Court Opinion

ID: 2982557
Source: CourtListenerOpinion
Date Created: 2015-09-22 20:24:53.867475+00
Date Added: 2024-06-11T15:48:17.308152
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 14a0649n.06

                                       Case No. 13-4101                             FILED
                                                                              Aug 19, 2014
                         UNITED STATES COURT OF APPEALS                   DEBORAH S. HUNT, Clerk
                              FOR THE SIXTH CIRCUIT

AVIS        RENT-A-CAR       SYSTEM,               )
INCORPORATED; BUDGET RENT A CAR                    )
SYSTEMS, INC.; ENTERPRISE RAC                      )
COMPANY OF CINCINNATI, LLC, dba                    )      ON APPEAL FROM THE UNITED
Enterprise Rent-A-Car; VANGUARD CAR                )      STATES DISTRICT COURT FOR
RENTAL USA, LLC, dba National and                  )      THE SOUTHERN DISTRICT OF
Alamo,                                             )      OHIO
                                                   )
       Plaintiffs-Appellees,                       )
                                                   )
v.                                                 )
                                                   )
CITY OF DAYTON, OHIO,                              )
                                                   )
       Defendant-Appellant.                        )

       BEFORE: COLE, Chief Judge; COOK and WHITE, Circuit Judges.

       COOK, Circuit Judge. This case involves a contract dispute between the City of Dayton,

Ohio (the “City”) and rent-a-car companies Avis, Budget, Enterprise, and Vanguard

(collectively, the “RACs”) concerning their operations at the Dayton International Airport

(“Airport”). The RACs contend that the City breached the Rental Car Ready/Return Agreement

(“RRA”) under which the City leased the entire first floor of a newly-constructed parking garage

at the Airport to the RACs rent-free for a twenty-year term. Specifically, according to the RACs,

the City attempted to unilaterally implement a permit system that reduced the space available to
Case No. 13-4101
Avis Rent-A-Car, Inc. v. City of Dayton

the RACs and charged additional rent before the twenty-year term expired. In the district court,

the City responded that the RRA automatically terminated when the Concession Agreement, the

RACs’ general operating agreement with the Airport, expired on December 31, 2012. Granting

summary judgment to the RACs, the district court rejected this interpretation because it

(1) renders the twenty-year lease provision meaningless, and (2) conflates the terms “expiration”

and “termination” despite the agreements’ distinct uses of those terms. We affirm.

                                               I.

       In 2006, the various RACs and the City entered into materially identical Concession

Agreements that “set forth the terms and conditions for the non-exclusive right and privilege to

operate an on-Airport rental car concession.” The City generated significant revenue from the

RACs’ concessions in the form of rent, fees, and the collection of a Customer Facility Charge

(“CFC”) from RAC customers. Though the Concession Agreement initially contemplated a

three-year term, the City and RACs later amended it to “expir[e] December 31, 2012 . . . , unless

terminated earlier in accordance with the provisions of this Agreement.”

       In May 2008, the City and the RACs signed a Memorandum of Understanding (“MOU”)

that expressed the City’s intent to construct a three-story Airport parking garage using CFC

revenue. It also memorialized the parties’ agreement to relocate the Ready/Return area—where

RAC customers pick up and return rental cars and the RACs store unused vehicles—from a

surface parking lot to the ground floor of the garage. That MOU provided that the “City and

each RAC will enter into a lease agreement for the ground level of the garage with a term of 20

years, during which time the RACs will not owe any space rent or ground rent.” Last, “[t]he

parties agree[d] to negotiate, in good faith, such additional agreements and amendments as are

necessary for the Garage project, including . . . amendment(s) to the Concession Agreement.”

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Avis Rent-A-Car, Inc. v. City of Dayton

       The RACs and the City then signed materially identical RRAs in anticipation of the

completion of the parking garage. Most important for the purposes of this case, the RRA

provided the following under “Article V – Term”: “This Agreement shall expire twenty (20)

years from the Garage Completion Date . . . . In addition, this Agreement shall automatically

terminate upon the date of termination of the Concession Agreement.” In terms of substance, the

parties “agreed that the ground floor of the Parking Garage . . . shall be allocated to the RACs for

Ready/Return” rent-free “[i]n consideration of the use of CFCs to fund construction of the

Parking Garage . . . and payment of [operation and maintenance services for the garage].”

       The present dispute arose in 2012 when the City’s new Director of Aviation asked the

City’s legal counsel “to look for ways for [the City] . . . to be able to get out of” the RRA

because he “believed that it was a bad deal for the City.” Ignoring the RACs’ repeated requests

to negotiate an extension of the Concession Agreement, the City instead issued a memorandum

declaring that “[t]he [Concession Agreements] expire on December 31, 2012[,] and accordingly

the [RRAs] automatically terminate.” The City proposed a drastically different permit system

that eliminated over half of the parking spaces leased to the RACs under the RRA and charged

significant per-space rent.

