Pursuant to5 T H C IR . R. 47.5 , the court has determined that this opinion should not * be publishe d and is not precedent except under the limited circu mstance s set forth in 5 T H C IR . R. 47.5 .4. 

### INTHE UNI TED S TATESCOU RT OFAPPEALS

FORTHE FIFTH CIRCU IT

N o. 08- 11123

XT RIA L LC P l a i n tiff - A p p ell a n t v. TRACKI NG SY S TE M S I NC D efen da n t- A pp el l ee

A p p ea lf

rom the U n i tedS tates D i stri ct C ou rt f or t h e N ort h ern D i st ri ctof T exas

B ef ore JO L LY , D eM O S S , an d P R A D O , C i rcui tJu dg es . D eM O S S , C i rcui tJu dg e: * Thi s c o nt r ac tcase, governed by T exas l aw , requi res t h e C ou rtt o deter m i ne
w he t he ras e t t l e m e nta gr e e m en tbe t w e e n Xt r i a LLC (“Xt r i a” ) a nd Tr ac ki ng S yst em s, I n c. (“ T racki n g S ys tem s” ) i s am bi gu ou s. B ecau se t h e di st ri ctcourt
e r r o n e o u s lyc o n c lu d e dth a tth ea gr e e m e nti s a m bi guo us , w e r e ve r s e a nd r e m and

. I. Tr ac ki ng Sys t e m s s o l d Xt r i a a da t a m ana ge m e nts ys t e m kno w n a s t he eL i en s N oti fi ca ti on S ys tem
. A s p a rt of the irs a le s ag ree m en t, X tri aag ree dto United States Court of App eals

Fifth Circuit 

### F I L E D October 1, 2009 Cha rl es R. F ulb ru g e II I ClerkN o. 08- 11123

2 pa y Tr ac ki ng Sys t e m s apo r t i o n o f any pr o f

i tX t r i a r e c e ive d if

i tr e s o l d t he e Li e ns syst em . La t er, i n an ef f ortt o m arket t h e eL i en s s yst em , X t ri a en t ered i n t o a sa l es r epr es ent at i on agr ee m entw i t h T r ac ki ng Syst em s’af f i l i at e I nt er nat i onal Insuran ce A l l i an ce, I n c. (“ IIA I” )

. P u rsuan tto thei r ag reem en t , IIA I w as t o act as X t ri a’ s non - excl u sive sal es agen ti n excha n ge f or c om m i ssi on s. I n 2005, Xtr i a s ol d t he eLi ens sy st em , t r i gge r i ng X t r i a’ s obli gat i on t o pay Tr ac ki ng Sys t e m s apo r t i o n o f t he pr o f

i t s . A di s put e soon arose b e t w e e n t he pa rt i es as t o t h e am ou n tX t ri a ow ed p u rsuan tt o t h ei r s al es agreem en t
. A f t er
m e di at i o n, t he pa r t i e s e nt e r e d i nt o a “ Se t t l e m e nt Agr e e m e nt and Rel e as e ” (t he

“ S et t l em en tA greem en t” )

. Th at agreem en ti s t h e subj ectof t h i s di spu t e. U nde rt he Se t t l e m en tAgr e e m e nt , “ TSI ” r e l e as e d, c o ve nant e d no tt o s ue andf o r e ve rdi s c har ge d Xt r i a “ f r o m a nd ag ai ns tal lm anne rof a c t i o n . . . r e l at i ng t o or ari si n g f

rom (i) t h e T S I-X tria A g reem en t , an d/or (i i) an y oralor ot h er
w r i t t en agr ee m en t bet w ee n T SI and X t r i a e nt er ed i nt o pr i ort o the E f fec t ive D at e . ” TSI w as de f

i ne d un de rt he a gr e e m e ntt o i nc l ude Tr ac ki ng Sys t e m s a nd i t s a f f i l i at e s . H o w e ve r , o nl y Tr ac ki ng Sys t e m s a nd Xt r i a w e r e pa r t i e s t o t he
a gr ee m en t. A f t ert he e f

fec t ive dat e o f

t he Set t l em entA gr ee m ent , I IA I fi l ed an arbi t rat i on proceedi n g aga i n stX t ri a al l egi n g t h at Xtri a breach ed thei r s al es
r e p r e s e n t a t iv e a g r e e m e n t
. X t r i ad e m a n d e dt h a tT r a c k i n gS y s t e m s c a u s e I IAI t o di s m i s s t he arbi t rat i o n pu r s uantt o t he Se t t l e m e ntAgr e e m e nt
. Tr ac ki ng Sys t e m s re f

us e d. Cons e que nt l y, X t r i a s ue d Tra c ki ng Sys t e m s fo rbr e ac h o f t he S ettl em en t A gr ee m en t. In i t s c om pl ai n t , X t ri a reasoned t h a tbecau se I IA I w as an af f i l i ate of T racki n g S yst em s, t h e S et t l em en t A greem en t rel eased X t ri a f rom al ll i abili t i es a r i s i ng f r om t he agr ee m entbe t w ee n X t r i a and I IA I and pr ovi ded a c ove nant t hat I IAI w o ul d no ts ue Xt r i a. Xt r i a all e ge d t hatTr ac ki ng Syst em s b r e ac he d t he S et t l em en tA greem en tb y al l ow i n g IIA I t o ini t i ate an d m ai n t ai n the arbit rat i onN o. 08- 11123

