Construction Interior Systems, Inc. v. Marriott Family Restaurants, Inc.

NATHANIEL R. JONES, Circuit Judge,

dissenting.

Contrary to the majority opinion, I find the disputed language in the contract ambiguous. Furthermore, I find that CIS was entitled to damages in addition to any work awarded to it by HJC. Therefore, I respectfully dissent.

Under Ohio law, an “[ajmbiguity exists only where a term cannot be determined from the four corners of the agreement or where contract language is susceptible to two or more reasonable interpretations.” Potti v. Duramed Pharmaceuticals, Inc., 938 F.2d 641, 647 (6th Cir.1991). Furthermore, as the majority indicates by citing Latina v. Woodpath Dev. Co., 57 Ohio St.3d 212 , 567 N.E.2d 262, 263-65 (1991) and Aultman Hosp. Ass’n v. Community Mut. Ins. Co., 46 Ohio St.3d 51 , 544 N.E.2d 920, 922-24 (1989), contract terms are to be given their ordinary meaning unless some other meaning is clearly evident from the face or overall content of the instrument or manifest absurdity would result.

Turning to this case,-the pertinent contract language reads as follows:

We [i.e., Howard Johnson] agree immediately to put you [i.e., CIS] on the bidders’ list for construction and rehab work. If after one year from this date you have not been the successful bidder on $300,000 worth of work, we agree to negotiate with you in good faith, subject to prevailing rates and quotes, for the performance by you of work which, together with the amount of work you may have been awarded during the prior year, would equal the sum of $300,000.

J.A., at 417.. The majority holds that this language entitled CIS to be placed on a list with no guarantee that it would ever get invited to bid on a project. As Marriott— the successor to Howard Johnson and Defendant in this case — notes, Howard Johnson’s policy was that not every contractor on the bidders’ list was solicited for bids on every project. Therefore, there were, at least conceptually speaking, two lists — we may call them the “master” and “subset” bidders’ lists. The master bidders’ list was essentially a list of all the companies that Howard Johnson would possibly deal with on construction and “rehab” work. The subset bidders’ list was a list of the contractors who actually get solicited to bid on a particular project. With Howard Johnson’s policy in mind, the contract could mean that CIS gets put on the master bidders’ list with, no guarantee that it would ever get solicited to actually bid on a project. If the first sentence of the paragraph is read in isolation, this seems to be a plausible interpretation. Presumably, a party could give valuable consideration for the right to be on the master list. The majority seems to reach this conclusion by reading this first sentence as though it is *759 unconnected from the rest of the paragraph.

The first sentence cannot be read in isolation, however. Reading the first sentence in conjunction with the rest of the paragraph leaves the indelible impression that CIS did not give valuable consideration just to be put on the master list. The language, “[i]f ... you have not been the successful bidder on $300,000 worth of work,” implies that CIS was to be given the opportunity to be a bidder on one or more projects worth $300,000. There was no way CIS could be an unsuccessful bidder without, in the first instance, being a bidder.

Based on the foregoing, CIS and Howard Johnson must have intended the contract to mean that CIS would actually get invited to bid on at least one project. Unlike the majority, I find this interpretation to be the ordinary meaning of the contract terms. Because I have indicated what I deem to be a reasonable interpretation of the contract, and because the majority has indicated what it holds to be a reasonable interpretation of the contract, I would hold that the contract is ambiguous as a matter of law.

There is a further ambiguity in the contract. What did the parties intend by the phrase, “put you on the bidders’ list”? Two interpretations of “put you on the bidders’ list” are suggested. First, the phrase could mean that CIS gets put on a list and by virtue of getting on this list, it gets to bid on all construction or “rehab” projects for which Howard Johnson solicits bids. This interpretation assumes that there is, at least conceptually, only one list that combines both the master and subset bidders’ lists. Second, the phrase could mean that CIS gets put on a list and gets to bid on projects that Howard Johnson independently decides to allow CIS to bid on. This interpretation assumes that there are really two separate lists, namely a master bidders’ and a subset bidder’s list.

The contract fails to further define “put you on the bidders’ list.” As a result, either of these two interpretations is reasonable. Therefore, I find that this phrase is ambiguous as a matter of law. 1 ’ 2

Because the jury found that “bidders’ list” meant that CIS was supposed to be allowed to bid on every construction and “rehab” project for which Marriott solicited bids, and because CIS was not allowed to bid on every project, the question then becomes, what are the appropriate damages?

The majority argues that the fact that CIS was not invited to bid in 1984 and 1985 (pursuant to a contract extension) does not establish a breach of the agreement. The majority contends that consistent with the agreement’s terms, Howard Johnson was contractually obligated to negotiate with CIS in good faith for the performance by CIS of $300,000 worth of work when CIS did not get at least $300,000 worth of work. The majority further contends that HJC, as the successor to Howard Johnson’s contractual obligations to CIS, could satisfy the $300,000 minimum amount of work as was required under the contract. It is also asserted by the majority that any damages CIS could have received were satisfied by HJC’s award of over $400,000 worth of work to CIS in 1986.

This reasoning directly follows the majority’s conclusion that the language of the contract is unambiguous. Because I find that language ambiguous, I fundamentally differ on the analytical approach taken on the relationship between Howard Johnson and CIS and how to interpret HJC’s awarding of over $400,000 worth of work to CIS in 1986.

Because the jury found the ambiguous language to mean that CIS was to have the opportunity to bid on each project, it is my view that the contract must be analyzed with that understanding. With the jury’s verdict in mind, I read Howard Johnson’s obligation to negotiate with CIS in good *760 faith for the performance by CIS of $300,-000 worth of work to mean that Howard Johnson was to negotiate with CIS if: 1) CIS was invited to bid on each project; and 2) after bidding on each project, CIS did not receive $300,000 worth of work. It seems to me that if Howard Johnson breaches one of the fundamental conditions of the contract, it does not matter whether Howard Johnson negotiates further with CIS. Because Howard Johnson did not allow CIS to bid on each project in 1984 and 1985, I would hold that Howard Johnson breached a fundamental condition of the contract.

By virtue of the breach, CIS is therefore entitled to damages from Howard Johnson for the years 1984 and 1985. I would find that the jury damage award given for the years 1984 and 1985 to be appropriate. 3 , 4

For the reasons stated herein, I would affirm.

. Because I think the paragraph is ambiguous, I would hold that the district court correctly admitted parol evidence. Rather than remaking the agreement (as the majority contends CIS is requesting), allowing parol evidence in this case helped define an otherwise undefined phrase, "bidders’ list."

. I would also find that the jury instructions on ambiguity and parol evidence were proper.

. CIS's theory of damages was based on the following formula: 1) the number of rooms refurbished from 1984 and 1985 was multiplied by the average contract price; 2) the resulting dollar figure was multiplied by the percentage of rooms on which CIS expected to be the successful bidder; and 3) the resulting dollar amount was multiplied by CIS’s percentage of profit to arrive at a final damage figure. I find CIS’s theory of damages appropriate.

. HJC’s award of over $400,000 worth of work to CIS in 1986 is separate from the damages CIS incurred because it was not invited to bid on every project in 1984 and 1985.