       After the City enacted ordinances to implement this permit process and advised the RACs

that they must file a permit interest form to continue operating at the Airport, the RACs filed two

consolidated suits alleging breach of contract under Ohio law.1 On cross-motions for summary

judgment, the district court granted judgment to the RACs, concluding that the RRA and

Concession Agreement use the terms “expiration” and “termination” distinctly, and therefore

       1
       The agreements at issue all provide that they “shall be governed by and construed in
accordance with the laws of the State of Ohio.”

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Avis Rent-A-Car, Inc. v. City of Dayton

“the December 31, 2012, expiration date of the Concession Agreement had no effect on the

twenty-year lease term of the [RRA], other than to provide the City with a manufactured

justification for implementing the permit process.” The City appeals.

                                                 II.

       We review the grant of summary judgment de novo, Kalich v. AT&T Mobility, LLC,

679 F.3d 464, 469 (6th Cir. 2012). Drawing all reasonable inferences in the light most favorable

to the City, we will affirm if “the record taken as a whole could not lead a rational trier of fact to

find for the non-moving party.”       Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,

475 U.S. 574, 587 (1986); see also Fed. R. Civ. P. 56(a). “Questions of contract interpretation

are generally considered questions of law subject to de novo review.” Chicago Title Ins. Corp. v.

Magnuson, 487 F.3d 985, 990 (6th Cir. 2007).

   A. The City’s Novation Argument

       Initially, the City argues that prefatory language in an amendment to the Concession

Agreement constitutes a novation that supersedes the RRA’s twenty-year term. That language

provides that the “City agrees that the Premises as depicted on Exhibit C shall be provided to

[the RACs] at no additional cost for the term of the [Concession] Agreement.”

       Yet, as the RACs point out, the City forfeited this argument by failing to raise it below.

Indeed, the City never mentioned this amendment in its briefing to the district court. “This court

will exercise its discretion to entertain issues not raised before the district court only in

exceptional cases or when application of the [forfeiture] rule would produce a plain miscarriage

of justice.” Thomas M. Cooley Law Sch. v. Kurzon Strauss, LLP, --- F.3d ---, 2014 WL
2959066, at *4 (6th Cir. 2014) (internal quotation marks and alterations omitted); see also Isaak

v. Trumbull Sav. & Loan Co., 169 F.3d 390, 396 n.3 (6th Cir. 1999) (“In order to preserve the

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integrity of the appellate structure, we should not be considered a ‘second shot’ forum . . . where

secondary, back-up theories may be minted for the first time.”). This case presents a routine

contract dispute, and no miscarriage of justice will result from holding the City to freely-

negotiated and agreed-upon contract terms, even if it now regrets the deal that it struck.

       The City responds that we should nevertheless consider this argument because it involves

only a question of law requiring no additional factual determinations. See In re Morris, 260 F.3d
654, 664 (6th Cir. 2001) (“[W]e should address an [unpreserved] issue presented with sufficient

clarity and requiring no factual development if doing so would promote the finality of litigation.”

(emphasis removed)). Here, though, the resolution of this issue may require further factual

development because the RACs offer a reasonable alternative interpretation:

       When the . . . [a]mendment states that ‘the Premises as depicted on Exhibit C
       shall be provided . . . for the term of the [Concession] Agreement,’ it means that
       the RACs’ respective allocation of ready/return spaces in the Garage ‘as depicted
       on Exhibit C’ (not their right to lease space on the first floor of the Garage) would
       be in effect for the term of the Concession Agreement.

(emphasis removed). This alternate interpretation renders the cited language ambiguous at a

minimum,2 and thus this issue falls outside the argument-forfeiture exception identified in

Morris. See Royal Ins. Co. of Am. v. Orient Overseas Container Line Ltd., 525 F.3d 409, 422

(6th Cir. 2008) (“If a contract contains ambiguities, it generally becomes the task of the fact-

finder to use extrinsic evidence to determine the intent of the parties.”).

   B. The Effect of the Concession Agreement’s Expiration on the RRA

       Alternatively, the City falls back on the argument it presented to the district court: the

Concession Agreement’s expiration on December 31, 2012, “automatically terminate[d]” the

       2
       The RACs maintain that their interpretation constitutes the only reasonable reading of
the amendment as a matter of Ohio contract law. Due to the City’s failure to preserve this
argument, however, we need not decide this issue.
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Case No. 13-4101
Avis Rent-A-Car, Inc. v. City of Dayton

RRA. The City relies on the final sentence of the RRA’s “Term” provision: “In addition, this

Agreement shall automatically terminate upon the date of termination of the Concession

Agreement.” As ably explained by the district court and the RACs, however, this argument fails

to persuade for two reasons.

