Court Opinion

ID: 202487
Source: CourtListenerOpinion
Date Created: 2011-02-07 05:54:06+00
Date Added: 2024-06-11T12:38:13.714808
License: Public Domain

United States Court of Appeals
                     For the First Circuit
No. 05-2710

              JOHN HANCOCK LIFE INSURANCE COMPANY;
         JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY;
         and INVESTORS PARTNER LIFE INSURANCE COMPANY,

                     Plaintiffs, Appellees,

                               v.

                      ABBOTT LABORATORIES,

                      Defendant, Appellant;

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT MASSACHUSETTS

         [Hon. Douglas P. Woodlock, U.S. District Judge]

                             Before

               Torruella and Lipez, Circuit Judges
                  and Stafford,* District Judge.

     Lawrence R. Desideri, with whom Stephen V. D'Amore, Peter E.
Gelehaar, Michael S. D'Orsi, Winston & Strawn, LLP, and Donnelly,
Conroy & Gelharr LLP were on brief, for the appellant.
     Brian A. Davis, with whom Joseph H. Zwicker, Stacy Blasberg,
and Choate, Hall & Stewart LLP were on brief, for the appellee.

                       September 28, 2006

                        AMENDED OPINION**

*
 Of the Northern District of Florida, sitting by designation.
** This opinion has been amended solely to comport with sealing
orders issued by the district court and this court. The amendments
do not in any way affect the substance of the opinion.
            LIPEZ,     Circuit    Judge.      John    Hancock     Life    Insurance

Company    and   two   of   its   subsidiaries       (collectively       "Hancock")

contracted with Abbott Laboratories ("Abbott") to join in financing

the development of some pharmaceutical compounds.                   In exchange,

Abbott promised to share with Hancock any profits the compounds

would generate.        It soon became apparent that a number of the

compounds had no good prospect of commercial success.                          Abbott

scaled    back   and   delayed    its   planned      investment    in    the   joint

project.    Arguing that Abbott had failed to uphold its part of the

bargain, Hancock stopped contributing funds altogether.                     Hancock

then sued for a declaratory judgment, asking the district court to

rule that, under the contract between the parties, Abbott's delayed

investment allowed Hancock to terminate its payments but retain its

share of any future profits.        Abbott countersued, arguing that the

contract explicitly allowed it to delay its contributions to the

project.    The parties consented to have the district court decide

the case on the papers submitted, and, on cross motions, the

district court entered judgment for Hancock.                    Abbott appeals,

essentially arguing that the district court incorrectly construed

the contract.     We affirm.

                                        I.

     We discuss the contract between Hancock and Abbott and then

their course of dealings.         We leave some details for discussion in

connection with Abbott's appellate arguments.

                                        -2-
A.   The contract

     In 1999, Hancock and Abbott began negotiating the joint

venture at issue.   While the specifics evolved through 40 contract

drafts, the basics of the final agreement are relatively simple.

Abbott and Hancock would select a "basket" of research compounds

that Abbott had identified as possible pharmaceutical products and

that Hancock thought were promising.     Hancock would contribute

multiple millions each year for four consecutive years towards the

development of these compounds.   Abbott would spend at least 1.86

times as much as Hancock over this initial period of development.

The parties would share any profits from the compounds for roughly

fifteen years from the contract's inception, and Abbott would pay

Hancock set amounts when the joint project accomplished certain

development or regulatory goals.     In short, Hancock agreed to

provide substantial start-up investment for the project, and Abbott

agreed to match that investment.      Because Hancock would share

profits only for a set number of years, it stood to gain if the

compounds were developed quickly (and if they turned out to be

useful) and stood to lose if development were delayed (or if the

compounds were unsuccessful).

     For our purposes, the final contract between the parties,

which was signed on March 13, 2001, can be summarized.

     ! The parties agreed to partner in the development
     of a basket of     compounds, with each compound
     thought to have a potential pharmaceutical use.

                           -3-
     ! Hancock agreed to reimburse multiple millions of
     Abbott's spending on the joint project in four
     multiple million dollar payments – one for each
     year 2001 through 2004.

     ! Abbott agreed to provide an additional annual
     minimum contribution of un-reimbursed funds to the
     project in each of the four years.

