Opinion ID: 154146
Heading Depth: 3
Heading Rank: 1

Heading: Dataphon

Text: Once again, paragraph 5--the damages provision of the agreements--provides as follows: The system[s] to be constructed using the proceeds of the loan we have committed to providing herein must utilize cellular system equipment and ancillary equipment and services supplied by NovAtel. Should you refer to this commitment in any filing or application presented to the FCC in connection with one of the proposed systems listed on Schedule A, and fail to purchase NovAtel equipment in connection with the construction of a system listed on Schedule A, there shall become immediately due and payable from Applicant to NovAtel a fee of U.S. $100,000 in liquidated damages[.] Dataphon did not purchase any equipment from NovAtel because it sold its rights to U.S. Cellular. In its brief, Alberta relies heavily on the “fail to purchase” clause in isolation, arguing that since Dataphon “failed to purchase,” it owes NovAtel $100,000. In the process, Alberta essentially converts the “liquidated damages” to a fee for NovAtel’s financial commitment. That interpretation of the second sentence of paragraph 5 is unsupportable for three reasons. First, the contract does not have any force-majeure clause, does not address the possibility of a sale by Dataphon of all of its rights, and in other respects does not address the multitude of possibilities that might result in a “failure to purchase” NovAtel equipment. It would be an extraordinarily expansive reading of the “fail to purchase” -17- clause to conclude that the parties intended Dataphon to pay $100,000 to NovAtel under any conceivable circumstance which could result in nonpurchase.5 Second, Alberta’s theory that the $100,000 damage figure converts to a fee for the financial commitment is not borne out by the text of paragraph 5. If the parties intended something of that nature, they would have expressed it in fuller terms--possibly in a separate paragraph reserved for that purpose--especially in view of the fact that the opening paragraph of the agreement recites $1.00 as sufficient consideration for the financial commitment. Third, Alberta’s repeated emphasis on the “fail to purchase” clause completely neglects the clause’s relationship to the rest of the sentence: Should you refer to this commitment in any filing or application presented to the FCC in connection with one of the proposed systems listed on Schedule A, and fail to purchase NovAtel equipment in connection with the construction of a system listed on Schedule A, there shall become 5 In the context of the FCC applications here, it is understandable why NovAtel may not have had assignment of Dataphon’s rights in mind in connection with these agreements. FCC regulations required applicants to warrant that they actually intended to construct and operate the cellular station. See, e.g., 47 C.F.R. § 22. 923(b)(7) (1988). In their applications, both Dataphon and Constitution stated: The Applicant warrants that the Applicant’s motivation for filing this application is the Applicant’s intention to provide cellular service to the public. The Applicant is specifically not interested in obtaining this license for sale or other disposition at any time, and is applying to construct and operate the system as a business venture. Appellant’s App. (No. 95-5213) at 18; Appellant’s App. (No. 95-5214) at 20. -18- immediately due and payable from Applicant to NovAtel a fee of U.S. $100,000 in liquidated damages[.] (emphasis added). The sentence refers directly to Dataphon (“should you . . .”), and the clause, on its face, does not address a situation where there is no construction. Taken in conjunction with the first sentence in paragraph 5, the second sentence essentially stands for the unremarkable proposition that if Dataphon takes advantage of the financial commitment in its filings with the FCC, it may not use a competitor’s equipment when it constructs a system, unless it pays damages to NovAtel. This agreement simply reflects NovAtel’s marketing strategy of extending the inducement of financial commitments to secure the subsequent sale of its products when a successful applicant actually constructs a cellular telephone system, and imposing a penalty if a competitor’s equipment is used. Thus, we do not read the second sentence in paragraph 5 as expansively as Alberta. To the extent there is any doubt on the point, we resolve it against the drafter, NovAtel, especially since we are dealing with a damages provision. On this view of the contract, Alberta’s unjust enrichment argument fails as well, since Dataphon was doing no more than the agreement permitted.