Court Opinion

ID: 9441652
Source: CourtListenerOpinion
Date Created: 2023-08-03 18:00:23.56673+00
Date Added: 2024-06-11T17:31:46.358118
License: Public Domain

Case: 22-20274     Document: 00516844626         Page: 1     Date Filed: 08/03/2023

           United States Court of Appeals
                for the Fifth Circuit
                                                                       United States Court of Appeals
                                                                                Fifth Circuit

                                                                              FILED
                                                                         August 3, 2023
                                  No. 22-20274                           Lyle W. Cayce
                                                                              Clerk

   In the Matter of Speedcast International Limited,
                                                    Debtor,

   Inmarsat Global Limited; Inmarsat Solutions B.V.;
   Inmarsat Maritime Ventures, Limited; Inmarsat
   Incorporated; Inmarsat Solutions (US) Incorporated;
   Inmarsat Solutions (Canada) Incorporated; Inmarsat
   Solutions AS Norway,

                                                                      Appellants,

                                       versus

   Speedcast International Limited,

                                                                        Appellee.

                  Appeal from the United States District Court
                      for the Southern District of Texas
                            USDC No. 4:22-CV-8

   Before Barksdale, Southwick, and Higginson, Circuit Judges.
   Leslie H. Southwick, Circuit Judge:
          This bankruptcy appeal is all about contract interpretation. Several
   contracts governed the business relationship among the parties. Their last
   contract terminated all of the creditors’ claims against the debtor except for
Case: 22-20274       Document: 00516844626           Page: 2      Date Filed: 08/03/2023

                                      No. 22-20274

   narrowly defined “Permitted Claims.” The creditors seek reversal of the
   district and bankruptcy court’s conclusion that a particular claim was not a
   permitted one. We AFFIRM.
               FACTUAL AND PROCEDURAL BACKGROUND
          The facts are mostly undisputed. Inmarsat Global Limited and related
   entities (collectively, “Inmarsat”) operate a satellite network providing com-
   munications services to remote locations, including ships at sea. Inmarsat
   sells the services at retail to end-users and at wholesale to distributors.
   Speedcast International Limited was a leading Inmarsat distributor, purchas-
   ing Inmarsat’s services and providing them to its own customers. Speedcast
   is the debtor in the bankruptcy.
          Several agreements governed the parties’ relationship. Inmarsat sold
   satellite services to Speedcast under various Master Service Agreements
   (“MSAs”), which described the services Inmarsat would deliver and ex-
   pressed the terms for their delivery — including price.
          In 2016, Inmarsat launched “Fleet Xpress,” or “FX,” a maritime
   communications service. In connection with the launch, the parties entered
   into a Strategic Alliance Agreement (“SAA”). In the SAA, Inmarsat gave
   Speedcast a 30% discount off its usual pricing, and Speedcast promised a cer-
   tain volume of business. Specifically, in the SAA’s “Pricing Principles,” In-
   marsat agreed to “[a] discount of thirty percent (30%) on Tier 1 Pricing for
   all available FX[] service and price plans, applicable for all Speedcast FX[]
   customers.” “In exchange for” the discount, Speedcast contracted to pro-
   vide Inmarsat a minimum number of customers, called a “Minimum RGU 1

          1
            An “RGU” correlates to a customer vessel. It is a terminal “installed on a
   Commercial Maritime vessel, used as a primary communication link and subscribed for a
   single FX/GX service plan.”

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   Commitment.” Speedcast committed to meet the minimum number of cus-
   tomers in each of the five years starting in 2017, and to meet its cumulative
   commitment of 1800 new customers “across the entire five (5) year period.”
           An additional payment was provided for in the SAA: “If Speedcast
   d[id] not meet the Minimum RGU Commitment” in any given year, it was
   obligated to pay a “Shortfall Amount.” The shortfall payment was calcu-
   lated by a formula using the amount by which Speedcast fell short of its com-
   mitment to sign up new customers or switch them from other services to the
   FX services. The parties refer to this as the “‘take-or-pay’ obligations.”
           In December 2019, the parties executed an amendment to the SAA.
   The amendment provided Speedcast with an immediate credit on its overdue
   debt, extended payment terms for amounts past due under several MSAs,
   and revised Minimum RGU Commitments for FX services applicable from
   January 1, 2020, forward. Those Minimum RGU Commitments required
   Speedcast to make FX services the majority of its new installations, to move
   existing customers from other services to FX services, and to keep current
   FX customers on FX services. Speedcast received discounted pricing during
   2020.
           The 2019 Amendment stated: “Performance [shall] be reviewed at
   the end of each calendar year starting at the end of 2020 . . . . Inmarsat shall
   invoice Speedcast for any ship shortfall each year under the above clauses.”
   Throughout 2020, Inmarsat billed Speedcast at the SAA’s discounted prices
   for its FX services, and Speedcast consistently paid that discounted price.
           On April 23, 2020, Speedcast filed for Chapter 11 bankruptcy. Inmar-
   sat continued to provide satellite services to Speedcast. In June 2020, Speed-
   cast determined it would not meet its Minimum RGU Commitment and that
   the Shortfall Amount would be large. The parties began negotiations and

