Court Opinion

ID: 769796
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:16:11+00
Date Added: 2024-06-11T17:55:45.788230
License: Public Domain

221 F.3d 1015 (7th Cir. 2000)
Tri-State Business Machines, Inc., Plaintiff-Appellee,v.Lanier Worldwide, Inc., Defendant-Appellant.
No. 99-2723
In the  United States Court of Appeals  For the Seventh Circuit
Argued April 6, 2000Decided July 26, 2000

Appeal from the United States District Court for the Western District of Wisconsin.  No. 98-C-0403-S--John C. Shabaz, Chief Judge.
Before Posner, Chief Judge, and Flaum and Ripple,  Circuit Judges.
Flaum, Circuit Judge.

1
On March 30, 1999, the  district court entered judgment in favor of  plaintiff Tri-State Business Machines, Inc.  ("Tri-State") pursuant to a prior arbitration  award, and denied defendant Lanier Worldwide,  Inc.'s ("Lanier") counterclaim for breach of the  duty of good faith and fair dealing. Lanier now  appeals the district court's orders executing  that judgment, contending that the district court  erred in its enforcement of the arbitration  award.

I.  Background

2
On June 9, 1998, Tri-State filed suit in the  Circuit Court for LaCrosse County, Wisconsin,  alleging that Lanier violated the Wisconsin Fair  Dealership Law ("WFDL"), Wisc. Stat. sec. 135 et  seq. (1999), when it terminated a Dealer  Agreement1 between the two parties. The case  was removed to federal court pursuant to  diversity jurisdiction, and Lanier then moved to  stay the case pending the completion of  arbitration. The district court granted Lanier's  motion to compel arbitration and stayed all  arbitrable issues.

3
After an arbitration hearing, a panel of three  arbitrators determined that the WFDL was  inapplicable to the Dealer Agreement between the  parties. However, the panel also found that,  according to the terms of the Agreement, Lanier's  termination of its relationship with Tri-State  triggered an obligation on its part to repurchase  from Tri-State "any L[anier] inventory that T[ri-  State] currently owns." In order to implement  this conclusion, the arbitration panel required  that "L[anier] . . . pay to T[ri-State] such  amount as T[ri-State] paid to L[anier] as the  purchase price for such inventory when T[ri-  State]purchased such inventory originally . . .  ." In addition, the arbitration panel ordered  Lanier to pay Tri-State overdue service payments  in the amount of $41,760.40. This award was  confirmed in its entirety by the District Court  for the Western District of Wisconsin and  judgment was entered for Tri-State.

4
On May 28, 1999, Tri-State filed a motion for a  writ of execution and an order to compel Lanier  to perform its obligations under the confirmed  award. The district court granted this motion and  directed Lanier to pay $417,835.20 to Tri-State  for existing inventory, but later stayed this  order pending resolution of Lanier's motion for  reconsideration. After reconsideration, the  district court ordered Lanier to pay $346,265.20  to Tri-State. Included in that amount were  $321,258.00 in inventory, $3,831.83 in Lanier  sales literature, and $21,174.84 plus interest  from the balance remaining on the money judgment.  The district court held that the additional  inventory balance of $92,774.83 should be  addressed between the parties and then, if  necessary, submitted to the district court.

5
Tri-State made a second motion for a writ of  execution in the amount of $346,265.20 on June  21, 1999. The district court granted this motion  and ordered that the second writ of execution  issue immediately. The district court further  required Lanier to place the remaining disputed  amount in a trust account. Lanier now challenges  the writs of execution issued against it, arguing  that the district court erred in determining that  certain items--specifically used equipment and  sales literature--were within the meaning of  "inventory" as used by the arbitration panel in  its award.

II.  Analysis

6
The dispute in this case centers on the meaning  of the word "inventory" as used by the  arbitration panel in its award to Tri-State. The  arbitration panel ordered Lanier to "repurchase  from T[ri-State] any L[anier] inventory that  T[ri-State] currently owns." According to Lanier,  the district court erred in finding that this  repurchase requirement included both used  equipment and sales literature possessed by Tri-  State. Lanier argues that used equipment and  literature are not within the definition of  "inventory" as that term was used by the  arbitration panel, and that those items should  have been excluded by the district court in  calculating the amount Lanier owed Tri-State  pursuant to the arbitration award. We review the  district court's conclusions of law de novo and  its findings of fact for clear error. See Harter  v. Iowa Grain Co., 211 F.3d 338, 347 (7th Cir.  2000).

