Opinion ID: 221235
Heading Depth: 2
Heading Rank: 1

Heading: Term of the Agreement

Text: Mountain Valley contends that the district court erred in construing the Agreement as having a perpetual term, rather than an indefinite term that would allow either party to terminate it at will. Mountain Valley moved for a new trial on Southern's breach of contract claim, at which the sole issue would be whether Mountain Valley permissibly terminated the Agreement after a reasonable time and with reasonable notice. See Sierra Wine & Liquor Co. v. Heublein, Inc., 626 F.2d 129, 131 (9th Cir.1980) (applying Nevada law) (holding that a contract which includes no express term is terminable at will after a reasonable period, upon reasonable notice). Southern asserts, and the district court agreed, that the Agreement was perpetual and, therefore, only terminable pursuant to its explicit terms. We review the district court's denial of Mountain Valley's motion for a new trial for abuse of discretion. See United States v. Barrera, 628 F.3d 1004, 1007 (8th Cir.2011). A district court abuses its discretion when it bases its decision on a legal error. Roach v. Stouffer, 560 F.3d 860, 863 (8th Cir.2009). As such, [w]e review de novo a district court's interpretation and construction of a contract, as well as a district court's interpretation of state law. Am. Prairie Constr. Co. v. Hoich, 594 F.3d 1015, 1023 (8th Cir.2010). Our subject matter jurisdiction in this case is based upon diversity of citizenship, and the parties agree that we are to apply Nevada law. See Kaufmann v. Siemens Med. Solutions USA, Inc., 638 F.3d 840, 843 (8th Cir.2011). Thus, we must attempt to predict what [the state supreme] court would decide if it were to address the issue. Raines v. Safeco Ins. Co. of Am., 637 F.3d 872, 875 (8th Cir.2011). According to Nevada law, the court shall effectuate the intent of the parties when interpreting a contract. Davis v. Nev. Nat'l Bank, 103 Nev. 220, 737 P.2d 503, 505 (1987). A basic rule of contract interpretation is that `every word must be given effect if at all possible.' Musser v. Bank of Am., 114 Nev. 945, 964 P.2d 51, 54 (1998) (quoting Royal Indem. Co. v. Special Serv. Supply Co., 82 Nev. 148, 413 P.2d 500, 502 (1966)). A court should not interpret a contract so as to make meaningless its provisions. Phillips v. Mercer, 94 Nev. 279, 579 P.2d 174, 176 (1978). The Supreme Court of Nevada addressed the enforceability of perpetual contracts for the first time in Bell v. Leven, 120 Nev. 388, 90 P.3d 1286 (2004). In Bell, the contract included language regarding its duration: the term of this agreement is perpetual or until terminated by mutual consent [of] all parties. Id. at 1287 (alteration in original). The state district court concluded that the perpetual duration clause in the agreement did not provide a legally sufficient duration, and thus, determined that the duration of the agreement was for a reasonable period of time. Id. The Supreme Court of Nevada reversed and held that, although courts should avoid construing contracts to impose a perpetual obligation[,] ... when the language of a contract clearly provides that the contract is to have a perpetual duration, the courts must enforce the contract according to its terms. Id. at 1288. In reaching this conclusion, the Supreme Court of Nevada cited, with approval, the Oregon Court of Appeals' decision in Paul Gabrilis, Inc. v. Dahl, 154 Or.App. 388, 961 P.2d 865 (1998). Bell, 90 P.3d at 1288. In Dahl, the court stated that, if there is nothing in the nature or language of a contract to indicate that the contract is perpetual, courts will interpret the contract to be terminable at will on reasonable notice. Nevertheless, where provided for, perpetual agreements will be enforced according to their terms. Dahl, 961 P.2d at 868. The court went on to determine that the country club membership agreement had a perpetual duration despite the lack of an express provision to that effect. Id. The court also stated that, [a]lthough the inclusion of grounds for termination in an agreement is not always a sign that the agreement can be terminated only for cause, the inclusion of such a provision strongly suggests that it is. Id. Mountain Valley argues that the Agreement does not expressly and unequivocally state that it is to be perpetual because the term `perpetual' does not appear in the Agreement, nor do[] any other word[s] expressing a similar intent. The court in Bell, however, did not condition the finding of a contract's term as perpetual on the use of certain magic words; it required that the language of a contract [must] clearly provide[] for a perpetual term. Bell, 90 P.3d at 1288. Here, Section 2.1 of the Agreement states that the Agreement shall remain in effect until terminated under Paragraphs 2.2 or 2.3. The Agreement clearly provides for a perpetual duration unless one of two specific events occursmutual consent to end the Agreement under Paragraph 2.2 or default as defined by Paragraphs 2.3, 5.9, and 5.10. If we were to interpret the Agreement to be terminable at will by either party, as Mountain Valley urges us to do, we effectively would nullify the contractual provisions regarding the conditions for terminationa result rejected by Nevada law. [2] See Phillips, 579 P.2d at 176. In short, Mountain Valley and Southern contemplated the duration of their relationship and agreed to a term that ends only by mutual consent or specific acts of default. See Bell, 90 P.3d at 1288; cf. Lichnovsky v. Ziebart Int'l Corp., 414 Mich. 228, 324 N.W.2d 732, 739 (1982) (An agreement which the parties have agreed is terminable only for cause, and which is thus by their agreement to endure until so terminated, is legally enforceable until terminated on that ground.). As such, the district court did not err when it determined that the Agreement between Mountain Valley and Southern was for a perpetual term and not for an indefinite term. Accordingly, the district court did not abuse its discretion when it denied Mountain Valley's motion for a new trial on this basis. [3]