     ! Abbott also agreed that its and Hancock's
     combined spending on the project would be "at
     least" the Aggregate Spending Target over the
     "Program Term," which the contract defined as "a
     period of four (4) consecutive Program Years."1 In
     other words, by December 31, 2004, Abbott would
     provide approximately two-thirds of the Aggregate
     Spending Target to the project above and beyond the
     one-third of the Aggregate Spending Target that
     Hancock promised to contribute.

     ! Abbott was "permitted" to "change its funding
     obligations [] only as follows":

          (a) If Abbott expended Hancock's yearly
          contribution during a "Program Year" but did
          not contribute its annual minimum contribution
          of its own un-reimbursed funds, Abbott could
          "carryover" its obligation to the following
          year.     The balance of Abbott's yearly
          obligation, termed the "Annual Carryover
          Amount," would be added to Abbott's minimum
          contribution for the "subsequent Program
          Year."      If   Abbott   carried   over   its
          contribution, Hancock's obligations for the
          "subsequent Program Year" would be suspended
          until Abbott spent the "Annual Carryover
          Amount."

          (b) If Abbott did not spend the entire
          Aggregate Spending Target "during the Program
          Term," it could "carryover" the balance to the
          "subsequent year commencing immediately after

1
  The contract defined a "Program Year" as a full calendar year
beginning on January 1 and ending on December 31, except that the
first "Program Year" would be shortened to begin of the day the
contract was signed and to end on December 31, 2001.

                          -4-
            the end of the Program Term." If there was
            such a carryover, the difference between the
            Aggregate Spending Target and the amount
            actually spent by the end of the "Program
            Term" would be called the "Aggregate Carryover
            Amount."

     ! Abbott would update Hancock at least yearly about
     the project, providing an "Annual Research Plan"
     with a budget for future spending.     Abbott would
     also provide yearly "Status Reports" stating the
     company's spending on the joint project so far.
     Hancock's payments were due 30 days after receiving
     these documents.

     ! In certain enumerated circumstances, including if
     Abbott "does not demonstrate in its Annual Research
     Plan its intent and reasonable expectation" to
     spend at least the Aggregate Spending Target in
     joint funds on the project "during the Program
     Term,"   Hancock's   funding    obligations   would
     terminate but the rest of the contract (detailing
     how the parties would share profits) would remain
     in effect.

     ! Even if one of the enumerated terminable events
     came to pass and Hancock's payment obligations were
     cancelled, Hancock would still have to pay its
     contributions for the year in which the terminable
     event took place.

B.   The parties' dealings

     2001

     Abbott's first "Annual Research Plan" was appended to the

final contract, which was executed on March 13, 2001.        It called

for total project spending almost double the Aggregate Spending

Target by the end of 2004.     Under this plan, Abbott would spend

many millions of dollars of its own funds, or roughly five times as

much as Hancock, through the end of 2004.       During 2001, Abbott

decided to halt development of some compounds. In November, Abbott

                                 -5-
sent Hancock a document titled "2002 Preliminary Annual Research

Plan," which called for total spending of less than Abbott's first

Annual Research Plan but more than the Aggregate Spending Target

through 2004. In December, Abbott sent the "2001 Status Report" on

the year's spending, revealing that spending on the project would

total multiple millions less by year's end (compared to the amount

that had been planned). Abbott's cover letter for the "2001 Status

Report" stated that Hancock's 2001 payment was due in 30 days, an

indication that Abbott believed its contractual obligations for the

year had been satisfied.      This was so even though the only "Annual

Research Plan" Abbott had given Hancock was marked "Preliminary."

Abbott did not manifest any intention to send an update to the

"2002 Preliminary Annual Research Plan."         Apparently agreeing that

the "Preliminary" plan satisfied Abbott's reporting obligation for

2001, and that Abbott's obligations for that year were complete,

Hancock timely provided its 2001 contribution of multiple millions.

     2002

     In   2002,   Abbott    decided   to    terminate   development   of   an

additional compound because the scientific results did not warrant

further development.       Abbott also dramatically reduced efforts on

some other compounds.       As a result, less than two years into the

joint project, Abbott was      pursuing a significantly smaller number

of the    original basket of compounds with full effort.              Abbott

submitted its "2002 Status Report" and the "2003 Preliminary Annual

                                      -6-
Research Plan" together on December 20, 2002.                The Status Report

revealed that 2002 spending on the project would be far less than

the "2002 Preliminary Annual Research Plan" had promised. The Plan

stated that spending for 2003 would also be significantly less than

Abbott had estimated the year before.                 The Plan, however, was

silent as to 2004.          Unlike the previous year's version, the Plan

divulged the company's planned spending only for the next year.