        First, the City’s interpretation would render the RRA’s express twenty-year term

meaningless. “The meaning of a contract is to be gathered from a consideration of all its parts,

and no provision is to be wholly disregarded as inconsistent with other provisions unless no other

reasonable construction is possible.” Karabin v. State Auto. Mut. Ins. Co., 462 N.E.2d 403, 406

(Ohio 1984); see also Quill v. R.A. Inv. Corp., 707 N.E.2d 35, 40 (Ohio Ct. App. 1997) (rejecting

contract interpretation that would render the provision at issue a “nullity”). Because the City’s

interpretation contravenes these well-established contract principles, the district court properly

rejected it as unreasonable.

        Second, the City’s interpretation erroneously conflates the terms “termination” and

“expiration” despite clear textual indicators that the parties intended these terms to have distinct

meanings. Read in context, “expiration” refers to the prescribed end of a defined period of time,

and “termination” refers to the premature end of such a period. Thus, the Concession Agreement

provides that “[t]his Agreement is effective for a period of six (6) years . . . beginning January 1,

2007 . . . and expiring December 31, 2012 . . . , unless terminated earlier in accordance with the

provisions of this Agreement.” (emphasis added). Similarly, another clause provides that “[i]f

an Event of Default occurs . . . after the expiration of the applicable . . . cure period . . . , the City

. . . may terminate this Agreement.” (emphasis added).

        Other provisions likewise distinguish the terms. For example, the RRA requires that,

“[u]pon termination or expiration of this Agreement, whichever date is earlier, [the RACs] shall

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Avis Rent-A-Car, Inc. v. City of Dayton

return the Premises.”      (emphasis added).    If “[t]he parties intended the terms . . . to be

synonymous,” as the City insists, the RRA would not need to list both as possible conditions

precedent to the return of the leased premises. And as the district court explained, the RRA’s use

of the phrase “automatically terminate” in the event of the Concession Agreement’s termination

bolsters this interpretation:

        Th[e] use of the adverb “automatically” emphasizes the intransitive form of
        “terminate,” while also highlighting the fact that the parties chose not to use the
        synonymous intransitive verb “expire.” In other words, the choice of language
        suggests that the parties specifically chose not to conflate the terms, and that they
        intended at all times to distinguish termination by a party to the agreement from
        expiration according to its negotiated term.

Because the Concession Agreement expired, as opposed to terminated, on December 31, 2012,

the RRA did not simultaneously terminate.

        Case law supports our conclusion. “When interpreting a contract, we will presume that

words are used for a specific purpose.” Wohl v. Swinney, 888 N.E.2d 1062, 1066 (Ohio 2008).

Regarding these particular terms, courts recognize that though “the words termination and

expiration may sometimes be used interchangeably [for] the end of a full contract term[,]

. . . termination usually means an action taken to end the contract before the end of its anticipated

term.” Lockheed Aircraft Serv. Co. v. Rice, 956 F.2d 1174, 1992 WL 29143, at *1 (Fed. Cir.

1992) (table); see also Perfection Oil Co. v. Saam, 264 F.2d 835, 838 (8th Cir. 1959) (“[T]he

word ‘termination’ . . . should be interpreted to mean the cancellation of a contract before the

expiration of the term provided for in the contract, and . . . ‘termination’ and ‘expiration’ are not

synonymous words.”).

        In response, the City cites cases where the court found “termination” to encompass

“expiration.” See, e.g., NaturaLawn of Am., Inc. v. W. Grp., LLC, 484 F. Supp. 2d 392, 401 (D.

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Md. 2007); Carvel Corp. v. Rait, 117 A.D.2d 485, 489 (N.Y. App. Div. 1986). But as the RACs

note, these cases falter here. For example, in NaturaLawn, the contract provided that a “non-

compete clause would apply after termination ‘for any reason.’” 484 F. Supp. 2d at 401. In

holding that the contract’s expiration triggered this clause, the court reasoned that “‘expiration’ is

one reason for the ‘termination’ of an agreement.” Id. The parties included no such broad

language here. In Carvel, the court focused on the agreement’s “stated purpose” of protecting

trade secrets after a licensing agreement ended. Carvel, 117 A.D.2d at 48990. Here, no

overarching purpose supports the City’s preferred interpretation other than buyer’s remorse. All

indicators of meaning in these agreements lead to the conclusion that the parties purposefully

distinguished an agreement’s expiration from its termination. See Foster Wheeler Enviresponse,

Inc. v. Franklin Cnty. Convention Facilities Auth., 678 N.E.2d 519, 526 (Ohio 1997) (“[T]he

meaning of any particular . . . contract is to be determined on a case-by-case and contract-by-

contract basis, pursuant to the usual rules for interpreting written instruments.”).

                                                 III.

       For these reasons, we AFFIRM.

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