Opinion ID: 8414968
Heading Depth: 2
Heading Rank: 1

Heading: Costco isn’t entitled to invoke its rights under Section 4.7.

Text: Costco asserts that the district court erred in refusing to allow it to exercise its rights under Section 4.7 of the Costco Agreement. Because this argument presents a question of contract interpretation, our review is de novo. In re Universal Serv. Fund Tel. Billing Practice Litig., 619 F.3d 1188, 1211 (10th Cir. 2010). In denying Costco’s motion, the district court relied in part on the fact that Section 4.7 applies only if “Class Counsel and Class Representatives agree to enter into any agreement' with any person or company to resolve any action or any other pending or threatened claim concerning ATC.” Costco App. 180 (emphasis added). Specifically, the district court concluded that the phrase “concerning ATC” modifies the term “agreement,-” and thus that only agreements “concerning ATC” can trigger Costco’s rights under Section 4.7. Costco argues this was error. Citing the last-antecedent rule, it maintains that the phrase “concerning ATC” modifies its nearest antecedents—i.e., “claim” and “action”—and not, as the district court found, the more remote term “agreement.” See Caughey v. Emp’t Sec. Dep’t, 81 Wash.2d 597, 503 P.2d 460, 463 (1972) 1 (explaining that “qualifying words and phrases” typically “refer to the last antecedent”). But as the plaintiffs correctly point out, the last-antecedent rule only operates if “no contrary intention appears” in the contract. Id. And here, the district court implicitly concluded that Section'4.7’s parenthetical list of examples .evinces just such a “contrary intention.” Id. We agree. By giving a parenthetical list of examples of agreements that concern ATC—i.e., agreements that “call[] for a lower conversion percentage, slower rate of conversion to ATC, or for completion of conversion to ATC at a later date”—rather than examples of “claims” or “actions” concerning ATC, Costco App. 180, Section 4.7 expresses an “intention” that is “contrary” to the general rule that “qualifying words and phrases refer to the last antecedent,” Caughey, 503 P.2d at 463. Specifically, Section 4.7’s parenthetical list indicates that rather than modifying its nearest antecedents, the phrase “concerning ATC” instead modifies the term “agreement.” Costco .App. 180. Costco resists this conclusion. It points out that Section 4.7’s parenthetical list of examples is preceded by the phrase “including, without limitation.” Id. Thus, Costco concludes, the district court erred in using Section 4.7’s parenthetical list of specific examples- to limit the general phrase “any agreement” to agreements that are similar to those in Section 4.7’s parenthetical list—i.e., agreements that concern ATC. 2 Id. In support, Costco cites United States v. West, 671 F.3d 1195 (10th Cir. 2012). There, we acknowledged that the principle of ejusdem generis “[ojrdinarily ... limits general terms which follow specific ones to matters similar to those specified.” Id. at 1200 (alterations in original) (quoting. Gooch v. United States, 297 U.S. 124, 128, 56 S.Ct. 395, 80 L.Ed. 522 (1936)). But we declined to apply that interpretive canon to the statute at issue in West, in part because Congress prefaced that statute’s list of examples with the phrase “including, but not limited to.” Id. at 1200 (emphasis omitted) (quoting 21 U.S.C. § 860(e)(1)); see also id. at 1201-02. Much like the statute at issue in West, Section 4.7 prefaces its list of examples with the phrase “including, without limitation.” Costco App. 180; see 671 F.3d at 1200. But unlike our task in West—which was to discern “Congress’ intent in enacting” the relevant statute, 671 F.3d at 1200—our task here is to determine how the Supreme Court of Washington would interpret Section 4.7, cf. Valley Forge Ins. Co. v. Health Care Mgmt. Partners, Ltd., 616 F.3d 1086, 1093 (10th Cir. 2010) (“[0]ur task in diversity cases is to predict how the state supreme court would rule.”). And that court recently applied ejusdem generis to a statutory list despite the presence of a similar introductory phrase. See State v. Larson, 184 Wash.2d 843, 365 P.3d 740 (2015). In Larson, the court examined a statute that prohibited, in relevant part, the “possession of an item, article, implement, or device designed to overcome security systems including, but not limited to, lined bags or tag removers.” Id. at 741 (emphasis added) (quoting Wash. Rev. Code § 9A.56.360(l)(b)). The court agreed with the State that “[t]he statutory language ‘including, but not limited to’ ” indicated that “lined bags and tag removers” were “illustrative examples rather than an exhaustive list.” Id. at 743 (quoting § 9A.56.360(l)(b)). But “contrary to the State’s assertions,” the court also concluded that those “illustrative examples were intended to limit the scope of the statute” to similar items. Id. (emphasis omitted). And in reaching that conclusion, the court applied the limiting canon of ejusdem gen-eris. See id. Under Larson, we conclude that Section 4.7’s use of the phrase “including, without limitation” indicates that agreements “calling for a lower conversion percentage, slower rate of conversion to ATC, or for completion of conversion to ATC at a later date,” Costco App. 180, are “illustrative examples” of the types of agreements that will trigger Section 4.7, “rather than an exhaustive list” of the agreements that will do so, 365 P.3d at 743. But, under Larson, we likewise conclude that Section 4.7’s list of “illustrative examples” nevertheless demonstrates an “inten[t] to limit the scope of’ Section 4.7 to agreements that are “similar” to those examples. 