3 pro c e e d i ng a g a i ns t Xt r i a . Tr a c ki ng Sy s t e m s m o v e d t o d i s m i s s a l l e g i ng t hat X t ri a st ated a cl a im againstI IA I bu tha d fai l ed to st ate a c l ai m f or breach of
c o nt r ac ta ga i ns tTr ac ki ng Sys t e m s . Tr ac ki ng Sys t e m s sur m i s e d t hati tha d no d u ty u n d er t h e con tract to p rev en t I IA I f rom i n i ti a ti n g a su i t ag a i n st X tri a . In de c i di ng t he m o t i o n t o di s m i s s , t he di s t r i c tc o ur tde t e r m i ne d t hatt he Se t t l e m e nt Agr e e m e ntw as a m bi guous. The c o ur tf o und t hatt he Se t t l e m e ntAgr e e m e nt
c o u l db e c o n s t r u e d t o i m p o s e a n o b l i g a t i o n o n T r a c k i n gS y s t e m s t o p r e v e n tI IAI f r o m i ni t i at i ng o rm ai nt ai ni ng an arbit r at i o n pr o c e e di ng. But, the a gr e e m e nt
cou l dalso b e con stru ed to p rov i d e a de fen se for X tri aag a i n st an y claim byIIA I, rath e r th a n a n a ffirm a tiv e ob li g a tion on T ra ck in gS y ste m s to co n tro l its a ffili ate. T h e m att er proc eeded t o a ben ch tr i alt o d e te rm i n e w h et h er t h e parti es i n ten d ed f

or T ra ck i n g S y stem s to pr ev en t its aff i l i a tes from i n i ti a ti n g, or t o c ause i t s af

f i l i at es t o di sm i ss , a sui t agai nst X t r i a. The di st r i c tc our tf ound t hat X t ri a fai l ed to prove that t h e parti es i n t en ded for T ra cki n g S yst em s t o contr ol II A I a n dth u s , fa ile d t o p r o v e b r e a c h o f th e S e tt le m e n t A g r e e m e n t. X tr ia ap pea l ed the di st ri ctcourt ’ s j u dg m en ti n favor of T racki n g S yst em s. II. T h e que s t i o n b e f

o r e t he Cour ti s w he t he rt he Se t t l e m e ntAgr e e m e nt b e tw e e n X tr iaa n dT r a c k in gS y s te m s is a m b ig u o u s . “W h e th e ra c o n t r a c t is
a m b i gu ou s i s a q u estion of l a w for th e cou rt t o d ecide

. ” B arnar d Cons t r . Co. v. C i ty of L u bbock , 4 5 7 F. 3 d 4 2 5 , 4 2 8 ( 5 t h Ci r . 2 0 0 7 ) ( c i t i ng Coker v. Coker , 650 S .W .2d 3 9 1 , 394 (T ex. 198 3) )

. A ccor di n gl y, w e revi ew t h e qu est i on of w h et h er t h e contr acti s am bi gu ou s de no vo . I d. a t 4 2 7
. S et t l em en tagreem en t s are sub jec t t o t h e gen eralpri n ci pl es of contr act
c o n s tr u c tio n . S ee T

exas v. A m . T

oba cco Co. , 4 6 3 F .3d 3 9 9 , 4 0 7 (5t h C ir. 2 0 0 6 ). In i n t erpret i n g a contract , a court ’ s pri m ary concern i s asc ert ai n i n g t h e parti es’ in te n t. Nat’

lUn i on Fi re Ins. Co. v. CBI Ind u s. , I n c. , 907 S. W

. 2d 517, 520 (Tex. 1995)

. I f

a c ont r ac t“i s sow or ded t hati tc an be given a c er t ai n or def i ni t e l egalN o. 08- 11123

4 m e ani ng o ri nt e r pr e t at i o n, t he n i ti s no ta m bi guo us a nd the c o ur tw i l lc o ns t r ue th e con tract a s a m a tter of l a w . ” Coker , 650 S. W

. 2dat393
. H o w e ve r , w he n t he la n gu a ge i n the con tract i s “su scep tib l e to tw o or m ore rea son a b le in te r p r e ta tio n s ” a n a m b ig u itye x is ts
. E n t er. L easi ng Co. of Hou st on v. B arri os , 156 S

