The opinion of the court was delivered by: PETER K. LEISURE
This is an action brought by Chase Manhattan Bank, N.A., ("Chase") against Keystone Distributors, Inc., ("KDI"). The parties entered into a contract (the "Contract"), Ex. A to Motion to Dismiss and for Summary Judgment, and Chase asserts that KDI owes it money according to the terms of the Contract. Chase also alleges a fraud claim and several tort claims. Defendant now moves this Court to dismiss the complaint as a matter of law, pursuant to Fed. R. Civ. P. l2(b)(6), and alternatively for summary judgment, pursuant to Fed. R. Civ. P. 56. Plaintiff opposes defendant's motion. For the reasons stated below, defendant's motion is granted in part and denied in part.
The parties to this lawsuit, Chase, a New York City-based national bank, and KDI, a Boston-based mutual fund distribution company, are both sophisticated entities. On or about December 21, 1988, they entered into the Contract.
The transaction which is the subject matter of the Contract is fairly straight forward.
Between June 1, 1983 and November 30, 1988, KDI advanced certain of its own monies to nine separate mutual funds (together the "Funds" or, individually, a "Fund"). Memorandum in Support of Motion to Dismiss and for Summary Judgment ("Defendant Mem.") at 2. The monies were advanced by KDI from its own resources for sales commissions to brokers and dealers on the sale of Fund shares and to itself for costs incurred in selling Fund shares. Id. at 3. The Contract was an arrangement whereby Chase bought and KDI sold all of KDI's right, title, and interest in and to a portion of the reimbursements of these monies, if any, by the Funds.
Id. at 2. Chase paid $ 58.8 million to KDI to receive the income stream generated by these reimbursement payments, Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Dismiss and for Summary Judgment ("Plaintiff Mem.") at 1, and had received approximately $ 62 million at the time of the filing of the instant motion, Defendant Mem. at 3.
The instant action was brought by Chase. Chase alleges that KDI repeatedly breached the express provisions of the Contract and thereby wrongfully deprived Chase of at least $ 16 million that KDI received from the Funds. Chase further contends that KDI has breached its duty of good faith and fair dealing, has breached its fiduciary duties to Chase, and has committed fraud. In response to Chase's allegations, KDI has brought the instant motions to dismiss and for summary judgment. KDI argues that the express provisions of the Contract render Chase's allegations meritless. This Court, for the most part, agrees.
A. Standard for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Lang v. Retirement Living Pub. Co., 949 F.2d 576, 580 (2d Cir. 1991). Summary judgment "is appropriate only 'after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'" Thornton v. Syracuse Sav. Bank, 961 F.2d 1042, 1046 (2d Cir. 1992) (quoting Celotex, 477 U.S. at 322); accord Irvin Indus., Inc. v. Goodyear Aerospace Corp., 974 F.2d 241, 245 (2d Cir. 1992).
"In deciding whether to grant summary judgment all inferences drawn from the materials submitted to the trial court are viewed in a light most favorable to the party opposing the motion. The nonmovant's allegations are taken as true and it receives the benefit of the doubt when its assertions conflict with those of the movant." Cruden v. Bank of New York, 957 F.2d 961, 975 (2d Cir. 1992). "Only when no reasonable trier of fact could find in favor of the nonmoving party should summary judgment be granted." Id.; accord Taggart v. Time, Inc., 924 F.2d 43, 46 (2d Cir. 1991).
In the instant action, the parties dispute the interpretation of a seventy page contract. In the context of determining the proper construction of a contract, summary judgment may be granted where the contractual language conveys a "definite and precise meaning absent any ambiguity." Seiden Assoc., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992); see also Heyman v. Commerce and Indus. Ins. Co., 524 F.2d 1317, 1320 (2d Cir. 1975). However, when ambiguity exists and "the resolution of the ambiguity hinges on such extrinsic matters as the credibility of witnesses or documents or upon choosing one among several reasonable inferences that may be drawn from such extrinsic evidence, a jury, and not a court, should decide what meaning is to be ascribed to the contract." Brass v. American Film Technologies, Inc., 987 F.2d 142, (2d Cir. 1993); see also Seiden Assoc., 959 F.2d at 428; Record Club of America, Inc. v. United Artists Records, Inc., 890 F.2d 1264, 1271 (2d Cir. 1989).
It is well settled that whether ambiguity exists in a contract is a threshold question of law to be resolved by the court. Contract language is unambiguous when it has "'a definite and precise meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference in opinion.'" Seiden Assoc., 959 F.2d at 428 (quoting Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir. 1989)). Conversely, contractual language is considered ambiguous when it is "capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Walk-In Medical Centers, Inc. v. Breuer Capital Corp., 818 F.2d 260, 263 (2d Cir. 1987)); see also Seiden Assoc., 959 F.2d at 428.
Where the terms of the agreement, "giving due consideration to the surrounding circumstances [and] apparent purpose which the parties seek to accomplish" are not "wholly unambiguous," summary judgment is improper. Morse/Diesel, Inc. v. Fidelity and Deposit Co., 1990 U.S. Dist. LEXIS 6548, at *9 (S.D.N.Y.) (Leisure, J.) (citations omitted). The Second Circuit, however, has observed that when the language of the contract is plain it "is not made ambiguous simply because the parties urge different interpretations." Seiden Assoc., 959 F.2d at 428; see also Wertheim Schroder & Co. v. Avon Products, Inc., 1993 U.S. Dist. LEXIS 6184 (S.D.N.Y.) (Leisure J.). In addition, ambiguity is not created where one party's interpretation "'strains the contract language beyond its reasonable and ordinary meaning.'" Seiden Assoc. 959 F.2d at 428 (quoting Bethlehem Steel Co. v. Turner Constr. Co., 2 N.Y.2d 456, 459, 161 N.Y.S.2d 90, 141 N.E.2d 590 (1957)). Lastly, the Second Circuit has made clear that if a contract is unambiguous, its proper construction should be determined as a matter of law. See United States Naval Inst. v. Charter Communications, 875 F.2d 1044, 1048 (2d Cir. 1989).
B. The Instant Motion can be Decided as a Matter of Law
Chase has not contended that any provision of the Contract is ambiguous. Rather it urges this Court to accept that the Contract unambiguously creates certain obligations. KDI, in turn, argues that the Contract is clear and definite and that it articulates something entirely different. This Court finds that the Contract is, in fact, definite and precise, and consequently, the burden falls on this Court to construe the terms of the Contract. As was observed above, a contract is not made ambiguous simply because the parties urge different interpretations. Accordingly, it is the duty of this Court, on the instant motion, to interpret the Contract.
C. Disputed Payments are not Deferred 12b-1 Collection Payments
The instant dispute can be easily summarized. KDI forwarded monies to the Funds. Although these Funds had no legal obligation to reimburse KDI, KDI had an expectation of repayment. Chase purchased this expectation. The Funds have made various payments to KDI. In dispute is the specific payments to which Chase is entitled.
The transfer and sale of KDI's rights to certain payments is effected by § 2.1 of the Contract, and the provisions of that section are explicated in other sections. The relevant provisions are the following:
On the Closing Date, subject to all of the terms and conditions set forth in the Agreement . . . KDI shall convey, assign sell and transfer to RFC, and RFC shall purchase from KDI, all of KDI's right, title ...