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   discussed transferring “Speedcast customers to the Inmarsat platform and a
   full and final release of Speedcast from all take-or-pay obligations.”
          On November 13, 2020, the parties entered into a settlement consist-
   ing of two documents: an Asset Sale Agreement and a Deed of Termination
   and Release (“Termination Agreement”). Speedcast agreed to transfer its
   customer contracts and other assets to Inmarsat in exchange for Inmarsat’s
   releasing all of its claims against Speedcast. The release was subject to a nar-
   row exception which was labeled the “Permitted Claims.” The parties ter-
   minated all but one of their prior contracts. The Asset Sale Agreement pro-
   vided that Speedcast would sell, and Inmarsat would buy, “all of [Speed-
   cast’s] right, title, and interest in, to and under the Assets.” The “Assets”
   included Speedcast’s customer contracts.
          Under the Termination Agreement, Speedcast agreed to pay for all
   services delivered by Inmarsat under the Existing Agreements through the
   Effective Date of January 1, 2021. The Termination Agreement provided
   that “each Existing Agreement is terminated in full” as of that date. Addi-
   tionally, neither party “will have any further rights or obligations under any
   Existing Agreement.” A Hong Kong MSA, not relevant here, was the only
   “Surviving Agreement” that would not be terminated. All other MSAs and
   the SAA were “Existing Agreements” that would be terminated as of Janu-
   ary 1, 2021.
          The Termination Agreement also contained a broad release of Inmar-
   sat’s claims: Inmarsat agreed to “absolutely, irrevocably and unconditionally
   forever release and discharge” Speedcast from “any Released Claims . . .
   arising out of or relating to” the Existing Agreements or Surviving Agree-
   ment, “whether arising prior to, on or after” the Effective Date. “Released
   Claims” were defined as “other than the Permitted Claims, any and all

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   claims, actions, [or] causes of action . . . existing at any time, whether asserted
   or unasserted at the Effective Date.”
          “Permitted Claims” were defined as:
          any claims for payment by an Inmarsat Entity for services de-
          livered by the relevant Inmarsat Entity to a Speedcast Entity
          after 23 April 2020 under, and otherwise on the terms of, any
          Existing Agreement or the Surviving Agreement, including any
          applicable interest, fees or costs relating to such payment
          claims which are, or become, due and payable under the terms
          of the relevant Existing Agreement or the Surviving Agree-
          ment (as applicable).
          On November 13, 2020, Speedcast filed a motion with the bankruptcy
   court to approve the settlement under 11 U.S.C. § 363 and § 365. The motion
   stated Speedcast’s prospects for future profitability were “contingent upon
   adding new customers and meeting certain minimum levels of customer re-
   newals to avoid substantial penalties under existing contractual arrangements
   between [Speedcast] and Inmarsat.” The motion stated that Speedcast
   “d[id] not anticipate such targets being met.” A declaration supporting the
   motion stated that, “[a]fter factoring in estimated penalties, the aggregate
   impact for the forecast period of fiscal year 2020 through fiscal year 2023 is
   a loss of $11.6 million USD.” The declaration reiterated that Speedcast did
   not anticipate meeting its targets and “estimated such penalties at approxi-
   mately $25 million USD across FY20 — 23.” On December 11, 2020, the
   court approved the settlement, and it took effect on January 1, 2021.
          Speedcast failed to meet the earlier contracted-for target for deploy-
   ment of FX services during the period from April 23, 2020, through January
   1, 2021. Inmarsat issued an invoice reflecting that Speedcast fell short of the
   minimum commitment and estimated the Shortfall Amount under the SAA
   at $2,161,890.

