Opinion ID: 625482
Heading Depth: 3
Heading Rank: 3

Heading: The plain language of the Agreed Judgment.

Text: Defendants also appear to challenge the district court’s reading of the plain language of the Agreed Judgment. In particular Defendants point to a contested paragraph of the Agreed Judgment: 14 Case: 11-50450 Document: 00511789592 Page: 15 Date Filed: 03/15/2012 No. 11-50450 The parties have also agreed to the entry of a permanent injunction against the City of El Paso preventing the city from the enforcement of any adult business ordinances against either Foxy’s Nightclub . . . and the Lamplighter Lounge . . . . The clubs known as Foxy’s Nightclub and Lamplighter Lounge shall be recognized as legal, non-conforming uses and shall be permanently grandfathered as such for, for such a period of time as the businesses remain in operation at their current locations by their current owners and operators. These businesses shall retain their status as a nonconforming use, as set forth herein, regardless of any intervening court decisions or future changes or amendments to the El Paso City Code. The parties recognize that property located [where Foxy’s Nightclub is] is currently leased by CR&R, Inc., and the property located [where Lamplighter Lounge is] is owned at CR&R, Inc., . . . and that this injunction applies to that business as the real party in interest in this lawsuit and the third-party beneficiary of this settlement agreement. Thus, the phrase “remain in operation” as set forth above means that CR&R, Inc., will continuously maintain its ownership or leasehold interest in the subject properties and that the businesses shall remain open for business as adult businesses subject to the provisions of [the City Code] allowing for temporary closure for a short period of time. (emphasis added). The district court explained that “Defendants’ interpretation of the Agreed Judgment, that they would continue to be protected [from the City’s enforcement of SOB ordinances] so long as CR&R maintained its ownership and leasehold interests in the subject properties on which Foxy’s and Lamplighter were located, [wa]s untenable.” In arriving at this conclusion, the district court stated that granting “CR&R . . . grandfathered protection [would] change[] the plain meaning of the Agreed Judgment, since . . . the Agreed Judgment explicitly confers non-conforming use status only to Foxy’s and Lamplighter, not CR&R.” The district court further interpreted this section to mean that “the Agreed Judgment controls so long as CR&R maintains its ownership or leasehold interest, and Foxy’s and Lamplighter remain open for business as adult businesses at the current locations by their current owners and operators. The 15 Case: 11-50450 Document: 00511789592 Page: 16 Date Filed: 03/15/2012 No. 11-50450 language naming CR&R as a third-party beneficiary means that CR&R enjoys protection from liability for any violations of the City’s adult business zoning ordinances, protection derivative from Foxy’s and Lamplighter’s status as legal, non-conforming uses.” Defendants contest this reading on several grounds. First, Defendants argue that the district court’s conclusion that the Agreed Judgment “was intended to benefit only the corporations . . . who owned and operated the businesses and the shareholders of those corporations” renders the phrase “real party in interest” meaningless. Along these lines, Defendants assert that the district court’s reading that CR&R is a third-party beneficiary of the Judgment is “nonsensical” because if Foxy’s and the Lamplighter were granted protection from the City Code as lawful, non-conforming uses, then CR&R would not have needed derivative protection as a third-party beneficiary. Defendants also challenge the district court’s reading of the phrase “remain in operation” as meaning that CR&R had to maintain its ownership and leasehold interests over the properties and that the nightclubs had to remain open as SOBs at their current locations with their current owners and operators. Defendants argue that they themselves proposed this phrase and contest an interpretation that “fails to explain why Defendants would propose contract language that amounts to an additional limitation of their rights under the agreement.” In sum, Defendants believe that “the only reasonable interpretation is that the Agreed Judgment remains in effect so long as the businesses continue to operate at their present locations and CR&R maintains its interest in the subject properties.” These arguments are unpersuasive. First, it is unclear that by reading the term “real party in interest” to mean that CR&R derived its own protected status from the nightclubs’ legal, non-conforming use, the district court rendered the phrase “real party in interest” meaningless. Because the Agreed Judgment did not define these terms, one could possibly read the Judgment as protecting the 16 Case: 11-50450 Document: 00511789592 Page: 17 Date Filed: 03/15/2012 No. 11-50450 nightclubs, but not CR&R. In other words, the City would not have been able to enforce its Codes against the nightclubs, but would have been able to pursue CR&R as either the owner or lessee of the properties on which the nightclubs are located. However, the district court opted for a more sensible interpretation. Thus, under its reading, the second and third sentences in the contested paragraph establish the protections for the nightclubs: The clubs known as Foxy’s Nightclub and Lamplighter Lounge shall be recognized as legal, non-conforming uses and shall be permanently grandfathered as such, for such a period of time as the businesses remain in operation at their current locations by their current owners and operators. These businesses shall retain their status as a non-conforming use, as set forth herein, regardless of any intervening court decisions or future changes or amendments to the El Paso City Code. The fourth sentence clarifies that these protections also extend to CR&R: The parties recognize that property located [where Foxy’s Nightclub is located] is currently leased by CR&R, Inc., and the property located [where Lamplighter Lounge is located] is owned by CR&R, Inc., . . . and that this injunction applies to that business as the real party in interest in this lawsuit and the third-party beneficiary of this settlement agreement. Reading sentences in a paragraph in conjunction, so that later sentences clarify the scope and meaning of earlier ones, is routinely done by courts. See, e.g., Kern v. Sitel Corp., 517 F.3d 306, 309–10 (5th Cir. 2008). The district court’s reading does not render any term superfluous and simply gives a sense of how far the “legal, non-conforming use” protections were to extend. Defendants’ argument regarding the other contested sentence also fails. The district court read the sentence at issue to imply a further restriction on Defendants: [T]he phrase “remain in operation” as set forth above means that CR&R, Inc., will continuously maintain its ownership or leasehold interest in the subject properties and that the businesses shall remain open for business as adult businesses subject to the 17 Case: 11-50450 Document: 00511789592 Page: 18 Date Filed: 03/15/2012 No. 11-50450 provisions of [the City Code] allowing for temporary closure for a short period of time. Defendants contend that because they added this phrase to the Agreed Judgment, it should not be read as limitation because that would be contrary to their interests. The problem with Defendants’ argument is that it is hard to read this sentence differently than the district court did. The sentence expressly states that CR&R “will continuously” do something. The previous panel did not find this phrase to be ambiguous, and “[i]t is well established that the extrinsic evidence rule ordinarily requires the exclusion of parol[ ] evidence that would add to, vary, or contradict the unambiguous terms of a written contract.” Verex Assur., Inc. v. First Interstate Bank of Cal., 35 F.3d 559, 1994 WL 499619, at  (5th Cir. Aug. 22, 1994) (unpublished) (citation and internal quotation marks omitted). Thus, Defendants’ purported reasons for including the phrase are irrelevant given the unambiguous nature of the sentence. As the district court’s reading of the terms does not render any terms of the Agreed Judgment superfluous or meaningless, we reject Defendants’ arguments and affirm its decision.