Court Opinion

ID: 152077
Source: CourtListenerOpinion
Date Created: 2010-08-03 00:02:48+00
Date Added: 2024-06-11T12:28:49.461736
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                AUG 02 2010

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

EDUCATION LOGISTICS, INC., a                     No. 09-35601
Montana corporation; LOGISTICS
MANAGEMENT, INC., a Washington                   D.C. No. 9:07-cv-00006-DWM
corporation,

              Plaintiffs - Appellants,           MEMORANDUM*

  v.

LAIDLAW TRANSIT, INC., a Delaware
corporation,

              Defendant - Appellee.

                   Appeal from the United States District Court
                           for the District of Montana
                   Donald W. Molloy, District Judge, Presiding

                        Argued and Submitted June 7, 2010
                                Portland, Oregon

Before: HALL, FERNANDEZ and McKEOWN, Circuit Judges.

       Education Logistics and Logistics Management, Inc. (“Edulog”) appeal from

the grant of summary judgment to Laidlaw Transit, Inc. in this action arising from

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
a claimed breach of a 1992 contract (“ the Agreement”) to license software for

routing student bus transportation services. Reviewing de novo, we affirm in part,

reverse in part, and remand for further proceedings.

      The district court concluded that the parties’ duty to promote and facilitate

each other’s business, contained in Section 2.3.3 of the Agreement, did not survive

the termination of the exclusive license in 1997. The court based its conclusion

primarily on a specific reference within Section 2.2, the exclusive license

provision, subjecting it to Section 2.3, and the absence of such a reference in the

non-exclusive license provision, Section 2.1. Interpreting the agreement as a

matter of law, we conclude the promotion duty survives the exclusive license

period. Nothing in Section 2.3.3 explicitly or implicitly provides that the

promotion duty applies only to the exclusive license provision; correspondingly,

the non-exclusive license provision, Section 2.1, does not provide that it is exempt

from the promotion duty provision. See Mont. Code. Ann. § 28-3-303. When read

as a whole, the Agreement does not require a specific reference to another

provision in order for that provision to affect obligations within the provision being

interpreted. See Mont. Code Ann. § 28-3-202.

      Further, while Section 2.3 includes the duty to promote under Section 2.3.3,

it also contains other duties, for example the “no contact” duty under Section 2.3.2

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and the “avoid conflicts” and “prevent breaches by agents” duties under Section

2.3.3. Common sense and a plain reading of the Agreement dictate that these core

duties—which are not provided for elsewhere in the Agreement—would continue

during the perpetual non-exclusive license period. Consequently, interpreting

Section 2.2 to require the termination of the Section 2.3.3 promotion duty would

force an unnatural reading of the remainder of Section 2.3. See Mont. Code Ann.

§ 28-3-307. We conclude that summary judgment in favor of Laidlaw is not

warranted on the basis articulated by the district court, namely that the promotion

duty claims accrued following the exclusive license period.

      Section 23.0 provides that the Agreement “shall be governed by any

applicable provisions” of the Montana Uniform Commercial Code (“MUCC”)

“[e]xcept to the extent that the provisions of this Contract are clearly inconsistent”

with that application. We agree with the district court that the MUCC’s four-year

statute of limitations applies. See Mont. Code. Ann. § 30-2-725.

      The parties’ intention that the MUCC governs whenever applicable is clear

from the language of the contract alone. See Mont. Code. Ann. § 28-3-303.

Additionally, the MUCC’s limitations provision governing contracts for sale serves

as a more specific provision than Montana’s eight-year limitations provision for

contracts generally. See Mont. Code. Ann. § 1-2-102; 27-2-202; 30-2-7205; see

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also, e.g., In re MSR Exploration Ltd., 147 B.R. 560, 568 (D.Mont. 1992). The

Section 23.0 language designating the MUCC as governing law is explicit, and

does not involve an absurdity. See Mont. Code. Ann. § 28-3-41; Ophus v. Fritz, 11

P.3d 1192, 1196 (Mont. 2000). Edulog’s claim that a substantive provision

offering relief under the MUCC must be identified before the MUCC’s statute of

limitations provision may be applied is unsupported. Application of the MUCC

limitations provision is not “clearly inconsistent” with the provisions of the

Agreement, and thus the MUCC four-year statute of limitations applies.

