Seiden Associates, Inc. v. ANC Holdings, Inc.

• Decision Date: 23 March 1992
• Docket Number: No. 656,D,656
• Citation: 959 F.2d 425
• Parties: SEIDEN ASSOCIATES, INC., Plaintiff-Appellant, v. ANC HOLDINGS, INC., American National Can Co., Defendants-Appellees. ocket 91-7770.
• Court: U.S. Court of Appeals — Second Circuit

Page 425

959 F.2d 425

SEIDEN ASSOCIATES, INC., Plaintiff-Appellant, v. ANC HOLDINGS, INC., American National Can Co., Defendants-Appellees.

No. 656, Docket 91-7770.

United States Court of Appeals,

Second Circuit.

Argued Dec. 10, 1991.

Decided March 23, 1992.

Daniel A. Pollack, New York City (Edward T. McDermott, Pollack & Kaminsky, of counsel), for plaintiff-appellant Seiden Associates, Inc.

Jeremy G. Epstein, New York City (Michael W. Jahnke, James R. Warnot, Jr., Shearman & Sterling, of counsel), for defendants-appellees ANC Holdings, Inc. and American Nat. Can Co.

Before: FEINBERG, NEWMAN and CARDAMONE, Circuit Judges.

CARDAMONE, Circuit Judge:

The appeal before us presents a question of contract interpretation. When the meaning of a contract is litigated, a reviewing court ordinarily looks only at the words used by the drafters, who presumably understood what they intended. Where the language used creates an ambiguity, a reviewing court must permit the receipt of evidence in order to see what was in the drafters' minds. Plaintiff Seiden Associates, Inc. (Seiden) commenced this action to recover unpaid fees it claimed to have earned when, pursuant to an agreement, it recruited William Sick, Jr. as chief executive officer of defendant American National Can Company (National Can). Seiden appeals from an order entered on July 3, 1991 in the United States District Court for the Southern District of New York (Mukasey, J.), granting summary judgment in favor of National Can and defendant ANC Holdings, Inc. (ANC), the successor-in-interest to Triangle Industries, Inc. (Triangle), the original party to the agreement.

BACKGROUND

Seiden is a New York executive recruiting firm. On December 2, 1986 it entered into a contract dated October 31, 1986 with Triangle to recruit a chief executive officer for Triangle's container business, National Can. The letter agreement entered into by Seiden's president, Steven Seiden, and Triangle's president, Peter May, set forth the following:

Our fee for this assignment, which shall be an exclusive one, will be equivalent to 30% (thirty percent) of the executive's first year's earned base and incentive compensation, reduced by the paid portion of our retainer but not lower than the total retainer, as set forth in the As such retainer, Triangle Industries Inc. agrees to pay Seiden Associates $300,000 (three hundred thousand) in five equal monthly payments of $60,000 (sixty thousand) beginning on the date this letter is signed by you. This retainer is based on 30% of the Chief Executive Officer's initially estimated first year's total cash compensation of $1 million.

                following paragraph.   The final fee will be determined 12 months from the date of employ
                

After reviewing more than 100 candidates, Seiden recruited Sick and assisted the executive in negotiating with Triangle for the terms of his employment. Sick began employment with National Can on January 1, 1988 with a five-year contract that provided him with an annual salary of $800,000. In addition, he was eligible to receive cash incentive compensation from a deferred Performance Incentive Plan, which did not vest until his third year of employment, and to participate in two stock option plans. Most significant for purposes of this appeal, the agreement provided for a discretionary "cash bonus award up to an amount equal to 100% of the actual salary payable ... for such year. The amount of any such award shall be based upon the achievement, as determined by the Company's Board of Directors in the exercise of its reasonable judgment" of yearly company and personal performance goals and "shall be payable in a lump sum on or before each April 1 for the immediately preceding calendar year." During 1988 Triangle and its subsidiaries, including National Can, were purchased by the Pechiney Group. Pechiney is the parent of ANC, the successor-in-interest to Triangle.

