendant breached the specific provision of the non-circumvention agreement by independently bidding on the Xerox program where the defendant, a potential investor of the plaintiff, signed a non-circumvention agreement which specifically required that the potential investor "not to independently purchase lease transactions" with Xerox's PAS Program "for a period equal to the term of the Purchase Agreement"); Cura Financial Services v. Electronic Payment Exchange, Inc., 2001 WL 1334188, *1 (Del.) (2001) (finding that a defendant clearly violated the non-circumvention agreement where the defendant committed, through the contract, not to "deal with Cura's confidential bank sources without Cura's permission, and would not otherwise circumvent Cura in dealing with Cura's bank sources" but subsequently forged a relationship with the plaintiff's bank, without permission from or compensation to the plaintiff).*fn6
Therefore, because the Agreement in this case is unenforceable as a matter of law, Defendant's Partial Motion for Summary Judgment will be granted.*fn7
For the reasons stated above, Defendant's Motion for Partial Summary Judgment will be granted.