Court Opinion

ID: 9491384
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:12:45.30955+00
Date Added: 2024-06-11T17:54:42.575387
License: Public Domain

BRIEANT, District Judge,
dissenting:
I respectfully dissent, at least to the extent that I believe the question- presented on appeal should be certified to the New York Court of Appeals for an authoritative decision applying New York law as contemplated by Second Circuit Local Rule § 0.27 and New York Court of Appeals Rule § 500.17.
The crucial phrase “elect to close the business” is not defined in the agreement. Tet-ley has advanced three possible interpretations of that phrase, and Chock has advanced a fourth. The majority rejects Chock’s interpretation and concludes that because Tetley would prevail under any one of its three interpretations there is no genuine issue of material fact for trial. Existence of these numerous conflicting interpretations, in my view, confirms the ambiguity in the language of the agreement and standing alone precludes summary judgment.
*206I have a fifth possible interpretation: the licensed New York attorney retained by Chock to draft the agreement was inept and inexact; he or she failed to distinguish between closing “the Business ” and closing “the manufacturing facility at Linden, New Jersey.”1 The latter was the true intendment of the parties, and this may be ascertained by a court from all of the surrounding facts and circumstances known to the parties at the time they contracted, including their purposes in contracting and the benefits sought by each. New York does not punish clients for obvious lawyer mistakes which harm nobody. Nicholos v. Cashelard Restaurant, Inc., — A.D.2d -, 672 N.Y.S.2d 98, 100-01 (1st Dep’t 1998); Schwartz v. Schwartz, 153 A.D.2d 935, 937, 545 N.Y.S.2d 741, 743 (2d Dep’t 1989).
The following facts are obvious from the context, undisputed or easily established at a plenary trial. Tetley had a manufacturing facility at Linden, New Jersey (“the Linden plant” or “the plant”), at which it was producing instant coffee. The Linden plant had a larger capacity than necessary for Tetley’s own use, and instant coffee was but a small part of Tetley’s business. The plant was a high cost operation and only marginally profitable for Tetley. The effort devoted to its management could have better been applied to Tetley’s core business, which is the production and sale of tea.
Based on these facts Tetley’s management decided to get out of the instant coffee production business associated with the Linden plant. Had Tetley done so simply by closing the Linden plant, it would have triggered the immediate payment of the unfunded pension costs which are the subject of this lawsuit, as well as significant costs in terminating the unionized production employees. Tetley would have lost the economic value of the experienced staff engaged in the sale of instant coffee to private brands and been left with a vacant factory.
To avoid these drawbacks, Tetley sought to engage in a transaction with Chock. By acquiring the business Chock was able to close its own smaller plant in Queens County and it acquired Tetley as a customer for instant coffee for at least a three-year period. Chock also acquired a covenant not to compete, together with the Tetley private brand customer lists, the sales staff of Tetley’s instant coffee enterprise, and other tangibles and intangibles.
When entering the contract it was apparent to both sides that consideration had to be given to the possibility that Chock also would have difficulty maintaining the profitability of the Linden plant and that, were Chock to close that plant, Tetley’s unfunded obligations to the pension plan would become due from Chock. It was important to Tetley to secure and define the parties’ respective rights and obligations in the event of this foreseeable plant closure. The parties bargained for Chock’s option to elect in its sole .judgment to close “the Business,” meaning thereby, in my opinion, the Linden plant, within five years, and thereby shift Tetley’s pension obligation back to Tetley. The parties further agreed that should Chock elect to do so, it would be required to pay a two million dollar penalty for surrendering its lease to the Linden plant, title of which remained in Tetley, and Tetley would become obligated to pick up the unfunded pension costs. The discharge of the production employees resulting from closing the Linden plant would trigger payment of these unfunded pensions costs. Both parties to the negotiations understood this.
It bears emphasis that the contract was so structured as to deter Chock from making an economically unjustified decision to close the Linden plant. In closing the plant Chock faced substantial costs, including the cost of terminating the production employees, surrendering the lease, and sending the machinery to Mexico where cheaper, non-union labor now produces instant coffee for Chock and also apparently for Tetley. Chock would not close the plant on a mere whim.
*207The objectively determinable intention of the parties was that the election would be to close the Linden facility. There was no way that Chock could close “the Business” as defined in the agreement, unless all at once it withdrew totally from the instant coffee business and sacrificed the sales staff, the private brand customer lists, the covenant not to compete and its own good will, a highly unlikely event not within the contemplation of any party.
