Opinion ID: 4176712
Heading Depth: 2
Heading Rank: 2

Heading: Construction of the Stipulation

Text: On appeal, Plaintiffs argue that the district court erred in construing the Stipulation by failing to interpret the phrase “Bonds currently held” according to its ordinary meaning. Plaintiffs also argue that the district court failed to consider the Stipulation as a whole and misapplied the burden of proof, and that the resulting construction was patently unreasonable. This court reviews a district court’s construction of a settlement agreement de novo. United States v. Bailey, 775 F.3d 980, 981 (8th Cir. 2014); Transcon. Ins. Co. v. Rainwater Const. Co., 509 F.3d 454, 456 (8th Cir. 2007). “Interpretation of a release or a settlement agreement is governed by the same principles applicable to any other contractual agreement, and the primary rule of construction is that the intention of the parties shall govern.” Andes v. Albano, 853 S.W.2d 936, 941 (Mo. 1993). Missouri courts determine the intent of the parties “based on the contract language alone unless its terms are ambiguous.” Health Care Found. of Greater Kan. City, 507 S.W.3d 646, 661 (Mo. Ct. App. 2017); see also Andes, 853 S.W.2d at 941 (“[L]anguage that is plain and unambiguous on its face will be given full effect within the context of the agreement as a whole unless the release is based on fraud, accident, misrepresentation, mistake, or unfair dealings.”). “Under Missouri law, determining -11- the meaning of an unambiguous provision is a question of law for the court, determined by giving language its plain and ordinary meaning without resort to extrinsic evidence.” Shaw Hofstra & Assocs. v. Ladco Dev., Inc., 673 F.3d 819, 825 (8th Cir. 2012) (quoting Weitz Co. v. MH Washington, 631 F.3d 510, 524 (8th Cir. 2011)). “A contract is ambiguous when the terms are susceptible of more than one reasonable meaning.” Id. (quoting Weitz, 631 F.3d at 524). Plaintiffs argue that the district court misconstrued the term “Bonds currently held.” The provision of the Stipulation setting forth “Step 1” states, “[I]f Bonds currently held by Class Members are not tendered . . . then [Defendants] are not obligated to fund the proportionate amount of Gross Settlement Amount represented by Bonds that are not tendered.” Appellants’ App. 37. This provision requires the calculation of a percentage of the Net Settlement Fund to be paid by Defendants based on the par value of the Bonds that were eventually tendered. The parties agree that the par value of the Bonds actually tendered was $6,970,000. The parties disagree, however, about how the Stipulation defines the appropriate point of comparison, though both agree that the Stipulation compels a comparison between the Bonds tendered and the “Bonds currently held.” Defendants defined the “Bonds currently held” as a constant value of $8,455,000 in par value based on, among other references, Table 1. Plaintiffs argue that the Bonds tendered should only be compared against the par value of Bonds actually held by members of the class (those in Groups 1 and 2) at the time the Stipulation was executed. Because class members in Groups 5 and 6 made claims for losses relating to Bonds totaling $880,000 of par value, the amount of “Bonds currently held” should be reduced accordingly by $880,000. Plaintiffs argue this view best represents the ordinary meaning of the phrase “Bonds currently held.” Claims from class members in Groups 5 and 6, who had sold their Bonds, reflect the fact that some number of Bonds were not held by class members at the time of settlement. The Stipulation, however, unambiguously defines the par value of “Bonds currently held” as a fixed amount: $8,455,000. Table 1 represents that $8,455,000 is -12- the par value of “Bonds Currently Held,” and as the district court noted, there is no indication in the Table that this number is subject to change. The Stipulation contains other references to the class members “hold[ing],” in the present tense, Bonds totaling $8,455,000 in par value. E.g., Appellants’ App. 36 (Group 1 holds Bonds with par value of $2,495,000, and Group 2 holds Bonds with par value of $5,960,000). By contrast, the use of the phrase “Bonds currently held” in the description of Step 1, which Plaintiffs highlight, contains no similar definitional referent. Rather, as the district court noted, the description of Step 1 states that Defendants have no obligation to pay the class with respect to Bonds that are not tendered. Plaintiffs argue that a view of the Stipulation as a whole shows that the $8,455,000 figure simply represents the par value of the Bonds originally purchased by class members, not those currently held. According to Plaintiffs, the definitions of Groups 5 and 6 – class members who had sold their Bonds for a loss – shows that it was understood that the value of “Bonds currently held” would be less than $8,455,000. Plaintiffs also point to the definition of Step 2, which provides that the amounts that Groups 1 and 2 will receive is conditional on claims submitted by Groups 5 and 6; this, in Plaintiffs’ view, also reflects an understanding that class members in Groups 1 and 2 did not currently hold Bonds with a combined par value of $8,455,000 at the time the Stipulation was signed. Nevertheless, as stated above, the Stipulation explicitly represents that $8,455,000 was the value of “Bonds currently held.” The district court correctly observed that the definition and inclusion of Groups 5 and 6, and the effect that claims from those Groups have on the Step 2 calculation, each relate not to the total amount owed by Defendants but to the relative amounts owed toward each Group. Ultimately, the language of the Stipulation clearly states that the value of “Bonds currently held” was a fixed amount, or $8,455,000. Plaintiffs’ argument that the Stipulation did not mean to do this relies on assumptions that the parties did not mean to say what the Stipulation says, but instead meant to state that the value of “Bonds currently held” depended on the outcome of the claims process. Under -13- Missouri law, an “[a]mbiguity arises only where the terms are reasonably open to more than one meaning, or the meaning of the language used is uncertain.” Health Care Found., 507 S.W.3d at 661 (quoting Woods of Somerset, LLC v. Developers Sur. & Indem. Co., 422 S.W.3d 330, 335 (Mo. Ct. App. 2013)). “Ambiguity does not arise merely because the parties disagree over the meaning of a provision, and courts may not create ambiguity by distorting contractual language that may otherwise be reasonably interpreted.” Id. (quoting Woods of Somerset, 422 S.W.3d at 335). Where, as here, the contract is subject to only one reasonable interpretation, “the parties’ intent may be gathered from the terms of the contract alone, and no extrinsic evidence may be introduced to contradict the terms of the contract or to create an ambiguity.” State ex rel. Greitens v. Am. Tobacco Co., 509 S.W.3d 726, 741 (Mo. 2017). The district court did not err in interpreting the Stipulation according to its unambiguous meaning and in holding that Defendants complied with the Stipulation’s payment obligations. Plaintiffs also argue that the district court erred in not considering statements made on the record before the district court regarding the parties’ settlement prior to the drafting of the Stipulation. Plaintiffs argue that the statements before the district court are not parol evidence because the transcript of the colloquy before the district court was incorporated into the Stipulation. Under Missouri law, “[t]o incorporate terms from another document, the contract must ‘make [] clear reference to the document and describe[] it in such terms that its identity may be ascertained beyond a doubt.’” State ex rel. Hewitt v. Kerr, 461 S.W.3d 798, 810-11 (Mo. 2015) (second and third alterations in original) (quoting Intertel, Inc. v. Sedgwick Claims Mgmt. Servs., Inc., 204 S.W.3d 183, 196 (Mo. App. 2006)). “The intent to incorporate must be clear.” Id. at 810. However, the existence of a merger clause strongly indicates that a writing is a complete and final agreement. Johnson ex rel. Johnson v. JF Enters., LLC, 400 S.W.3d 763, 766 (Mo. 2013). -14- The Stipulation states that the parties previously put the settlement on the record in chambers. This reference to the discussion in chambers, included in the section of the Stipulation that recites the history of the litigation, does not convey any clear intent to incorporate the representations made before the district court as contractual terms. The Stipulation also contains a merger clause. Thus, to the extent the transcript constitutes a document that the Stipulation could incorporate, the district court did not err in refusing to look outside the four corners of the Stipulation. Moreover, it is clear from the transcript that even when discussing settlement before the district court, prior to drafting the Stipulation, Defendants had only agreed to pay class members based on Bonds actually tendered, and no statement by either party spells out Plaintiffs’ preferred calculation method.5