Opinion ID: 2773213
Heading Depth: 2
Heading Rank: 1

Heading: Interpreting the TSA

Text: Under California law,2 “even if a contract appears unambiguous on its face, a latent ambiguity may be exposed by extrinsic evidence [that] reveals more than one possible meaning to which the language of the contract is yet reasonably susceptible.” Dore v. Arnold Worldwide, Inc., 139 P.3d 56, 60 (Cal. 2006) (internal quotation marks omitted). “‘The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.’” Id. (quoting Pac. Gas & Elec. Co. v. G. W. Thomas Drayage & Rigging Co., 442 P.2d 641, 644 (Cal. 1968)). The Bankruptcy Court conducted a “preliminary [review] of all credible extrinsic evidence” 3 and correctly determined that it should not be considered to “override the 1 The Bankruptcy Court had jurisdiction pursuant to 28 U.S.C. § 157; we have jurisdiction to hear a direct appeal of the final judgment from the Bankruptcy Court in this instance pursuant to 28 U.S.C. § 158(d)(2). 2 It is undisputed that California law governs the TSA. TSA, § 3.3. 3 In this preliminary assessment, the Bankruptcy Court reviewed the declarations of Donald Royer (former General Counsel of DFC and Downey Bank) and William Lesse Castleberry (an expert specializing in federal income taxation). It correctly determined that neither should be considered in interpreting the TSA. The Royer Declaration was impermissible because he was not a signatory to the TSA and provided no contemporaneous evidence to support his conclusory assertions. Giuliano v. FDIC (In re Downey Fin. Corp.), 499 B.R. 439, 463-64 (Bankr. D. Del. 2013). The Castleberry 3 ‘intent’ expressly stated in the TSA.” Giuliano v. FDIC (In re Downey Fin. Corp.), 499 B.R. 439, 462-63 (Bankr. D. Del. 2013). The Bankruptcy Court correctly determined that “the TSA[ is] an integrated contract” (In re Downey Fin. Corp., 499 B.R. at 463), which expressly states that the intent of the parties was “to establish a method for allocating the consolidated tax liability of each member among the Affiliated Group.” TSA, § 2.1(a).