      Edulog filed this suit on January 11, 2007. Following summary judgment on

the promotion duty, the district court concluded that all of Edulog’s remaining

claims accrued before January 11, 2003, and granted summary judgment to

Laidlaw on statute of limitations grounds. We agree that the record is replete with

evidence that a number of alleged breaches of the Agreement occurred well before

January 2003. Although discovery is not required to trigger the MUCC limitations

period, it bears noting that there is also ample evidence Edulog was aware of these

potential breaches long before January 2003. See Mont. Code. Ann. § 30-2-

725(2). However, the district court does not appear to have considered whether

new breaches for which Edulog may recover may have occurred within the

limitations period. The Agreement is properly characterized as a contract with

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continuing obligations capable of distinct and separate breaches. See Minidoka

Irrigation Dist. v. Dep’t of Interior, 154 F.3d 924, 926 (9th Cir. 1998). For

example, Laidlaw’s duty to pay royalties arises whenever a “New Bus” enters

service. Laidlaw, which has continued to perform under the Agreement, has not

demonstrated a total repudiation of the Agreement. Edulog, on the other hand, has

submitted evidence raising a genuine issue of material fact whether Laidlaw has

engaged in new breaches of the contract since January 11, 2003. Summary

judgment was not appropriate for breaches Edulog alleges occurred since that date.

See Sands v. Nestegard, 646 P.2d 1189, 1193 (Mont. 1982). We affirm the grant

of summary judgment as to all claims accruing prior to January 11, 2003, including

promotion duty claims, and reverse and remand for further proceedings as to

claims accruing on or following that date.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED. Each

party shall pay its own costs on appeal.

                                          5
                                                                               FILED
Education Logistics Inc v Laidlaw Transit Inc 09-35601                         AUG 02 2010

                                                                           MOLLY C. DWYER, CLERK
Hall, J., concurring in part and dissenting in part                          U.S. COURT OF APPEALS

      I agree with the majority that the Montana UCC’s four-year statute of

limitations applies and that the district court improperly granted summary

judgment as to breach of contract claims accruing on or after January 11, 2003. I

do not agree, however, that Laidlaw’s duty to promote and facilitate Edulog’s

business under Section 2.3.3 of the Agreement survived the expiration of the

exclusive license.

      Section 2.2 of the Agreement explicitly conditions Laidlaw’s exclusive

license on the terms of Section 2.3 of the Agreement, which includes the duty to

promote Edulog’s software. Section 2.1 of the Agreement places no limitations on

Laidlaw’s perpetual non-exclusive license. If Section 2.3 of the Agreement were

to apply to both the non-exclusive license and the exclusive license, there would be

no need to include the express limitation in Section 2.2. It seems unlikely that the

parties would draft two adjacent provisions, include an express limitation in just

one provision, yet intend that that limitation would apply to both provisions. It

also seems unlikely that the parties would see the need to expressly cross-reference

a duty to promote in the context of a five-year exclusive license but would omit

such a reference in the context of creating the same duty in perpetuity.

      All of the provisions of Section 2.3 appear compatible only with an
exclusive arrangement between Edulog and Laidlaw. Section 2.3.1 refers to

“Retention of Rights by LMI During the Currency of Exclusive License” and

refers only to Section 2.2 of the Agreement. Section 2.3.2 (the “no contact” duty

referenced by the majority) provides Laidlaw the exclusive right to market to its

own customers and limits Edulog’s ability to contact Laidlaw’s customers directly.

This provision only makes sense if Laidlaw has an exclusive license to market

Edulog’s software. Once the exclusive license expires, Edulog is free to provide

its software to competing school bus providers, who in turn would be free to

contact Laidlaw’s customer base.

      The mutual promotion and facilitation duties in Section 2.3.3 itself make

little sense if, under the perpetual non-exclusive license, Edulog may freely license

its software to Laidlaw’s competitors. Section 2.3.3 obligates (1) Edulog and

Laidlaw to work together to minimize potential conflicts and define respective

markets; (2) Edulog to use its best efforts to promote Laidlaw bus services; (3)

Laidlaw to use its best efforts to promote Edulog software; and (4) both parties to

ensure that employees and contractors do not contravene the Agreement. Once

Edulog begins serving Laidlaw’s competitiors—who presumably would attempt to

infiltrate Laidlaw’s market—Edulog loses any real ability to insulate Laidlaw from

competition. If Edulog is unable to meaningfully fulfill the obligations set forth in

                                         -2-
2.3.3 upon the expiration of the exclusive license, it seems unlikely that the parties

would have intended for Laidlaw to actively promote Edulog software in

perpetuity.

      The most reasonable interpretation of the Agreement is that the duty to

promote in Section 2.3.3 only applies for the duration of the exclusive license set

forth in Section 2.2. I therefore dissent in part.

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