NOT RECOMMENDED F OR F ULL-TEXT PUBLICATION F ile Nam e: 12a0751n.06 Nos. 11-5430, 11-5498 UNITED STAT ES COURT OF AP P EALS F OR THE S IXTH CIRCUIT

DREXEL CHEMI CALCOMPANY, Plaintiff-Appellant Cross-Appe llee,

v. AL BA UGH, I

NC., Def endant- Appellee Cross-Appellant; ) ) ) ) ) ) ) ) ) ) ON AP PEAL FR OM T HE UNI TED STATES DI STRI CT COURT FOR THE WES TERN DI STRI CT OF TEN

NESSEE

BEF ORE: GI BB ONS, ROGERS, and COOK, Circuit J udg es. ROGERS, Circuit J u d g e. Dre x el Chemical Company and Albaug h, I nc. enter ed into a written Agre ement where b y Albaug h could m ake use of Drexel’s reg istration to import and sell a pesticide called atra zine, which cannot be sold in the United States absent such reg istration. Dre x el and Albaug h dispute sever al terms of the Ag ree ment g overning their rel at i o n s h i p, as well as the fac tual question of when the Ag ree ment was terminated. The district court incorr ectly interpre ted the Ag ree ment as unambig uously provi d i n g t hat Albaug h was not require d to make partial reimburse ment for cer

tain pay ments made afte r Albaug h terminated the Ag ree ment, but relating to the period that the Ag ree ment was in eff ect. Since the Ag ree men t is ambig uous on this point, a

rema nd is nece ssary

to determine the intention of the parties. Apar t f rom this int erpr etation issue, t h e district court committed no reve rsible err or. The district court did not clea rly err in i t s deter mination of when the Ag ree ment terminated. The district court was corr ect in finding Albaug hNos. 11-5430, 11-5498

Drex el v. Albaugh

liable for half of a $1.5 milli on pay ment that Albaug h has contested, beca use that pay

ment was made “in order to maintain the reg istration” under the terms of the Ag ree ment. Finally , the district court did not abuse its discretion in assig ning pr ejudg ment interest. I

. At razine i s a pesticide develope d by the predece ssors of S y ng enta Crop Protection, I n c. , a g roup that included Novar tis Crop Protection, Inc. Pesticide manufa cture rs wh o wish to sell products in the United States t h at co n t ain atra zine are require d under the Fe dera l I nsecticide , Fung icide and Rodenticide Act (F I FR A) , 7 U.S.C. § 136a, to reg ister their products with the Environmental Protection Ag ency (EPA). The orig inal reg istrant o f a p ro d uct conducts tests to confirm, among other t hings, that the product will not cause “unre asonable adver se effec ts o n t h e environment,” 7 U. S

. C

. § 136a(c )(5) (D), which in turn are submitt ed to the EPA. Subsequent applicants may use that data in their own applications for reg istration, a pro ce s s referr ed to as “follow-on reg istration.” Follow-on reg istration is only allowed if the subsequent applicant offe rs to pay data compensation to the orig inal reg istrant; it is this d at a co m p en s ati on that allows the follow-on re g istrant to rely on the data in their

applications. 7 U.S.C § 136a(c )(1) (F )(iii). Novar tis was the orig inal reg istrant of atrazine with the EP A. Dre x el Chemical C ompany

succe ssfully neg otiated with N ovartis to obtain follow-on reg istration, allowing Dre x el also to sell atra zine-containing products in the United States. I n 1998, Albaug h, I nc. wished to beg in selling atra zine, but could not rea ch an ag ree ment with Novar tis as to how much data compensation would be appropriate. I nstead, Albaug h approa ched Drexel, whose reg istration with Novar tis also had a

