UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

THE BELLA COMPANY, INC.,

Case No. 2:09-cv-11517

Plaintiff, 

v. Hon. George Caram Steeh

SALONQUEST LLC, 

Defendant.

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OPINION AND ORDER DENYING PLAINTIFF’S 

MOTION FOR PARTIAL SUMMARY JUDGMENT

This matter comes before the court on plaintiff’s motion for summary judgment (Dkt.

#48). While captioned a motion for summary judgment, the only relief requested by plaintiff

in its motion is a declaration that the agreement governing the relationship between the

parties may only be terminated as set forth in section 12 of the agreement. Thus, plaintiff

seeks a portion of the relief requested in count IV (declaratory judgment) of its complaint.

Defendant filed a response to plaintiff’s motion for summary judgment and plaintiff filed a

reply. Oral argument occurred at a hearing on November 29, 2010. For the reasons set

forth below, plaintiff’s motion for partial summary judgment is DENIED.

BACKGROUND

On May 10, 2005, plaintiff and defendant entered into a distributorship agreement

involving defendant’s line of Aquage brand salon products. The agreement provides for

plaintiff to serve as a distributor of Aquage on an exclusive basis in Michigan. Plaintiff was

a start-up company in 2004 and is owned by Richard Orrico. In reaching the terms of the

distributorship agreement, Richard Orrico represented plaintiff and Dennis Lubin
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represented defendant. Defendant drafted the agreement. Section 2 of the agreement

provides:

Term of Agreement. The term of this Agreement shall commence as of the

date this Agreement is signed by both parties and shall end four years later

on the last day of the month in which it was signed. However, unless

terminated by either party in accordance with Section 12, the term of this

Agreement shall be automatically renewed and extended for an additional

one year term at the end of the initial term and each renewal term. 

Section 12 provides:

Distributor [plaintiff] may terminate the term of this Agreement by giving

Company [defendant] written notice of termination at least thirty (30) days

prior to the effective date of termination specified in the notice. Company

may elect to make termination by Distributor effective on an earlier date than

specified by Distributor by giving Distributor written notice at least three (3)

business days prior to such earlier effective date of termination. 

Company [defendant] may terminate the term of this Agreement for Cause

by giving Distributor written notice of termination at least ninety days prior to

the effective date of termination specified in the notice...

Section 12 defines cause as (1) plaintiff’s failure to pay an invoice; (2) plaintiff’s assignment

of the agreement; (3) a change in control over plaintiff’s business; (4) plaintiff’s failure to

meet or exceed specified performance levels; (5) plaintiff’s failure to use its best efforts to

promote defendant’s products; (6) any violation of defendant’s diversion policies; (7) any

violation of defendant’s distribution policies; (8) any violation of defendant’s trademark or

copyright policies; or (9) plaintiff’s bankruptcy or insolvency.

On January 28, 2009, four months prior to the expiration of the agreement’s initial

four-year term, defendant gave plaintiff notice that it would allow the agreement to expire

on May 31, 2009. Plaintiff asserts that the notice by defendant violated the agreement

because the agreement automatically renews at the end of the initial four-year term and

then again each year unless plaintiff chooses to terminate the agreement or unless
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defendant has cause to terminate the agreement under section 12. Plaintiff asserts that

Mr. Lubin assured Mr. Orrico that plaintiff “didn’t have anything to worry about” because the

agreement would automatically renew. Defendant argues that section 2 provides for

renewal unless one of the parties affirmatively acts to cancel the agreement at the end of

a term. Defendant asserts that the provisions in section 12 set forth the circumstances

under which the parties may terminate the agreement during a term, rather than at the

expiration of a term. 

On April 22, 2009, plaintiff filed a four-count complaint in which it alleges (1) breach

of contract of the agreement’s exclusivity provision; (2) anticipatory breach of contract of

the termination provision; (3) fraud and misrepresentation; and (4) declaratory judgment.

On October 2, 2009, defendant filed a motion seeking partial judgment on the pleadings

on the last three counts. On February 5, 2010, the court issued an opinion and order

denying defendant’s motion for partial judgment on the pleadings. In its opinion, the court

found defendant’s interpretation of section 2 was not required. Instead, the court found that

the interpretation urged by plaintiff was also a reasonable reading of section 2 of the

agreement.

On September 16, 2010, plaintiff filed a motion for summary judgment, seeking a

declaration that the agreement may only be terminated by defendant for cause, in

accordance with section 12 of the agreement. Thus, the interpretation of the termination

provisions in the agreement is again before the court. 

STANDARD FOR SUMMARY JUDGMENT

Federal Rule of Civil Procedure 56(c) empowers the court to render summary

judgment forthwith if the “pleadings, depositions, answers to interrogatories and admissions
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on file, together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as a matter of law." See

Redding v. St. Eward, 241 F.3d 530, 532 (6th Cir. 2001). The Supreme Court has affirmed

the court's use of summary judgment as an integral part of the fair and efficient

administration of justice. The procedure is not a disfavored procedural shortcut. Celotex

Corp. v. Catrett, 477 U.S. 317, 327 (1986).

