Harris Corp. v. Giesting & Associates, Inc., No. 01-13749.

• Decision Date: 17 July 2002
• Docket Number: No. 01-13749.
• Parties: HARRIS CORPORATION, Plaintiff-Counter-Defendant-Appellant-Cross-Appellee, v. GIESTING & ASSOCIATES, INC., Defendant-Counter-Claimant-Appellee-Cross-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1270

297 F.3d 1270

HARRIS CORPORATION, Plaintiff-Counter-Defendant-Appellant-Cross-Appellee, v. GIESTING & ASSOCIATES, INC., Defendant-Counter-Claimant-Appellee-Cross-Appellant.

No. 01-13749.

United States Court of Appeals, Eleventh Circuit.

July 17, 2002.

Alexandre de Gramont, Jerome A. Murphy, Crowell & Moring, Washington, DC, for Harris Corp.

Steven D. Kelley, Lindquist & Vennum, P.L.L.P., Minneapolis, MN, Douglas C. Spears, Adams & Spears, PA, Orlando, FL, for Giesting & Associates, Inc.

Appeals from the United States District Court for the Middle District of Florida.

Before TJOFLAT, RONEY and COX, Circuit Judges.

PER CURIAM:

Harris Corporation ("Harris"), a semiconductor devices and systems manufacturer, appeals in three aspects a judgment based on a jury verdict in favor of Giesting & Associates, Inc. ("Giesting") for breach of the sales representative agreement between the two. Giesting cross-appeals on three issues. The jury verdict, answering special interrogatories, assessed damages in three different categories. The district court entered a lump sum judgment in the amount of $748,336 plus prejudgment interest of $83,505.33. A separate judgment was entered against Harris for attorney's fees in the amount of $30,000. We vacate the judgment for damages and remand for further proceedings. We affirm the judgment for attorney's fees.

Giesting made the following claims against Harris which were presented to the jury:

(1) Harris unlawfully terminated their sales representative agreement. The jury found that Harris improperly terminated the contract and awarded damages of $417,664. We reverse this part of the judgment because the contract's "termination for convenience" language was unambiguous and the district court improperly admitted extrinsic evidence to effectively strike the clause from the contract. Without this extrinsic evidence there would have been an insufficient basis for a breach of contract claim based upon Harris' termination for convenience.

(2) Harris violated applicable state statutes which require prompt payment of commissions upon termination and impose penalties for failure to do so. The jury found that Harris violated the state commission statutes of Alabama, Georgia, Indiana, and Michigan, and awarded damages under these statutes of $122,046. We affirm this portion of the judgment.

(3) Harris failed to pay commissions and other amounts that were due to Giesting under the agreement for work done prior to the termination date. The jury found that Harris breached the agreement by improperly reducing commissions, awarding damages of $208,626. Harris does not appeal its liability for having improperly reduced the commissions, but contends the amount is based on an incorrect termination date and thus incorrect. We agree and vacate this portion of the judgment and remand for recalculation based on the agreement's proper termination date.

On cross-appeal, Giesting claimed that the district erred by denying its motion for new trial which was based upon (1) Giesting's breach of contract claim on the J1850 product line; and (2) Giesting's unjust enrichment claim. Giesting also claims that the district court improperly limited Giesting's attorney's fees to $30,000 out of the $343,359 Giesting requested.

Harris Corporation, which manufactured and sold semiconductors, entered into a sales representative agreement, effective July 1, 1997, with Giesting & Associates, Inc., whereby Giesting would be compensated through commissions on sales of Harris products. This was a non-exclusive contract and Harris had sales representative agreements with other firms. This 1997 agreement was preceded by five previous agreements over a period of ten years. They set forth in detail the parties' relationship. With one exception, they all contained a termination — for-convenience clause discussed below.

In 1998, because of a severe downturn in the semiconductor industry and based on economic conditions and business considerations, Harris decided to terminate its sales representative agreement with Giesting and a number of other sales representative firms. In a jury trial, the district court concluded that the termination-for-convenience clause was ambiguous and allowed extrinsic evidence that, in effect, allowed the jury to disregard this provision of the contract and decide that Harris had improperly terminated the contract.

We discuss each of the points raised by appellant Harris seriatim, but note that it is only the decision on the first issue that sets a precedent in this circuit and merits publication.