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“follow-on” provision allowing other companies to use it. Dre x el and Albaug h ag ree d that Albaug h would make use of Dre x el’s reg istration, and in exchang e Albaugh would share in Dre x el’s data compensation o b li g a

ti o n to Novar

tis. The companies enter ed into a written Ag ree ment on Dec ember 7 , 1 9 9 8

. P ara g raph 2(iii) of the Ag ree ment stated that Albaug h ag ree d to pay a lump sum of $750,000, and “[i] n addition, Albaug h shall pay fifty perc ent (50%) of the costs of all future pay ments that Dre x el makes to Novar tis in the future as data compensation in order to maintain the Reg istration.” Albaug h completed its $750,000 pay ment to Dre x el on J uly 9, 2002. Under Parag raph 7 of the Ag ree ment, Albaug h was allowed to terminate the Ag ree ment at any time afte r that point. The 1 parties dispute when the Ag ree ment was terminated. Albaug h claims that it terminated the Ag ree ment on J uly 16, 2006, throug h an oral decla ration by its President to Dre x el’s Chairman and CEO. Dre x el claims that Albaug h terminated the Ag ree ment by sending a letter on September 29, 2006. The letter

stated: Pursuant to Section 7 of the above ref ere nced Ag ree ment dated Dec ember 7, 1998, Albaug h, I nc. here by terminates said Ag ree ment, and further reque sts that, within 30 day s of the date of this letter, Dre x el return, and cer tify in writing that it has returne d and reta ins no copies of, all of Albaug h’s and Atanor’ s confide ntial information that Dre x el re ceive d pursuant to this Ag ree ment. Parag raph 7 r eads in full: 1 This Ag ree ment shall terminate, and Al baug h shall not be obligated to make any further pay

ments here under, upon EPA’s ref usal to amend t h e C S F for the Reg istration in the manner set forth in this Ag ree ment. Albaug h may also terminate this ag ree ment at any time afte r final pay ment of the $750,00 0 p ay ment called for under pa rag raph 2( i) here of. - 3 -Nos. 11-5430, 11-5498

Drex el v. Albaugh During the y ear s that Albaug h made use of Dre x el’s reg istration, Albaug h made no pay ments to Dre x el related t o the data compensation. Nor did Dre x el m ake a ny pay ments to Novar

tis or i ts

succe ssor, Sy

ng enta. Then, in September 2006, Sy ng enta infor

med Dre x el that Dre x el owed over ten milli on dollars in data compensation pursuant to a Special Review conducte d in 2004 and 2005 by the EPA consistent with FI FRA’s mandates. Dre x el had been awa re that this re view was being conducte d and in fac t had made offe rs to pay during this period, consistent with the require ments of FI FRA. Dre x el disputed the amount Sy ng enta claimed was owing , but de cided to pay a portion of it. Dre x el in turn sent an invoice to Albaugh dated September 25, 2006, for 50% of the pay ment it

was about to make to Sy

ng enta. On September 26, 2006, Dre x el paid Sy ng enta $1.5 milli on. Three day s later, Alba

ug h sent the termination letter mentioned above

. On May 15, 2007, Sy

ng enta com m en ce d arbitration proce eding s with the Americ an Arbitration Association pursuant to FI FRA beca use it could not rea ch an agr ee ment with Dre x el reg arding the proper amount of data compensation owed. I n Marc h 2008, th e arb i t ra t ion panel deter mined that Dre x el owed approximately $4 milli on to Sy ng enta as data compensation throug h 2008. The pan el gav e Drex el cre dit for the $1.5 milli on alre ady paid, leaving an awa rd of approximately $2.5 milli on. Dre x el in tur n filed suit ag ainst Albaug h, arguing that it owed Dre x el half of this amount, in addition to half of the $1.5 million alrea dy paid. Dre x el orig inally fi l ed a co m p laint in Tenne ssee court, but Albaug h remove d the case to fede ral c ourt on diversity

g rounds. Dre x el’s complaint alleg ed breac h of contra ct and r equeste d a

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decla ration of Albaug h’s obligation to pay its shar e of data compensation c osts. Both parties filed motions for summary

judgme nt. I n its summary judgme nt ruling , the district court found that Albaugh was require d to pay 50% of any pay

ment made by Dre x el to Novar tis/S y ng enta befor e the termination of the Ag ree ment, but that there exis ted a g enuine issue of materia l fac t as to when the Ag ree ment was terminated, and

so a trial would be nece ssary . The parties ag ree d that it wa s appropr iate to apply Tenne ssee law to the Ag ree ment. The district court also deter mined that Albaug h was not liable for any money paid by Dre x el to Sy ng enta af t er t er m ination of the Ag ree ment. The district court found the lang uag e of the Ag ree ment unambig uous on this point. The court rea d Parag raph 2(iii), wi t h i t s require ment for paying “all future pay

