The opinion
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 06-13922 June 7, 2007
________________________ THOMAS K. KAHN
CLERK
D. C. Docket No. 05-01764-CV-TWT-1
PROFITEL GROUP, LLC,
a Georgia Limited Liability Company,
Plaintiff-Counter-
Defendant-Appellant
Cross Appellee,
versus
POLYONE CORPORATION,
an Ohio corporation,
Defendant-Counter-
Claimant-Appellee
Cross Appellant.
________________________
Appeals from the United States District Court
for the Northern District of Georgia
_________________________
(June 7, 2007)
Before TJOFLAT, BLACK and EBEL,* Circuit Judges.
PER CURIAM:
ProfiTel audits telecommunications bills for corporate clients and identifies
telecommunications overcharges and billing errors. It sued PolyOne, a former
client, alleging that PolyOne received a credit from its telecommunications
company, MCI, on the basis of ProfiTel’s audit findings. ProfiTel claims that it is
thus entitled to compensation pursuant to the consulting contract both entities
signed at the onset of ProfiTel’s services. PolyOne counterclaims, alleging that
ProfiTel breached the contract because its audit services unduly burdened
PolyOne’s personnel. The district court concluded that neither party’s claims
could survive summary judgment. We conclude, however, that the court below
misinterpreted the consulting contract and erred by failing to credit evidence that
PolyOne received value from the consulting services. Because such evidence is
sufficient for ProfiTel’s claim to survive summary judgment, we REVERSE and
REMAND for further proceedings on that issue. However, we AFFIRM the
district court’s ruling that PolyOne’s counterclaim must be dismissed, because it
failed to establish causation and damages.
*
Honorable David M. Ebel, United States Circuit Judge for the Tenth Circuit, sitting by
designation.
2
I. DISCUSSION
In the fall of 2002, ProfiTel offered its services to PolyOne to identify any
billing errors against PolyOne’s volume telecommunications services contract
with MCI. ProfiTel would not bill PolyOne for these services. Instead, under a
contingency arrangement, ProfiTel would receive 50 percent of the amount of any
recovery for over-charges identified in the audit.
The parties signed a consulting agreement in July 2003 setting forth these
compensation terms. The contract also obligated PolyOne to provide the
underlying information needed for the audit and required that ProfiTel not use
PolyOne’s staff in carrying out the audit work. ProfitTel commenced work on the
audit and, in August 2003, notified PolyOne that MCI had overcharged PolyOne
by more than $1 million for domestic frame relay services. ProfiTel based that
conclusion on its position that MCI’s contract with PolyOne entitled PolyOne to
two discounts, both an express discount described in the contract and a generic
discount that MCI is obliged to apply by virtue of its tariff filings with the Federal
Communications Commission (“FCC”).
ProfiTel then drafted a letter for PolyOne to send to MCI to claim the
overcharges, based on ProfiTel’s theory that PolyOne was entitled to the
additional discount. PolyOne placed the letter on its letterhead and sent it to MCI
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on December 19, 2003. MCI denied the claim in its entirety on January 24, 2004,
asserting that no billing error had occurred. ProfiTel drafted another letter for
PolyOne to send to MCI to protest the denial, which PolyOne sent on February 18,
2004. In late April 2004, MCI sent another letter to PolyOne reiterating that the
claim was denied. PolyOne alleges that, during this time, it devoted staff
resources to ascertaining the validity of the claim, responding to requests for
information, and assisting ProfiTel.
Following MCI’s denials of the claim, ProfiTel recommended that PolyOne
file a complaint with the FCC to resolve the billing dispute. ProfiTel states that it
met with PolyOne in December 2004 to discuss a strategy for pursuing an FCC
claim, but that PolyOne told ProfiTel “for the first time” that it believed MCI’s
billings were correct and “that it was abandoning its billing error claim against
MCI.” PolyOne contends that it questioned the accuracy of ProfiTel’s audit
findings and conclusions much earlier, when ProfiTel “first presented” the alleged
billing error to PolyOne.