I. Harris unlawfully terminated the sales representative agreement it had with Giesting.

The central issue is whether the "termination for convenience" section in the contract was sufficiently ambiguous for the district court to allow extrinsic evidence to effectively strike the section. The relevant portions of the contract read as follows:

Harris or Representative may terminate this Agreement for convenience at any time upon sixty (60) days written notice to the other....

Harris may also terminate this Agreement for default in the event Representative:

(i) Fails to perform any material obligation required by this Agreement;

(ii) Makes an assignment for the benefit of creditors or a trustee in bankruptcy, or a receiver is appointed;

(iii) Submits any false or fraudulent reports or statements concerning Harris or its Products to any Customer, the Government, or to Harris;

(iv) Violates any applicable federal or state law or regulation, including the export administration and control laws and regulations of the United States or any amendments thereto.

We review de novo whether a contract's language is ambiguous. Hopkins v. BP Oil, Inc., 81 F.3d 1070, 1074 (11th Cir.1996) (citing Dunkin' Donuts of Am., Inc. v. Minerva, Inc., 956 F.2d 1566, 1573 (11th Cir.1992)).

The district court erred in finding that the contract was ambiguous and permitting parol evidence. The general rule is that "termination for convenience" clauses permit one party to terminate a contract, even in the absence of fault or breach by the other party, without suffering the usual financial consequences of breach of contract. See generally Stock Equip. Co. v. Tenn. Valley Auth., 906 F.2d 583 (11th Cir.1990). Termination for convenience clauses may not be used to shield the terminating party from liability for bad faith or fraud. T & M Distribs., Inc. v. United States, 185 F.3d 1279, 1283 (Fed. Cir.1999). A "party who willingly and without protest enters into a contract with knowledge of the other party's interpretation is bound by such interpretation and cannot later claim that it thought something else was meant." Perry & Wallis v. United States, 192 Ct.Cl. 310, 427 F.2d 722 (1970); see also Restatement (SECOND) of Contracts § 201(2) (1981).

In this case we have two private, sophisticated parties who voluntarily entered into a contract. The record indicates that Giesting knew of the termination for convenience clause, what it meant, and requested that Harris remove it. Harris refused, and Giesting agreed to the contract anyway, even though it had successfully negotiated the provision out of one of the previous contracts.

"Termination for convenience" as used in this case is not ambiguous because the meaning of the phrase is plain on its face insofar as it permits termination without cause. In fact, a separate section in the contract discusses "termination for default," sometimes referred to as "termination for cause." The inclusion of the "termination for default" section strongly supports the application of the plain meaning of "termination for convenience" in this contract because it indicates that the parties differentiated between reasons for termination and expressly adopted both "termination for convenience" and "termination for default."

In an unpublished disposition, the Second Circuit, looking at Florida law, summarily affirmed the district court's opinion in Trionic Assocs., Inc. v. Harris Corp., 198 F.3d 235 (2d Cir.1999), stating that "[w]e affirm the judgment of the district court substantially for the reasons stated in its thorough and well-reasoned [published] opinion. See Trionic Assocs., Inc. v. Harris Corp., 27 F.Supp.2d 175, 180-85 (E.D.N.Y.1998). We have considered all of the appellant's arguments on appeal and find them to be without merit." In Trionic, the district court held that the termination for convenience clause in the contract between Harris and Trionic, both of which were sophisticated, private companies, was valid and controlling, and Harris properly terminated for convenience its contract with Trionic. The Trionic court followed the general rule that conduct which is expressly authorized by a contract cannot be said to breach the implied covenant of good faith and fair dealing, reasoning that "Harris' past conduct may arguably have created an expectation that Harris would not terminate the contract for convenience, yet the Agreement expressly gives Harris the right to do so. The express contract terms controls over any alleged conflicting usage or course of dealing." Trionic, 27 F.Supp.2d at 181 (citing Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129, 136 (5th Cir.1979) (holding that not exercising a termination for convenience clause for seven years did not create a course of conduct that overrode express contractual language that permitted termination of the contract "for any reason.")).

One other district court, in an unpublished opinion, entered summary judgment for Harris on an identical breach-of-contract claim. Oasis Sales Corp. v. Harris Corp., Civ. No. 98-2737 (D.Minn. Aug. 4, 1999). A number of other unpublished district court opinions involved cases similar to the instant case.¹ Apparently, these district courts did not publish their orders because standard "termination for convenience" language is so commonly regarded as not ambiguous. No cases other...