Court Opinion

ID: 152281
Source: CourtListenerOpinion
Date Created: 2010-08-04 19:25:13+00
Date Added: 2024-06-11T17:24:28.075729
License: Public Domain

Not for Publication in West’s Federal Reporter

          United States Court of Appeals
                       For the First Circuit

No. 09-1934

                       VERTEX SURGICAL, INC.,

                        Plaintiff, Appellant,

                                     v.

                     PARADIGM BIODEVICES, INC.,

                         Defendant, Appellee.

           APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF MASSACHUSETTS

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

                                  Before

                      Boudin, Circuit Judge,
                    Souter, Associate Justice,*
                    and Howard, Circuit Judge.

     Barbara H. Kramer, with whom Mitchell A. Kramer and Kramer &
Kramer, LLP were on brief, for appellant.
     Thomas E. Kenney, with whom Robert R. Pierce and Pierce &
Mandell, P.C. were on brief, for appellee.

                             August 4, 2010

     *
          The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
            SOUTER,       Associate      Justice.         The     appellee       Paradigm

Biodevices, Inc. does business in Massachusetts producing and

distributing medical equipment.                  It contracted with a Georgia

corporation, the plaintiff-appellant Vertex Surgical, Inc., to act

as a sales representative in Georgia and portions of nearby states.

The    written     contract       had     both     a    choice      of     law     clause

(Massachusetts) and a forum selection provision (Massachusetts

federal court).         When Paradigm terminated the agreement, Vertex

charged    it    with    breach    and    sued    in    the     district       court   for

Massachusetts,        claiming    among    other       things    that    Paradigm      had

violated the Georgia Wholesale Distribution Act, Ga. Code Ann.

§§ 10-1-700 et seq., which requires payment of sales commissions

within 30 days after termination of a contract like the one in

question, and provides penalties for failure.                       The Act further

declares that its provisions “may not be waived,” and directs that

“the   courts    of     this   state     shall   not    recognize        any    purported

waiver.”    Ga. Code Ann. § 10-1-703.

            Vertex       moved    for    summary       judgment    on     the    Georgia

statutory claim, which the district court understood to depend on

whether the Georgia law “can affect the rights of the parties,

given the Agreement’s choice of Massachusetts law to govern the

terms of the Agreement.”           The court concluded that it could not:

the statute “ultimately attempts to provide further regulation of

the terms set out in the Agreement” and “[s]uch regulation by

                                          -2-
Georgia      law    is    barred     by    the     Agreement’s     choice       to   have

‘Massachusetts law exclusively . . . govern all terms of this

Agreement.’”         Notwithstanding the Georgia statute’s non-waiver

provision,         the    district        court     concluded      that        applicable

Massachusetts choice of law rules did allow for an effective waiver

by a clause choosing the law of a state other than Georgia, and it

granted summary judgement on the point sua sponte to Paradigm.                          On

this de novo review, Rosario v. Dept. of Army,                    607 F.3d 241, 246

(1st Cir. 2010), we think the omission of a preliminary step in the

analysis undermines the district court’s reasoning, and we thus

vacate and remand.

             The court’s analysis rests on the premise that Vertex

waived the benefit of the Georgia statute by agreeing to the

contract’s choice of law provision.                It relied primarily on a case

in   which    we     construed      a   choice     of    law    clause    covering      an

“[a]greement        and    the    rights    and    obligations      of    the     parties

[t]hereto,” Northeast Data Sys., Inc. v. McDonnell Douglas Computer

Sys. Co., 986 F.2d 607, 609 (1st Cir. 1993), thus assuming that the

provision     used       here    extends   to     any   issue   that     may    arise   in

litigation following a claimed breach.                  The parties’ choice of law

clause, however, fell short of such plenary scope.1

      1
       There is no question that it was proper for the district
court to determine the meaning of the contractual terms; absent a
question of extrinsic fact requiring trial (there being none raised
here), Massachusetts law treats contract construction as an issue
for the court. Teragram Corp. v. Marketwatch.com, Inc., 444 F.3d

                                            -3-
            Both the choice of law and forum selection provisions

occurred in §25.1 of the written agreement.            As for choice of law,

the parties agreed that “Massachusetts law exclusively shall govern

all     terms   of    this    Agreement,     including     this    paragraph.”

