Canopy Corp. v. Symantec Corp.
| Decision Date | 20 October 2005 |
| Docket Number | No. 2:04CV629DAK.,2:04CV629DAK. |
| Citation | 395 F.Supp.2d 1103 |
| Parties | CANOPY CORPORATION and David E. Jorgensen, Plaintiff, v. SYMANTEC CORPORATION, Defendants. |
| Court | U.S. District Court — District of Utah |
Brent V. Manning, Alan C. Bradshaw, Chad R. Derum, Manning Curtis Bradshaw & Bednar LLC, Salt Lake City, UT, for Plaintiff.
James S. Jardine, Daren G. Mortenson, Matthew R. Lewis, Ray Quinney & Nebeker, Salt Lake City, UT, for Defendants.
This matter is before the court on Defendant Symantec Corporation's Motion for Summary Judgment. The court held a hearing on the motion on October 13, 2005. At the hearing, Plaintiffs Canopy Corporation and David Jorgensen ("Canopy") were represented by Brent V. Manning and Chad R. Derum, and Symantec was represented by James S. Jardine, Matthew R. Lewis, and Daren G. Mortenson. The court has carefully considered all pleadings, memoranda, and other materials submitted by the parties. The court has further considered the law and facts relevant to the motion. Now being fully advised, the court enters the following Memorandum Decision and Order denying Symantec's motion on the breach of contract claim and granting the motion in all other respects.
This dispute arises from a Professional Services Agreement ("Agreement") between PowerQuest Corporation and Custom Contact Corporation d.b.a. Telegistics, Inc. PowerQuest was a software company that marketed several software products to companies and consumers. Part of PowerQuest's business required the assembly and shipment of orders for its software products. In 2001, Telegistics was a company that provided product assembly and order fulfillment services.
Before entering the Agreement with Telegistics, PowerQuest had been performing its own product assembly and shipping. Darrell Jakins, PowerQuest's Director of Operations, was given the responsibility of identifying potential partners and negotiating a contract with the partner selected. Jakins was a personal friend of Scott Mecham, who was a part owner of Telegistics. Jakins and Mecham did most of the negotiations for each company in connection with the Agreement. Paul Winn, PowerQuest's CEO and David Jorgensen, Telegistics' CEO and majority shareholder, however, were involved in some of the meetings and negotiations before the Agreement was signed.
The parties exchanged various drafts of the Agreement and drafted a provision requiring the owners of Telegistics to personally guarantee Telegistics's performance under the Agreement. All three of the owners signed the personal guarantee provision. During the negotiations, the parties also debated the term of the Agreement and PowerQuest's ability to terminate the Agreement for convenience. The parties appear to agree that they both recognized that Telegistics would need to have the Agreement in place for at least one year in order to recoup start-up costs. However the parties main dispute focuses on when termination could occur at the end of the first year. PowerQuest claims that it wanted a long-term contract but with the possibility of a quick termination, if necessary. Jorgensen claims that he wanted a long-term contract and both parties to be bound to the same time frame.
The term provision which the parties ultimately agreed upon provides that
This Agreement will remain in effect from the date first written above for a period of five years, unless terminated earlier under the terms of this Agreement. At the end of the first twelve month period, the Agreement will continue unless PowerQuest provides sixty (60) day written notice to Telegistics of its intent to terminate the Agreement.
The Agreement was executed on November 6, 2001, and the parties began performing under the Agreement. PowerQuest recognizes that Telegistics' performance was satisfactory under the Agreement, with the exception of the purchasing of component parts. A few months after the Agreement was signed, Telegistics began having financial difficulties and had trouble paying vendors of component parts and other vendors.
As a result of these financial difficulties, Jorgensen transferred Telegistics' income-producing assets to Canopy in an agreement dated December 30, 2002. Jorgensen was the sole owner of Canopy. Mecham and Edwards, the minority shareholders of Telegistics, did not participate in the transaction. As part of this agreement, Telegistics assigned its rights and interests in the Agreement with PowerQuest to Canopy. Although no formal notice was given to PowerQuest of this assignment, PowerQuest became aware that Canopy would be performing product assembly and order fulfillment for it instead of Telegistics. PowerQuest then began paying Canopy for its services. PowerQuest claims that the Agreement was no longer in effect after this assignment occurred but, for purposes of this motion, it is not disputing the assignment's validity or effect on the Agreement.