. W

. 3d 547, 549 (Tex. 2004) (c i t i ng A m . M f rs. Mu t
. I

n s. Co. v. S cha ef

er , 124 S

. W

. 3d154 , 157 (T ex. 200 3) )

. O n l y w h en an am bi gu i t y exi st s m ay the court
c o n s id e rp a r o l e v id e n c e to d e te r m in e t h e p a r tie s ’t r u e in te n t. Nat’ lUn i on Fi re Ins. , 907 S. W

. 2d at520. A n am b i gu i ty i n a co n tract ca n be eith er “p a ten t” or “l a ten t. ” A pa t e nta m bi guit y i s e vi de nto n t he fac e o f t he co nt r ac tw hi l e al at e nt am bi gu i t y ari ses w h en a con t ractw h i ch i s u n am bi gu ou s on i t s face i s appl i ed t o the s ubj ec tm a tter w i t h w hi c h i tdeal s and an am bi guit y ap pe ar s by r e as o n o f s o m e c o l l at e r alm at t e r . I f al at e nt am bi guit y ar i s e s , pa r o le vi de nc e i s a dm i s s ibl e f o ra s c e r t ai ni ng t he t r ue i n t e n t i o n s o f t h e p a r t i e s a s e x p r e s s e d i n t h e a g r e e m e n t
. The cl assi c exam pl e of

a l atent am bi gu i t y ci t ed bya vari et y of aut h ori t i es i s ac o nt r ac tt hatc all s f o rg o o ds t o b e de l ive r e d t o t he
“ green h ou se on P ecan S t reet” w h en there are, in fact , t w o or m ore gr ee n h ou ses on P eca n S treet. A m . T oba cco Co. , 4 6 3 F .3 da t 4 0 9 (in te r n a l cit a tio n s a n dq u o ta tio n s o m itt e d). III. I n t he i ns t antc as e , t he di s t r i c tc o ur ti n e s s e nc e he l d t h atal at e nt
am bi guit y e xi s t e d a s t o what o bli ga t i o ns Tr ac ki ng Sys t e m s as s um e d unde rt he S ettl em en t A gr ee m en t. S p ecif i ca l l y, th e cou rt f

ou n dtha t w h en ap p l i ed to T ra ck i n g S ys tem s’aff i l i a tes th e a gr ee m en t cou l dbe rea dto ei th er (1) obli ga te Tr ac ki ng Sys t e m s t o c o nt r o l i t s af f i l i at e s o r ( 2) pr o vi de a de fe ns e i n t h e e ve nt th a t a n a ffilia te s u e dX tr ia

. T h e pert i n en tl an gau ge i s as f ol l ow s:
1. 3 T ra c ki ng Sys t e m s , I nc . : The t e r m “ TSI ” m e ans t he N e va da C o r p o r a tio n , . . . its p a s t, p r e s e n t a n dfu tu r e a ffilia te s a n dth e ir predecessors a n d success ors . . . an d an y com pa n i es, af f i l i ates,N o. 08- 11123

5 co r po r at i o ns , e nt i t i e s o ra s s o c i at i o ns t hati tdo e s o rm ayhe reaf t er ow n , con trol, op era te, m a n a ge or d i rect. 3
. 1 R elea se b y T S I: 3. 1. 1 TSI do e s he r e byr e l e as e , r e m i s e, c o ve nantno tt o s ue a nd fo r e v e r d is c h a r g e : (a ) X tr ia

. . . a s fo llo w s : fr o m a n d a g a i n s ta ll m a n n e ro f a c t i o n . . . re la tin gto o ra r is in gfr o m (i) th e T S I- X tr ia A greem en t , an d/or (i i) an y oralor ot h er w ri t t en agreem en tbetw een T S I an d X t ri a en t ered i n t o pri or t o t h e E f fect ive D ate.
H avi ng r evi ew ed t he S ettl em entA gr ee m entas a w hol e, w e b el i eve t hat t he Se t t l e m e ntAgr e e m e nti s no tl at e nt ly am bi guo us . Tr ac ki ng Sys t e m s a nd Xt r i a ar e t he o nl y pa r t i e s t o t he agr e e m e nt
. U nde rt he a gr e e m e nt , Xt r i a ag r e e d,
am on g ot h er t h i n gs, t o payT racki n g S yst em s i n excha n ge f or Track i n g S yst em s’
as s ur anc e t hat“ TSI ” w o ul d r e l e as e a nd c o ve nantno tt o s ue X t ri a. Tr ac ki ng S y s te m s m a d e a n u n q u a lifie d , u n c o n d itio n a l p r o m is e th a ti t s a ffilia te s w o u ld rel ease X t ri a an d n otsue rela tin g t o an y previ ou s agreem en tm ad e betw een X tri aan dT ra ck i n g S ys tem s’ a ff i l i a tes. A l th ou gh th e ag ree m en t i s sil en t a s to h ow T racki n g S yst em s m i gh tf u l f i l lits c o m m i t m en t( e. g. contr oli t s af f i l i ates)
or h ow a breach of t h e agreem en t m ay be rem edi ed (e. g. an af f i rm ative defense
m ayb e r ai s e d i n re s po ns e t o an af f i l i at e ’ s s ui t , o ri nde m ni f i c at i o n b y Tr ac ki ng S yst em s) , t h e a greem en tis n ota m bi gu ou s as a resul tof the sil en ce. I m preci si on is n o t t a n ta m o u n t t o a m b ig u ity