(Abbott later explained that the 2004 numbers had not been listed

in   the   "2003   Preliminary      Annual     Research   Plan"    because     of   a

computer error.)       As it had the previous year, Abbott stated in a

cover    letter,     also   sent   on    December   20,   that    Hancock's    2002

contribution was due in 30 days.                Again, Abbott manifested no

intention to update its "Preliminary" report and gave no indication

that the document was not the planning statement required by the

contract.     Hancock timely provided its reimbursement of multiple

millions.2

      2003

      During further review of the "2003 Preliminary Annual Research

Plan,"     Hancock    noticed      the   document's    failure     to   make    any

prediction of spending in 2004, a lapse that the company appears to

have overlooked on its initial review.              During a September 9, 2003

conference call, Hancock asked Abbott to supplement the plan with

2
 The 30th day after December 20 was January 19, a Sunday. Hancock
tendered its payment the next business day. Abbott accepted the
payment without comment and agrees that it was timely.

                                         -7-
the missing information.       Abbott's Controller then sent Hancock a

letter, dated September 22, 2003, stating the following:

      I went back to review the data and spend estimates
      made about 1 year ago for 2003. On 8/26/02, the
      estimated program spend for 2003 was at [more than
      indicated in the 2003 Preliminary Annual Research
      Plan].   By October 14, 2002, after the Executive
      Committee's portfolio review, the estimated spend
      for 2003 had dropped to [approximately the same
      amount as in the 2003 Preliminary Annual Research
      Plan] and for 2004, it was at [an amount that when
      added to the spending for 2001, 2002 and 2003 was
      less than the Aggregate Spending Target].

This was an important admission.            Abbott confirmed that if there

had   been   no   computer   error   and    the   "2003    Preliminary   Annual

Research Report" had included planned spending for 2004, it would

have shown that Abbott planned to spend only an amount less than

previously projected, which would mean that spending through the

end of 2004 would total -- at the most -- an amount less than the

Aggregate    Spending   Target.       The    earlier      status   reports   had

indicated that Abbott's spending for 2001 and 2002 would be higher.

In its October 2002 reviews, Abbott had projected higher spending

for 2003 and for 2004.

      To the same September 22, 2003 letter, Abbott attached a

document it called "the Final 2003 Plan."          This version of the 2003

plan indicated that Abbott's spending during the Program Term would

be even lower than it had projected in October 2002.                     Abbott

forecasted total spending of less than the Aggregate Spending

Target through 2004 and an additional amount in 2005.               Under this

                                     -8-
projection, total spending through 2004 would fall many millions

short of the Aggregate Spending Target.                    However, Abbott would

exceed the threshold if 2005 spending were included.

     After reviewing the updated 2003 plan, Hancock sent Abbott a

letter, dated October 10, stating that its "obligation to make any

remaining   Program    Payments       to    Abbott   for    [2003   and    2004]   is

terminated" because "the Final 2003 Plan, in conjunction with the

more limited information contained in the Preliminary 2003 Annual

Research Plan . . . did not, and does not, reasonably demonstrate

Abbott's intent and reasonable expectation to" spend the Aggregate

Spending Target on the joint project "during the Program Term."

     Shortly thereafter, Abbott sent Hancock a "2004 Preliminary

Annual Research Plan," which projected total project spending                      for

2004 and 2005.     Cumulative spending on the project would be less

than the Aggregate Spending Target through 2004 and more than the

Aggregate   Spending      Target   through       2005.       The    same   document

indicated that Abbott would spend well below the annual minimum in

2003 provided for under the contract.

     Hancock never made a contribution for 2003.                        Rather, the

company   sued   Abbott    in   the    district      court    for   a   declaratory

judgment that its payment obligations had terminated.                         After

pretrial proceedings, the parties consented to have the district

court resolve their dispute on the papers as a "case stated,"

meaning that the district court "could make findings of fact

                                           -9-
instead    of   granting    inferences    to    each   non-movant   in   turn."