At the same time that ProfitTel was finalizing its audit report and preparing
to file a complaint with the FCC, a problem was developing in the three-year
volume contract between PolyOne and MCI. Sometime in the summer of 2004,
MCI alerted PolyOne that PolyOne would fail to meet its minimum usage
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obligations for the first year of the contract, which was to end July 31, 2004.
Under the contract’s terms, PolyOne would face $1 million in underutilization
penalties for that year, and if the same pattern continued, another $2 million in
penalties for the remaining two years of the contract.
MCI and PolyOne began negotiations to amend this contract. PolyOne
presented evidence that a senior vice president at MCI working on these
negotiations was unaware of PolyOne’s earlier allegations of a billing error.
PolyOne states that “[a]t no time during the negotiation of these terms did MCI or
PolyOne ever raise the ProfiTel ‘billing error’ allegation or use that allegation as a
bargaining chip.”
Nevertheless, when the new agreement between PolyOne and MCI was
finally signed in late February 2005, in addition to waiving the past penalty for
underutilization, lowering utilization requirements for future years, and raising
from 90 percent to 95 percent PolyOne’s exclusivity relationship with MCI, the
agreement included the following language releasing MCI from any billing error
claims:
Customer hereby releases, forever quitclaims, and discharges MCI . . .
from any and all claims . . . arising out of any alleged or actual billing
errors related to frame relay services provided by MCI to customer prior
to December 31, 2004 (the “Released Claims”). This release and
discharge from all claims and liabilities applies to matters now known
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and to all matters that may hereafter be discovered, if any, with respect
to the Released Claims above. After execution of this Amendment,
Customer shall thereafter be barred from bringing any charge, complaint
or other action against MCI relating to such matters.
ProfiTel Group, LLC v. PolyOne Corp., No. 1:05-CV-1764, 2006 U.S. Dist.
LEXIS 44987, at *4-5 (N.D. Ga. June 19, 2006).
On July 5, 2005, ProfiTel filed a breach-of-contract action against PolyOne,
alleging that PolyOne received valuable concessions in its contract renegotiations
with MCI as a result of the billing errors identified by ProfiTel, and thus the
concessions were a “credit” by MCI that should trigger ProfiTel’s right to
compensation under its consulting agreement with PolyOne.
PolyOne counterclaimed for breach of contract, alleging that ProfiTel had
inappropriately used PolyOne’s staff for the audit and that ProfiTel’s performance
fell below the standard of commercial reasonableness because it engaged in the
unauthorized practice of law. PolyOne claimed it was damaged by the wrongful
use of its staff because they were diverted from cost-saving initiatives that could
have been implemented earlier.
The district court, on cross-motions for summary judgment, dismissed both
parties’ claims. The court interpreted the consulting contract to require ProfiTel to
identify legally valid “billing errors” as a condition for ProfiTel receiving payment
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for services, and concluded that ProfiTel’s theory of audit recovery was not valid
under telecommunications and contract law. In the alternative, the district court
decided that even if ProfiTel had found a valid billing error, it had failed to show
that PolyOne received monies or a credit for the error. Regarding PolyOne’s
counterclaim, the district court determined that PolyOne’s alleged loss of the
opportunity to save additional money through more timely implementation of cost-
savings initiatives was simply “too speculative to establish the existence of
damages.” ProfiTel Group, 2006 U.S. Dist. LEXIS 44987, *38.
Both parties appealed.
A. Interpretation of the Term “Billing Error” in the Consulting Contract
The interpretation of a contract is a question of law we review de novo.
Daewoo Motor Am., Inc. v. Gen. Motors Corp., 459 F.3d 1249, 1256 (11th Cir.
2006). “If a contract is clear and unambiguous, then its interpretation is a matter
of law and there is no issue of fact to be determined.” Nationwide Mut. Fire Ins.
Co. v. Guman Bros. Farm, 652 N.E.2d 684, 686 (Ohio 1995) (quotation omitted).1
“The purpose of contract construction is to effectuate the intent of the parties, and
1
The parties do not dispute that Ohio law governs this interpretation, because the
consulting contract so provides.
