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National City Golf Finance v. Higher Ground Country Club Management Co.

April 3, 2008

NATIONAL CITY GOLF FINANCE, PLAINTIFF,
v.
HIGHER GROUND COUNTRY CLUB MANAGEMENT COMPANY, LLC, DEFENDANT.



The opinion of the court was delivered by: Gerard E. Lynh, District Judge

OPINION AND ORDER

Plaintiff National City Golf Finance ("National City") seeks summary judgment against Defendant Higher Ground Country Club Management Company, LLC, ("Higher Ground") for breach of a finance lease of global positioning system ("GPS") units for Higher Ground's golf carts. Higher Ground also moves for summary judgment, seeking a declaration that it owes National City nothing. In the alternative, Higher Ground requests that it be granted leave, pursuant to Fed. R. Civ. P. 14(a), to assert third party claims of indemnification and contribution against ProLink Solutions, LLC ("ProLink"), the seller and supplier of the golfcart GPS systems. For the following reasons, the cross-motions for summary judgment will be denied, and defendant's motion to add third party claims against ProLink will be granted.

BACKGROUND*fn1

Higher Ground manages and operates Silo Ridge Country Club ("Silo Ridge"), including the club's golf course. Greg Ward, a traveling salesman for ProLink, a manufacturer of golf paraphernalia, including GPS units for golf carts,*fn2 made a sales call to Higher Ground to pitch ProLink's GPS systems, but Higher Ground was not interested in leasing or purchasing the units outright, due to the high cost. Months later, Ward made a follow-up sales call to pitch the optional "pay for play" program, whereby, at no cost to Higher Ground, ProLink would install its "ProStar" GPS system, the latest and most technologically advanced GPS system manufactured by ProLink, in Higher Ground's golf carts at Silo Ridge. In exchange, Higher Ground would give all of its golfers the option to use the GPS system. Those golfers who opted to use the system, after a three-hole trial period, would pay for the usage of the GPS system at a rate of $1.50 per 9 holes. Higher Ground would collect those payments and remit them to ProLink. When a golfer chose to use the GPS system, the unit would send a signal to ProLink, which would then keep track of the unit's usage. Ward promised, and Higher Ground understood, that there would be no other payment obligations. Ward conducted a field demonstration for Higher Ground of ProLink's ProStar system, noting that the optional system would allow Higher Ground to have "all the sizzle" of a golf cart GPS system "without buying the steak." (Affidavit of Robert Caeners, dated May 30, 2007, ¶ 12.)

Following Ward's visits, Higher Ground informed ProLink that it would like to have the ProStar units installed on its golf carts under the optional "pay for play" program, and on April 27, 2005, signed a lease agreement for the installation of those units. Although Ward and ProLink presented Higher Ground with the contract papers, and although ProLink would manufacture and install the GPS units, the lease agreement was not between Higher Ground and ProLink, but between Higher Ground and National City. The written lease does not precisely specify the GPS units to be installed, but instead describes them as "GPS Assemblies" manufactured by ProLink/ParView, LLC.

In late June 2005, ProLink installed GPS units on the Silo Ridge golf carts. However, instead of installing ProStar units, it installed "GameStar" units. The GameStar system was based on outdated technology and, at the time of installation, was already five years old. (See Affidavit of Chris L. Schauerman, dated June 25, 2007, ¶ 5; Caeners Aff. ¶ 16.) Unhappy with the GameStar system, Higher Ground immediately and repeatedly complained to Ward, demanding that the ProStar system be installed. Ward admitted that ProLink had delivered the wrong system, but refused to deliver the promised units, stating that the ProStar system was available only for purchase and was not available for lease as part of the optional "pay for play" program. (Caeners Aff. ¶ 18.) Although Higher Ground was unhappy with the units, and repeatedly demanded that ProLink deliver the correct units, neither Higher Ground nor ProLink disabled or removed the GameStar units from the golf carts, and when golfers chose to use the system, Higher Ground accepted payment from those golfers and remitted their payments to ProLink.*fn3 However, throughout the season, Higher Ground encountered numerous problems with the units. First, based on an internal review of its records, Higher Ground determined that the number of golfers ProLink calculated to have used the system in any given period was substantially higher than the number that Higher Ground believed had used the system, and ProLink/National City expected Higher Ground to make up the difference. (Caeners Aff. ¶ 21.) Second, the units themselves malfunctioned in various ways. (Id. at ¶¶ 19-20.)

In early 2006, Higher Ground introduced a new fleet of golf carts at Silo Ridge, and again demanded that ProLink install ProStar units. Ward informed Higher Ground that ProLink would not install the ProStar GPS systems on the new carts, and that Silo Ridge was obligated to pay $9,000 to install the GameStar models on the new golf fleet, or "must pay the buyout" which would be "way over $175,000." (Caeners Aff. Ex. I.) The "bottom line," Ward told Higher Ground, "is that SiloRidge and Prolink will be doing business until [March] 2010." (Id.) Higher Ground refused to have the GameStar system installed on the new fleet of golf carts, and ProLink (not National City) repossessed the GPS units. (Id. ¶ 22; see Schauerman Aff. ¶ 3.) When ProLink repossessed the units in April 2006, "the outdated technology . . . [in] the GameStar system had negligible value because it had been supplanted by new technology." (Schauerman Aff. ¶ 4.) The "sole value of the Higher Ground GPS units in April, 2006, the time of their repossession, was their value as scrap." (Id. ¶ 8.)

