Lee v. Flintkote Co.

Decision Date11 January 1979
Docket NumberNo. 77-1355,77-1355
Citation193 U.S.App.D.C. 121,593 F.2d 1275
PartiesJohn M. LEE et al., Appellants, v. FLINTKOTE COMPANY.
CourtU.S. Court of Appeals — District of Columbia Circuit

Coleman R. Rosenfield, Fort Lauderdale, Fla., of the bar of the Supreme Court of Florida, pro hac vice, by special leave of Court, which whom Michael D. Hausfeld, Washington, D. C., was on the brief, for appellants. Jerry S. Cohen, Washington, D. C., also entered an appearance for appellants.

Jay F. Gordon, New York City, with whom George Berger, New York City, was on the brief, for appellee.

Before BAZELON, LEVENTHAL and ROBINSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge SPOTTSWOOD W. ROBINSON, III.

SPOTTSWOOD W. ROBINSON, III, Circuit Judge.

This appeal emanates from a summary judgment rejecting a claim of intentional interference by a third party with contractual relations subsisting between franchisees of retail paneling stores and their franchisor. 1 The pivotal issue is whether the franchise contracts conferred upon the franchisees the exclusive right to sell the franchisor's products within the territories respectively franchised. A subsidiary question is whether the agreements were ambiguous on that score and thus opened the door to introduction of extrinsic evidence purporting to reflect the parties' intentions. We answer both questions in the negative and accordingly affirm.

I. BACKGROUND

Appellants are owners and operators of individually-franchised retail outlets in the Washington-Baltimore area known as Ply*Gem paneling centers. They obtained their franchises between 1969 and 1974 through essentially similar contracts made with a unit of a corporate group which we shall refer to as Ply*Gem. 2 Appellants assert that by the terms of the franchise agreements, Ply*Gem guaranteed each franchisee the exclusive right to sell Ply*Gem paneling and related products within two and one-half miles of the location of his paneling center. 3

In March, 1976, by virtue of a contract with Ply*Gem, the Flintkote Company became the general distributor of Ply*Gem products. 4 Appellants claim that Flintkote thereby gained, and began exercising, authority to sell Ply*Gem products to other retail dealers in their exclusive areas. For this they sued Flintkote for damages, alleging that it entered into the agreement "with full knowledge of the contracts between (appellants) and PLY*GEM Companies, and with the intent to injure, destroy and otherwise interfere with the due prosecution of (appellants') businesses. . . ." 5

Finding no ambiguity in the franchise agreements which contained an express merger clause 6 the District Court rejected appellants' contention that by virtue of the contracts they acquired the sole right to sell Ply*Gem products within their stores' territories. 7 Rather, the court held, such exclusivity as was conferred was simply the right to be the only "Ply*Gem outlet within a two and one-half mile radius." 8 The court further held that extra-contractual evidence proffered by appellants in an effort to support their position was either irrelevant or barred by the parol evidence rule. 9 Since, in its view, appellants did not possess exclusive selling rights under their franchise agreements, the court concluded that Flintkote was not interfering with their business relations with Ply*Gem, 10 and it granted Flintkote's motion for summary judgment. 11

Appellants assert that the franchise agreements, properly construed, endow them with the exclusive right to sell Ply*Gem products within their designated territories. Alternatively, they contend that the contractual language was at least ambiguous, that the evidence they unsuccessfully sought to introduce was admissible to clarify its meaning, and consequently that the case was not in a posture permitting summary judgment. 12 We disagree with appellants on all counts.

II. THE CHOICE OF LAW

This litigation is maintainable in the federal courts because the parties are of diverse citizenship. 13 With federal jurisdiction so based, we normally would first determine the applicable local law. 14 All of the franchise agreements, however, expressly state that they are to be interpreted conformably to the law of New York. 15 Whether such a provision is operative in a federal court action founded on diversity depends upon the conflict of laws principles of the jurisdiction in which the court sits. 16

At no time during the course of this litigation have the parties briefed the choice of law question. 17 Nor have they, either in the District Court or here, relied upon the law of New York or of any other jurisdiction in particular as the sole source of controlling precedent. The District Court apparently assumed that District of Columbia law governed the issues presented, 18 and with that the litigants seem perfectly content. Our initial concern is whether we ourselves should take a different tack.