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that intent is presumed to reside in the language they chose to employ in the
agreement.” State ex rel. Petro v. R.J. Reynolds Tobacco Co., 820 N.E.2d 910,
915 (Ohio 2004) (quotations omitted). “[C]ommon words appearing in a written
instrument are to be given their plain and ordinary meaning unless manifest
absurdity results or unless some other meaning is clearly intended from the face or
overall contents of the instrument.” Alexander v. Buckeye Pipe Line Co., 374
N.E.2d 146, 150 (Ohio 1978). “When the terms in a contract are unambiguous,
courts will not in effect create a new contract by finding an intent not expressed in
the clear language employed by the parties.” Shifrin v. Forest City Enters., Inc.,
597 N.E.2d 499, 501 (Ohio 1992).
Section 2.1 of the consulting contract between ProfiTel and PolyOne stated:
[ProfiTel’s] fee from “Audit Findings,” as defined in Section 1.1 of this
agreement, shall be 50% of all monies and/or credits for past billing
errors and non-conformance actually recovered by [ProfiTel] on behalf
of [PolyOne]. Payment of [ProfiTel’s] fee from Audit Findings is due
and payable 30 days from the date such monies or credits are recovered
or realized by [PolyOne]. . . . For an abundance of clarity, [ProfiTel] will
receive a percentage only of recoveries for past billing errors and non-
conformances; [ProfiTel] will not receive a percentage of any recoveries
on future billings.
Section 1.1 of the consulting contract states that “[p]ast billing errors and
non-conformance(s) shall be identified by [ProfiTel] to [PolyOne] and will be
defined as Audit Findings,” and further puts the term “audit findings” in context
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by stating that “[ProfiTel] will file a claim to recover any and all Audit Findings
on behalf of [PolyOne].” Therefore, the term “billing error” has no meaning
independent of the term “audit finding.”
The district court considered “billing error” to mean only those identified
amounts for which PolyOne would have a valid legal claim to recover. However,
nothing in the four corners of the consulting agreement gives rise to this
definition, nor is there any suggestion that this is what the parties intended. The
contract lacks any implication that the parties even contemplated that ProfiTel’s
audit findings would have to be “validated” in any manner other than PolyOne’s
actual recoveries due to the audit findings.
Instead, we conclude that the term “billing errors” is defined the same as
“audit findings” in this contract, and that these terms should be given their “plain
and ordinary meaning.” Alexander, 374 N.E.2d at 150. Under Section 1.1, it is
ProfiTel who has the power to identify and define audit findings. Section 2.1
provides compensation for audit findings only to the extent monies and credits are
“actually recovered.” The ready conclusion is that “billing error” here means a
finding by ProfiTel identifying an arguable billing error that proves to be a basis
for a recovery by PolyOne from MCI. There is no evidence that the parties to the
agreement intended anything other than a “plain and ordinary” commercial
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meaning to the terms “error” and “finding,” which generally would be defined as
the errors and findings an auditor or consultant identifies in the
telecommunications bills. We find no additional requirement that the validity of
the asserted error be upheld as a legally-recoverable claim in a court of law before
it qualifies as a billing error.
Therefore, the district court erred in its determination that, irrespective of
whether MCI in fact provided credits or monies to PolyOne based on ProfiTel’s
audit findings, ProfiTel’s audit findings do not identify “billing errors” because
those claims are not enforceable as a matter of law. Because we hold the term
“billing errors” in the consulting agreement requires only a recovery by PolyOne
in order to trigger a right to compensation, we reverse the district court on this
issue. On remand, the district court should focus on whether PolyOne actually
recovered credits or monies from MCI as a result of the alleged billing error
identified in ProfiTel’s audit.
B. Whether MCI-PolyOne Contract Concessions Amounted to a “Credit” to
PolyOne
The district court alternatively concluded that ProfiTel had not shown that
there was a connection between its audit findings and the concessions PolyOne
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received in its renegotiated contract with MCI. We reverse this holding as well,
because ProfiTel has put forth adequate evidence to survive summary judgment on
the issue of whether the new MCI-PolyOne contract terms amounted to a “credit”
given by MCI to PolyOne for the billing errors ProfiTel identified.