DiGregorio v. Hartford Comp. Employee Ben. Serv. Co., 423 F.3d 6,

12 (1st Cir. 2005).         In due course, the district court issued a

thorough 65-page opinion, finding in Hancock's favor both on the

question of whether Abbott was required to plan on spending at

least the Aggregate Spending Target through 2004, and on whether

Abbott's failure to do so allowed Hancock to cancel its 2003

payment, as well as its payment for 2004.

                                       II.

     The district court determined that, for the most part, the

contract    between   the    parties     was   "unambiguous   and   that   the

interpretation proffered by Hancock is the only reasonable one."

The district court did identify two ambiguities in the contract

that were relevant to the dispute between the parties.              As to one

of these ambiguities, which we explain later in this opinion, the

district court considered extrinsic evidence and made findings of

fact on the intent of the contracting parties.           As we also explain,

the other "ambiguity" identified by the district court was really

an issue of contract interpretation, and was resolved as such.               On

both issues, the district court concluded that Hancock had the

stronger case.

     On appeal, Abbott challenges the district court's findings and

conclusions with three arguments.              First, Abbott says that the

contract allowed it to plan to spend the Aggregate Spending Target

                                    -10-
over    five   years   instead      of    four.     Anticipating       the   possible

rejection      of   this   claim,    Abbott       also   makes   two    alternative

arguments that, if accepted, would entitle it to Hancock's 2003

payment of multiple millions.             Abbott says that the event allowing

Hancock to stop paying happened in 2003, not 2002, and so Hancock

had to make its payment for that year.3              Even if the relevant event

happened in 2002, meaning that Hancock was potentially freed of its

obligation to make a 2003 payment, Abbott contends that Hancock

waived that right by failing to recognize the 2002 event promptly.

    We address these arguments in turn.

A.     Jurisdiction and standard of review

        Like the district court, we will accept the parties' agreement

on forum selection and choice of law.                    The contract allows any

disputes between the parties to be decided in the federal district

court in Massachusetts.        Based on the parties' complete diversity

of citizenship and the dollar amount at issue, this case is

properly in federal court.               See 28 U.S.C. § 1332.         The contract

calls on us to apply Illinois contract law (Abbott is based in

Illinois), which the parties agree should govern.                 We are "free to

forego independent inquiry and accept that agreement."                   Cochran v.

Quest Software, Inc., 328 F.3d 1, 6 (1st Cir. 2003).

        As to matters of law decided on summary judgment, such as

3
  As we noted above, the contract provided, "For the avoidance of
doubt, [Hancock's] Program Payments for the Program Year in which
[a terminable] event occurs shall still be due and payable."

                                          -11-
contract interpretation, our review is de novo.             See Utica Mutual

Ins. Co. v. Weathermark Investments, Inc., 292 F.3d 77, 80 (1st

Cir. 2002).      If it were necessary to review the district court's

factual findings, our review would be far more deferential.                 See

Principal Mutual Life Ins. Co. v. Racal-Datacom, Inc., 233 F.3d 1,

3 (1st Cir. 2000).       However, as we will discuss, we believe that

the   contract    is   unambiguous   on   the   points    necessary   for   the

disposition of this appeal, permitting us to affirm on the plain

meaning of the contract alone.              See States Res. Corp. v. The

Architectural Team, Inc., 433 F.3d 73, 80 (2005) (recognizing that

the court of appeals can affirm a grant on summary judgment on any

basis made apparent by the record).

B. Abbott's planning obligations

      Hancock's position is easily summarized. The contract allowed

Hancock to stop paying if Abbott did not "reasonably demonstrate in

its Annual Research Plan, its intent and reasonable expectation to

expend on Program Related Costs during the Program Term an amount

in excess of [the Aggregate Spending Target]" (emphasis added).

The contract defines "Program Term" as "a period of four (4)

consecutive Program Years" (emphasis added).             The contract defines

"Program Year" as "a period of twelve (12) consecutive calendar

months commencing on January 1 of each year, except that the first

Program Year shall commence on the Execution Date and end on

December 31, 2001."       This means, according to Hancock, that the

                                     -12-
"Program Term" ended on December 31, 2004, and that Abbott was

required to budget in its "Annual Research Plans" to spend the

Aggregate Spending Target by that date.                   Since Abbott planned to

spend less than the Aggregate Spending Target by the end of 2004,

Hancock could stop paying.

