Krepps v. NIIT (USA), Inc.

MATTHEW B. KREPPS, Plaintiff, v. NIIT (USA), INC., Defendant.

No. 11 C 8787

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

DATE: January 24, 2014

Magistrate Judge Jeffrey Cole

MEMORANDUM OPINION AND ORDER

INTRODUCTION

Matthew Krepps has moved for summary judgment on the question of whether NIIT assumed the liabilities and obligations of a Joint Venture Agreement between Economist's Advocate and Cognitive Arts when it purchased Cognitive Arts. The answer to that question turns on the interpretation of the Asset Purchase Agreement between NIIT and Cognitive Arts.¹ One of the obligations under the Joint Venture Agreement is that Mr. Krepps be allowed to convert his shares in the Joint Venture into Cognitive Arts stock. And, the Joint Venture Agreement stated that it would be binding on Cognitive Arts' successors and assigns.

NIIT's earlier attempt to obtain summary judgment on this issue failed largely due to the ambiguity of the Asset Purchase Agreement it prepared for its "purchase" of Cognitive Arts.² And that ambiguity existed notwithstanding its author's claim that the contract was drafted to "delineate as explicitly as possible those assets and liabilities that [NIIT ] is acquiring, versus those assets andliabilities that are to be excluded."³ But that is not what occurred. Instead of clarity and simplicity, there is complexity and uncertainty.

In order to defend against plaintiff's motion for summary judgment, NIIT now finds itself having to argue that it bollixed the drafting of the Asset Purchase Agreement, rendering it ambiguous.⁴ If that's the case, extrinsic evidence is necessary, and Mr. Krepps' motion for summary judgment must be denied. Wilson v. Career Educ. Corp., 729 F.3d 665, 686-87 (7^th Cir. 2013); Citadel Group Ltd. v. Washington Regional Medical Center, 692 F.3d 580, 587 (7^th Cir. 2012). Of course, a contract is not ambiguous simply because one or both of the parties say it is. A contract is ambiguous if "'its language is reasonably and fairly susceptible to more than one meaning.'" Emergency Medical Care, Inc. v. Marion Memorial Hosp., 94 F.3d 1059, 1061 (7^th Cir. 1996).

In the Asset Purchase Agreement, NIIT purported to list those contracts it would be assuming from Cognitive Arts and those it would not. NIIT contends vehemently that it "wanted nothing to do with any contract Cognitive Arts may have had with Economist's Advantage . . . ." (NIIT's Response at 2). But rather than simply stating in the Asset Purchase Agreement that the Joint Venture Agreement between Cognitive Arts and Economist's Advantage was excluded, it drafted a labyrinthine document meandering from provisions to schedules and back again, that it now suggests was seasoned with mistakes. (NIIT's Response at 2, 4, 6, 9-11).

A.

At the outset, the parties are at odds over what law applies to the interpretation of the Asset Purchase Agreement. The agreement, itself, states that Georgia law applies, but Mr. Krepps favors the application of Illinois law and argues that NIIT has waived adherence to the agreement's choice-of-law provision by relying on Illinois law in the previous round of briefing on NIIT's motion for summary judgment. To be sure, in that briefing, NIIT did rely on Illinois law when discussing the issue of successor liability. But, in those discussions, it did note that contract interpretation - as opposed to successor liability - was controlled by Georgia law. And it reserved the right to argue that Georgia law applied to issues other than successor liability. (NIIT's Sur-Reply, at 4-5). And so, we shall abide by the contract's specification of Georgia law even though in the end, it doesn't make much of a difference, as Georgia law on contract interpretation is not unique or different from that of Illinois.

Since Justice Holmes' classic article, The Path of the Law, 10 Harv.L.Rev. 457 (1897), there has been agreement by all American courts that the making of a contract depends not on the agreement of two minds in one intention, but on the agreement of two sets of external signs, not on the parties having meant the same thing but on their having said the same thing." Id. at 464. See also Paxton-Buckley-Loda Educ. Ass'n v. Ill. Educ. Labor Relations Bd., 304 Ill.App.3d 343, 350, 710 N.E.2d 538 (4th Dist.1999). Thus, as in Illinois, Georgia's cardinal rule of contract construction is to ascertain the intent of the parties, as evidenced by the language of the contract. Calhoun, GA NG, LLC v. Century Bank of Georgia, 320 Ga.App. 472, 474-75, 740 S.E.2d 210, 212-13 (Ga.App. 2013); Garrett v. So. Health Corp. of Ellijay, 320 Ga.App. 176, 182, 739 S.E.2d 661 (2013); Gallagher v. Water Tower Realty Co. v. Fordham 25 E. Superior, L.L.C., 404 Ill.App.3d 658, 665, 936 N.E.2d 1127, 1133 (1^st Dist. 2010). Neither in Georgia nor in Illinois do we "take a tourthrough [a party's] cranium, with [the party] as the guide." Skycom Corp. v. Telstar Corp., 813 F.2d 810, 814 (7th Cir.1987).

