Opinion ID: 623239
Heading Depth: 3
Heading Rank: 1

Heading: MSA Section XV Waiver

Text: Under Kentucky law, which the parties agree governs this issue, contract interpretation is a question of law, which we review de novo. Noe v. PolyOne Corp., 520 F.3d 548, 551 (6th Cir. 2008); Morganfield Nat’l Bank v. Damien Elder & Sons, 836 S.W.2d 893, 895 (Ky. 1992). Courts interpreting contracts must look to the language of the agreement to determine the parties’ intent. “When no ambiguity exists in the contract, [the court] look[s] only as far as the four corners of the document to determine that intent.” Abney v. Nationwide Mut. Ins. Co., 215 S.W.3d 699, 703 (Ky. 2006). Whether a contract is ambiguous—in that a reasonable person would find it susceptible to different interpretations—is also a question of law reviewed de novo. Id.; Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 385 (Ky. Ct. App. 2002). No. 10-5043 VIBO Corp., Inc. v. Conway, et al. Page 16 Plaintiff agreed to be bound by the MSA when it signed the AA. Section XV of the MSA addresses the possibility of constitutional claims between the parties and contains a waiver clause. The provision states, in relevant part: Each Participating Manufacturer further acknowledges that it understands that certain provisions of this Agreement may require it to act or refrain from acting in a manner that could otherwise give rise to state or federal constitutional challenges and that, by voluntarily consenting to this Agreement it . . . waives for the purposes of performance of this Agreement any and all claims that the provisions of this Agreement violate the state or federal constitutions. MSA Section XV. Plaintiff and the district court adopted differing interpretations of this waiver provision. Plaintiff argues that the waiver only prevents it from challenging the constitutionality of MSA requirements that Plaintiff “act or refrain from acting” in a manner that may be deemed unconstitutional.7 Plaintiff reads the second clause (the waiver of constitutional claims) as limited by the first clause (recognition that the Plaintiff may be required to act unconstitutionally). Plaintiff argues that the waiver does not bar its claims, because none of its constitutional claims are based on requirements that cause Plaintiff to act or refrain from acting. On appeal, Plaintiff asserts that the district court erroneously read the waiver broadly so as to encompass all constitutional claims rather than only those claims related to requirements that Plaintiff act or refrain from acting. However, the district court actually adopted Plaintiff’s limited interpretation of the waiver clause as only applying to restrictions on Plaintiff’s own actions. See VIBO Corp., 594 F. Supp. 2d at 782. The difference of interpretation lies in the district court’s broad construction of the phrase “requirements that Plaintiff act or refrain from acting” to mean “provisions that affect 7 Plaintiff also claims that MSA Section XV only waives First Amendment claims because the original litigation preceding the MSA involved advertising restrictions. This claim is utterly without merit, as the waiver language clearly provides for “any and all claims that the provisions of this Agreement violate the state or federal constitutions” and does not signal that it applies only to First Amendment claims. MSA Section XV (emphasis added). We look only to the plain language of the agreement to determine the parties’ intent. Abney, 215 S.W.3d at 703. No. 10-5043 VIBO Corp., Inc. v. Conway, et al. Page 17 the Plaintiff’s performance under the contract” and its liberal interpretation of what requirements “affect” Plaintiff’s performance. See id. Under the district court’s interpretation, it concluded that three of Plaintiff’s four constitutional claims related to provisions that affected its performance and were thus encompassed by the waiver. Specifically, the court found that Plaintiff’s Equal Protection and Due Process claims involved “[t]he MSA’s unequal application of its purported back-payment requirements, grandfather exemptions and escrow requirements.” Id. Because the alleged unequal payment scheme affected Plaintiff by imposing on it obligations higher than those of the other manufacturers, the court found that these two claims affected Plaintiff’s performance and were therefore waived. In regard to Plaintiff’s Commerce Clause claim, the district court found that it “involves a requirement made on the plaintiff” and thus was waived. Id. at 783. We reject both of these interpretations of the waiver clause. We read Section XV more broadly than the district court and find that all constitutional claims related to the MSA are waived, even those not grounded on restrictions to Plaintiff’s own actions.8 Our interpretation is based on a close reading of the language of the two clauses in the waiver. The waiver, which is outlined in a single sentence, states that each participating manufacturer “acknowledges that it understands” two things: (1) “that” it may be required to act unconstitutionally; (2) “and that” it “waives . . . any and all” of its constitutional claims. The use of “that . . . and that” demonstrates that this sentence has two separate and equal components. Thus, the second clause is not limited by the first clause, but rather they are distinct acknowledgments. For Plaintiff to succeed on its argument that the second clause was to be limited by the first, the language of the waiver would, at the very least, need more indication that the clauses are co-dependent by using language such as “that” and “therefore” or “so.” The fact that both clauses are in the same sentence does not signify that they are co-dependent. Moreover, the second clause 8 Our reading of the waiver provision does not require that we interpret the phrase “act or refrain from acting” within Section XV. However, we note that the district court’s interpretation of “requirements that Plaintiff act or refrain from acting” to mean “any provision that affects Plaintiff’s performance” appears too broad based on a reading of the provision’s plain language. No. 10-5043 VIBO Corp., Inc. v. Conway, et al. Page 18 contains a clear, broad waiver that Plaintiff has waived “any and all claims that the provisions of this Agreement violate the state or federal constitutions.”