Opinion ID: 3066264
Heading Depth: 2
Heading Rank: 1

Heading: 2d 1, 7 (Del. 2002); United Rentals, Inc. v. RAM

Text: Holdings, Inc., 937 A.2d 810, 831 (Del. Ch. 2007) (A “canon of construction . . . requires harmonization of seemingly conflicting contract provisions”); GRT, Inc. v. Marathon GTF Tech., Ltd., No. 5571-CS, 2012 WL WALKER DIGITAL, LLC v. EXPEDIA, INC. 8 2356489, at  (Del. Ch. June 21, 2012) (“[A] court will prefer an interpretation that harmonizes the provisions in a contract as opposed to one that creates an inconsistency or surplusage.”). By disregarding the conflict between the warranty clause and the pending litigation, the majority fails to give effects to all provisions, nullifying the warranty clause. The district court itself acknowledged “the broad granting language is inconsistent with plaintiff’s warranty that none of the Transferred Patents were [the] subject of litigation,” J.A. 13, but ultimately “declin[ed] to elevate a standard warranty clause above unambiguous granting language—the clear purpose of the document,” J.A. 14. It is impossible to reconcile the court’s simultaneous recognition of conflicting terms and its insistence on unambiguous contract language. Cordis Corp. v. Boston Scientific Corp., 868 F. Supp. 2d 342, 352 (D. Del. 2012) aff’d in part, vacated in part on other grounds, 504 F. App'x 922 (Fed. Cir. 2013) (“[i]nconsistent contractual provisions may create ambiguity in a contract.”). IV. The Majority’s Interpretation Conflicts with the Overall Plan of the Settlement Agreement “[T]he meaning inferred from a particular provision cannot control the meaning of the entire agreement if such an inference conflicts with the agreement’s overall scheme or plan.” Riverbend Cmty., LLC v. Green Stone Eng’g, LLC, 55 A.3d 330, 334–335 (Del. 2012) (internal quotation marks and citation omitted). Rather, “[a] court must interpret contractual provisions in a way that gives effect to every term of the instrument, and that, if possible, reconciles all of the provisions of the instrument when read as a whole.” Counsel of the Dorset Condo., 801 at 7; see also Delta & Pine Land Co. v. Monsanto Co., C.A. No. 1970–N, 2006 WL 1510417, at  (Del. Ch. May 24, 2006) (“It is, of course, a familiar principle that contracts WALKER DIGITAL, LLC v. EXPEDIA, INC. 9 must be interpreted in a manner that does not render any provision illusory or meaningless.”) (internal quotation marks and citation omitted). The majority elevates Section 1.1 over all other clauses in the Agreement, rendering listings on Schedule A redundant, the warranty clause meaningless, and the parties’ clear intent irrelevant. An interpretation with such effects cannot be the “only reasonable interpretation.” Maj. Op. at 9. “An unreasonable interpretation produces an absurd result or one that no reasonable person would have accepted when entering the contract.” Osborn, 991 A.2d at 1160. Reading the Section 1.1 as the district court and WALKER DIGITAL, LLC v. EXPEDIA, INC. 10 majority do leads to an absurd result, a fact the district court itself acknowledged. 1 See J.A. 3425. 1 In entirety, the court stated: It strikes me that . . . defendants’ interpretations are leading us to a ludicrous result, and by that I mean the following. As I understand it, the parties to the contract at issue have no dispute and agree that ownership of the patents-in-suit were never transferred to eBay and that they are still owned by Walker Digital. The movants, who are non-parties to the contract, are urging the Court to interpret the contract contrary to the parties’ intentions, and I think even in their papers, the defendants say, kind of consistently, that maybe the parties didn't realize that this language they were using would lead to this result, but I think even the parties don’t dispute that the, even the movants don't dispute that the parties didn't intend the consequence urged by the movants. And so the non-movants are urging the Court to accept their interpretation despite the fact that it’s contrary to the parties’ intention and despite the fact that their interpretation leads to what I would consider an absurd result. . . . So I understand and, you know, I appreciate intellectually the exercise you all went through to come to your interpretation, but I didn't see a case, and you