The standard for determining whether summary judgment is appropriate is "'whether

the evidence presents a sufficient disagreement to require submission to a jury or whether

it is so one-sided that one party must prevail as a matter of law.'" Amway Distributors

Benefits Ass’n v. Northfield Ins. Co., 323 F.3d 386, 390 (6th Cir. 2003) (quoting Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)). The evidence and all reasonable

inferences must be construed in the light most favorable to the non-moving party.

Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). "[T]he

mere existence of some alleged factual dispute between the parties will not defeat an

otherwise properly supported motion for summary judgment; the requirement is that there

be no genuine issue of material fact." Anderson, 477 U.S. at 247-48 (emphasis in original).

ANALYSIS

Under Ohio law, which governs the agreement, if the terms of the contract are not

ambiguous, the court applies “the plain language of the contract.” City of St. Mary’s v.

Auglaize County Bd. Of Comm’rs,, 115 Ohio St. 3d 387, 390 (2007). A contract term is

ambiguous when it is susceptible to two conflicting but reasonable interpretations. United

Tel. Co. of Ohio v. Williams Excavating, Inc., 125 Ohio App. 3d 135, 153 (Ohio App. 3 Dist.

1997). The court may not consider parol evidence when determining whether a contract
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is ambiguous. Shifrin v. Forest City Enter., Inc., 64 Ohio St. 3d 635, 638 (1992). Only if

a contract is ambiguous on its face will the court consider parol evidence. Id. Moreover,

the court should read the agreement as a whole and should give meaning to each provision

of the agreement. Foster Wheeler Enviresponse, Inc. v. Franklin County Convention

Facilities Authority, 78 Ohio St. 3d 353, 362 (1997). The rules of contract interpretation are

designed to ascertain, and give effect to, the parties’ intent. Id.

In this case, both parties set forth reasonable interpretations of section 2 of the

agreement. Plaintiff argues that the second sentence of section 2 must be read as a

qualification to the first sentence. Plaintiff argues that, although the first sentence

contemplates termination after a four-year term, the second sentence mandates that the

agreement is automatically renewed unless terminated in accordance with section 12.

Plaintiff thus argues that defendant may only terminate for cause, pursuant to section 12,

whether during a term or after a term. Plaintiff argues that any other interpretation ignores

the word “however” in the second sentence and therefore violates the rule that the court

should give meaning to every part of a contract.

In contrast, defendant notes that section 2 provides for a four-year term and

subsequent one-year terms. Defendant argues these terms were included with the

intention that either party could cancel the agreement without cause at the end of a term.

If neither party cancels, the agreement is automatically renewed and extended for a oneyear term. At the end of the one-year term, the parties would again have the option of

cancelling the agreement or allowing the agreement to automatically renew for an

additional one-year term. Defendant argues the termination methods set forth in section

12 apply only to cancellation during a term. If the agreement is given plaintiff’s
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interpretation, and the provisions of section 12 control termination both during and after a

term, the provision of terms becomes meaningless. In addition, the specific language

utilized in section 12 supports defendant’s interpretation. Section 12 provides the method

by which each party “may terminate the term of this Agreement,” suggesting the termination

takes place during a term. 

The court determines that the agreement is ambiguous, as the two conflicting

interpretations of the termination provisions of the agreement set forth by the parties are

both reasonable. 

Plaintiff argues “all ambiguities are to be construed against SalonQuest, which wrote

the contract.” Plaintiff argues defendant is the drafter of the contract, and should have

included explicit language providing for termination without cause in section 2, if that was

defendant’s intention. Between its original brief and reply brief, Plaintiff cites five cases in

support. In two of the cases cited, the principle that a contract should be construed against

the drafter was stated but not applied. See Graham v. Drydock Coal Co., 76 Ohio St.3d

311, 314 (1996) (noting principle, but finding parties’ intentions determinative); Keymer v.

Management Recruiters International, Inc., 169 F.3d 501, 505 (8th Cir. 1999) (finding the

contract language clear and unambiguous, but stating that principle would apply if language

was ambiguous). In another two cases, other contract principles supported the nondrafter’s interpretation. See Brakefire, Inc. v. Overbeck, 144 Ohio Misc. 2d 35, 57 (2007)

(in case where employer drafted the contract, court adopted employee’s interpretation,

noting the principle that contracts should be construed against the drafter but also finding

that the language of the contract and the conduct of the parties supported employee’s

interpretation); Mead Corp. v. ABB Power Generation, Inc., 319 F.3d 790, 797-98 (6th Cir.
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2003) (affirming because ambiguous language should be construed against drafter, in case

where district court adopted same interpretation because interpretation was proper under

principles that every provision in a contract should be given effect and that the court should

give effect to the parties’ intentions). In the fifth case, the Ohio Supreme Court simply

noted the principle of “contra proferentem” in allowing expert testimony on the meaning of

a technical provision of the contract which was interpreted differently by the plaintiff and

defendant. McKay Machine Co. v. Rodman, 11 Ohio St.2d 77, 80 (1967).

