Opinion ID: 727231
Heading Depth: 2
Heading Rank: 2

Heading: The Existence of an Ambiguity

Text: 41 Gulf argues even if it is true that the class action settlement was never intended or understood to include Cities in the plaintiff-class, the district court erred in considering that fact. Gulf asserts that the evidence of its intentions and understanding is extrinsic to the settlement agreement and judgment and that [e]xtrinsic evidence ... may ... be considered only if the terms of the judgment, or of documents incorporated in it, are ambiguous. Securities & Exchange Comm'n v. Levine, 881 F.2d 1165, 1179 (2d Cir.1989). Gulf contends that the terms of the settlement and the judgment unambiguously include Cities within the definition of the class, with the consequence that the district court had no right to consider extrinsic evidence to reach its conclusion that Cities was not included in the class. We disagree. 42 The documents incorporated into the judgment defined the plaintiff-class in conflicting ways. The judgment expressly incorporated by reference the Stipulation of Settlement, including the Proof of Claim and Release Form. Although the Stipulation defined the class as including all purchasers, the Proof of Claim used a more restricted term, limiting purchasers to those who purchased on the open market. Thus it is not merely the case that ambiguity occurred in occasional documents during the course of the litigation; the ambiguity is found in the very judgment alleged to be preclusive. 43 Nor do we rely solely on the fact that the judgment, through incorporation by reference, included inconsistent definitions. Inconsistencies would not necessarily amount to ambiguity if, in the circumstances, they had no likelihood of misleading. At times mistakes are obviously just that. Although they give incorrect information, they carry no realistic likelihood of misleading because it is so clear they are mistakes. Here, that was not the case. Taken in context, especially considering the long history of confusion as to the definition of the plaintiff-class, the reference in the Proof of Claim and Release Form to purchasers on the open market had a high capacity to mislead. 5 As noted above, the Unified Consolidated and Amended Class Complaint had identified the purchaser component of the plaintiff-class as covering only those who purchased ... on the open market. And Judge Kram's class certification order of September 23, 1986, also contained a limitation to open market purchasers. When the Proof of Claim and Release Form identified the class in terms of purchasers on the open market, this formulation was consistent with those important prior documents. Thus, it was by no means apparent that the definition in the Proof of Claim was a mere mistake to be disregarded. Rather, it would have been logical under the circumstances to read the document that excluded Cities from the class as having done so intentionally. The likelihood that the definition would be interpreted in this way makes the judgment documents functionally and realistically ambiguous. 44 Of course, it is true that one who made a thorough study of all the pertinent documents would probably have concluded that, as between the inconsistent definitions, the erroneous one was the definition that incorporated the open market limitation. Gulf points out that paragraph 46 on the thirty-second page of the Stipulation of Settlement, which was on file in the office of the Clerk of the Court, provides that [a]ny inconsistency between the Stipulation and the exhibits attached hereto shall be resolved in favor of the Stipulation. Gulf argues that Cities could have inspected this provision, which would have eliminated the ambiguity by telling which of the inconsistent versions prevails. In addition, among the judgment documents, the class was more frequently defined without the open market limitation than with. 45 These observations may be true but they are not determinative. For purposes of the rule of interpretation that bars consideration of extrinsic evidence in the absence of ambiguity, ambiguity is a practical concept. In the context of this class action litigation and the frequent instances of inconsistency in the class definition, the documents comprising the consent judgment were, as a practical matter, ambiguous and misleading, even if an exhaustive search might have provided a key for resolution of the ambiguity. Where documents giving notice of settlement of a class action are prepared in such a way as to mislead a potential class member into believing that it is not a class member, and therefore has no need to opt out of the class in order to preserve an independent lawsuit, the recipient will not be required to scour all other potentially pertinent documents in an effort to discover whether the reassuring documents sent to it were inaccurate. 46 We conclude that because of the ambiguity as to whether the plaintiff-class included all purchasers in the relevant period or only those who purchased on the open market, principles governing the interpretation of contracts and judgments authorize reference to extrinsic evidence. The extrinsic evidence powerfully supports Judge Mukasey's finding that the settlement agreement and the judgment entered on it were never understood to encompass Cities' off-market purchase. Cities therefore had no obligation to file an opt-out election to exclude itself from the class. Its claim against Gulf in the Oklahoma courts was not precluded by the settlement of a class action of which it had never been considered a part, and Judge Mukasey was correct in denying Gulf's application for injunctive relief barring Cities from pursuing the action.Conclusion 47 We affirm the ruling of the district court.