can correct me if I’m wrong, where non-parties to a contract interpreted a contract contrary to the parties’ intention and leading to a result that does not make any sense in the real world. WALKER DIGITAL, LLC v. EXPEDIA, INC. 11 In sum, because Section 1.1’s plain language conflicts with other provisions in the Agreement, as well as the general circumstances and intent surrounding its execution, the Settlement Agreement is ambiguous whether the unlisted child patents and applications, including the patents-in-suit, were transferred to eBay. V. Extrinsic Evidence Clearly Demonstrates the Parties Did Not Intend to Transfer the Patents-in-Suit When there is uncertainty in the meaning and application of contract language, the reviewing court must consider the evidence offered in order to arrive at a proper interpretation of contractual terms. Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997); GMG Capital Investments, LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776, 780 (Del. 2012) (Where a contract is ambiguous, “the interpreting court must look beyond the language of the contract to ascertain the parties’ intentions.” (emphasis added) (internal quotation marks and citation omitted); United Rentals, Inc. v. RAM Holdings, Inc., 937 A.2d 810 (Del. Ch. 2007). These findings are reviewed with deference. Honeywell Int’l Inc. v. Air Prods. & Chems., Inc., 872 A.2d 944, 950 (Del. 2005) (“To the extent the trial court’s interpretation of the contract rests upon findings extrinsic to the contract, or upon inferences drawn from those findings, our review requires us to defer to the trial court’s findings, unless the findings are not supported by the record or unless the inferences drawn from those findings are not the product of an orderly or logical deductive reasoning process.”); see also AT&T Corp. v. Lillis, 970 A.2d 166, 169–70 (Del. 2009). Though the district court found the Agreement unambiguous, it determined the parol evidence was “equivocal” and insufficient to establish standing. J.A. 15; J.A. 3425–26 (emphases added). WALKER DIGITAL, LLC v. EXPEDIA, INC. 12 see also J.A. 25 n.1 (“[T]he court ultimately found the parol evidence to be unpersuasive . . .”). This statement diverges from many of the district court’s other statements, such as: “It strikes me that [] defendants’ interpretations are leading us to a ludicrous result . . . .” J.A. 3425; “[t]heir interpretation leads to what I would consider an absurd result,” id.; and “it is difficult for someone like me to resolve [this issue] in defendants’ favor based solely on the language because it is such an incredible result.” J.A. 3435. The extrinsic evidence overwhelmingly supports Walker’s position despite the district court’s conclusion and Defendants’ arguments to the contrary. As discussed above, both the no-pending litigation warranty as well as the first sentence of Section 1.1 in connection with Schedule A support Walker’s position that the parties intended to transfer only those patents on Schedule A. [[Another section of the Settlement Agreement also supports Walker’s interpretation.]] In accord with this section, Walker executed and delivered twenty-six short form assignments corresponding to the patents and applications listed in Schedule A. J.A. 6. [[Other actions Walker took conflict with the majority’s interpretation.]] The parties simply did not intend to transfer those patents. [[Communications prior to the execution of the Settlement Agreement also support Walker’s position.]] Communications after the execution of the Agreement further demonstrate Walker and eBay’s intent that Schedule A be an exhaustive list. Upon informing eBay about the Defendants’ motion to dismiss for lack of standing, eBay provided a letter stating: “[t]his confirms that eBay Inc. is not the owner of U.S. Patent Nos. 7,831,470 (09/219267) and 7,827,056 (11/423481).” J.A. 14. Furthermore, Mr. Tikku, Senior Patent Counsel at WALKER DIGITAL, LLC v. EXPEDIA, INC. 13 eBay, provided a declaration stating eBay did not intend to transfer the patents. J.A. 14. [[Evidence supporting this assertion]] Though eBay has neither asserted nor disclaimed ownership of the ’359 patent, there is no compelling reason to treat it differently than the ’470, ’056, and ’942 patents; it is not listed on Schedule