remediation costs associated with the environmental liabilities.
As further extrinsic evidence, Northville points to the
economics of the transaction, contending that the Harold
Bernstein family would never have agreed to "accept more than
their pro rata share of the liability." Tr. at 146 (Mar. 19,
2002) (Ripp Direct Testimony). Specifically, Northville argues
that the amount of environmental liabilities that RJE has paid
under the PPAA is significantly less than 44.34% of the total
liabilities (the amount that the Raymond Bernstein family would
have been responsible for had it not sold its shares of
Northville), and to interpret the Abandonment Provision to allow
RJE to escape responsibility for the remaining liabilities would
amount to an unintended windfall. See Tr. at 296-7 (Mar. 20,
Federal courts have jurisdiction over declaratory judgment
actions only in "a case of actual controversy."
28 U.S.C. § 2201. To qualify, a controversy must be "of sufficient immediacy
and reality to warrant the issuance of a declaratory judgment."
Maryland Casualty Co., v. Pacific Coal & Oil Co.,
312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941); see also Amica
Mut. Ins. Co. v. Franklin, 147 F.3d 238, 243 (2d Cir. 1998)
(issuing declaratory judgment on proper interpretation of a
contract); Boosey & Hawkes Music Publishers, Ltd. v. Walt
Disney Co., 145 F.3d 481, 486 (2d Cir. 1998) (same). The
uncertainty regarding the proper appraisal price and the
deadline for bids render this controversy of "sufficient
immediacy" to warrant a declaratory judgment.
Since this action is brought pursuant to the Court's diversity
jurisdiction, New York substantive law applies. See Erie
Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed.
1188 (1938). The Option Agreement contains a choice of law
provision that provides that it is to be "construed and enforced
in accordance with the laws of the State of New York." Option
Agreement § 7.08. Under New York law, contractual choice of law
provisions are valid so long as the transaction bears a
reasonable relationship to New York. See N.Y. U.C.C. § 1-105
(McKinney 1993); Marine Midland Bank, N.A. v. United Missouri
Bank, N.A., 223 A.D.2d 119, 643 N.Y.S.2d 528, 530 (1st Dep't
1996) (citing Wyatt v. Fulrath, 16 N.Y.2d 169, 264 N.Y.S.2d 233,
211 N.E.2d 637 (1965) ("As a general rule, choice of law
provisions . . . are valid and enforceable in [New York].")).
Since the transaction in this litigation relates to the Pipeline
System on Long Island, New York, New York law governs.
"Under New York law, a written contract is to be interpreted
so as to give effect to the intention of the parties as
expressed in the unequivocal language they have employed."
Terwilliger v. Terwilliger, 206 F.3d 240, 245 (2d Cir. 2000)
(citing Breed v. Insurance Co. of North America, 46 N.Y.2d 351,
355, 413 N.Y.S.2d 352, 385 N.E.2d 1280 (1978)); see also
Hartford Acc. & Indem. Co. v. Wesolowski, 33 N.Y.2d 169, 172,
350 N.Y.S.2d 895, 305 N.E.2d 907 (1973). "[W]hen the intent of
the parties can fairly be gleaned from the face of the
instrument," the plain words of the contract govern, and
"matters extrinsic to the agreement may not be considered."
Terwilliger, 206 F.3d at 245; see also W.W.W. Assocs. v.
Giancontieri, 77 N.Y.2d 157, 162, 565 N.Y.S.2d 440,
566 N.E.2d 639 (1990). Contract provisions should not be read in isolation;
rather, "the entire contract must be considered, and all parts
of it reconciled." Terwilliger, 206 F.3d at 245; see Laba v.
Carey, 29 N.Y.2d 302, 308, 327 N.Y.S.2d 613, 277 N.E.2d 641
(1971) (holding that provisions within a
contract "must be read together . . . [and the] intent must be
gleaned from the several provisions of the contract."); see
also Kinek v. Paramount Communications, Inc., 22 F.3d 503, 509
(2d Cir. 1994) (applying federal common law) ("[D]efendant's
attempt to read [contract provisions] in isolation is, however,
inconsistent with well established principles of contract
construction, which require that all provisions of a contract be
read together as a harmonious whole, if possible."); 22 N.Y.
Jur.2d Contracts § 251 ("Because the intention of parties to a
contract is ascertained, not from one provision or particular
words or phrases, but from the entire instrument, in the
construction of contracts, the entire contract must be
considered."). "[W]here consideration of the contract as a whole
will remove the ambiguity created by a particular clause, there
is no ambiguity." Readco Inc. v. Marine Midland Bank,
81 F.3d 295, 300 (2d Cir. 1996) (citing Hudson-Port Ewen Assocs., L.P.
v. Chien Kuo, 78 N.Y.2d 944, 945, 573 N.Y.S.2d 637,
578 N.E.2d 435 (1991)). Not only must provisions within an individual
contract be read together, but also "[w]here several instruments
constitute part of the same transaction, they must [also] be
interpreted together." 22 N.Y. Jur.2d Contracts § 258; see also
Nau v. Vulcan Rail & Construction Co., 286 N.Y. 188, 197,
36 N.E.2d 106 (1941) (holding that several agreements "must be read
together as one . . . [when] they were to effectuate the same
purpose and formed a part of the same transaction.");
Restatement (Second) of Contracts § 202(2) ("[A]ll writings that
are part of the same transaction are interpreted together.").
When contract language is ambiguous, extrinsic evidence is
relevant to the extent it bears on "the parties' objective
manifestations of intent." Nycal Corp. v. Inoco PLC,
988 F. Supp. 296, 302 (S.D.N.Y. 1997) (applying New York law); see
also Wells v. Shearson Lehman/American Exp., 72 N.Y.2d 11, 24,
530 N.Y.S.2d 517, 526 N.E.2d 8 (1988). But see Walk-In Med.
Ctr., Inc. v. Breuer Capital Corp., 818 F.2d 260 (2d Cir. 1987)
("Evidence of the parties' subjective intent was . . . properly
admitted" in order to interpret ambiguous language.). "A
contract is ambiguous if it is reasonably susceptible of more
than one interpretation." Nycal, 988 F. Supp. at 299 (quoting
Burger King Corp. v. Horn & Hardart Co., 893 F.2d 525, 527 (2d
Cir. 1990)). When interpreting an ambiguous contract, the
subsequent conduct of the parties also is relevant with regard
to the parties' intention. See Matter of Robinson v. Robinson,
81 A.D.2d 1028, 440 N.Y.S.2d 127, 129 (4th Dep't 1981) (citing
Muzak Corp. v. Hotel Taft Corp., 1 N.Y.2d 42, 150 N.Y.S.2d 171,
133 N.E.2d 688 (1956)).
I. The Agreements Read Together Unambiguously Provide for the
Exclusion of Remediation Costs in Calculating the "Fair Market
Value of the Pipeline System"
The Court concludes that the parties unambiguously intended a
straight asset sale, meaning that the fair market value of the
Pipeline System shall not take into account the appraised costs
of future remediation. The Court comes to this conclusion for
the following combined reasons: (A) the use of the defined term
"Pipeline System" in the "fair market value" clause of the
Abandonment Provision suggests a straight asset sale; (B) the
PPAA explicitly capped RJE's responsibility for remediation
costs; (C) none of the provisions in any of the agreements
allows Northville to impose, by exercise of any of its options,
remediation costs on RJE in excess of the PPAA cap, and (D)
where the parties intended to have RJE assume environmental