As a preliminary matter, we conclude that the term credit in the consulting
agreement between ProfiTel and PolyOne is not limited to an explicit monetary
refund by MCI. Credit is a “common word[]” that is “to be given [its] plain and
ordinary meaning,” Alexander, 374 N.E.2d at 150, and although in some contexts
this may be defined strictly in book-keeping terms, credit also is often defined as a
“deduction from an amount otherwise due.” Webster’s Third New International
Dictionary 532-33 (1981). Moreover, the fact that under the consulting agreement
ProfiTel is entitled to compensation if “credits are recovered or realized” suggests
that credits may not necessarily be money-in-hand. We need not explore the outer
limits of that language here. We conclude only that the term “credit” in the
consulting agreement is broad enough to include valuable concessions allegedly
given by MCI to PolyOne that were based on billing errors identified by ProfiTel.
ProfiTel survives summary judgment because there is a genuine factual
dispute regarding the connection between the identified billing errors and MCI’s
concessions to PolyOne. “Summary judgment should be entered only if there is no
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genuine issue as to any material fact and the moving party is entitled to a judgment
as a matter of law.” Clemons v. Dougherty County, 684 F.2d 1365, 1368 (11th
Cir. 1982) (quoting Fed. R. Civ. P. 56(c); alteration omitted). We have been clear
on how a court must address factual disputes on summary judgment:
All reasonable doubts about the facts should be resolved in favor of the
non-movant. If the record presents factual issues, the court must not
decide them; it must deny the motion and proceed to trial. Summary
judgment may be inappropriate even where the parties agree on the basic
facts, but disagree about the inferences that should be drawn from these
facts. If reasonable minds might differ on the inferences arising from
undisputed facts, then the court should deny summary judgment.
Id. at 1369 (citations omitted). “[T]he mere existence of a scintilla of evidence in
support of the non-movant’s position will be insufficient; there must be evidence
on which the jury could reasonably find for the non-movant.” Burton v. City of
Belle Glade, 178 F.3d 1175, 1187 (11th Cir. 1999) (quotation, alterations omitted).
Here, both parties moved for summary judgment on ProfiTel’s claim that
PolyOne breached the consulting contract by not paying ProfiTel for its work in
identifying billing errors. ProfiTel’s evidence that it is entitled to compensation
principally consists of: (1) the release of claims language relating to the billing
errors placed in the very contract in which the underutilization penalties were
avoided; (2) the fact that other terms of the new PolyOne-MCI contract had little
monetary value to MCI, raising an inference that the penalty waiver and release of
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billing error claims were the most valuable terms; and (3) documentation that MCI
and PolyOne representatives discussed the alleged billing errors in the context of
the underutilization concessions.2 PolyOne also has significant evidence that
there was no connection between the audit findings and MCI’s penalty waiver.
PolyOne’s evidence suggests that: (1) PolyOne unilaterally decided to abandon
the claim related to billing errors rather than use it as leverage in negotiations with
MCI; (2) MCI was prepared to waive the underutilization penalty and renegotiate
at a lower volume for future years regardless of the existence of a claim for billing
errors; and (3) MCI added the release of claims language as a mere “afterthought.”
With this universe of evidence, summary judgment is clearly inappropriate
for either party. Both parties offered more than the “mere existence of a scintilla
of evidence” required to withstand summary judgment as a non-movant. Burton,
178 F.3d at 1187. There is a “genuine issue as to [a] material fact,” Clemons, 684
F.2d at 1368, namely whether MCI’s decision to waive current and future
underutilization penalties had a connection to PolyOne’s original claim that MCI
had overcharged it for telecommunications services. “[R]easonable minds might
differ on the inferences arising from undisputed facts,” which here would include
2
Much of this evidence has been sealed due to its proprietary nature.
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the release of claims language and documented emails, so “the court should deny
summary judgment.” Id. at 1369.