It is irrational to assume that it was a material issue in the negotiations, which made any economic difference whatsoever to Chock or Tetley, whether Chock made liquidating sales of inventory produced at the Linden plant after the expiration of the five-year period. It was obviously within the contemplation of both parties that if Chock elected to close the Linden plant it would remain in the instant coffee business, it would continue to employ the non-manufacturing employees acquired from Tetley and it would continue to sell instant coffee, produced or acquired wherever, to its own customers, to Tetley and to the private brand customers it obtained from Tetley as part of its purchase of the business. Indeed, in transferring the production of instant coffee to Mexico, Chock made arrangements to accumulate inventory at Linden precisely for the purpose of being able to continue to service Tetley’s own requirements for instant coffee. I do not agree that Chock was required to “close the Business ” before October 30, 1994 if closing the Business means Chock had to give up selling instant coffee. Such was never the intention of the parties, and indeed the majority concedes that “[n]either the source of the coffee nor the identity of the buyers would be material [to Tetley].” Maj. Op. at 204.
The third alternative suggested by the majority required that Chock dispose of all the inventory at Linden before October 30, 1994 in a bulk sale to a jobber or simply throw it in the river. This interpretation is also implausible because once Chock elected to close the plant it made no difference to Tetley what was done with the inventory or when it was done.2
The only plausible interpretation of the objective intent of the contract is that both parties contemplated the effect on the pension accruals of a decision by Chock to close the Linden plant within five years, and that the scrivener simply failed to express with sufficient clarity their resolution that the burden of Tetley’s unfunded pension accruals would shift to Chock only after five years of presumably successful operations at Linden.
The obvious purpose of section 12 of the agreement was to ensure that Chock would not recover the pension liability which went with the plant and its workforce unless, within the time period agreed upon, it made a permanent election to cease operating the Linden plant and incur no further liability to the pension plan. Chock did this prior to the October 30, 1994 deadline. Its sale of the remaining inventory after that date, made in part to Tetley, had no impact on the finality of the election to close the plant, on the triggering of the pension accrual liability, or on the possibility of accruing further pension liability, all of which flow not from being in the business, but from operating the Linden plant.
If “close the Business ” in the context of this case means anything more than closing the manufacturing facility at Linden, New Jersey, the contract as written is so much gibberish and does not reflect the objective intentions of the parties. I am convinced that a New York court would place a reasonable construction on the contract to read the word business as meaning the instant coffee manufacturing facility at Linden, New Jersey. Certifying this issue to the state court indicates not a willingness to rewrite this contract, but rather a conviction that under New York law the primary goal of courts in interpreting contracts is to carry out the obvious intention of the parties as evidenced by the entire agreement and context.
It is not a foregone conclusion, as the majority implies in footnote three, that a New York court would ignore the context of *208this agreement and find in Tetley’s favor as a matter of law. Where the document viewed in light of the knowledge of both parties and the factual background for the transaction makes clear the parties’ overall intention,' a New York court examining isolated provisions will choose that construction which will carry out the plain purpose and object of the agreement. See Kass v. Kass, 91 N.Y.2d 554, 673 N.Y.S.2d 350, 696 N.E.2d 174, 180-81 (1998) (“[C]ourts ‘should examine the entire contract and consider the relation of the parties and the circumstances under which it was executed. Particular words should be considered, not as if isolated from the context, but in light of the obligation as a whole and the intention of the parties as manifested thereby. Form should not prevail over substance and a sensible meaning of words should be sought.’ ”) (quoting William C. Atwater & Co., Inc. v. Panama R.R. Co., 246 N.Y. 519, 524, 159 N.E. 418, 419 (1927)); Village Nursing Home v. Axelrod, 146 A.D.2d 382, 390, 541 N.Y.S.2d 377, 382 (1st Dep’t 1989) (“In construing a contract, the agreement is to be read as a whole and every part will be interpreted with the whole in seeking to give each clause its intended purpose in the promotion of the primacy and dominant purpose of the contract.”); Matter of Friedman, 64 A.D.2d 70, 82, 407 N.Y.S.2d 999, 1006 (2d Dep’t 1978) (“Parties to an agreement are presumed to act sensibly ... and an interpretation that produces an absurdly harsh result is to be avoided. Since there exists, in every contract, an implied covenant of good faith and fair dealing, the courts may take into consideration the fact that one construction would make the contract unreasonable. Thus courts will endeav- or to give the construction most equitable to both parties instead of one which will give one of the parties an unfair or unreasonable advantage over the other.”) (internal citations and quotations omitted).
Our obligation to Erie principles commands us to apply a sensible meaning here. Therefore, I respectfully dissent.

. The scrivener may have been a highly capable attorney who was having a bad day, punctuated by interruptions from the telephone and the im-portunities of partners and other clients, vicissi-ludes not faced by federal judges, who quickly forget the working conditions of a commercial lawyer. In fairness, I note that counsel for Chock on this appeal did not draft the contract.

. It is next to impossible to close down a processing plant without having some inventory and work in progress.