. Se eL andr y ’ s Se af o o d Re s t s . , I

nc . v . W at e rf r o nt Cafe, I n c. , 49 S

. W

. 3d544 , 549 (T ex. A pp . — A u st i n 200 1, p et
. d i sm ’ d). W h et h er th e p a r tie s in te n d e dace r ta in co u r s e o f p e r fo r m a n c e o rre m e d yfo rb r e a c h is i r r e l e va ntb e c au se the pr o m i s e b y Tr ac ki ng Sys t e m s c an bef ul f i l l e d wi t ho ut fu r th e rc la r ific a tio n . A c c o r d in g ly , th e a g r e e m e n t is n o t la te n tlya m b ig u o u s . S ee Lud wig v . Enc o r eMe d. , L. P. , 1 9 1 S

. W

. 3 d2 8 5 , 29 0 (T ex . A p p . — A u sti n 20 0 6 , pe t. deni ed) ( a l at entam b i gu i ty exi st s “ w hen t he c ont r ac tappear s t o c onveyaN o. 08- 11123

6 sens ibl e m e ani ng o n i t s fac e , b uti tc anno tb e c ar r i e d o utw i t ho utf u rt h er c la r ific a tio n ”). T racki n g S yst em s urges us t o hol d that eit h er T racki n g S yst em s di d n ot
assum e an ob l i gati on un der t h e Sett l em en tA greem en tt o contr oli t s af f i l i ates or t he agr ee m enti s am bi guous as t o w het herTrac ki ng Syst em s as sum ed suc h an obli gat i on. To s upporti t s ar gum ent , Trac ki ng Syst em s poi nt s t o the l ac k of an e xp l i c i tpr o vi s i o n o bli ga t i ng Tr ac ki ng Sys t e m s t o c o nt r o li t s a f f i l i at e s o ra ny provi si on i n di cat i n g t h at Tracking S yst em s w as act i n g on beh al f of i t s af f i l i ates. Tr ac ki ng Sys t e m s f

ur t he r ar gue s t hati t“ w o ul d no tm ak e s e ns e ” t hatTr ac ki ng S yst em s w ou l d obli gate it sel f t o contr olaf

f i l i ates w h ose act ivi t i es i t cou l d n ot d ir e c t. Tr ac ki ng Sys t e m s ’a r gum e nt s a r e una va i l i ng. W e do no th ol d t h att he S ettl em entA gr ee m entex pl i c i t l y o bl i gat ed Tra c ki ng Syst em s t o c ont r oli ts
a ff i l i a tes. R a th er, w e c o n c lu d e tha t T ra ck i n g S ys tem s p rom i sed tha t its af f i l i ates w ou l d n ot sue X t ri a. O n e w h o prom i ses t o “ produ ce a r esul tf or w h i ch i ti s ne c e s s ar y t o o bt ai n t he c o - o pe r at i o n o f t hi r d pe r s o ns ” ge ne r all y as s um e s t he
r is k th a t t h e th ir dp a r tym a yn o t c o m p ly

. T oyo Cot t on Co. v. Cot t on Con cent ration Co. , 461 S. W

. 2d 116, 118 (Tex. 1971) ( quot i ng 6 C ORB I N ON C ONTRACTS § 1340 ( 196 2) )

. A l t h ou gh i tm ay be u n w i se to c oven an ton beh al f of an ent i t y o ne c annotac t ual l y c ont r ol , an a gree m ents houl d be enf or c ed as
w ri tten , “w i th ou t re g a r dto w h eth er [t h e p a rti es] con tracted w i sely.” CMS Part n ers , L t d

. v. P l u m roseUS A , I n c. , 101 S. W

. 3d 730, 733 (Tex. A p p .— T e x a r k a n a2 0 0 3 , n o p e t.). IV

. F o rth e r e a s o n s s e tfo r t h a b o v e , w e r e v e r s e th e d is t r ic tc o u r t ’s determ i n ati on of am bi gu i t y an d r em an d t o t h e di st ri ct court f or f u rt h er proceedi n gs on the i ssues of breach an d d am ages. R E V E R S E D A N D R E M A N D E D

.