Following ProLink's repossession of the units, National City sued Higher Ground for breach of the lease agreement. National City now moves for summary judgment, claiming that, by refusing to continue to use the GameStar units, Higher Ground broke their contract with National City, and owe approximately $375,000 in damages, consisting of National City's loss of anticipated revenue from Silo Ridge's golfers' use of the GameStar units. National City argues that this is a simple case of breach of contract -- that Higher Ground entered into a finance lease with National City; that equipment was leased to Higher Ground "as is" with "no warranties"; that pursuant to that lease, which contained a "hell or highwater clause," payment by Higher Ground was due under any circumstance; and that the contract clearly provided for liquidated damages in the event of a default. Moreover, National City argues that "any claimed misstatements by ProLink employees and any supposed imperfection in the equipment may not be raised by Higher Ground as a claim or defense." (D. Mem. at 10.)

Higher Ground, on the other hand, opposes summary judgment for National City, and moves for summary judgment itself, claiming that it has been swindled by a "bait and switch" engineered by ProLink and National City, working in tandem, and is entitled to a declaratory judgment that it owes National City nothing. First, it claims that it never agreed to the installation of the GameStar system -- a system it claims was obsolete before it was even installed in the carts at Silo Ridge, and a system whose present value, plaintiff admits, is negligible -- and that immediately upon installation of the units it demanded that the bargained-for ProStar units be installed. Second, Higher Ground claims that it never understood that it was contracting with any other entity but ProLink. Third, it claims that it never agreed either to a fixed payment scheme whereby Higher Ground guaranteed a minimum usage level of the GPS units or to a liquidated damages provision. Instead, Higher Ground claims that Ward had promised -- and Higher Ground had only agreed to -- a program whereby Higher Ground allowed ProLink to install the GPS units on the Silo Ridge golf carts, and Higher Ground would collect usage payments from those clients who opted to use the GPS units and pass those payments along to ProLink. In the alternative, Higher Ground moves for permission to implead ProLink pursuant to Fed. R. Civ. P. 14(a).

DISCUSSION

I. Legal Standards

A. Summary Judgment

Summary judgment is appropriate where the "pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). Rule 56 "mandates the entry of summary judgment, 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." Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The party moving for summary judgment bears the initial burden of explaining the basis for its motion and identifying those portions of the record it believes "demonstrate the absence of a genuine issue of material fact." Id. at 323. The burden then shifts to the non-movant to produce evidence sufficient to create a genuine issue of material fact for trial. Fed. R. Civ. P. 56(e)(2) (When a summary judgment motion is "properly made and supported, an opposing party may not rely merely on allegations or denials in its own pleading; rather, its response must -- by affidavits or as otherwise provided in [Rule 56] -- set out specific facts showing a genuine issue for trial."); Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) ("When the moving party has carried its burden under [Rule 56], its opponent must do more than simply show that there is some metaphysical doubt as to the material facts.").

The Court's responsibility is to determine if there is a genuine issue to be tried, and not to resolve disputed issues of fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The Court must draw all reasonable inferences and resolve all ambiguities in the non-movant's favor, and construe the facts in the light most favorable to the non-movant. Id. at 255 ("The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor."). However, the "mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient" to withstand a motion for summary judgment. Id. at 252.

A non-movant's unsupported denials of the movant's evidence, without more, cannot create disputes of material fact. See Fed. R. Civ. P. 56(e)(2) (When a summary judgment motion is "properly made and supported, an opposing party may not rely merely on allegations or denials in its own pleading" but must "by affidavits or as otherwise provided . . . set out specific facts showing a genuine issue for trial."). The affidavits must be supported by personal knowledge. Danzer v. Norden Sys., Inc., 151 F.3d 50, 57 n.5 (2d Cir. 1998). The evidence must be admissible. Likewise, "conclusory statements or mere allegations [are] not sufficient to defeat a summary judgment motion." Davis v. State of New York, 316 F.3d 93, 100 (2d Cir. 2002); see also id. ("The nonmoving party must go beyond the pleadings and by [his or] her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.") (alterations in original) (citation and internal quotation marks omitted).

B. Contract Interpretation

Under Ohio law, which the parties agreed would govern the lease contract, "[t]he purpose of contract construction is to discover and effectuate the intent of the parties." Graham v. Drydock Coal Co., 76 Ohio St. 3d 311, 313 (1996) (citation omitted). The intent of the parties is "presumed to reside in the language they chose to use in their agreement." Id. (citation omitted). "Extrinsic evidence is admissible to ascertain the intent of the parties when the contract is unclear or ambiguous, or when circumstances surrounding the agreement give the plain language special meaning." Id. at 313-14 (citation omitted). Furthermore,

Where the language of a contract . . . is susceptible of two constructions, one of which makes it fair, customary, and such as prudent men would naturally execute, while the other makes it inequitable, unusual, or such as reasonable men would not be likely to enter into, the interpretation which makes a rational and probable agreement must be preferred.

Id. at 316 (citation and internal quotation marks omitted). "Finally, a contract is to be construed against the party who drew it." Id. at 314 (citation omitted). In construing a contract, courts in Ohio are guided by the doctrine of expressio unius est exclusio alterius, meaning that "the expression in a contract of one or more things of a class implies the exclusion of all others not expressed." 18 Ohio Jur. 3d Contracts § 127. "In Ohio, the construction of a contract is a matter of law for the court to decide." Schwartz v. CNA Ins. Co., 406 F. Supp. 2d 844, 847 (N.D. Ohio 2005), citing Latina v. Woodpath Dev. Co., 57 Ohio St. 3d 212, 214 (1991). "The question of whether the language of an agreement is ambiguous is a question of law." Aerel, S.R.L. v. PCC Airfoils, L.L.C., 371 F. Supp. 2d 933, 939 (N.D. Ohio 2005) (citations and internal ...


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