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TRIAD FIN. ESTABLISHMENT v. TUMPANE CO.

June 10, 1985

TRIAD FINANCIAL ESTABLISHMENT, Plaintiff,
v.
THE TUMPANE COMPANY, Defendant.



The opinion of the court was delivered by: MCCURN

NEAL P. McCURN, D.J.

MEMORANDUM-DECISION AND ORDER

 Plaintiff, Triad Financial Establishment ["Triad"] brings this breach of contract action against defendant, The Tumpane Company ["Tumco"], seeking more than $3.5 million in commissions allegedly owed to Triad under the contracts between the parties. Presently before the court are cross-motions for summary judgment. For the reasons set forth below Triad's motion for summary judgment is denied and Tumco's motion for summary judgment is denied in part and granted in part.

 Background

 Plaintiff Triad is a Liechtenstein entity controlled by Adnan Khashoggi, a well-known Saudi Arabian businessman. Triad describes itself as a "marketing and consulting organization" that "assists its clients in locating, identifying, and participating in international business ventures, particularly in Saudi Arabia." Plaintiff's Memorandum at 9. Defendant Tumco is a New York corporation with its principal place of business in Vancouver, Washington. Tumco is primarily engaged in providing support services such as housing, transportation, food services and health facilities for large military projects.

 In 1971 the United States agreed to equip and modernize the Royal Saudi Air Force of the Kingdom of Saudi Arabia ["Saudi Arabia"] through a long range, multibillion dollar program called "Peace Hawk" ["Peace Hawk" or "program"]. In accordance with the terms of the Foreign Military Sales ["F.M.S."] Contract, the Northrop Corporation ["Northrop"] was designated the prime contractor for the entire program. *fn1" Defendant Tumco was interested in being named as the sole-source subcontractor for support services on the Peace Hawk program. On December 1, 1971, Triad and Tumco entered into two agreements wherein Tumco appointed Triad as its marketing agent to assist Tumco in obtaining the Peace Hawk support services subcontract from Northrop.

 The Peace Hawk program proceeded in phases. In phases I, II, IV, and VI, Saudi Arabia purchased Northrop F-5 aircraft and related hardware from the United States. In phases III, III Extension ["IIIE"], V, and VII, Saudi Arabia contracted for support services related to the arms purchases. For each of the phases Northrop was the United States government's prime contractor. Tumco was awarded the support services subcontract for phases III (covering the period from April 4, 1972 to August 15, 1975), phase IIIE (covering the period from August 16, 1975 to February 15, 1976), and phase V (covering the period from February 16, 1976 to June 19, 1979).

 Triad contends that it has performed all of its obligations under the agreement and is entitled to commissions in excess of $3.5 million. Tumco contends that it does not owe Triad any commissions and has counterclaimed for the return of $1.7 million already paid to Triad under the agreements.

 Discussion

 Federal Rule of Civil Procedure 56(c) provides that a court may enter summary judgment for a party if there are no genuine issues of material fact in dispute and the party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir. 1983); Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 444 (2d Cir. 1980). In discussing whether summary judgment is proper in cases involving interpretation of a contract the Second Circuit recently stated:

 The law in this circuit is clear: "where a contract is not wholly unambiguous, summary judgment must be denied even where both parties move for pre-trial resolution." Schering Corp. v. Home Insurance Co., 712 F.2d 4, 10 (2d Cir. 1983); Heyman v. Commerce and Industry Insurance Co., 524 F.2d 1317, 1320 (2d Cir. 1975).

 Long Island Airports Limousine Service Corp. v. Playboy-Elsinore Associates, 739 F.2d 101, 103 (2d Cir. 1984); accord, Rothenberg v. Lincoln Farm Camp, Inc., 755 F.2d 1017, 1019 (2d Cir. 1985); Grand Union Co. v. Cord Meyer Development Corp., 735 F.2d 714, 717 (2d Cir. 1984). If a contract is ambiguous and therefore susceptible to more than one reasonable interpretation, a genuine issue of material fact exists as to the intent of the parties at the time the contract was entered into. Grand Union Co. v. Cord Meyer Development Corp., 735 F.2d at 717.

 I. The Contract Interpretation Issues

 As a preliminary matter the court notes that it is not clear from the record whether Triad performed any services for Tumco.Mr. Khashoggi claims that he "cemented" the relationship between Tumco and Northrop through his discussions with various Northrop officials. Those Northrop officials, however, do not recall Khashoggi advocating the use of Tumco as the support services subcontractor on the Peace Hawk program. Whether Triad actually performed its contractual obligations under the agreements is obviously a "genuine issue of material fact" that would preclude granting summary judgment for either party. Fed. R. Civ. P. 56(c). However, even if the court assumes arguendo that Triad is entitled to compensation for services rendered, the method of calculating Triad's compensation cannot be determined from the face of the agreements and, thus, as outlined below, summary judgment must be denied.

 In the course of its efforts to obtain a subcontract on the Peace Hawk project, defedant Tumco entered into two agreements with Triad. The first, more general agreement is termed a "Marketing Agreement". It essentially provides that Triad will use its best efforts to develop specific projects to be delineated in more detailed "Product Agreements", and will be compensated at a rate provided for in the individual product agreements. The second, more specific agreement is captioned "Product Agreement # 1." *fn2" This agreement specifically relates to the "Northrop F-5 Aircraft Maintenance and Training Program as sold by Tumco as a subcontractor to Northrop under a United States Government F.M.S. Contract," i.e. the Peace Hawk program.

 Both parties contend that the agreements are plain on their face and that summary judgment should therefore be granted. However, the parties' interpretations of key clauses in the contracts are diametrically opposed.

 The Marketing Agreement establishes the nature of the relationship between the parties. Pursuant to the Marketing Agreement, Tumco appointed Triad as its marketing representative for the sale of "Tumco Products" on the projects delineated in the Product Agreements. Triad's compensation was defined in P2(e) of the agreement as follows:

 Compensation as used herein shall mean the consideration earned by TRIAD by reason of the performance of marketing services set forth in Paragraph 3, for which ...


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