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          On April 9, 2021, Inmarsat filed an administrative expense claim for
   the Shortfall Amount under the SAA based on Speedcast’s failure to meet its
   2020 Minimum RGU targets. Speedcast objected on the basis that Speedcast
   had already paid Inmarsat to release its claim to the Shortfall Amount. In-
   marsat also sought $2.9 million for satellite services that Inmarsat delivered
   to Speedcast between April 23, 2020, and March 2021 under the Hong Kong
   MSA. Speedcast did not dispute that claim. The court approved it, and
   Speedcast paid it.
          On December 21, 2021, the bankruptcy court denied Inmarsat’s claim
   for the Shortfall Amount. The court interpreted the Termination Agreement
   as having released all claims except for “Permitted Claims,” and the Short-
   fall Amount was not a Permitted Claim. Thus, Inmarsat had released its
   claim for those amounts. Specifically, the court found Permitted Claims are
   limited to claims for payment “for services delivered . . . under, and other-
   wise on the terms of” a prior agreement. The bankruptcy court explained
   that “Inmarsat delivered its services under the [MSAs], not the [SAA],” and
   the “Shortfall Amount arises under the terms of the [SAA].” Because “no
   services were delivered under the [SAA],” the court explained, Inmarsat’s
   claim could not qualify as a Permitted Claim and was, therefore, released and
   disallowed.
          The district court affirmed, holding Inmarsat had released its claim
   for the Shortfall Amount. Inmarsat timely appealed.
                                  DISCUSSION
          “We review the bankruptcy court’s rulings and decisions under the
   same standards employed by the district court.” In re Perry, 345 F.3d 303,
   309 (5th Cir. 2003). As such, we review legal conclusions de novo and find-
   ings of fact for clear error. Id. This court reviews a “district court’s inter-
   pretation of a contract de novo.” Gonzalez v. Denning, 394 F.3d 388, 392 (5th

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   Cir. 2004). “Whether there is a ‘plain meaning’ to a contract or whether an
   ambiguity exists is a legal question also subject to de novo interpretation.”
   Lloyds of London v. Transcontinental Gas Pipe Line Corp., 101 F.3d 425, 429
   (5th Cir. 1996).
          The parties agree the Termination Agreement is governed by New
   York law. Under New York law, “agreements are construed in accord with
   the parties’ intent.” Greenfield v. Philles Recs., Inc., 98 N.Y.2d 562, 569
   (2002). “The best evidence of what parties to a written agreement intend is
   what they say in their writing.” Id. (quotation marks and citations omitted).
   “[A] written agreement that is complete, clear and unambiguous on its face
   must be enforced according to the plain meaning of its terms.” Id. Ambigu-
   ity, though, allows use of parol evidence. Schron v. Troutman Sanders LLP,
   20 N.Y.3d 430, 436 (2013). “[T]he resolution of [such] ambiguity is for the
   trier of fact.” Global Reinsurance Corp. of Am. v. Century Indem. Co., 22 F.4th
   83, 95 (2d Cir. 2021) (quotation marks and citation omitted).
          First, Inmarsat argues the lower courts erred in concluding the claim
   unambiguously is not a Permitted Claim. Second, Inmarsat contends the dis-
   trict court erred in holding that, even if the definition of a Permitted Claim is
   ambiguous, extrinsic evidence shows the parties intended for the Termina-
   tion Agreement to release all Shortfall Amount obligations.
          To understand how the Termination Agreement affected the Shortfall
   Amount payments, we begin by examining the four corners of the agreement
   and determining if there is clarity or ambiguity.
          The Termination Agreement provides that “each Existing Agree-
   ment is terminated in full” as of the Effective Date — January 1, 2021. Fur-
   ther, neither party “will have any further rights or obligations under any Ex-
   isting Agreement.” Additionally, Inmarsat agreed to “absolutely, irrevoca-
   bly and unconditionally forever release and discharge” Speedcast from “any