In response, defendant argues ambiguous contracts should be construed against

the drafter only when the parties lack equal bargaining power. Defendant cites two

unpublished Ohio appellate court decisions in support. See 4746 Dressler, LLC v.

Fitzpatrick Enter., Inc., Case No. 08-CA-00155, 2009 WL 2457126, *5 (Ohio App. 5 Dist.

Aug. 3, 2009) (noting “Ohio courts have generally resolved contract ambiguities against the

drafter only where parties lack equal bargaining power to select contract language,”

reversing trial court’s construction of the agreement against the drafter when both parties

were sophisticated entities, and remanding for “a factual determination of the intent of the

contracting parties”); In re Myer, 2000 Ohio App. LEXIS 4102, *6 (Ohio App. 11 Dist. Sep.

8, 2000) (noting the general principle referenced above and adopting the non-drafter’s

interpretation as it was consistent another provision in the agreement). Defendant argues

both parties to the agreement at issue in this case are small but, sophisticated, businesses.

Defendant notes that: (1) Mr. Orrico’s family had owned a professional beauty

distributorship; (2) Mr. Orrico and Mr. Lubin had three or four meetings regarding the

agreement; (3) Mr. Orrico reviewed the agreement with a lawyer; and (4) plaintiff

successfully negotiated for exclusivity in Michigan. During the hearing, the parties disputed
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the amount of negotiation that took place as the parties entered into the agreement. 

 The court finds that the cases cited by plaintiff do not dictate judgment as a matter

of law for plaintiff. In this case, plaintiff’s interpretation of the contract does not give

meaning to important portions of the contract, particularly the provision of terms. The

ambiguity in this case is not so slight as to be resolved by the principle of “contra

proferentem” which, as plaintiff’s counsel admitted during the hearing, is “a last resort.”

Plaintiff also argues the court should consider parol evidence from Mr. Orrico,

plaintiff’s owner, that he was told when he signed the agreement that the contract would

automatically renew. However, defendant submitted a counter-affidavit from Mr. Lubin,

defendant’s representative, stating defendant intended to commit itself for an initial fouryear period, during which time it could only cancel for cause pursuant to section 12. Mr.

Lubin also states defendant understood the agreement would automatically renew for an

additional one-year term only if neither party acted to allow the agreement to expire at the

end of the period. As a factual dispute exists, the parties’ intentions are not dispositive in

this case.

Last, plaintiff argues defendant’s interpretation is inconsistent with sections 5(c) and

12 of the agreement. Section 5(c) provides that, if plaintiff’s performance is substandard

for two consecutive years, defendant has the right “to terminate the term of this Agreement”

by providing written notice to plaintiff. Plaintiff argues that if defendant had the right to

terminate at the conclusion of any term, the two-year interval set forth in section 5(c) would

be meaningless because defendant could terminate at the end of the one-year

supplemental term instead of waiting for two consecutive years of poor performance. The

court disagrees. Defendant’s interpretation of section 5(c) is also reasonable in light of the
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initial four-year term of the agreement during which time defendant contractually agreed

to limit its termination rights. Moreover, the specific language utilized in granting defendant

the right to terminate for cause – the right “to terminate the term of this Agreement” –

supports defendant’s interpretation that section 5(c) applies to termination during a term.

Plaintiff makes similar arguments regarding section 12's provisions defining cause for

termination. Plaintiff notes that section 12(b)(i) allows a 10-day chance to cure and a 90-

day notice of termination. Again, the court finds defendant’s interpretation of this provision

is also reasonable as it would provide defendant a right to terminate during a term with

cause. The specific termination language used in section 12 mirrors the language in

section 5(c) – allowing defendant to “terminate the term of this Agreement” under certain

conditions. The court does not believe defendant’s interpretation of the agreement conflicts

with the language of sections 5(c) and 12.

The court finds the termination provisions in the agreement are ambiguous. Thus,

the court looks to extrinsic evidence and the agreement as a whole to determine the

parties’ intentions. Viewing the evidence in the light most favorable to the non-movant, the

court finds a material factual dispute exists regarding the parties’ intentions on termination

of the agreement.

CONCLUSION

For the reasons set forth above, plaintiff’s motion for partial summary judgment is

DENIED. 
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Dated: December 7, 2010

S/George Caram Steeh 

GEORGE CARAM STEEH

UNITED STATES DISTRICT JUDGE

CERTIFICATE OF SERVICE

Copies of this Order were served upon attorneys of record on

December 7, 2010, by electronic and/or ordinary mail.

S/Josephine Chaffee

Deputy Clerk