Court Opinion

ID: 9468500
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:16:30.331862+00
Date Added: 2024-06-11T17:40:53.765797
License: Public Domain

KUNZIG, Judge,
dissenting in part.
I disagree with the majority’s decision concerning the so-called recapitalization obligation. My specific conclusion comports more closely with the specific contractual language which governs the matter.
The stock agreement expressly defines the scope of the recapitalization obligation as follows: “Chrysler and [Kolb] shall each contribute to ... the Corporation ... a proportionate share of such additional capital.” (Emphasis supplied.) The expression “such additional capital” plainly refers to the amount which the parties “shall determine ... [to be] required to maintain the capital at a satisfactory level.” In other *1144words, Chrysler and Kolb were only required by the agreement to contribute such additional capital as they mutually, after twelve months, determined to be requisite for maintaining the capital at a satisfactory level. Note that the operative terms — “determine,” “additional capital,” “maintain,” “satisfactory level” — are undefined by the stock agreement and bespeak an intention to afford the contracting parties the greatest possible latitude in arriving at their determination. The crucial point, however, is that under any plausible construction of these terms, the requisite determination never occurred and therefore the key event triggering the recapitalization obligation did not transpire. Consequently, Chrysler’s omission to contribute additional capital cannot be deemed a breach because it never came under any absolute duty to do so.
Restated, it is my view that the stock agreement did not create an unconditional obligation to recapitalize, but only a conditional obligation. The pivotal condition, a joint determination to recapitalize, had not been satisfied and therefore the obligation never became absolute. Ergo, the basis for a breach claim is wholly lacking.
My conclusion, essentially a matter of word-logic, is bolstered by considering the flaws in the position staked out by the majority on this point.
Generally, the majority, via Judge Cudahy’s concurrence, expounds the viewpoint that the stock agreement did indeed obligate Chrysler to participate in the recapitalization of the Waukesha dealership following the first twelve months of operation. In summing up, Judge Cudahy’s concurrence states that Chrysler may have been “improvident” in giving this commitment, but that “it is not our function to relieve the parties of duties imprudently contracted.” This statement is revealing, because it explicitly shows that the majority is not averse to interpreting arguably ambiguous contract language in a manner which reflects poorly upon the business judgment of the contracting parties. On the contrary, I believe that as an aid to construction it is far more fruitful to assume that contracting parties act rationally and strive to make reasonable business deals. Given this stance, I prefer my own interpretation to the majority’s.
In essence, I would hold that the parties merely adopted a “wait and see” attitude as regards further capitalization after twelve months. It is apparent from the record that nascent car dealerships stand a good chance of losing money during their first year of operation due to the normal vicissitudes of breaking into a new market. Under these circumstances, it was prudent for the parties to have signalled the possible need for additional capitalization at that time and to have established a special audit procedure to guarantee that all the relevant data would be in hand.
The majority, however, goes one important step further. It asserts that the stock agreement did not merely evince a “wait and see” attitude, but positively bound the parties to some additional capitalization following the expiration of twelve months; in other words, that it did not give each party the option to veto further recapitalization by simply refusing to give his assent thereto. Reduced to practical terms, this is tantamount to saying that the parties bound themselves to an open-ended commitment to advance an indeterminate amount of dollars to an established money-losing concern without any way of knowing the circumstances which would actually be in existence at the time when the contribution would have to be made. I submit that this is something that a rational investor would not do. Such an open-ended commitment would be foolish and needlessly risky and would expose the obligor to the very likely prospect of having to throw good money after bad. And it is not what I think happened here. I think that, in effect, the parties simply promised each other to keep an open mind and not to be unalterably opposed to further capitalization after one year’s experience with the new dealership. Such an exchange of promises is not inherently valueless, as the majority suggests, despite that the fact that it merely creates the hope rather than guaranty of future additional cash infusions.
*1145The majority points to certain verbal assurances which Kolb claims to have received, but I do not believe that these so-called assurances (a term notably vague) in any way go beyond the specific provision of the stock agreement to which they refer. The majority also relies upon certain seeming inconsistencies in the drafting of the stock agreement and attempts to draw therefrom an inference unfavorable to Chrysler. While I grant the general validity of the majority’s point, I hardly view it as compelling and do not regard it as sufficient to override the more fundamental point that the majority’s analysis leads straight to an unrealistic result.
The majority further asserts that a damages claim can be predicated upon the fact that “Chrysler clearly breached its obligation of determining, in good faith, whether additional contributions were necessary to maintain the Corporation’s capital at a satisfactory level.” Ante, at 1142. Presumably then, some sort of good faith bargaining session was required, an obligation which Chrysler rather plainly ignored, according to the majority.
I wholly disagree. The majority is effectively seeking to read into the relevant portion of the stock agreement a procedural component which simply is not there. Aside from the provision of a twelve-month audit, the agreement is absolutely silent on what steps the parties might have taken in arriving (or not arriving) at their determination.
This case involves a plethora of legal and factual issues and has generated an enormous record. The district judge, having heard all the evidence and assessed the credibility of the witnesses, concluded that Kolb’s breach claim was utterly baseless. While this decision does not bind us, in a case such as this, it is entitled to substantial deference. The scattered bits of argumentation upon which the majority relies do not, in my opinion, cast any substantial doubt upon the propriety of the disposition of the district court.
Accordingly, I respectfully dissent with regard to the majority’s reversal on the recapitalization claim.