Approximately a year later, on December 5, 2003, Symantec acquired PowerQuest. As part of the due diligence process for the transaction, PowerQuest provided a copy of the Agreement to Symantec. But PowerQuest did not list the Agreement as an existing material contract in its company disclosure letter. Jakins also informed Dee Heinz, Symantec's Logistics Director, that PowerQuest was not obligated to continue using Canopy.
In late January, 2004, Jorgensen spoke to Heinz about Symantec's use of Canopy's services. Heinz informed Jorgensen that Symantec intended to stop using Canopy as of February 21, 2005. Symantec did, in fact, stop using Canopy's services as of February 21, 2004. Symantec did not provide written notice nor did it give sixty days notice. Canopy, however, did not object that the termination notice was oral rather than in writing and did not demand sixty-days notice.
Shortly thereafter, Canopy filed this lawsuit based on Symantec's termination of Canopy's services. Canopy's Amended Complaint alleges causes of action for breach of contract, promissory estoppel, breach of the implied covenant of good faith and fair dealing, promissory estoppel, and unjust enrichment/unjust detriment.
Symantec seeks summary judgment on each of Canopy's causes of action. Specifically, Symantec asks this court to grant summary judgment on Canopy's breach of contract claim because the extrinsic evidence regarding the parties' intent at the time of contracting unambiguously demonstrates that Symantec could terminate the Agreement at any time after the first year. Symantec also moves for judgment with respect to Canopy's claims for breach of the implied covenant of good faith and fair dealing, promissory estoppel, and unjust enrichment/unjust detriment on the grounds that they are redundant of the breach of contract claim and fail as a matter of law. Finally, Symantec asks this court to rule as a matter of law that the indemnification provision in the Agreement does not allow the recovery of attorneys' fees in a direct action between the parties.
The parties' main dispute with respect to the breach of contract claim involves the proper interpretation of the Agreement's term provision. The term provision of the Agreement provides:
This Agreement will remain in effect from the date first written above for a period of five years, unless terminated earlier under the terms of this Agreement. At the end of the first twelve month period, the Agreement will continue unless PowerQuest provides sixty (60) day written notice to Telegistics of its intent to terminate the Agreement.
Symantec argues that the term provision allowed Symantec to terminate the Agreement at any time after the conclusion of the first year provided it gave Telegistics sixty-days written notice. Canopy argues that PowerQuest had to notify it of termination within sixty days of the first year of the Agreement, otherwise it was bound to the remaining four years of the Agreement. Because the parties have conflicting interpretations of the term provision, this court must determine whether the language of the term provision is ambiguous in that it could reasonably support both interpretations.
"A contract provision is ambiguous if it is capable of more than one reasonable interpretation because of uncertain meanings of terms, missing terms or other facial deficiencies." Winegar v. Froerer Corp., 813 P.2d 104, 108 (Utah 1991). Under Utah law, Ward v. Intermountain Farmers Assn., 907 P.2d 264, 268 (Utah 1995). "Rational interpretation requires at least a preliminary consideration of all credible evidence offered to prove the intentions of the parties ... so that the court can `place itself in the same situation in which the parties found themselves at the time of contracting.'" Id. (citation omitted). "[A] contract provision is not necessarily ambiguous just because one party gives that provision a different meaning than another party does." Plateau Mining Co. v. Utah Div. of State Lands & Forestry, 802 P.2d 720, 725 (Utah 1990). "The contrary positions of the parties must each be tenable." Id.
"If after considering such evidence the court determines that the interpretations contended for are reasonably supported by the language of the contract, then extrinsic evidence is admissible to clarify the ambiguous terms." Ward, 907 P.2d at 268. All relevant evidence of the parties' intent must be considered because "[i]n construing a contract, the intention of the contracting parties is controlling." Peterson v. The Sunrider Corp., 48 P.3d 918, 925 (Utah 2...
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