      Abbott's more complicated position relies on the fact that the

"carryover" provisions in the contract allowed the company to

postpone    actual    attainment        of   the   Aggregate      Spending   Target

threshold    until    the   end    of   2005.       According     to   Abbott,    the

carryover provisions, by implication, also freed the company of any

obligation to plan to spend all of the Aggregate Spending Target by

the end of 2004. Hancock counters that the carryover provisions do

not by their terms apply to Abbott's planned spending, but only to

its actual spending.        The sense of this distinction, Hancock and

the district court agreed, is that unforseen circumstances during

the   fourth   year    might      reasonably       have    been   thought    by   the

contract's     drafters     to     excuse      strict      compliance    with     the

contractually agreed spending, even if a mere change in plans on

Abbott's part would not.

      Hancock has by far the stronger argument.                   As the district

court recognized, Abbott's approach is belied by the contract's

definition of "Program Term."

      In Illinois, as elsewhere, "[i]t is a basic and fundamental

tenet of contract law [] that even if a contract offers only a

                                        -13-
limited definition of a term, it must be applied as written."

Conn. Specialty Ins. Co. v. Loop Paper Recycling, Inc., 824 N.E.2d

1125, 1133 (Ill. App. 2005).   Put another way: "A court . . . may

not interpret [a] contract in a way contrary to the plain and

obvious meaning of its terms."    Krilich v. American Nat. Bank &

Trust Co. of Chicago, 778 N.E.2d 1153, 1164 (Ill. App. 2002).   See

also In re Blinds to Go Share Purchase Litigation, 443 F.3d 1, 7

(1st Cir. 2006) ("Where the parties to a contract take pains to

define a key term specially, their dealings under the contract are

governed by that definition."); Alexian Bros. Health Providers

Ass'n v. Humana Health Plan, Inc., 330 F. Supp. 2d 970, 975 (N.D.

Ill. 2004) ("[P]arties to a contract may serve as their own

lexicographers and may assign a particular meaning to any word they

choose.").

     In light of these precedents, we need look no further than the

contract's own definition of "Program Term" as "a period of four

(4) consecutive Program Years."       When the contract said that

"Hancock's obligation to make any remaining Program Payments    . .

. shall terminate" if Abbott did not "reasonably demonstrate in its

Annual Research Plan, its intent and reasonable expectation to

expend on Program Related Costs during the Program Term an amount

in excess of [the Aggregate Spending Target]" (emphasis added), the

contract meant that Hancock could stop paying if Abbott did not

"demonstrate . . . its intent and reasonable expectation" to spend

                               -14-
the money by the end of 2004.     Abbott insists that "[n]owhere does

[the contract] provide that Abbott must forfeit Hancock's payments

if Abbott forecasts [] that it will need [a] fifth year" to spend

the Aggregate Spending Target.     But the contract provides exactly

that.

     As the district court stated, reading the contract as it was

written does not somehow make the contract illogical, irrational,

or "commercially unreasonable."     Cf. Beanstalk Group, Inc. v. A.M.

Gen. Corp., 283 F.3d 856, 860 (7th Cir. 2002) ("[A] contract will

not be interpreted literally if doing so would produce absurd

results that the parties, presumed to be rational persons pursuing

rational ends, are unlikely to have agreed to seek.").          Abbott and

Hancock reasonably could agree that Abbott would be bound by the

contract to make all reasonable efforts to spend the Aggregate

Spending Target on the joint project by the end of 2004.          Hancock

had obvious reasons to prefer such an obligation: the more Abbott

spent on the project during its first four years, the greater

Hancock's returns were likely to be.         Abbott had good reasons to

accede to Hancock's demands: Hancock provided an enormous infusion

of funds on favorable terms.       And Abbott and Hancock reasonably

could   agree   that,   despite   Abbott's    obligation   to   make   all

reasonable attempts to spend the Aggregate Spending Target through

2004, the company should have the ability to stretch its actual

expenditure of funds into a fifth year, if unexpected events during

                                  -15-
2004 made it impossible to spend the money as soon as planned.   The

parties shared an interest in avoiding unnecessary or inefficient

last-minute spending on the project.   In light of these plausible

goals, it made sense for the contract to provide that Abbott was

required to plan to spend the Aggregate Spending Target by December

31, 2004, but that it was not required to actually spend the money

by that time.     Whether this was the best, fairest, or most

efficient way to structure the contract is not our concern.4

     Referring to the rule that a contract must be read as a whole,

Abbott places great reliance on the appearance of the phrase "any

extension period of the Program Term" in the contractual definition

of "Program Related Costs." "Program Related Costs," not otherwise

relevant here, were costs that Abbott could count as expenditures

on the joint program.   The definition provided:

     "Program Related Costs" shall mean (i) all direct
     and indirect costs and expenses that are incurred
     by Abbott during a given Program Year . . . and
     (ii) the milestone and license fees paid during a
     given Program Year or during any extension period

4
  Abbott says repeatedly -- in its brief and at oral argument --
that the contract must be read to impose a two to one ratio of
Abbott's spending to Hancock's.    Abbott criticizes the district
court for allowing actual spending in roughly a four to one ratio.
But the contract never required Hancock to spend half as much as
Abbott. Indeed, Abbott's initial projection was that it would spend
five times as much as Hancock. What the contract did not allow was
for Abbott to spend less than 1.87 times as much as Hancock
(Hancock's maximum contribution was approximately one-third of the
Aggregate Spending Target, and Abbott's minimum was approximately
two-thirds of the Aggregate Spending Target). Our resolution of
this dispute is fully consistent with these principles agreed to by
the parties.

                          -16-
      of the Program Term . . ..

According to Abbott, the phrase "extension period" in the above-

quoted paragraph frees the company from any obligation to plan for

spending the Aggregate Spending Target by the end of 2004.

      The district court found Abbott's "extension period" argument

unpersuasive.        We agree, though for different reasons.5          The

language Abbott relies on does not purport to alter the meaning of

"Program Term," which is the definition that matters in the section

allowing Hancock to terminate its payments.        As the district court

stated, "the Agreement defines 'Program Term' specifically and

without exception as 'a period of four (4) consecutive Program

Years. . . .    Thus, the Program Term, as defined by the Agreement,

ran   from   March    13,   2001   through   December   31,   2004."   The

contractual relationship between Abbott and Hancock would continue

beyond the end of 2004, the district court recognized, because

Abbott would remain responsible for making payments to Hancock.

But that continuation did not free Abbott from its obligation to

plan to spend the Aggregate Spending Target during the "Program

Term" itself.    Additionally, there are contextual clues far more

5
   The district court found the "extension period" language
ambiguous. It then conducted a skillful and convincing analysis of
some 40 contract drafts that preceded the final version. On the
basis of that review, the district court found that "extension
period" was a "vestige" from a previous draft that the parties
mistakenly failed to delete from the final contract. If we were
not able to resolve the issue on the plain language of the
contract, we would readily adopt the district court's factual
findings on the ambiguity.

                                     -17-
relevant to this controversy that eliminate any chance that the

parties to the contract intended the "Program Term" to be five

years    rather   than   four.    For   instance,   the   very   carryover

provisions Abbott relies on refer to the "Program Term" and "the

subsequent year commencing immediately after the end of the Program

Term."    The only plausible reading of the contract is that "the

subsequent year commencing immediately after the end of the Program

Term" is the year 2005.          The "Program Term" itself ended on

December 31, 2004.

     In short, the contract required that Abbott plan to spend the

Aggregate Spending Target during the "Program Term."         The contract

defined the "Program Term" as the period beginning on the day the

contract was signed and ending on December 31, 2004.                Abbott

unambiguously revealed in its 2003 plan that it did not plan to

spend the Aggregate Spending Target by the end of 2004. Therefore,

under the terms of the contract, Hancock could terminate its

payments.

C.   The year of the terminable event -- 2002 or 2003?

     Abbott argues in the alternative that, even if Hancock could

withhold its 2004 payment in light of Abbott's failure to forecast

spending the Aggregate Spending Target through 2004, Hancock could

not cancel its 2003 payment. Abbott rests this argument on wording

in the same section of the contract that allowed Hancock to stop

paying if Abbott did not "reasonably demonstrate in its Annual

                                   -18-
Research Plan, its intent and reasonable expectation to expend on

Program Related Costs during the Program Term an amount in excess

of [the Aggregate Spending Target]."    The wording states: "For the

avoidance of doubt, [Hancock's payments] for the Program Year in

which [an event that allows the termination of payments] occurs

shall still be due and payable."   Abbott says that Hancock stopped

paying on the basis of events that happened in 2003 and that the

2003 payment was therefore still due.     In response, Hancock says

that the event allowing it to terminate its payments was Abbott's

December 2002 "2003 Preliminary Annual Research Plan," which failed

to manifest any intention by Abbott to spend the Aggregate Spending

Target on the joint project by the end of 2004.   We agree with the

district court that Hancock was not required to make a 2003

payment.