“Agreement” is not a defined term, but its meaning is indicated by

the   contract’s     title,   “Independent     Agent     Agreement,”   and   an

integration clause stating that “[t]his Agreement contains the

entire agreement . . . between the parties.” We therefore conclude

that “Agreement” capitalized refers to what the parties signed,

with the consequence that “terms” refers to words used in the

document, and that law “govern[ing]” them speaks to the source of

rules    used   to   determine   their     meaning.      Matters   apart   from

construing “terms” are ostensibly left alone, including any choice

of law issue about the applicability of post-breach statutory

obligations imposed by a state other than Massachusetts having an

interest in the contractual relationship of principal and sales

agent.

            This reading is confirmed by contrasting the scope of the

choice of law clause (“all terms of this Agreement”) with that of

the immediately preceding forum selection clause: “all disputes in

any way relating to, arising under, connected with, or incident to

1, 9 (1st Cir. 2006).

                                     -4-
this Agreement.”2           Obviously, the phrase “relating to, arising

under, connected with, or incident to this Agreement” covers a lot

more       ground    than   “terms    of    this   Agreement,”   and    the   textual

contrast within the one contract paragraph makes a rather forceful

case for reading “terms” as “written terms” and leaving the law

governing           other    issues        (like    statutory    post-termination

obligations) untouched by the contracting parties. This reading is

also consistent with Jacobson v. Mailboxes Etc. U.S.A., Inc., 419

Mass. 572, 580 n.9, 646 N.E.2d 741, 746 n.9 (1995), in which the

Supreme Judicial Court of Massachusetts explained that a choice of

law provision stating “only that the agreement is to be governed

and construed by California law . . . does not purport to bar the

application         of   [Massachusetts       statutory   law]   to    the    parties’

dealings.”3

       2
       The forum selection clause requires that all such disputes
be brought in federal district court in Boston if possible, or in
the Commonwealth’s courts if federal subject matter jurisdiction is
wanting.
       3
        Our   own   decision   in  Northeast   Data   Systems   is
distinguishable for two reasons. First, as in Jacobson, the narrow
choice of law provision in the parties’ contract here “does not
state that the rights of the parties are to be governed by
[Massachusetts] law,” 419 Mass. at 580 n.9, 646 N.E.2d at 746 n.9;
see also Valley Juice Ltd., Inc. v. Evian Waters of France, Inc.,
87 F.3d 604, 612 (2d Cir. 1996).      And second, Northeast Data
Systems “was concerned only with a chapter 93A claim under
Massachusetts law, which (critically) contains no anti-waiver
provision.” New England Surfaces v. E.I. Du Pont de Nemours & Co.,
546 F.3d 1, 9 (1st Cir. 2008).

                                             -5-
            The choice of law provision here does not bar application

of   the   Georgia   statute   and   therefore   does   not   constitute   a

contractual waiver by Vertex of its provision.           This leaves open

the question whether a Massachusetts court would, in the absence of

a contractual waiver, recognize and enforce the Georgia statute, a

question involving Massachusetts choice of law principles and the

related questions of how it might construe and what effect it might

give to the Georgia statute’s anti-waiver provisions.             Although

technically we do not defer to a district court on the meaning of

the law of the state in which it sits, we nevertheless think it

would be helpful for the district court to consider this set of

issues in the first instance, possibly aided by more complete

briefing in light of our resolution of the main issue decided by

the district court. To allow for that consideration, we vacate the

order of summary judgment for Paradigm on the Georgia statutory

claim and remand the case to the district court.          Costs are taxed

in favor of Vertex Surgical, Inc.

            So ordered.

                                     -6-