Court Opinion

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Date Created: 2015-10-13 22:42:00.405916+00
Date Added: 2024-06-11T15:40:59.223875
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Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

4-11-2007

Integrated Health v. Abe Briarwood Corp
Precedential or Non-Precedential: Non-Precedential

Docket No. 06-2279

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                                                               NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT

                                     No. 06-2279

             IN RE: INTEGRATED HEALTH SERVICES, INC., et al,
                                       Debtors

                               C. TAYLOR PICKETT,
                                             Appellant

                                           v.

                    INTEGRATED HEALTH SERVICES, INC.

           APPEAL FROM THE UNITED STATES DISTRICT COURT
                    FOR THE DISTRICT OF DELAWARE
                           D.C. Civil No. 04-cv-00354
                District Judge: The Honorable Gregory M. Sleet

                     Submitted Under Third Circuit LAR 34.1(a)
                                 March 27, 2007

           Before: RENDELL, BARRY, and CHAGARES, Circuit Judges

                                (Filed: April 11, 2007)

                                      OPINION

BARRY, Circuit Judge

     Appellant, C. Taylor Pickett, appeals from a final order of the District Court
affirming the Bankruptcy Court’s grant of summary judgment to Integrated Health

Services, Inc. (“Integrated Health”).1 For the following reasons, we will affirm the order

of the District Court.

                                               I.

       In 1993, Integrated Health joined Caves Valley Golf Club as a corporate member.

It paid $75,000 and was issued stock certificates in the club. Pursuant to the club’s

bylaws, the stock certificates and membership cannot be sold or assigned without consent.

       Pickett served as Integrated Health’s Executive Vice President and Chief Financial

Officer. According to Pickett, in recognition of his service to the company, in December

1998 Integrated Health transferred “all of its rights, title and interests in and to the

Membership” to him. Appellant’s Br. at 6. That transfer was memorialized by a March

24, 1999 memo from Robert N. Elkins, Integrated Health’s Chief Executive Officer and

President, which stated:

       This memorandum confirms the agreement between you and IHS regarding
       the Caves Valley membership. IHS has assigned to you all its rights, title,
       and interest related to the membership. You shall remain the IHS
       designated member unless you resign the membership or you are terminated
       for cause. You shall be personally responsible for all dues, fees and
       assessments (to the extent not paid by IHS as reimbursable business
       expenses), including all capital charges assessed by Caves Valley.
       I appreciate all of your continuing efforts on behalf of IHS.

   1
    As purchaser of the stock of Integrated Health, which filed for Chapter 11
bankruptcy in 2000, Abe Briarwood Corp. is Integrated Health’s successor-in-interest and
appellee in this action.
2
Ohio App. at 85 (“Elkins Memo”). Pickett did not take possession of the stock certificates in

the club or report the transfer as income or executive compensation.

       On February 2, 2000, Integrated Health filed for relief under Chapter 11 of the

Bankruptcy Code. In its filings with the Bankruptcy Court, which were signed by Pickett

as its Chief Financial Officer, Integrated Health included the membership in Caves Valley

Golf Club as a long-term asset.

       Pickett remained with Integrated Health until December 31, 2001. At that time,

Pickett and the company executed an agreement in which he “waive[d], relinquishe[d],

release[d], acquit[ted], and forever discharge[d] the IHS Group from any and all claims . .

. arising out of or in any manner connected with [his] agreements with the IHS Group up

to the date on which this Agreement is fully executed.” App. at 246 (“Letter Agreement”).

Following this parting of the ways, Pickett continued to use the golf club and pay the

annual dues required for membership. In August 2002, Integrated Health asked the club

to remove Pickett as its corporate designee.

       Pickett brought this action in Bankruptcy Court seeking a declaratory judgment

that he is the owner of the membership and therefore that it is not part of Integrated

Health’s bankruptcy estate. By Opinion and Order dated January 9, 2004, the Bankruptcy

Court granted summary judgment for Integrated Health. See Pickett v. Integrated Health

Servs., Inc. (In re Integrated Health Servs., Inc.), 304 B.R. 101 (Bankr. D. Del. 2004).

The Court ruled that the Elkins Memo is ambiguous and that the evidence clearly shows

                                               3
that the parties did not intend to assign the membership to Pickett. It found Pickett’s

remaining arguments meritless. Pickett appealed and the District Court affirmed the

Bankruptcy Court’s order.

       We have jurisdiction pursuant to 28 U.S.C. §§ 158(d) and 1291. Our review of the

District Court’s order affirming the grant of summary judgment is plenary. See Rosen v.

Bezner, 996 F.2d 1527, 1530 & n.2 (3d Cir. 1993). We “may affirm the district court’s

order if, when viewing the evidence in the light most favorable to the non-moving party,

there is ‘no genuine issue as to any material fact and the moving party is entitled to

judgment as a matter of law.’ ” Reese Bros., Inc. v. United States, 447 F.3d 229, 232 (3d

Cir. 2006) (quoting Fed. R. Civ. P. 56(c)).

                                              II.

       Pursuant to Maryland law,2 the validity and scope of a purported assignment is

determined by analyzing the intent of the parties, which is done by considering what

reasonable persons in the position of the parties would have thought the language of the

agreement at issue meant. Hernandez v. Suburban Hosp. Ass’n, 572 A.2d 144, 147 (Md.

