Court Opinion

ID: 4345320
Source: CourtListenerOpinion
Date Created: 2018-11-28 21:00:18.573878+00
Date Added: 2024-06-11T14:22:02.724761
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                _______________

                                      No. 17-1922
                                    _______________

                   In re: TH PROPERTIES, d/b/a TH Properties, L.P..,
                                                               Debtors

           MONTGOMERY, MCCRACKEN, WALKER & RHOADS, LLP,
                                               Appellant
                         _______________

                 On Appeal from the United States District Court for the
                           Eastern District of Pennsylvania
                               (D.C. No. 2:16-cv-04080)
                       District Judge: Hon. Wendy Beetlestone
                                  _______________

                      Submitted Under Third Circuit L.A.R. 34.1(a)
                                  January 19, 2018

             Before: AMBRO, RESTREPO, and FUENTES, Circuit Judges

                           (Opinion Filed: November 28, 2018)
                                  _________________

                                       OPINION
                                   _________________

       *This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does
not constitute binding precedent.
FUENTES, Circuit Judge.

       Montgomery, McCracken, Walker, and Rhoads, LLP, (“Montgomery McCracken”)

acted as counsel to Reorganized Debtor TH Properties, L.P. (“TH Properties”) in its

bankruptcy proceedings.1 Montgomery McCracken now appeals the District Court’s order

affirming the Bankruptcy Court’s interpretation of a fee stipulation between the parties.2

For the reasons explained below, we will vacate the District Court’s order and remand for

further consideration.

                                                  I.

       In 2009, TH Properties filed for bankruptcy, retaining Montgomery McCracken as

counsel.3 From 2009 to 2012, Montgomery McCracken remained as TH Properties’

counsel and filed nine “[a]pplication[s] for [c]ompensation and [r]eimbursement of

[e]xpenses,” in the Bankruptcy Court.4 However, in 2012, TH Properties retained new

counsel and filed an objection to Montgomery McCracken’s tenth and final fee

application.5 In an effort to settle the fee dispute, the parties negotiated and entered into a

fee stipulation (the “Stipulation”), which stated in relevant part:

       [Montgomery McCracken] will agree to reduce its total fees and costs claims
       against [TH Properties]. . . from $2.6 million for all pre-bankruptcy,
       bankruptcy, and post-bankruptcy work for [TH Properties] to the total sum
       of $2.325 million, with the said reduction of $275,000 to be applied after
       receipt by [Montgomery McCracken] of $2.325 million. . . .6

1
  App. at 3.
2
  Id. at 2.
3
  Id. at 3.
4
  Id. at 37-54.
5
  Id. at 67-72.
6
  Id. at 74-75.
                                              2
The Stipulation was approved by the Bankruptcy Court.7

       In 2016, TH Properties sent a fee payment to Montgomery McCracken along with

a letter explaining that the payment was its last.8 TH Properties also provided Montgomery

McCracken with a tally of all the payments it had made to Montgomery McCracken,

showing that its pre-bankruptcy, bankruptcy, and post-bankruptcy payments totaled $2.325

million.9 The tally included $680,789 of fee payments that were made to Montgomery

McCracken before the parties entered into the Stipulation.10

       After receiving TH Properties’ letter and payment, Montgomery McCracken moved

to reopen the bankruptcy case and enforce the Stipulation.11 Specifically, Montgomery

McCracken argued that TH Properties had not fulfilled its $2.325 million obligation

because it still owed $680,789—the amount TH Properties had paid before the

Stipulation.12

       The Bankruptcy Court granted Montgomery McCracken’s motion to reopen the

bankruptcy case, but it determined that the Stipulation was unambiguous and explained

that Montgomery McCracken’s argument that TH Properties still owed $680,789 was

“manifestly inconsistent with the plain language of the parties’ written agreement.” 13

7
  Id. at 83.
8
  Id. at 126.
9
  Id. at 127-131.
10
   Id. at 127.
11
   Id. at 132.
12
   Id. at 133.
13
   Id. at 133 n.1.
                                            3
Accordingly, the Bankruptcy Court concluded that TH Properties’ interpretation of the

Stipulation controlled.14

       Montgomery McCracken filed an appeal in the District Court, arguing that the

Stipulation was ambiguous.15        The District Court affirmed the Bankruptcy Court’s

interpretation of the Stipulation,16 and Montgomery McCracken appealed.17

                                              II.

        The question before us is whether the District Court and the Bankruptcy Court erred

in concluding that the language of the Stipulation was unambiguous. We conclude that

they did.