     Abbott argues that the December 20, 2002 document cannot be

considered a ground for termination for two reasons: because it was

marked "Preliminary" and because it did not include any statement

of planned spending for 2004.      Neither of these rationales is

convincing.   Hancock was not obligated to wait for an annual

research plan labeled "Final."   When Abbott sent Hancock the "2003

Preliminary Annual Research Plan" in December 2002, it also said

that the 30-day period for Hancock's payment was running, a sure

indication that Abbott considered its yearly reporting obligations

                                 -19-
to be complete.6   This demand for payment conformed to Abbott's

practice from the previous year of treating a "Preliminary" annual

plan as the "Annual Plan" required by the contract.   Additionally,

Abbott gave no indication that another plan, which might indicate

satisfactory planned spending for 2004, was coming.

     Abbott also says that the December 2002 document was not a

terminable event because it did not contain any projections for

2004. This argument fails in light of the contractual language and

Abbott's later admissions.   As we discussed above, the contract

allowed Hancock to terminate its payments if Abbott did "not

demonstrate in its Annual Research Plan its intent and reasonable

expectation" to spend at least the Aggregate Spending Target in

joint funds on the project "during the Program Term."    The "2003

Preliminary Annual Research Plan," submitted in 2002, plainly did

"not demonstrate" any intention by Abbott to spend the Aggregate

Spending Target through 2004.     Actually, due to the computer

glitch, the document "did not demonstrate" a plan to spend anything

at all in 2004.    But -- as Abbott later admitted -- even if the

document had been complete, it would have shown "the estimated

6
  Under the contract, Abbott was supposed to send Hancock the
Annual Research Plan "at least forty-five (45) days prior to the
start of each Program Year" and the Status Report "no later than
thirty (30) days before the last day of each Program Year."
Hancock was not expected to make its payments any earlier than
December 1 of the year in which they were due.       The contract
allowed Hancock to delay its payments until 30 days after it had
received both the Status Report and the Annual Research Plan.

                               -20-
spend for 2003 had dropped to [approximately the same amount as in

the 2003 Preliminary Annual Research Plan] and for 2004, it was at

[an amount that when added to the spending for 2001, 2002 and 2003

was   less   than   the   Aggregate    Spending   Target]."   Given   this

admission by Abbott, Abbott's "2003 Preliminary Annual Research

Plan," submitted in December 2002, failed to manifest the company's

intent to spend the required amount through 2004.             As Hancock

points out, it was not relieved of its payment obligations merely

because another party failed to correct a computer glitch.             If

Hancock had requested clarification of the December 20, 2002 plan,

Abbott would have stated that it no longer planed to spend the

Aggregate Spending Target by the end of 2004.

      The district court provided a slightly different gloss on the

same conclusion that the terminable event happened in 2002, relying

on the principle of contract interpretation that "if possible,

effect must be given to all of the language so that provisions

which appear to be conflicting or inconsistent may be reconciled

and harmonized."     In re Halas, 470 N.E.2d 960, 964 (Ill. 1984).      We

also find the district court's analysis persuasive.7

      As the district court concluded:

7
 While the district court suggested that there was an ambiguity to
resolve in this analysis, the district court also stated that the
issue "translated into a contractual interpretation argument" and
required no parol evidence.    Because a careful reading of the
contract itself resolved the issue, there was no need to resolve
any ambiguity.

                                      -21-
              [I]t is clear [from the contract language]
              that the parties intended Abbott to present an
              [Annual Research Plan] prior to the start of
              each Program Year that would include . . .
              budgets for the remaining Program Years in the
              Program Term. Thus, the parties intended that
              the [Annual Research Plan] for 2003 would be
              submitted to Hancock in 2002 and it would
              include . . . budgets for 2003 and 2004. As a
              result . . . Abbot's failure to demonstrate
              its intent and reasonable expectation to
              expend at least [the Aggregate Spending Target
              by the end of] 2004 [] took place in 2002, not
              2003.

