Opinion ID: 2982835
Heading Depth: 2
Heading Rank: 2

Heading: Is the Release Ambiguous?

Text: The language of the release at issue is contained in ¶ 4 of the Settlement Agreement: General Releases and Waivers by Applicants: Upon the execution and delivery of this Settlement Agreement, Transdermal, DPM, Modi and Mattatall and each Applicant, on his, her or its, as the case may be, own behalf and behalf of his heirs, assigns, attorneys, agents and legal representatives, officers, directors and shareholders does hereby release, waive and forever discharge each other, including each of their current and former officers, directors, employee, 1 Mattatall argues that Nevada law also permits consideration of extrinsic evidence to determine whether a contract is ambiguous, citing M.C. Multi-Family Dev., L.L.C. v. Crestdale Assocs., LTD., 193 P.2d 536 (Nev. 2008); and Oracle USA, Inc. v. Rimini Street, Inc., 6 F. Supp. 3d 1108 (D. Nev. 2014). The argument does not stand up to scrutiny. It has been squarely rejected by the Nevada Supreme Court in Frei ex rel. Litem v. Goodsell, 305 P.3d 70, 73–74 (Nev. 2013), and Kaldi v. Farmers Ins. Exch., 21 P.3d 16, 21–22 (Nev. 2001). Nevada law does recognize the admissibility of extrinsic evidence “of a separate oral agreement as to any matter on which a written contract is silent, and which is not inconsistent with its terms.” M.C. Multi-Family, 193 P.3d at 545 (quoting Kaldi, 21 P.3d at 22). But this exception is of no help to Mattatall because the instant release is not silent and seems to be facially inconsistent with the extrinsic evidence . . . unless the release is adjudged to be reasonably susceptible to more than one interpretation, in which case the extrinsic evidence is admissible anyway. Oracle includes reference, in dictum, to a Ninth Circuit ruling, observing that “[i]f a party’s extrinsic evidence creates the possibility of an ambiguity, a court may not rely on the text of the contract alone to determine the intent of the parties.” Oracle, 6 F. Supp. 3d at 1116 (quoting Foad Consulting Grp., Inc. v. Azzalino, 270 F.3d 821, 828 (9th Cir. 2001)). However, the quoted language is based on California’s “liberal parole evidence rule,” not Nevada law. Foad, 270 F.3d at 826. It is also at odds with the rule actually applied by the Oracle court—i.e., that extrinsic evidence can be considered only if the contract is ambiguous. Hence, while Nevada courts are concerned to effectuate the intent of the parties, the starting point for the intent inquiry is the language of the parties’ agreement. If it is unambiguous, the language will be construed according to its plain meaning. Only if it is ambiguous will extrinsic evidence be considered. See Sheehan, 117 P.3d at 223–24. -6- Case No. 14-1614 Debourah Mattatall v. Transdermal Corp. shareholders, attorneys and accountants, agents, and successors and assigns, of and from any and all claims, causes of action, obligations, demands and liabilities whatsoever, of every name and nature, both in law and equity, known and unknown, anticipated and unanticipated, which a Party had, has or hereafter may have, or which any person or entity may have on any Party’s behalf, against each other, including their current and former officers, directors, employees, shareholders, attorneys and accountants, agents and successors and assigns, because of or arising from any matter, event or thing which has happened, developed or occurred before the execution of this Settlement Agreement. R. 18, Sealed Ex. O at ¶ 4, Page ID 426–27 (emphasis added). Focusing on the highlighted language, the district court concluded the release is unambiguous. Because “party” is defined as including Mattatall, the district court held that her claims under the Employment Agreement and Share Purchase Agreement against another party, Transdermal, having arisen before execution of the Settlement Agreement, are within the unambiguous scope of the release. Mattatall insists that the release, read in context of the Settlement Agreement as a whole, is reasonably susceptible to another interpretation. Mattatall makes several arguments; one is strongest and dispositive. She contends that the “whereas” recitals on the first pages of the Settlement Agreement define the purpose and scope of the agreement. The purpose is to settle the parties’ “dispute” (singular) defined by the two pending lawsuits: the first being the Fia applicants’ action against DPM, Modi and Mattatall, and the second being Transdermal’s action against the Fia applicants. Neither action presented any claim specifically involving Mattatall’s Employment Agreement or Share Purchase Agreement with Transdermal. Nor does any provision of the Settlement Agreement refer to either of Mattatall’s contracts with Transdermal. In neither lawsuit did Mattatall have any interests adverse to Transdermal’s. Accordingly, the argument goes, the Settlement Agreement was designed to resolve “the dispute” between two sets of parties—the applicants, on the one hand; and Transdermal, DPM, Modi and Mattatall, on the other. The correctness of this understanding is said to be reinforced by the “now therefore” -7- Case No. 14-1614 Debourah Mattatall v. Transdermal Corp. clause which, by providing that “the Applicants and the Company hereby agree as follows . . .”, indicates the scope of the dispute being settled. R. 18, Sealed Ex. O, Settlement Agreement at 2, Page ID 425 (emphasis added). Given this context, Mattatall argues that the language of the release is reasonably susceptible to a narrower and more “logical” construction than that given it by the district court. She argues the release can and should be construed as meaning that “Transdermal, DPM, Modi and Mattatall,” on the one side, and “each Applicant,” on the other side, mutually release all claims each party on each side may have against each party on the other side. This construction is said to be supported by the use of two “ands” in the release listing of the parties. But for this “two sides” alignment of the parties, she argues, it would have been unnecessary to include the first “and” in the listing of the parties. The district court’s construction of the release is thus said to render the first “and” superfluous. Mattatall’s construction is sensible, and truer to the purpose of the Settlement Agreement, of which the release is part. Quite apart from whether the two “ands” in the listing of parties can bear all the weight of Matattall’s argument, her construction of the release, viewed as part of the Settlement Agreement as a whole, is not unreasonable and does not directly conflict with other terms of the release. Her reading of the release is thus consonant with the Nevada law requirement that the contract be read as a whole and in such a way as to avoid negating any contract provision. See Road & Highway Builders, 284 P.2d at 380. Yes, the language of the release, viewed in isolation, is also broad enough to bear the construction given it by the district court. But the district court recognized that enforcement of the release in accordance with what it considered to be its plain meaning “is not logical.” Considering that Nevada law favors a “fair and reasonable” interpretation over a “harsh and unreasonable” one, see Shelton, 78 P.3d at 497, -8- Case No. 14-1614 Debourah Mattatall v. Transdermal Corp. the scale tips in favor of finding that Mattatall’s proffered construction of the release is also reasonable. Because we find that both constructions of the release are reasonable—i.e., that the language is capable of “having a double meaning,” see Galardi, 301 P.3d 366, the release is, by definition, “ambiguous” and extrinsic evidence should be considered “to determine the true mutual intentions of the parties,” see Shelton, 78 P.3d at 497.2