       Under Pennsylvania law, “[t]he paramount goal of contract interpretation is to

determine the intent of the parties.”18 “When the words [of a contract] are clear and

unambiguous, the intent of the parties must be determined from the express language of

the agreement . . . . Accordingly, where the intention of the parties is clear, there is no need

to resort to extrinsic aids or evidence.”19

14
   Id.
15
   Id. at 5.
16
   Id. at 5-10.
17
   The District Court had jurisdiction to review the Bankruptcy Court’s order under 28
U.S.C. § 158(a) (2018). We have jurisdiction to review the District Court’s order under
28 U.S.C. § 158(d). We review the District Court’s determination regarding ambiguity
de novo. Bohler-Uddeholm Am., Inc. v. Ellwood Grp., Inc., 247 F.3d 79, 92 (3d Cir.
2001) (explaining that we exercise “plenary review”).
18
   Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 587 (3d Cir. 2009) (citing
Garden State Tanning, Inc. v. Mitchell Mfg. Group, Inc., 273 F.3d 332, 335 (3d Cir. 2001)).
19
   Id. (internal citations and quotation marks omitted).
                                               4
       A contract is ambiguous “if . . . it is reasonably or fairly susceptible of different

constructions and is capable of being understood in more senses than one.”20            “To

determine whether ambiguity exists in a contract, the court may consider ‘the words of the

contract, the alternative meaning suggested by counsel, and the nature of the objective

evidence to be offered in support of that meaning.’”21 When the language of a contract is

ambiguous, “deciding the intent of the parties becomes a question of fact for the jury.”22

       In this case, the District Court concluded that the Stipulation was not ambiguous on

its face because it “contains no defective, obscure, or indefinite language.”23 Instead, the

District Court explained that the Stipulation “clearly states     . . . that [Montgomery

McCracken] agrees to reduce its ‘total’ fee and cost claims from $2.6 million ‘for all pre-

bankruptcy, bankruptcy, and post-bankruptcy work’ to the ‘total sum’ of $2.325 million.”24

The District Court thus decided in favor of TH Properties.

       On appeal, Montgomery McCracken argues that the Stipulation is ambiguous

because it is “reasonably susceptible” to being understood in “more than one sense.”25

20
   Bohler-Uddeholm Am., 247 F.3d at 93 (quoting Duquesne Light Co. v. Westinghouse
Elec. Corp., 66 F.3d 604, 614 (3d Cir. 1995) (citation omitted)).
21
   Id. (quoting Melon Bank, N.A. v. Aetna Bus. Credit, Inc., 619 F.2d 1001, 1011 (3d Cir.
1980)).
22
   See Am. Eagle Outfitters, 584 F.3d at 587 (citing Community Coll. Of Beaver County v.
Community Coll. Of Beaver, 375 A.2d 1267, 1275 (Pa. 1977)).
23
   App. at 6.
24
   Id.
25
   Am. Eagle Outfitters, 584 F.3d at 587 (internal quotation marks omitted).
                                             5
Specifically, Montgomery McCracken focuses on the word “claims” and asserts that it can

be understood to signify “money owed”26 or money “both paid and unpaid.”27 We agree.

       The District Court focused its analysis on the words and phrases “total,” “for all pre-

bankruptcy, bankruptcy, and post-bankruptcy work,” and “total sum,” but it neglected to

consider the word “claims.” As Montgomery McCracken asserts, “claims” could refer to

the amount that Montgomery McCracken was still owed when the Stipulation was

negotiated, or it could account for all of the money it was ever owed, regardless of whether

TH Properties had previously paid or not. Although the Stipulation does include the words

that the District Court focused on, like “total” and “all,” as well as others, none of them

illuminate which potential meaning of “claims” is correct. Furthermore, there is no explicit

reference in the Stipulation to TH Properties’ previous $680,789 payment and how it

should be considered. Black’s Law Dictionary, which defines “claim” as “any right to

payment,” also does not provide us with a clear answer because it does not clarify whether

the payments that TH Properties had already made were to count towards the $2.325

million it owed Montgomery McCracken.28

       Accordingly, we conclude that “claims” is susceptible to multiple meanings.

Because the parties’ obligations change based on which proposed definition of “claims” is

used, we conclude that the Stipulation is ambiguous.29

26
   Appellant’s Br. at 15.
27
   Id. at 20.
28
   Claim, BLACK’S LAW DICTIONARY (10th ed. 2014).
29
   Montgomery McCracken and TH Properties focused much of their briefs on arguing
whether the Stipulation contained latent ambiguity. Because we find the Stipulation to be
ambiguous on its face, we need not analyze the Stipulation for latent ambiguity.
                                              6
                                           III.

       For the foregoing reasons, we will vacate the District Court’s order and remand

the case for further proceedings.

                                            7
AMBRO, Circuit Judge, dissenting

       Judge Fuentes, writing for the majority, makes a plausible case that, without

understanding whether “claims” is meant to include or exclude the $680,789 TH

Properties had previously paid to Montgomery McCracken, the Stipulation is ambiguous.

On the one hand, why would Montgomery McCracken have a “claim[]” for money

already paid? On the other hand, under the Stipulation Montgomery McCracken agrees

“to reduce its total fees and costs claims against [TH Properties] . . . from $2.6 million for

all pre-bankruptcy, bankruptcy, and post-bankruptcy work for [TH Properties] to the total

sum of $2.325 million . . .” (Emphases supplied.) It would be hard to draft any more

clearly that “all pre-bankruptcy, bankruptcy, and post-bankruptcy work” means for all

time. Words with no constraint cannot be limited by a neutral noun—“claims.” Maybe

you could get around this logical impediment if the “total fees and costs claims” said

$3,280,789 ($2,600,000 + $680,789) instead of $2,600,000, but that is not said.

       Thus I align with Judge Beetlestone’s judgment and analysis. From a practical

standpoint it may make sense to rule as do my colleagues, but the words of the

Stipulation, drafted by counsel consummate in their craft, belie that practical concern.

Thus I respectfully dissent.

                                              1