365 P.3d at 743. And, under Larson, we reach that conclusion despite the fact that Section 4.7 prefaces its list of illustrative examples with the phrase “including, without limitation.” 3 Costco App. 180; see Larson, 365 P.3d at 743. Alternatively, even assuming that ejusdem generis applies, Costco argues that “the most general quality shared by Section 4.7’s [examples] is ... that they all minimize or eliminate Costeo’s obligations under the settlement,” not that they all concern the implementation of ATC. Costco Rep. Br. 11. And because the Stipulation—if Costco were allowed to adopt it— would share this general quality, Costco asserts that the Stipulation triggered Costco’s rights under Section 4.7. We find this argument foreclosed by Section 4.7’s plain language, which only allows Costco to “adopt the materially more favorable terms in any ... agreement in place of its obligations under Section Costco App. 180 (emphasis added). Section 4.4 requires Costco to “complete the conversion and installation of ATC set forth in sections 4.2 and 4.3 above within five years of the Effective Date in accordance with the following schedule.” Id. at 178. Sections 4.4.1 through 4.4.5 then set out the schedule under which Costco must implement ATC. In comparison, Section 4.2 states that Costco will convert pumps at existing stations to ATC. And Section 4.3 states that Costco will install ATC pumps at any new stations. By specifying that Costco may only replace its obligations under Section 4.4— rather than its obligations under Sections 4.2 and 4.3—Section 4.7 operates to allow Costco to adopt from other agreements only those more favorable terms that govern hoiv quickly and thoroughly it must implement ATC under Section 4.4, not to substitute more favorable terms governing whether or not it must implement ATC at all under Sections 4.2 and 4.3. Costco disagrees with this analysis. It insists that Section 4.7 allows it to replace not only its “obligations under Section 4.4, but also those listed in Sections 4.2 and 4.3.” Costco Aplt. Br. 34. In support, it points out that Sections 4.2, 4.3, and 4.4 are all explicitly “subject to” one another and to Section 4.7. Id. at 35 (quoting Costco App. 177-78). The plaintiffs argue that Costco forfeited this argument by failing to raise it before the district court. In response, Costco’s reply brief directs our attention to a single sentence in its briefing below. There, Costco pointed out that Sections 4.2 and 4.3 “expressly provide that Costco’s obligation to install ATC is ‘[sjubject to the other provisions in this Agreement,’ ” including Section 4.7. Costco App. 220 (alternation in original) (quoting Costco App. 177). But even assuming we could characterize this single sentence as “argument,” Costco “failed to identify in its opening brief where it raised this argument before the district court.” Harolds Stores, Inc. v. Dillard Dep’t Stores, Inc., 82 F.3d 1533, 1540 n.3 (10th Cir. 1996) (emphasis added) (declining to consider appellant’s argument where appellant failed to provide record citation in opening brief establishing it raised argument below); see also 10th Cir. R. 28.2(C)(2) (“For each issue raised on appeal, all briefs must cite the precise reference in. the record where the issue was raised and ruled on.”). Moreover, on appeal, Costco doesn’t merely argue that Sections 4.2 and 4.3 are subject to Section 4.7, as it (at least cursorily) suggested below. Instead, Costco argues on appeal that Sections 4.2, 4.3, and 4.4 are all subject to each other, and that all three sections are therefore “interdependent” and “stand or fall together.” Costco Aplt. Br. 35. Because the plaintiffs are correct that Costco (1) didn’t raise this specific argument below and (2) doesn’t attempt to establish plain error on appeal, we decline to consider this argument. See Schrock v. Wyeth, Inc., 727 F.3d 1273, 1284 (10th Cir. 2013) (explaining that forfeiture rule applies to new theory presented on appeal, even if that theory falls under same general category as argument presented below); Richison v. Ernest Grp., Inc., 634 F.3d 1123, 1131 (10th Cir. 2011) (noting that failure to argue for plain error on appeal “surely marks the end of the road” for forfeited argument). Further, we reject the suggestion Costco did make below—i.e., that simply because Sections 4.2 and 4.3 are “[s]ubject to” Section 4.7 means that Costco can replace its obligations under Sections 4.2 and 4.3, as opposed to its obligations under Section 4.4, with more favorable terms. Costco App. 177. First, if this were the case, the parties would have had no reason to specifically refer to Section 4.4 in Section 4.7; Section 4.4 is, like Sections 4.2 and 4.3, also “[s]ubject .to” Section 4.7. Costco App. 178. Second, when viewed together, Section 4.7’s list of representative examples—e.g., “calling for a lower conversion percentage, slower rate of conversion to ATC, or for completion of conversion to ATC at a later date than required by Section 4.4”—and its explicit language allowing Costco to “adopt ... materially more favorable terms ... in place of its obligations under Section k-kf Costco App. 180 (emphasis added), make clear that Section 4.7 is only triggered by agreements that contain more favorable terms concerning how to implement ATC under Section 4.4, not whether to implement ATC under Section 4.2 and 4.3. Costco again disagrees. It insists that Section 4.7’s examples are actually con-, sistent with applying Section 4.7 to agreements that, like the Stipulation, don’t require any ATC implementation. “For example,” Costco argues, “ ‘a lower conversion percentage’ is consistent with the [S]tipulation’s terms requiring a zero ‘conversion percentage.’ ” Costco Aplt. Br. 36 (quoting Costco App. 180). Likewise, “a ‘slower rate of conversion to ATC’ is consistent with the [Stipulation's terms requiring no ‘rate of conversion to ATC.’ ” Id. (quoting Costco App. 180). And finally, “ ‘completion of conversion to ATC at a later date’ is consistent with the [Stipulation's terms requiring no ‘completion of conversion to ATC’ at any date.” Id. (quoting Costco App. 180). We reject this argument. First, contrary to Costco’s characterization, the Stipulation doesn’t actually contain any such express “terms.” Id. It simply states that the individual defendants “are dismissed with prejudice from the separate civil actions.” App. Vol. 16, 4538. Second, even if we were inclined to treat such “terms,” Costco Aplt. Br. 36, as implicit in the Stipulation, the fact remains that Washington law requires us to “impute [to the parties] an intention corresponding to the reasonable meaning of the words [they] used” in drafting the Costco Agreement. Hearst Commc’ns, Inc. v. Seattle Times Co., 154 Wash.2d 493, 115 P.3d 262, 267 (2005); see id. (‘We generally give words in a contract their ordinary, usual, and popular meaning unless the entirety of the agreement clearly demonstrates a contrary intent.”). And rather than giving the words in Section 4.7’s examples their “reasonable,” “ordinary,” and “popular” meanings, id., Costco’s argument gives them tortured and unnatural ones. We don’t ordinarily say a car is “moving zero miles per hour”; we say it isn’t moving. We don’t typically say a car is “accelerating at a rate of zero miles per hour”; we say it isn’t accelerating. And we certainly don’t say that a car that’s never coming will “arrive at a later date”; we simply say it will never arrive. Thus, Section 4.7’s examples don’t support Costco’s position. Costco advances one final argument on appeal. It asserts that the district court’s conclusion that Section 4.7 only applies to agreements that concern how to implement ATC, as opposed to whether to do so, undermines Section 4.7’s purpose. In support, Costco points out that district court’s interpretation would allow Costco to assert its rights under Section 4.7 in response to a later agreement that contains materially more favorable terms— “but only if such terms are not too ‘materially more favorable.’ ” Costco Aplt. Br. 33. In other words, while Costco could-adopt later settlement terms that require a slower conversion to ATC, it couldn’t adopt later settlement terms that would require no conversion to ATC. Id. And according to Costco, this result is contrary to “the parties’ intent.” Id. at 34. But as the plaintiffs point out, this argument asks the panel to look beyond the plain language of Section 4.7 to the parties’ subjective intent in drafting that agreement. And under Washington law, “the subjective intent of the parties is generally irrelevant if the intent can be determined from the actual words used.” Hearst, 115 P.3d at 267. Here, we can determine the parties’ intent “from the actual words [they] used.” Id. Specifically, we can determine their intent from (1) Section 4.7’s language indicating that Section 4.7 only applies to agreements “concerning ATC,” Costco App. 180; (2) Section 4.7’s parenthetical list of examples, which all describe how a party must implement ATC, as opposed to whether it must do so; and (3) Section 4.7’s repeated references to Section 4.4, which likewise details how Costco must implement ATC, as opposed to Sections 4.2 and 4.3, which instead explain whether it must do so. Taken together, these three' aspects of Section 4.7 demonstrate that the parties never intended to allow Costco to replace its obligations regarding whether to implement ATC under Sections 4.2 and 4.3 with more favorable terms. Instead, they only intended to allow Costco to replace its obligations regarding how to implement ATC under Section 4.4 with such terms. And because that intent is evident from “the actual words [the parties] used” in Section 4.7, we decline to look beyond those words to the parties’ subjective intent. Hearst, 115 P.3d at 267. Accordingly, we affirm the district court’s order denying Costco’s motion to invoke its rights under Section 4.7.