1990); James v. Goldberg, 261 A.2d 753, 757 (Md. 1970). Considering the agreement as

a whole, if that construction yields a single unambiguous interpretation, the Court must

give effect to that plain meaning. See Turner v. Turner, 809 A.2d 18, 49 (Md. Ct. Spec.

   2
    Applying Delaware choice of law rules, the Bankruptcy Court determined that
Maryland law should be used to determine the validity and scope of the Elkins Memo.
Neither party disputes this finding.

                                              4
Ohio App. 2002); B & P Enters. v. Overland Equip. Co., 758 A.2d 1026, 1037 (Md. Ct. Spec.

App. 2000). If the language is susceptible to more than one construction, then the Court

may use extrinsic evidence, including the “subsequent conduct of the parties[,] as an aid

to its interpretation.” Globe Home Improvement Co. v. McCarty, 105 A.2d 216, 218 (Md.

1954); see also Solomon’s Marina, Inc. v. Rogers, 156 A.2d 432, 434 (Md.

1959); Evergreen Amusement Corp. v. Milstead, 112 A.2d 901, 903 (Md. 1955). The

Court may construe an ambiguous agreement when no disputed facts are at issue.

See Pac. Indem. Co. v. Interstate Fire & Cas. Co., 488 A.2d 486, 489 (Md. 1985);

cf. Teamsters Indus. Employees Welfare Fund v. Rolls-Royce Motor Cars, Inc., 989 F.2d
132, 137 (3d Cir. 1993).

                                            III.

       Pickett argues that the Bankruptcy Court erred in holding that the Elkins Memo is

ambiguous.3 Further, he contends that even if it were deemed to be ambiguous, the

evidence shows that the parties intended it to be an unqualified assignment of all of

Integrated Health’s interest in the club. We disagree.

       First, we agree with the Bankruptcy Court that the Elkins Memo is ambiguous.4

Although, as Pickett points out, the Memo says that “IHS has assigned to you all its

   3
    The District Court order from which Pickett appeals simply “holds that the
bankruptcy court’s order of April 19 was the proper disposition regarding the outstanding
motions.” App. at 11.
   4
   Although Pickett alleges that the club membership was initially assigned to him in
December 1998, he relies solely on the Elkins Memo in support of that assignment.

                                             5
rights, title, and interest related to the membership,” it further provides that “[y]ou shall

remain the IHS designated member unless you resign the membership or you are

terminated for cause.” App. at 85 (emphasis added). As the Bankruptcy Court pointed

out, “[w]hile the use of the word ‘assigns’ would normally indicate an intent to give away

the Membership, the phrase ‘corporate designee’ implies that there was only an intent to

allow the use of the corporate membership for a specified time,” Pickett, 304 B.R. at

107–08, especially as the Memo provides for two instances in which Integrated Health

could effectively strip Pickett of his membership rights. Given these contradictory

phrases, we find that the Elkins Memo is not susceptible to being read in an unambiguous

fashion.

       Second, we agree with the Bankruptcy Court that the extrinsic evidence shows that

the parties understood the Elkins Memo as providing something other than an assignment

of all of Integrated Health’s rights in the club.

       First, membership in the club is not assignable without the club’s consent.

Although this restriction is not dispositive, see Pickett, 304 B.R. at 106–07, it is certainly

a factor which weighs against reading the Elkins Memo as providing for an assignment,

especially as neither party sought the consent of the club, App. at B88–89.

       The actions of both parties subsequent to the dissemination of the Elkins Memo

also clearly reveal an understanding of the Memo’s limited scope. Integrated Health

continued to include the membership as a long-term asset on its books, even in

                                               6
bankruptcy court schedules signed by Pickett himself. Furthermore, Pickett did not take

possession of the stock certificates or list the assignment as income or executive

compensation in the company’s public filings. All of these actions and inactions show an

understanding by the parties that Integrated Health retained ownership of the club

membership following the dissemination of the Memo.5

       Finally, although both parties discuss at length the effect of the Letter Agreement

on the rights conferred by the Elkins Memo, given that the Memo did not assign the rights

in the club to Pickett we see no reason to address this or related issues.6 We agree with

the Bankruptcy Court that the remainder of Pickett’s arguments are without merit.

                                             IV.

       For the foregoing reasons, we will affirm the order of the District Court.

   5
     Despite the strength of the evidence supporting a narrow reading of the rights
conferred by the Elkins Memo, Pickett contends that the Bankruptcy Court erred in
finding that no assignment took place. According to Pickett, the Court “ignored the only
summary judgment evidence regarding the intent of the parties to the Elkins Memo”—his
affidavit. Appellant’s Br. at 12. In that affidavit, Pickett states that the intent of the Memo
“was to permanently assign and convey to me all of IHS’s rights, title and interests in and
to the Membership, including, without limitation, all privileges and benefits thereto.”
App. at 144. The Court found this affidavit to be irrelevant because “his testimony as to a
legal conclusion . . . is [not] proper[] evidence on that point” and was, regardless, “not
compelling.” App. at B146. We find no error.
   6
     In his Complaint, Pickett asserts that he is the owner of the membership or,
alternatively, that Integrated Health is equitably estopped from changing its position in
this litigation. He does not assert that the Elkins Memo created contract rights which have
been subsequently breached by Integrated Health. App. at 80–82; see Pickett, 304 B.R. at
110 & n.2. We see no reason to address such arguments on this appeal.

                                              7