Sick's 1988 W-2 income statement shows that he received $800,004 in salary, $4,700 for tax preparation, $173,437.50 for stock options, and $45,189.67 for moving expenses. Total earnings received during the 1988 calendar year therefore were $1,023,331.17. On March 1, 1989 the Chairman of Pechiney granted Sick a discretionary bonus of $1 million as compensation for services performed during 1988. An annual report on Form 10-K, submitted to the Securities Exchange Commission by Triangle Holdings, another successor-in-interest of Triangle, lists executive compensation for 1988, and indicates that Sick's total cash compensation paid in 1988 was $2,041,206, apparently reflecting all compensation eventually paid, except moving expenses, including the discretionary bonus received in 1989 and employer pension contributions.

Based upon the 10-K report, Seiden claimed a recruitment fee of 30 percent of the earned compensation paid for 1988 ($2,041,206) or $612,361.80, of which it had already received $300,000 under the retainer letter. The instant litigation arises over the $312,361.80 balance. ANC and National Can argue that the contract provides that Seiden's final fee was to be determined 12 months from the "date of employ" or on January 1, 1989. They urge that only payments made before December 31, 1988--the $800,004 paid in cash compensation as salary--is relevant in computing the recruitment fee. ANC contends the nonrefundable retainer of $300,000 exceeds 30 percent of $800,004 ($240,001.20), by about $60,000, and as a consequence it owes Seiden nothing further. The employer defendants further assert that the contract term "incentive compensation" referred to other cash incentives available to Sick and other National Can executives, but did not include the March 1989 $1 million discretionary bonus. In the event ANC is held not bound by the written contract between Triangle and Seiden, plaintiff alleged alternative claims in its complaint based upon unjust enrichment and quantum meruit.

The parties filed motions for summary judgment and the district court ruled in favor of defendants ANC and National Can on July 3, 1991. It determined that the language of the contract unambiguously required that only compensation payments ascertainable before December 31, 1988 were relevant to the calculation of Seiden's recruitment fee. Because it found that the language of the contract was unambiguous, the district court refused to consider plaintiff's proffer of extrinsic evidence of the parties' intent. Hence, the $1 million

                discretionary bonus paid by the defendant to Sick in March of 1989 was not factored into the computation of the final fee owed plaintiff.   Since ANC's status as a party was derived as a successor-in-interest to Triangle, plaintiff's unjust enrichment and quantum meruit claims were dismissed.   Seiden appeals.   We reverse
                

DISCUSSION

A.

Appellant challenges the grant of summary judgment to defendants, which it contends flowed from the trial court's erroneous conclusion that the terms of the contract were unambiguous. It was the absence of ambiguity that the district court relied on in precluding the receipt of extrinsic evidence, which Seiden believes would have shed light on the original parties' intent in signing the letter agreement of December 1986. The rules of construction in this area of contract law are well known.

In reviewing a written contract, a trial court's primary objective is to give effect to the intent of the parties as revealed by the language they chose to use. See Slatt v. Slatt, 64 N.Y.2d 966, 967, 488 N.Y.S.2d 645, 477 N.E.2d 1099 (1985). When the question is a contract's proper construction, summary judgment may be granted when its words convey a definite and precise meaning absent any ambiguity. See Heyman v. Commerce and Industry Co., 524 F.2d 1317, 1320 (2d Cir.1975); Painton v. Company & Bourns, Inc., 442 F.2d 216, 233 (2d Cir.1971). Where the language used is susceptible to differing interpretations, each of which may be said to be as reasonable as another, and where there is relevant extrinsic evidence of the parties' actual intent, the meaning of the words become an issue of fact and summary judgment is inappropriate, see Heyman, 524 F.2d at 1320; Painton, 442 F.2d at 233; cf. Antilles Steamship Co., Ltd. v. Member of the American Hull Insurance Syndicate, 733 F.2d 195, 202 (2d Cir.1984) (Newman, J., concurring) (ambiguity in a contract, in the absence of relevant extrinsic evidence, presents a question of law), since it is only when there is no genuine issue as to any material fact that the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).

In the past, we have defined ambiguous language as that which is " 'capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.' " Walk-In Medical Centers, Inc. v. Breuer Capital Corp., 818 F.2d 260, 263 (2d Cir.1987) (quotin...