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   Released Claims . . . arising out of or relating to” the Existing Agreements or
   Surviving Agreement, “whether arising prior to, on or after” the Effective
   Date. “Released Claims” are defined as “other than the Permitted Claims,
   any and all claims, actions, [or] causes of action . . . existing at any time,
   whether asserted or unasserted at the Effective Date.”
          Obviously, if Inmarsat’s claim for the Shortfall Amount is not a Per-
   mitted Claim, it is released. The Termination Agreement defines Permitted
   Claims as “claims for payment . . . for services delivered . . . under, and other-
   wise on the terms of, any Existing Agreement or the Surviving Agreement.”
   (emphasis added). The FX services were delivered under the MSAs; pricing
   and payment terms for those deliveries were modified by the SAA; and both
   the SAA and the MSAs are Existing Agreements under the Termination
   Agreement. Speedcast maintains the district court correctly concluded In-
   marsat’s claim does not fit into the definition of a Permitted Claim because
   the claim was not for services delivered.
          The dispute on appeal does not include that Speedcast was obligated
   to pay for services Inmarsat delivered under one agreement and “otherwise
   on the terms of” another. In fact, the bankruptcy court approved, and Speed-
   cast paid, an administrative expense claim for satellite services that Inmarsat
   delivered to Speedcast “under” the MSAs “and otherwise on the terms of”
   the SAA, which set the price for those services until it terminated. Speedcast
   insists those claims fit the definition of Permitted Claims because they were
   for services Inmarsat actually delivered, which is not the case with the claim
   for the Shortfall Amount.
          The district court stated that “[t]he Shortfall Amount is not for ‘ser-
   vices delivered.’” Instead, it was “a penalty for services that Inmarsat did
   not deliver to Speedcast, because Speedcast was unable to find enough pur-
   chasers for those services.” Speedcast adopts the district court’s reasoning,

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   arguing that the ordinary meaning of a payment “for” services delivered is a
   payment that is due “on account of” delivery of those services. See Cohen v.
   de la Cruz, 523 U.S. 213, 220 (1998).
           According to Speedcast, the Shortfall Amount penalty is imposed
   “[i]f Speedcast does not meet its Minimum RGU Commitment,” i.e., if
   Speedcast does not deliver services to as many customers as it promised. Ac-
   cordingly, Speedcast asserts that amount unambiguously falls outside the
   scope of a Permitted Claim, which is one for the provision of “services” (not
   customers), and they must be provided by Inmarsat to Speedcast, not the
   other way around. In other words, Speedcast contends the “penalty” applies
   because Speedcast was unable to find enough purchasers for its services and
   thus cannot be a payment for “services delivered.”
           Inmarsat counters that its claim for the Shortfall Amount is for pay-
   ment due “for services delivered” because the SAA makes clear that any
   Shortfall Amount is a critical component of the price of the FX services that
   Inmarsat actually delivered to Speedcast. Inmarsat agreed to provide a dis-
   count “in exchange for” Speedcast agreeing to provide a minimum level of
   customers or to pay the Shortfall Amount. Inmarsat avers the SAA repeat-
   edly ties the Minimum RGU Commitment to the discounted pricing terms
   of the contract, evidencing the RGU Commitment is the price/payment for
   the delivery of services. 2

           2
             For instance, in Paragraph 2.2, the SAA provides that, in order to “facilitate” the
   objectives of the SAA set forth in Paragraph 2.1, the parties agree that “Inmarsat will offer
   Speedcast special FX/GX pricing and terms, for a five (5) year incentive plan detailed in
   Schedule A (FX/GX Pricing and Alignment).” In the next sentence, Paragraph 2.2
   provides, “Speedcast will make a Minimum RGU Commitment over the five (5) year
   period from 01 January 2017, as detailed in Schedule A.” Under Section A.1 of Schedule
   A, titled “Pricing Principles,” the contract provides that the 30% discount is explicitly

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            We find Inmarsat’s pricing argument unpersuasive. The Shortfall
   Amount is not a payment for services delivered by Inmarsat to Speedcast.
   The SAA provides that the Shortfall Amount is part of the performance that
   Speedcast promised “[i]n exchange for” Inmarsat agreeing to grant a 30%
   discount. The Shortfall Amount in turn is not levied on the services that In-
   marsat delivered to Speedcast; it is levied due to the customers Speedcast
   failed to provide.
            Therefore, we find that the Termination Agreement’s definition of
   Permitted Claims unambiguously requires (1) a claim for payment, (2) by In-
   marsat, (3) for services delivered, (4) by Inmarsat to Speedcast. Inmarsat’s
   claim for the Shortfall Amount did not satisfy the third and fourth require-
   ments.
            We hold that the Termination Agreement’s definitions of Released
   Claims and Permitted Claims are unambiguous. Consequently, we need not
   consider any extrinsic evidence. See Schron, 20 N.Y.3d at 436.
            AFFIRMED.

   offered “[i]n exchange for Speedcast’s Minimum RGU [revenue] Commitment” — i.e.,
   the Shortfall Amount guarantee.

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