ments,” in ta

ndem with Paragraph 7, which allowed for termination afte r the initial $750,000 was paid, to mean that “when Alba ug h terminated the Ag ree ment in 2006, it was only require d to reimburse Dre x el for fifty perc ent of any pay ments Dre x el made to Sy

ng enta up to the point of termination.” To find otherwise, acc ording to the district court, would rende r Parag raph 7 meaning less: “[T ] h e o n l y conceivable purpose for the termination clause in para g raph 7 was to relieve Albaugh of further obligations to pay Dre x el for data com p en s ati on pay ments that Dre x el might make to Sy

ng enta afte r contra ct t er m i n at i o n.” The district court found that “Albaug h’s obligation to pay Dre x el under para g raph 2(iii) could only be trig g ere d by a pay ment,” not an offe r to pay or any other a ction.

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The district court reje cted Albaug h’s argument that the $1.5 milli on that Dre x el had paid to Sy ng enta toward data compensation, beca use it was asser

tedly voluntary , was not made “in order to maintain the Reg istration” under Parag raph 2( iii). The district court pointed out that the lang uag e of the Ag ree ment does not rea d “nec essar y to maintain the Reg istration,” and the money was indeed made for the purpose of maintaining the reg istr ati on. The district court conclude d that under the ordinary meaningof the Ag ree ment’s languag e, “so longas Dre x el’s pay ment was made ‘in order to’ or ‘for the purpose of’ maintaining the reg istration, that p aym en t wo uld trig g er Albaug h’s obligation to pay

Dre x el fifty

perc ent of the pa

y ment.” A bench trial was held on the q u es t i o n o f the date of the Ag ree ment’s termination. Four witnesses testified, including Albaug h’s President and Dre x el’s CEO, the two individuals who had the J uly 2006 conver sation at issue. The conver sation took place during a meeting of the Chemical Producer s and Distributors Association, which both individuals attended. The conver sation was not officia lly schedule d. Dre x el’s CEO testified that the conver sation lasted no more than five minutes. Acc ording to him, Albaug h’s P resident said to him, “B ob, we’ re thinki ng about getting out of t he atra zine marke t.” There was no fo l l o w- u p to the conver sation until the demand for pay ment to Sy ng enta was sent in September. Albaug h’s President testified that he had made the decision to exit the atra zine marke t befor e the meeting and deliberately soug ht out Dre x el’ s C EO to convey that information. He testified that such behavior was common in t h e i n d u s t ry , that the conver sation lasted fiftee n mi n utes, and that he informed Dre x el’s CEO “that we wer e exit ing the atra zine

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business and would sell our exis ting stocks, that we wer e terminating our contra ct with him.” Evidence was a lso presente d reg ardingbehavior by both parties befor e and a fter the conver sation. At the conclusion of the trial, the district court found as a matter of fac t that Dre x el’s CEO’s version of events reg arding the J uly 16 meeting was more cre dible, and that Albaug h’s President had only told him “that Albaug h was ‘thinking’ about exit ing the atra zine business.” The district court supported its finding by pointing out that there was no evidenc e of planning the meeting , no evidenc e of follow-up afte r the meeting , and no ref ere nce to the meeting in the September 29 letter. The district court there fore conclude d that Albaug h did not terminate the Ag ree ment until September 29, 2006, and so owed Dre x el 50% o f t h e p aym en t Dre x el had made to Sy ng enta on September 26, 2006, i.e., $750,000. The district court also awa rded Dre x el prejudg ment interest o n th e $ 750,000, calc ulated from the date Dre x el first sent the invoice at a rate of 7.5%. This amounted to $253,798.76. The district court relied on Tenn. Code § 47-14-123, which allows a court to awa rd interest “in acc ordanc e with the principles of equity .” The district court justified calc ulating the interest from the September 2006 date r ather

than from when the complaint was filed on Jul y 18, 2008, beca

use the c ourt found that “Dr exel was not inexcusab l y d i l at ory in pursuing its claim and, to the contra ry , promptly made Albaug h awa

re that it was obligated to pay its fifty perc ent share .” Drex el h ad reque sted 10% interest, the statu t o ry m ax imum, but the district court said that rate was “not war rante d, and that 7.5% is the appr opriate r ate.” Dre x el and Alba

ug h both appea l.