(Emphasis added.)       To hold otherwise, the district court reasoned,

would allow      Abbott "to obtain two Program Payments (for 2002 and

2003) for the price of one payment obligation termination." As the

district court emphasized, the contract gives Abbott one yearly

Hancock payment for each conforming year of Abbott's performance.

The contract would be subverted if Abbott could require an extra

payment   by    Hancock   merely    because   it   was   late   in   submitting

complete projections.

D.   Waiver or estoppel

       Abbott's final fallback argument is that Hancock waived the

right to cancel its 2003 payment by waiting until the fall of 2003

to   notify    Abbott   that   it   considered     its   payment     obligations

terminated.      We agree with the district court that Hancock did

nothing that could establish a waiver or estoppel under Illinois

law.

       In Illinois, waiver is the "voluntary relinquishment of a

known right, claim, or privilege."            Vaughn v. Speaker,533 N.E.2d

                                     -22-
885, 890 (Ill. 1988).        It may be "express or implied."               Geier v.

Hamer   Enters.     Inc.,    589    N.E.2d    711,     722   (Ill.   App.    1992).

Equitable estoppel may be found where a party indicates through its

conduct that it will not enforce its contractual rights in a timely

fashion and the other party reasonably relies on that conduct to

its detriment.       See Geddes v. Mill Creek Country Club, 751 N.E.2d

1150, 1157 (Ill. 2001).            Abbott's waiver and estoppel arguments

share a common problem: they do not establish that Hancock conveyed

any intention to relinquish a contractual "right or privilege." We

discuss    briefly    Abbot's      three   principal     waiver      and   estoppel

arguments, resolving them on this common ground.

     Abbott first argues that Hancock should have made an earlier

notification that it planned to terminate its payments.                    However,

the contract does not contain any requirement that Hancock notify

Abbott when a terminable event occurred.                 To the contrary, the

contract   states     that   "Hancock's       entire    obligation     [under   the

contract] shall be limited to providing [its] program payments."

Further, the contract provides that "[t]he waiver by either party

hereto of any right hereunder or the failure to perform or of a

breach by the other party shall not be deemed a waiver of any other

right hereunder . . .."            Hancock could not waive its right to

terminate payments by failing to provide a notification that it was

not required to make.

                                       -23-
       Abbott also contends that Hancock indicated that it was

satisfied with the December 2002 "2003 Preliminary Annual Research

Plan" by tendering its 2002 payment upon receipt of that document,

and that Abbott relied on that payment as an indication that the

December 20, 2002 plan was sufficient.             But Hancock's payment for

2002 could not have been any indication that Hancock considered the

"2003 Preliminary Annual Research Plan" as compliant with Abbott's

planning obligations. Even if Hancock considered the plan a breach

by Abbott, Hancock had no choice but to make its 2002 payment.

After all, the contract provided that Hancock's payment "for the

Program Year in which [an event that allows the termination of

payments] occurs shall still be due and payable."                Abbott's breach

occurred in 2002.        Hancock paid for 2002.      That is merely what the

contract required.

       Abbott finally claims that Hancock forfeited its right to deem

the    December   2002    "2003    Preliminary     Annual    Research    Plan"   a

terminable event by failing to make a timely request for a 2003

Annual Research Plan that included planned spending for 2004. This

argument    represents      an    attempt    by   Abbott    to   shift   its   own

responsibilities to Hancock. The contract made it abundantly clear

that all responsibility for planning and funding rested with

Abbott.    Hancock's only obligation was to provide large payments

when    Abbott    submitted      conforming   documentation.         Given     this

arrangement, it was reasonable for both parties to accept the "2003

                                      -24-
Preliminary Annual Research Plan," submitted in December 2002, as

Abbott's final word on the subject.             That December 2002 plan

allowed Hancock to terminate its payments because it did not

manifest Abbott's intention to spend the contractually prescribed

amount   during   the   Program   Term   (and   because   any   request   for

clarification of the document merely would have confirmed that

Abbott did not intend to spend enough during the Program Term).

Hancock did not have to ask for clarification before it deemed the

December 2002 Plan a breach by Abbott allowing it to terminate its

payments.

     Affirmed.

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