Opinion ID: 2167196
Heading Depth: 1
Heading Rank: 3

Heading: The Meaning of hereunder and thereunder

Text: Tomran argues that the choice of law provision in the Deposit Agreement mandates the application of New York law to determine whether it may proceed in a derivative suit on behalf of AIB because under its terms the choice of law provision encompasses all rights. We disagree. Section 7.6 of the Deposit Agreement provides: Governing Law. This Deposit Agreement and the Receipts shall be interpreted and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by the laws of the State of New York. Maryland follows the objective law of contract interpretation and construction. Owens-Illinois, Inc. v. Cook, 386 Md. 468, 496, 872 A.2d 969, 985 (2005); Taylor v. NationsBank, N.A., 365 Md. 166, 178-79, 776 A.2d 645, 653 (2001); Wells v. Chevy Chase Bank, F.S.B., 363 Md. 232, 251, 768 A.2d 620, 630 (2001). We have explained: A court construing an agreement under this test must first determine from the language of the agreement itself what a reasonable person in the position of the parties would have meant at the time it was effectuated. In addition, when the language of the contract is plain and unambiguous there is no room for construction, and a court must presume that the parties meant what they expressed. In these circumstances, the true test of what is meant is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant. Consequently, the clear and unambiguous language of an agreement will not give [way] to what the parties thought that the agreement meant or intended it to mean. General Motors Acceptance Corp. v. Daniels, 303 Md. 254, 261, 492 A.2d 1306, 1310 (1985) (citations omitted). The cardinal rule of contract interpretation is to give effect to the parties' intentions. Owens-Illinois, 386 Md. at 497, 872 A.2d at 985. Moreover, this Court has adhered to the principle that we will not unnecessarily read contractual provisions as meaningless: A recognized rule of construction in ascertaining the true meaning of a contract is that the contract must be construed in its entirety and, if reasonably possible, effect must be given to each clause so that a court will not find an interpretation which casts out or disregards a meaningful part of the language of the writing unless no other course can be sensibly and reasonably followed. National Union v. David A. Bramble, Inc., 388 Md. 195, 209, 879 A.2d 101, 109 (2005), quoting DIRECTV, Inc. v. Mattingly, 376 Md. 302, 320, 829 A.2d 626, 637 (2003), quoting in turn Sagner v. Glenangus Farms, Inc., 234 Md. 156, 167, 198 A.2d 277, 283 (1964). See also Bausch & Lomb, Inc. v. Utica Mut. Ins. Co., 330 Md. 758, 782, 625 A.2d 1021, 1033 (1993); Dahl v. Brunswick Corp., 277 Md. 471, 478-79, 356 A.2d 221, 226 (1976). Imbued with its ordinary, plain meaning and read in the context of the choice of law provision, hereunder and thereunder must be viewed as referring to the rights set forth in the Deposit Agreement and Receipts. Based upon the grammatical and syntactical structure of the clause, hereunder must concern the rights and obligations contained within the Deposit Agreement, which is the document where the choice of law clause appears. Similarly, thereunder must reference the terms embodied in the Receipts, which are the only other documents listed and which appear after the Deposit Agreement in the clause. Therefore, we conclude that the only reasonable interpretation of hereunder and thereunder is one wherein the phrase limits the scope of the choice of law provision to those rights enumerated in the Deposit Agreement and Receipts. The United States Court of Appeals for the Ninth Circuit in Batchelder v. Kawamoto, 147 F.3d 915 (9th Cir.), cert. denied 525 U.S. 982, 119 S.Ct. 446, 142 L.Ed.2d 400 (1998), reached the same conclusion when presented with a choice of law clause that was substantively identical to the clause at issue in the case sub judice. In Batchelder, the choice of law clause provided: This Deposit Agreement and the Receipts and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by and construed in accordance with the laws of the State of New York, United States of America. It is understood that notwithstanding any present or future provision of the laws of the State of New York, the rights of holders of Stock and other Deposited Securities, and the duties and obligations of the Company in respect to such holders, as such, shall be governed by the laws of Japan. The Ninth Circuit stated that [t]he first sentence of § 7.07 provides that contract rights contained in the Deposit Agreement itself or in the ADR certificates as well as the construction of the Deposit Agreement, are to be governed by the laws of New York. Id. at 918. The Ninth Circuit did not make its interpretation of the scope of the first sentence contingent upon the existence of the second sentence as Tomran asserts. The court continued to explain its reasoning by stating that Batchelder, in attempting to assert a right that is not expressly granted to him by the Deposit Agreement, the second sentence directs this court to apply Japanese law to determine the existence and scope of Batchelder's right. Id. Although the second sentence is dispositive in Batchelder, the Ninth Circuit noted that even if the second sentence was not included in the clause, it would be bound to apply Japanese law under the internal affairs doctrine, which provides that the law of the jurisdiction of incorporation governs the rights and responsibilities of the corporation and its shareholders. Id. at 920. Thus, according the Ninth Circuit, Japanese law would have applied in Batchelder regardless of the second sentence in the choice of law provision. Therefore, our analysis is consistent with the opinion in Batchelder. Our determination also is consistent with those jurisdictions that have considered the meaning of hereunder and thereunder in the choice of law context, in arbitration clauses, and in forum selection clauses. See, e.g., Rochdale Village, Inc. v. Public Service Employees Union, 605 F.2d 1290, 1296 (2d Cir.1979) (holding that [t]he insertion of the word `hereunder' after the otherwise all-inclusive phrase `any and all disputes' has the effect of limiting, albeit slightly, the parties' duty to arbitrate. All disputes arising `under' the agreement are to be arbitrated; those that are collateral to the agreement are not.); Desktop Images, Inc. v. Ames, 929 F.Supp. 1339, 1345 (D.Colo.1996) (stating that use of thereunder in the arbitration clause limits its application to those claims based upon the terms of the contract); Hoffman v. Minuteman Press Int'l Inc., 747 F.Supp. 552, 559 (W.D.Mo.1990) (The `hereunder' language in these franchise agreements limits application of the forum selection clause to suits arising under the agreement and seeking enforcement of the agreement). Had the parties intended the choice of law clause to govern all rights, as Tomran urges, there would be no need to include the phrases hereunder and thereunder in the clause. Thus, were we to conclude that the clause applied to all rights, regardless of their inclusion in the Deposit Agreement or Receipts, we would be rendering the phrase hereunder and thereunder nugatory. Moreover, Tomran's interpretation of the choice of law clause would result in the creation of two classes of derivative plaintiffs: beneficial shareholders, whose rights are governed by New York law, which presumably is more favorable to those plaintiffs and would permit Tomran to proceed, and AIB's normal shareholders, whose actions would be governed by the more stringent Irish law. We will not adopt such a position. Therefore, we find that hereunder and thereunder limits the scope of the choice of law clause to those rights specifically stated in the Deposit Agreement and the Receipts. Because neither the Deposit Agreement nor the Receipts by their terms provide Tomran with the right to sue derivatively, we determine that the choice of law provision does not apply to the issue of whether Tomran has the right to sue derivatively.