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I I

. A. Futur e Pay

ments under the A g ree ment The lang uag e of the Ag ree ment is ambig uous as to whether Albaugh i s responsible for pay ments that Dre x el m akes after t h e termination of t he Agr eeme nt but relating to the period that the Ag ree ment was in eff ect. The single sentenc e that discusses the issue s t at es t hat Albaug h is responsible for 50% of “all future pay ments” made “as data compensation in order to ma intain the Reg istration.” The sentenc e i s s ilent as to the outer limit of “future .” The lang uag e could mean pay ments made while t h e Agr eement is in eff ect—a s the district court rea d it—but it could alternatively mean pay

ments made for data collecte d while the Ag ree ment is in eff ect (or pay

ments otherwise re l ated to that time period), even if the pay ments are made afte r the Ag ree ment is terminated. This second interpre tation g ains some streng th from the fac t that the “future pay ments”

are further descr ibed as those “Dr exel make s to N ovartis in the future as data compensation.” The repe tition of “future ” sug g ests that this require ment extends bey ond the date of Agr ee m ent termination. The lang u age of the Ag ree ment could even be said to have no outer limit for when Albaug h’s pay

ment obligations end, if rea d strictly literally

. Un d er Tenne ssee law, contra ctual lang uag e is ambig uous when “it is of uncer tain meaning and may fairly be understood in more way s than one.” Allstate Ins. Co. v. W atson , 195 S.W .3d 609, 611 (Tenn. 2006) (quoting Farmers-Pe oples Bank v. Clemmer , 519 S.W .2d 801, 805 (Tenn.1975) ). This contra ct’s lang uag e fits that descr iption. Be cause the Ag ree ment is ambiguou s , fu rt her fac tual development is nece ssary . Under Tenne ssee law, when there are multipl e plausible interpre tations of contra ctual terms, courts should

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Drex el v. Albaugh

not rely solely on a li tera l int erpr etation of the l anguag e to deter mine the contract’s true meaning , but rather should apply

rules of construction to de termine the intent of the par ties, including using extrinsi c or parol evidenc e. See W atson , 195 S.W .3d at 611-12. I n this case , further evidenc e may inform the proper interpre tation of “future .” We do not presc ribe what evidenc e in particula r should be put forth, but it could possibly include information about how cer tain terms are understood in the ag ricultural chemica l business, particula rly in the FI FRA regulatory context, t h e n at u re of the pay ments made to Sy

ng enta, and pre v i o u s ag ree ments or corr espondenc e betwee n Dre x el and Albaug h—whether or not the Ag ree ment itself was being discussed. Evidence supporting Dre x el’s alleg ation that Albaug h continued to re ly on Dre x el’s reg istration afte r the Ag ree ment was terminated ma

y also be take n into consideration. Albaug h’s explanation for why the Ag ree ment is unambiguous is not convincing

. Reading the Ag ree ment to cover pay ments made afte r termination does not rende r Parag raph 7’s second sentenc e meaning less. There are a number of rea sons that might explain wh y t h e sentenc e was included in the Ag ree ment, including to provide Albaug h with a means to exit the Ag ree ment, or to preve nt holding Al b au gh re s ponsible for data compensation ad infinitum. In addition, the first sentenc e of Parag raph 7 say s that the Ag ree ment “shall terminate, and Albaug h shall not be obligated to make any furt h er p ay

ments here under,” if EPA reg istration does not g o throug h succe ssfully

. Refer ence to such further p ay ment obligations is absent from the second sentenc e, which is the sentenc e in question here

. The absenc e of this phrase in the second sentenc e makes it less plain that

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termination by Albaug h afte r the $750,000 was paid means absolutely no post-termination pay ment obligation could arise. F actua l development is requir ed to interpre t these provisions. B. D ate of

Ag ree ment Termination The district c ourt’s conclusion that the Ag ree ment was terminated on September 29, 2006, rathe r than on J uly 16, 2006, was not clea rly err oneous, as Albaug h argues. The evidenc e could have supported either side’s acc ount of what was discussed at the J uly 16 meeting