7
Because Lanier's challenge to the district  court's writs of execution focuses on the court's  interpretation of a specific term in the  arbitration award, we are mindful of several  principles governing judicial consideration of  such awards. "It is well-settled that the  district court generally may not interpret an  ambiguous arbitration award." Flender Corp. v.  Techna-Quip Co., 953 F.2d 273, 279 (7th Cir.  1992) (citations omitted); see also United  Steelworkers v. Danly Mach. Corp., 852 F.2d 1024,  1027 (7th Cir. 1988). Rather, "[i]f an award is  unclear, it should be sent back to the arbitrator  for clarification." Flender, 953 F.2d at 279-80  (citations omitted). However, because "remand for  clarification is a disfavored procedure," id. at  280 (citations omitted), "[w]hen possible . . .  a court should avoid remanding a decision to the  arbitrator because of the interest in prompt and  final arbitration." Teamsters Local No. 579 v. B  & M Transit, Inc., 882 F.2d 274, 278 (7th Cir.  1989) (citations omitted). "Thus, a court is  permitted to interpret and enforce an ambiguous  award if the ambiguity can be resolved from the  record." Flender, 953 F.2d at 280 (citations  omitted); see also Ethyl Corp. v. United  Steelworkers, 768 F.2d 180, 188 (7th Cir. 1985),  cert. denied, 475 U.S. 1010 (1986).

8
In support of its argument that "inventory"  does not include used equipment and sales  literature, Lanier cites the general contract  principle that damages should put the aggrieved  party in the same position it would have been in  had the contract been performed. See Restatement  (Second) of Contracts sec. 347 cmt. a (1979)  ("Contract damages are ordinarily based on the  injured party's expectation interest and are  intended to give him the benefit of his bargain  by awarding him a sum of money that will . . .  put him in as good a position as he would have  been in had the contract been performed.").  According to Lanier, proper expectation damages  would entail the forced repurchase of Lanier  inventory that Tri-State cannot now sell by  virtue of the termination of the Dealer  Agreement, but does not include used equipment  from which Tri-State has already gotten the  benefit of its bargain. In other words, Lanier  argues that because Tri-State has had the use of  the equipment in question and has benefitted from  that use, requiring Lanier to repurchase it at  the original purchase price would be a windfall  to Tri-State. See E. Allan Farnsworth, Contracts  sec. 12.8, at 874-75 (2d ed. 1990) ("It is a  fundamental tenet of the law of contract remedies  that . . . an injured party should not be put in  a better position than had the contract been  performed.").

9
Lanier further argues that used equipment and  sales literature are generally not included  within the meaning of the term "inventory."  According to Lanier, although the arbitration  panel found that the WFDL did not apply to the  parties' Dealer Agreement, the panel nonetheless  relied on the concept of inventory in the WFDL in  making its award. Under the WFDL, an individual  who grants a dealership and then terminates that  dealership is required to "repurchase all  inventories sold by the grantor to the dealer for  resale under the dealership agreement at the fair  wholesale market value." Wisc. Stat. sec. 135.045  (1999). Lanier contends that this provision  protects the dealer only in regard to goods sold  directly to the dealer by the grantor, and that  the act of leasing, selling, or renting those  goods is an intervening step which removes the  goods from the definition of "inventory" as  contemplated by the WFDL. Lanier also asserts  that "inventory," as it is generally understood  and as it is defined in the WFDL, refers only to  goods held for resale. See U.C.C. sec.  9-102(48)(B) (2000) ("'Inventory' means goods .  . . which . . . are held by a person for sale or  lease . . . ."); see also Wisc. Stat. sec.  135.045 (1999). Lanier argues that because the  sales literature at issue was not held by Tri-  State for resale, it, like the used equipment,  should not have been included within the  definition of "inventory" for purposes of the  district court's enforcement of the arbitration  award.

10
Tri-State responds that Lanier is not asking  this Court to interpret the arbitration panel's  use of the word "inventory," but rather to alter  the substantive meaning of the award. According  to Tri-State, Lanier is trying to change the  award by inserting the word "new" before  "inventory" in circumstances where there is no  indication that the arbitration panel intended to  limit its award in this way.2 Tri-State argues  that the plain meaning of "inventory" encompasses  everything it possesses that was originally  purchased from Lanier, including both new and  used equipment. In support of this argument, and  its contention that "inventory" includes sales  literature as well, Tri-State cites the  definition of "inventory" in U.C.C. sec. 9-  102(48)(D), which provides that goods are  "[i]nventory" if they are "materials used or  consumed in a business." U.C.C. sec. 9-102(48)(D)  (2000). Under this definition, both sales  literature and used equipment, as items used in  a business, would be included within the meaning  of "inventory." Tri-State asserts that both the  plain meaning of "inventory," and the definition  of that term in the U.C.C., support the district  court's reading of the arbitration award.

11
Although much of the parties' argument in this  case focuses on the correct definition of  "inventory," we do not believe that the  arbitration award is as clear as either party  asserts. The award requires that Lanier  repurchase from Tri-State any Lanier "inventory"  Tri-State currently owns, but it does not specify  whether that repurchase obligation includes used  equipment or sales literature. Furthermore, the  definitions offered by the parties are themselves  somewhat ambiguous, and there is no indication  that the various statutes from which those  definitions are taken were actually relied on by  the arbitration panel in making its award. Lanier  urges us to resolve this difficulty by applying  general principles of contract law, but that  argument is itself a concession that the  arbitration panel's use of the term "inventory"  requires interpretation. As we stated previously,  district courts are not to interpret ambiguous  arbitration awards, but rather should remand such  awards for clarification. See Colonial Penn Ins.  Co. v. Omaha Indemnity Co., 943 F.2d 327, 334 (3d  Cir. 1991) ("[C]ourts have uniformly stated that  a remand to the arbitration panel is appropriate  in cases where the award is ambiguous.").  However, despite our conclusion that the  arbitration panel's use of the word "inventory"  is subject to multiple interpretations, and  despite the district court's failure to remand  for clarification of that award, we may  nonetheless affirm the district court if the  meaning of "inventory" is clear from the record.  See Flender, 953 F.2d at 280 (citations omitted).