In conclusion, although the district court was correct to deny ProfiTel’s
motion for summary judgment on the issue of whether PolyOne breached the
consulting agreement, it erred by granting summary judgment to PolyOne. We
reverse that holding and remand for further proceedings.3
C. Whether PolyOne’s Alleged Damages in its Counterclaim Are Too Speculative
PolyOne counterclaimed that ProfiTel breached the consulting agreement by
inappropriately using PolyOne’s staff resources to pursue the claim against MCI
and by engaging in the unauthorized practice of law. PolyOne alleged it was
damaged by delays in implementing cost-savings initiatives due to the time
PolyOne personnel spent on ProfiTel’s audit. The district court granted summary
judgment to ProfiTel, holding that PolyOne’s damages were too speculative to
3
The district court did not decide whether ProfiTel’s alleged damages – compensation
due from the consulting agreement – could be quantified under ProfiTel’s theory that PolyOne
received a credit from MCI in the form of utilization concessions. However, the court observed
that the alleged billing errors totaled around $1 million, but the value to PolyOne of MCI waiving
the underutilization penalty and setting revised volume requirements was $3.15 million.
Whether ProfiTel can quantify its damages is a matter that may have to be addressed on remand,
but it is not an issue that is presented to us on this appeal.
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support its claim, and that PolyOne had not established that any alleged breach by
ProfiTel caused such damage. We agree.
Questions of causation and damages often are addressed simultaneously in
breach-of-contract actions. “Damages must arise as a result of the breach and
must naturally and necessarily flow from the breach of contract.” Nichols v.
Chicago Title Ins. Co., 669 N.E.2d 323, 328 (Ohio Ct. App. 1995) (quotation
omitted). A claim for lost cost-savings is analogous to a claim for lost profits.
While Ohio law recognizes a claim for lost profits, it requires that the “profits
were within the contemplation of the parties at the time the contract was made, the
loss of profits is the probable result of the breach of contract, and the profits are
not remote and speculative and may be shown with reasonable certainty.” Charles
R. Combs Trucking, Inc. v. Int’l Harvester Co., 466 N.E.2d 883, 887 (Ohio 1984).
PolyOne alleges opportunity costs of $638,638 based on the money “lost”
due to the time that PolyOne spent responding to ProfiTel’s audit activities.
PolyOne’s evidence at summary judgment consisted of a PolyOne executive’s
testimony on the specific cost-savings initiatives that had been scheduled for
implementation, the duration of the delay of each, and the projected savings that
were lost during that time. PolyOne’s damages claim does not focus on the
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overhead and staff cost associated with the actual time spent reviewing ProfiTel’s
audit work, but instead sought to recover opportunity costs.
However, PolyOne’s testimony did not show that its support of the billing
errors identified by ProfiTel actually caused specific delays for particular projects,
and it did not take into account whether other factors could have caused or
contributed to the alleged implementation delays. Moreover, PolyOne makes no
distinction between staff time that would normally be spent reviewing a billing
audit conducted by an outside party such as ProfiTel and time that should have
been protected by the consulting agreement. In addition, PolyOne has assumed,
without substantiation, that staff time improperly spent on the ProfiTel audit
would have generated savings to PolyOne.
PolyOne’s evidence at the summary judgment stage was simply too flimsy
to establish that ProfiTel’s audit activities caused the asserted delays in cost-
saving initiatives, and that such delays resulted in opportunity costs of $638,638.
We affirm the district court’s dismissal of PolyOne’s counterclaim.
II. CONCLUSION
We REVERSE the district court’s decision awarding PolyOne summary
judgment on ProfiTel’s claim, and we hold that the term “billing error” in the
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consulting agreement requires only proof of a related recovery or realization of
money or credit from MCI based upon an asserted billing error identified by
ProfiTel in its audit report. We also hold that neither party was entitled to
summary judgment on the issue of whether PolyOne had breached the agreement.
We REMAND for further proceedings on ProfiTel’s claim. However, we
AFFIRM the district court’s conclusion that PolyOne’s counterclaim must fail,
because PolyOne did not present evidence that any breach by ProfiTel caused “lost
savings” damages, and because PolyOne’s asserted damages were speculative.
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