Opinion ID: 2981253
Heading Depth: 2
Heading Rank: 1

Heading: Future Payments under the Agreement

Text: The language of the Agreement is ambiguous as to whether Albaugh is responsible for payments that Drexel makes after the termination of the Agreement but relating to the period that the Agreement was in effect. The single sentence that discusses the issue states that Albaugh is responsible for 50% of “all future payments” made “as data compensation in order to maintain the Registration.” The sentence is silent as to the outer limit of “future.” The language could mean payments made while the Agreement is in effect—as the district court read it—but it could alternatively mean payments made for data collected while the Agreement is in effect (or payments otherwise related to that time period), even if the payments are made after the Agreement is terminated. This second interpretation gains some strength from the fact that the “future payments” are further described as those “Drexel makes to Novartis in the future as data compensation.” The repetition of “future” suggests that this requirement extends beyond the date of Agreement termination. The language of the Agreement could even be said to have no outer limit for when Albaugh’s payment obligations end, if read strictly literally. Under Tennessee law, contractual language is ambiguous when “it is of uncertain meaning and may fairly be understood in more ways than one.” Allstate Ins. Co. v. Watson, 195 S.W.3d 609, 611 (Tenn. 2006) (quoting Farmers-Peoples Bank v. Clemmer, 519 S.W.2d 801, 805 (Tenn.1975)). This contract’s language fits that description. Because the Agreement is ambiguous, further factual development is necessary. Under Tennessee law, when there are multiple plausible interpretations of contractual terms, courts should -8- Nos. 11-5430, 11-5498 Drexel v. Albaugh not rely solely on a literal interpretation of the language to determine the contract’s true meaning, but rather should apply rules of construction to determine the intent of the parties, including using extrinsic or parol evidence. See Watson, 195 S.W.3d at 611-12. In this case, further evidence may inform the proper interpretation of “future.” We do not prescribe what evidence in particular should be put forth, but it could possibly include information about how certain terms are understood in the agricultural chemical business, particularly in the FIFRA regulatory context, the nature of the payments made to Syngenta, and previous agreements or correspondence between Drexel and Albaugh—whether or not the Agreement itself was being discussed. Evidence supporting Drexel’s allegation that Albaugh continued to rely on Drexel’s registration after the Agreement was terminated may also be taken into consideration. Albaugh’s explanation for why the Agreement is unambiguous is not convincing. Reading the Agreement to cover payments made after termination does not render Paragraph 7’s second sentence meaningless. There are a number of reasons that might explain why the sentence was included in the Agreement, including to provide Albaugh with a means to exit the Agreement, or to prevent holding Albaugh responsible for data compensation ad infinitum. In addition, the first sentence of Paragraph 7 says that the Agreement “shall terminate, and Albaugh shall not be obligated to make any further payments hereunder,” if EPA registration does not go through successfully. Reference to such further payment obligations is absent from the second sentence, which is the sentence in question here. The absence of this phrase in the second sentence makes it less plain that -9- Nos. 11-5430, 11-5498 Drexel v. Albaugh termination by Albaugh after the $750,000 was paid means absolutely no post-termination payment obligation could arise. Factual development is required to interpret these provisions.