12
After examining the record of the arbitration  hearing, we find it significant that Tri-State  provided the arbitration panel with an inventory  valuation dated May 29, 1998. That inventory  valuation, submitted as Exhibit 128, lists the  total value of Lanier inventory held by Tri-State  at $321,258.54, an amount that includes the value  of both new and used Lanier equipment held by  Tri-State. At no time during the arbitration  hearing did Lanier object to the inventory list  referencing the used equipment, nor did it  challenge Tri-State's characterization of that  equipment as inventory. Under these  circumstances, the record supports a conclusion  that "inventory," as the term was used by the  arbitration panel, includes the items contained  in Tri-State's inventory valuation, and that the  district court properly determined that the  arbitration award ordered the repurchase of the  used equipment from Tri-State. We therefore  conclude that the district court properly issued  the writs of execution in regard to the  $321,258.00 attributable to the repurchase of  Lanier inventory owned by Tri-State.

13
Although the record supports the district  court's finding as to the used equipment, it is  not sufficient to sustain the court's conclusion  that the word "inventory" in the arbitration  award includes the Lanier sales literature  possessed by Tri-State. The sales literature was  not on the list of inventory submitted to the  arbitration panel, and we can find no indication  in the record that the panel considered the  repurchase of the sales literature in making its  award. While it is possible that a broad reading  of "inventory" could encompass the sales  literature, a narrower reading of that term would  exclude the sales literature from the calculation  of the amount owed by Lanier under the  arbitration award. Because the term "inventory"  in the arbitration award is ambiguous, and  because that ambiguity is not resolved by the  record in regard to the disputed sales  literature, the district court could not have  included the sales literature within the  repurchase requirement of the arbitration award  without engaging in impermissible interpretation  of that award. We therefore conclude that the  district court erred in not remanding the issue  of the sales literature to the arbitration panel  for clarification and in issuing the writs of  execution in regard to the $3,813.83 attributable  to the Lanier sales literature possessed by Tri-  State.

III.  Conclusion

14
Having considered the district court's writs of  execution in light of our conclusion that the  arbitration panel's use of the word "inventory"  is ambiguous, we AFFIRM the writs of execution  issued by the district court insofar as they  order the repurchase of used Lanier equipment  possessed by Tri-State, but REVERSE and REMAND those  orders in regard to the repurchase of the Lanier  sales literature for further proceedings  consistent with this opinion.3

Notes:

1
 The Dealer Agreement between Lanier and Tri-State  was entered into by the parties on June 1, 1986,  and expired by virtue of Lanier's notice of  termination on May 31, 1998. Among other things,  the Dealer Agreement, as amended, provided that  "[a]ny controversy or claim arising out of or  relating to this . . . Dealer Agreement or the  breach . . . thereof shall be submitted to  binding arbitration in Atlanta, Georgia in  accordance with the Commercial Arbitration Rules  of the American Arbitration Association . . . ."

2
 Tri-State argues that because Lanier is now  trying to alter the substantive meaning of the  word "inventory" as it was used in the  arbitration award and in the Award and Judgment  enforcing that award, the proper remedy would  have been to file a Rule 59(e) motion seeking to  alter or amend the judgment issued by the  district court. See Fed.R.Civ.P. 59(e) ("Motion  to Alter or Amend Judgment."). According to Tri-  State, because no such motion was filed within  ten days of the entry of judgment, Lanier's  arguments are now procedurally barred.
Although we recognize that a Rule  59(e) motion could be the proper  means of attacking a judgment in circumstances  where the moving party seeks to change or clarify  the judgment entered, that is not the case here.  Lanier does not argue that the judgment should be  altered so that the used equipment and the sales  literature would be excluded from the definition  of "inventory" used by the arbitration panel, nor  does it argue that the arbitration award is  unclear and should be clarified. Rather, Lanier  argues that the arbitration panel did not include  used equipment and sales literature within the  meaning of "inventory," and that the district  court erred in interpreting the arbitration award  to include those items. Under these  circumstances, where Lanier does not seek to  alter, amend, or clarify the arbitration award  enforced by the district court, but rather argues  that the award was erroneously interpreted,  Lanier's failure to file a Rule 59(e) motion does  not bar its claims and we may consider them on  appeal.

3
 The only issues on appeal are the district  court's findings regarding the used equipment and  the literature. The remainder of the district  court's writs of execution, including the  $21,174.84 plus interest attributable to the  balance remaining on the money judgment and the  $92,744.83 that relates to additional inventory  and that the district court ordered placed in  trust, are unaffected by this decision.