. Evidence supporting the district court’s conclusion inc lu d e d : te s ti mony from Dre x el’s CEO, which the district court found to be more cre dible than that of Al b au gh ’s President; the lack of any evidenc e from Albaug h reg arding planning for a termination meeting apar t from testimony ; the lack of any written evidenc e that there was follow-up reg arding what was discussed; and the lang uag e of the September 29 letter, which made no ref

ere nce to the meeting and sug g ested that the le tter itself was meant to e ffe ct the Ag ree ment’s termination. Although evidenc e was prese nted that could have led a fac tfinder to the opposite conclusion as well, absent clea r err or, it is not our place to second- g uess the district court’s deter mination that Dre x el’s acc ount was more cre dible than Albaug h’s and was supported by more evidenc e. The district court’s re solution of this fac tual issue was not cle arly err oneous.

C. Nature of

$1.5 Milli on Pay

ment The $1.5 milli on pay

ment that Dre x el made to Sy ng enta on September 26, 2006, was made “in order to maintain the Reg istration,” and so under the Ag ree ment Albaug h was liable for half of it, reg ardle ss of how the interpre tational issue in Part A is resolved. The district court did not clea rly

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err in the fac tual finding s underg irding this assessment, and its i n t erp re t ation of the contra ctual lang uag e is corr ect. Dre x el rec eived a reque st fo r p ay m en t from Sy

ng enta under the data compensation scheme outlined in FI FRA. Dre x el paid $1.5 milli on toward this amount. The $1.5 milli on was there fore made for the purpose of maintaining the reg istration, a nd there fore trig g ere d Albaug h’s obligations under the Ag ree ment. Albaug h’s char acte rization of the pay ment as “voluntary” is both inacc urate and somewhat beside the point. As the district court pointed out, “[c]ooperation in the data compensation scheme of FI FRA is essential to maintaining the product reg istration,” and failure to participate can lead to suspension of the reg istrat i on under 7 U.S.C § 136a(c )(2) (B )(iv). Dre x el’s pay ment qualified as participation; indeed, the arbitration panel ultimately cre dited it toward the amount Dre x el o we d Sy ng enta a s data c ompensation. The fac t that f ailure to make such a pay ment may not have led to

an immediate loss of reg istration does not lessen its importance or keep it from being made “in order to maintain the Reg istration.” The Ag ree ment does not ref er to pay men t s n ec es s a r

y to maintain reg istration. A contra ct is enfor ced “ac cording to the ordinary m ea n i n g of its words.” Moore v. Moore , 603 S.W .2d 736, 739 (Tenn. Ct. App. 1980). The ordinary meaning of the words in the Ag ree ment includes the $1.5 milli on pay ment. Although Albaug h argues that the Ag ree ment ref ers to pay ments “re quired as part of [an] ex i s t ing data compensation ag ree ment betwee n Dre x el and Sy ng enta

. . . [or an] exis ting data compensation arbitra tion decision betwee n Dre x el and Sy ng enta,” the ordinary meaning of the words in the Ag ree ment will not bear these additional require ments that Albaug h seeks to impose.

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Drex el v. Albaugh D. Prejudg ment I ntere st Award The district court acte d within its discretion when i t co n cl u ded that Dre x el was not inexcusably dilatory in bring ing suit ag ainst Albaug h, and so calc ulated prejudg ment interest from the date Dre x el sent an invoice to A lbaug h, i.e., September 26, 2006. Albaug h’s arg ument on this point is littl e more than a statement to the contra ry , that Dre x el was inexcusably dilatory

. Albaug h raised the same argument below, wher e the district court was fre e to reje ct it, as it did. Under Tenne ssee law, awa

rds of prejudg ment interest depen d on “whe ther the awa rd of prejudg ment interest is fair, g iven the particul ar ci rc umstances of the case .” Myint v. Allstate Ins. Co ., 970 S.W .2d 920, 927 (Tenn. 1998). The district court was briefe d on the particula r circ umstances of this

case , an d co n cluded that Dre x el had acte d rea sonably and deser ved the prejudg ment interest

awa rded. N o abuse of

discretion took place

. I I I

. We remand this ca se for

further proce eding s consistent with this opi nion.

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