While one party to an agreement - like NIIT here - will often contend that the agreement couldn't possibly mean what it says if the draftsmanship tends to go against that party's interests (NIIT's Response at 5), subjective intent is irrelevant. Greenwald v. Kersh, 275 Ga.App. 724, 727, 621 S.E.2d 465, 468 (Ga.App. 2005)("[C]ourts apply an objective theory of intent whereby one party's intention is deemed to be that meaning a reasonable man in the position of the other contracting party would ascribe to the first party's manifestations of assent, or that meaning which the other contracting party knew the first party ascribed to his manifestations of assent."); Hampton v. Ford Motor Co., 561 F.3d 709, 714 (7^th Cir. 2009)("Illinois follows the objective theory of intent, whereby the court looks first to the written agreement and not to the parties' subjective understandings.").

But, where the wording of the contract leaves the intent of the parties in doubt - that is, where reasonable but differing constructions can be placed on the language - ambiguity exists. Thompson v. LaFarge Bldg. Materials, Inc., - Ga.App. -, -, 746 S.E.2d 908, 911 (2013); Estate of Pitts v. City of Atlanta, - Ga.App. -, -, 746 S.E.2d 698, 702 (2013); Fischel v. Souri, 2013 WL 1296200, *7, - Ill.App.3d -, - (1^st Dist. 2013). When a contract is ambiguous, Georgia law has a bit of a quirk: the court is to resort to the state's statutory construction rules. Monitronics Intern., Inc. v. Veasley, - Ga. App. -, -, 746 S.E.2d 793, 801 (2013); Willesen v. Ernest Communications, Inc., - Ga. App. -, -, 746 S.E.2d 755, 758 (2013).

Those rules are not much different from ordinary rules of construction. NIIT focuses on one in particular:

The rules of grammatical construction usually govern, but to effectuate the intention they may be disregarded; sentences and words may be transposed, and conjunctions substituted for each other.

Ga. Code Ann., § 13-2-2(6). Just as importantly, however, those rules of construction - just like Illinois's - dictate that ambiguities are to be construed against the drafting party or the party undertaking the obligation. Ga. Code Ann., § 13-2-2(5); Duldulao v. St. Mary of Nazareth Hospital Center, 115 Ill.2d 482, 493, 505 N.E.2d 314, 319 (1987); Zwayer v. Ford Motor Credit Co., 279 Ill.App.3d 906, 910, 665 N.E.2d 843, 846 (1^st Dist. 1996). Here, that is NIIT.

If all that fails, extrinsic or parol evidence may come into play. Coca-Cola Bottlers' Sales and Services Co. LLC v. Novelis Corp, 311 Ga.App. 161, 168, 715 S.E.2d 692, 698 (2011); Farm Credit Bank of St. Louis v. Whitlock, 144 Ill.2d 440, 447, 581 N.E.2d 664 (1991). But, at that point, the interpretation of the contract becomes an issue of fact. Monitronics, - Ga. App. at -, 746 S.E.2d at 801; Goody Products, Inc. v. Development Authority of City of Manchester, 320 Ga.App. 530, 535, 740 S.E.2d 261, 268 (2013); McBride v. McBride, 990 N.E.2d 1184, 1195 (1^st Dist. 2013); Harmon v. Gordon, 712 F.3d 1044, 1051 (7^th Cir. 2013).⁵

B.

Interpretation of the Agreement must begin with Section 1.1 which is titled, hopefully enough, "Assets to be Acquired":

. . . [NIIT] agrees to purchase from [Cognitive Arts], and [Cognitive Arts] agrees to sell to [NIIT] . . . all right, title and interest of [Cognitive Arts] in and to all of the tangible and intangible assets of [Cognitive Arts] used in the Business (other than the Excluded Assets (as defined in Section 1.2)) [⁶], . . . (collectively, the "Purchased Assets"), including, without limitation, . . . the following:

* * *

(b) [Cognitive Arts'] executory contracts with respect to the Business to the extent assignable (the "Assigned Contracts") on Schedule 1.1(b), together with all confidentiality, noncompetition and nonsolicitation covenants running in favor of [Cognitive Arts] set forth on Schedule 1.1(b); . . .

(Plaintiff's Exhibit C).

Stripped of its excessive verbiage, NIIT agreed to acquire "all" of Cognitive Arts assets, except for excluded assets, which were listed in separately numbered paragraphs on Schedule 1.2 (Ex. E). It agreed that it would be acquiring Cognitive Arts' executory contracts, if they were assignable - set out in Schedule 1.1(b). But, given the oceanic phrase, "including, without limitation," the Agreement was subject to being interpreted as providing that those contracts specifically listed in Section 1.1 were not the only ones NIIT contemplated it would be acquiring.

The phrase,"including, without limitation," is a staple of contracts of all sorts.⁷ Indeed, a Westlaw search reveals many hundreds, if not thousands of contract (and related) cases, where the phrase is employed as a matter of course. The plain meaning of the phrase is "to contain as part of something" - to "indicate[ ] a partial list." Black's Law Dictionary, 766 (7^th edition 1999). All thecases agree that "even without the additional if not redundant language of 'without limitation,'" St. Paul Mercury Insurance. Co. v. Lexington Insurance. Co., 78 F.3d 202,...