We were confronted with this problem once before. The occasion was presented in 1961 when an appellant who at the trial level relied on District of Columbia caselaw complained on appeal that Ohio law should have been applied. After an extensive review of the authorities, we disagreed:

(O)rderly administration of justice suggests that plaintiff should not at this late stage be allowed to rely on the law of another jurisdiction. While this court recognizes its power to take judicial notice of applicable state law, or to remand for its application, nothing in this record suggests that it is appropriate to do so in order to avoid injustice or to promote the ends of justice. We conclude, therefore, that the trial court was not bound to notice and apply the law of Ohio or Maryland statutory law when appellant not only failed to rely on either but affirmatively argued the law of the District. 19

Four years later, the District of Columbia Court of Appeals endorsed this approach. 20

These decisions, pronounced when both courts shaped the evolving common law of the District of Columbia, 21 chart the course we must pursue here. The rule they established, whether viewed as purely procedural in nature 22 or as the expression of a conflict of laws policy of the District, 23 dictates recourse to District law. We believe, moreover, that sound judicial administration and the potential unfairness of invoking a body of foreign law that neither side has considered applicable strongly support that approach here. 24 We turn, then, to identify the principles relevant to the issues before us.

III. THE PAROL EVIDENCE RULE AND THE "PLAIN MEANING" RULE

The District of Columbia recognizes both the parol evidence rule 25 and its relative, the "plain meaning" canon of contract interpretation. 26 The District Court felt that consideration of minutes of a 1968 management meeting of Ply*Gem featuring promotional techniques prior to execution of any of appellants' franchise agreements was barred by the parol evidence rule. A segment of those minutes captioned, "In Answer to Questions Posed by Potential Franchisees," reads:

Q. 26. WHY DO I NEED YOU? I CAN OPEN A PANELING STORE AND BUY THROUGH OTHER PANEL DISTRIBUTORS WITHOUT GIVING YOU $10,000.

In addition, you receive the exclusive rights within your area to the Ply*Gem name and their products. . . . 27

Insofar as these minutes may have been offered to show an antecedent compact or understanding varying or supplementing the terms of the franchise agreements, the District Court correctly rejected them. The franchise contracts state unequivocally that they embody the final and exclusive understanding of the parties, 28 and District law gives full effect to that stipulation. 29

On the other hand, the minutes conceivably could evidence custom and practice in the paneling industry, and that, in turn, arguably could indicate in some degree the parties' intentions when they entered into the contracts in question. 30 Strictly speaking, the parol evidence rule does not bar extra-contractual evidence of meanings assigned the terms of an agreement; 31 that is the function of the plain meaning rule, which prohibits consideration of extrinsic evidence of intent when the contract is unequivocal. 32

Speaking to the role of ambiguity in this connection, we have summarized the District of Columbia law in this manner:

Construction of unambiguous features of a written contract is a problem for the court, not the jury. Put another way, the legal effect of reasonably clear terms of a contract is a question of law for judges. The admissibility of extrinsic evidence, and possible need for the jury to assess it, depend upon the existence of an ambiguity in the contract. Only if its meaning is dubious, and the evidence of the parties' intention is uncertain or conflicting, is there appropriate occasion to seek the conclusion of jurors as to what was in mind. Moreover, the question whether the contract is ambiguous or not is one of law to be determined by the court. 33

With these principles in mind, we turn to the franchise agreements in suit.

IV. THE FRANCHISE AGREEMENTS

In the federal courts, a party moving for summary judgment bears the burden of establishing the absence of any issue of material fact. 34 This principle obtains although the movant would not have the burden of proof at trial. 35 Moreover, the party opposing summary judgment need not present any evidentiary matter unless the movant has made a prima facie showing that the case is completely free from any significant question of fact. 36 The movant thus faces a formidable task, 37 but we think it was accomplished here.

We must, at the outset, agree with Flintkote that if Ply*Gem's promise not to approve a "licensed location" within two and a half miles of a franchise's store was intended as a grant of exclusive selling rights within that area, it was most awkwardly put. 38 We are skeptical, too, that so important a feature of the franchise agreement would...

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