A. Mr. Tikku’s testimony devastates the district court’s finding that the extrinsic evidence was “equivocal” and “unpersuasive.” In sum, the extrinsic evidence resolves the ambiguity due to the conflicting provisions in the Agreement, and demonstrates that Walker and eBay did not intend to transfer all continuations, continuations-in-part, and related applications, including the patents-in-suit, to eBay. Accordingly, I would find the district court abused its discretion. VI. To the Extent Walker Lacked Standing, the District Court Should Have Dismissed the Case without Prejudice The majority determined the trial court “did not abuse its discretion when it imposed a dismissal with prejudice in this case [because] Walker had multiple opportunities to cure its Article III defect.” Maj. Op. at 15. In the Third Circuit, a dismissal with prejudice is a “severe and disfavored remedy.” Alvin v. Suzuki, 227 F.3d 107, 122 (3d Cir. 2000). Indeed, “the Third Circuit . . . as well as other regional circuit courts, have repeatedly emphasized that a dismissal for lack of standing should generally be without prejudice, particularly when the defect is curable.” Univ. of Pittsburgh v. Varian Med. Sys., Inc., 569 F.3d 1328, 1332 (Fed. Cir. 2009) (emphasis added); see also H.R. Techs., Inc. v. Astechnologies, Inc., 275 F.3d 1378, 1384 (Fed. Cir. 2002) (“Because lack of standing is not an issue that goes WALKER DIGITAL, LLC v. EXPEDIA, INC. 14 to the merits of the underlying patent issues, a dismissal of a complaint for lack of standing would not normally be expected to be made with prejudice.”). As this court has recognized, “the law universally disfavors dismissing an action with prejudice based on lack of standing, and there is a strong presumption that such a dismissal is improper.” Univ. of Pittsburgh, 569 F.3d and 1333 (emphasis added). An important inquiry under the law is whether “the defect is curable.” Id. at 1332. The district court’s standing ruling did not extinguish any claims and was not an adjudication on the merits. See Univ. of Pittsburgh, 569 F.3d at 1332 (citing Kasap v. Folger Nolan Fleming & Douglas, Inc., 166 F.3d 1243, 1248 (D.C. Cir. 1999)). Walker maintained it had “been and currently is engaged in continued discussion with eBay regarding ownership of the patents-in-suit,” J.A. 26, but the court nonetheless found Walker had opportunities to fix the standing problem and failed to provide evidence “that it has a plan to cure,” J.A. 26. [[Moreover, Walker had irrefutable proof of its rights.]] The majority also focuses on the fact that Walker had multiple opportunities to cure the standing defect yet failed to do so. Maj. Op. at 15, 16. [[Walker provided evidence it attempted to cure.]] It was reasonable for Walker not to cure when the court, which had stated on record that Defendants’ “interpretations are leading us to a ridiculous result,” J.A. 3425, and initially dismissed the case without prejudice after finding Walker lacked standing. Additionally, the district court itself acknowledged: The motions to dismiss involved complex questions of law, with there being grounds for reasonable disagreement. With arguably valuable property rights at stake, it is not surprising that plaintiff choose to have the court resolve the WALKER DIGITAL, LLC v. EXPEDIA, INC. 15 dispute rather than amicably resolve such with defendants. J.A. 25 (footnote omitted). By dismissing Walker’s claims with prejudice, the district court effectively punished Walker because it chose to have the district court resolve the standing issue rather than obtaining an assignment from eBay. Because our law strongly disfavors dismissal with prejudice, and because the district court itself recognized the logic in Walker to “choos[ing] to have the court resolve the dispute,” I would reverse the court’s dismissal with prejudice. VII. Conclusion Given Delaware law and that all provisions in the Agreement except for the second sentence of Section 1.1 reflect Walker’s (and eBay’s) understanding that only the patents listed in Schedule A were transferred, I would find the district court erred in finding no ambiguity. Moreover, the extrinsic evidence clearly demonstrates the parties intended to transfer only the patents and applications listed on Schedule A. For these reasons, I respectfully dissent.