Environmental Products Corp. v. King Companies, Inc.
| Decision Date | 02 November 1994 |
| Docket Number | No. 94-1536,94-1536 |
| Citation | 47 F.3d 1164 |
| Parties | NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. ENVIRONMENTAL PRODUCTS CORPORATION, Plaintiff-Appellee, v. KING COMPANIES, INCORPORATED; RVM Leasing Corporation, Defendants-Appellants. . Argued: |
| Court | U.S. Court of Appeals — Fourth Circuit |
ARGUED: Craig David Diviney, DORSEY & WHITNEY, Minneapolis, MN, for Appellants. James R. Crassweller, DOHERTY, RUMBLE & BUTLER, P.A., St. Paul, Minnesota, for Appellee.
ON BRIEF: Scott A. Benson, DORSEY & WHITNEY, Minneapolis, MN; C. Torrence Armstrong, Frederick P. Helm, MCGUIRE, WOODS, BATTLE & BOOTHE, Alexandria, VA, for Appellants. Deborah B. Hilke, DOHERTY, RUMBLE & BUTLER, P.A., St. Paul, MN; Grady C. Frank, Jr., HAZEL & THOMAS, P.C., Alexandria, VA, for Appellee.
Before WILKINS, LUTTIG, and WILLIAMS, Circuit Judges.
This declaratory judgment action was removed to federal court under diversity jurisdiction. Appellee, Environmental Products Corporation (ENVIPCO), brought this action in the Virginia state courts to determine the scope of its required performance under a contract (the Agreement) between ENVIPCO and Appellants, King Companies, Inc. and RVM Leasing Corporation (King). King appeals the district court's summary judgment order in which the district court held that ENVIPCO's responsibilities under the Agreement were less onerous than King expected. For the reasons explained below, we affirm in part and reverse in part.
Many states require beverage retailers to charge an extra deposit on every can or bottle of soda they sell as a means of encouraging consumers to return the receptacle for recycling. New York, for instance, passed such a law in 1983 finding that "requiring a deposit on all beverage containers ... will provide a necessary incentive for the economically efficient and environmentally benign collection and recycling of such containers." N.Y. Environmental Conservation Law Sec. 27-1001 (McKinney 1994). In New York, when a consumer empties a bottle or can, she simply returns it to the retailer for a full refund of her deposit, and the retailer returns the container to a recycling center. Id. Sec. 27-1007. See generally, Jeffrey B. Wagenbach, The Bottle Bill: Progress and Prospects, 36 Syracuse L.Rev. 759 (1985).
To make this process easier for both retailers and consumers, ENVIPCO began to market Reverse Vending Machines (RVMs). Using laser technology, these machines allow the consumer to insert bottles and cans into the RVM which in turn computes and dispenses the appropriate refund. In 1983, after New York state passed its deposit law, ENVIPCO needed extra capital to expand its operation and distribute its machines into the Empire State. Therefore, in July 1983, ENVIPCO entered into the Agreement with King (which was subsequently amended in October 1983), in which King agreed to buy the machines that ENVIPCO designed and to lease them to retailers. ENVIPCO agreed to maintain the machines in good repair and also agreed to serve as King's exclusive remarketing agent for the RVMs after their initial leases expired. Under this arrangement, ENVIPCO received an influx of capital from King's purchases. King, on the other hand, received a steady flow of income throughout the term of the initial lease and had the potential for additional income through the remarketing of those machines not on lease.
By 1993, relations between ENVIPCO and King had soured. King filed a declaratory judgment action against ENVIPCO in the United States District Court for the District of Minnesota to determine whether the Agreement required it to sell back several RVMs to ENVIPCO under a repurchase provision in the Agreement. In the course of resolving this dispute in King's favor, the district court determined that the Agreement was "complete, integrated, and unambiguous." (J.A. 126.) As a result, the parol evidence rule applied and barred the use of any extrinsic evidence showing a contemporaneous or prior agreement. Id.
Following resolution of the Minnesota lawsuit in King's favor, ENVIPCO filed this action for declaratory relief in the Circuit Court of Fairfax County, Virginia. ENVIPCO sought to resolve other issues not settled in the Minnesota suit surrounding its right to repurchase certain machines and to settle certain conflicts arising from the Agreement. King removed the action to federal court under 28 U.S.C. Sec. 1441 (1988), and brought unsuccessful motions to dismiss and transfer. King then answered and counterclaimed for declaratory judgment and equitable relief. After discovery and on separate motions from both parties, the district court granted summary judgment in favor of ENVIPCO.
The district court found (1) that the Agreement allows ENVIPCO to decide, in its reasonable discretion, not to remarket machines because of their advanced age or run-down condition, and (2) that the Agreement only requires ENVIPCO to maintain King's machines for a period of five years. King appeals these rulings and asserts a separate evidentiary point of error.
We review a grant of summary judgment de novo. Miller v. Federal Deposit Ins. Corp., 906 F.2d 972, 974 (4th Cir.1990). "Under Rule 56(c), summary judgment is proper 'if the pleadings depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.' " Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed.R.Civ.P. 56(c)). As a federal court sitting in diversity, we must apply the choice of law rules of the forum state--in this case, the Commonwealth of Virginia. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941). Virginia law looks favorably upon choice of law clauses in a contract, giving them full effect except in unusual circumstances. See Tate v. Hain, 25 S.E.2d 321, 324 (Va.1943). Therefore, because Sec. 7.3 of the Agreement explicitly provides a choice of law clause calling for the application of Minnesota law, we apply Minnesota law in our review. (J.A. 289.) With these principles in mind, we first review whether ENVIPCO must remarket all machines regardless of age or condition and then examine whether ENVIPCO's maintenance responsibilities under the Agreement extend beyond five years.
In its counterclaim for declaratory judgment, King argued that regardless of age or condition, the Agreement required ENVIPCO to remarket all of King's RVMs after their initial leases expired. The language of the Agreement states:
5.01 Buyer hereby appoints Seller as its exclusive Remarketing Agent for Equipment purchased by Buyer to (at Buyer's option): (a) sell or (b) re-lease (collectively "Remarket") such equipment at the termination of the Lease.
5.02 Seller shall act as Remarketing Agent for as long as Buyer owns any of Seller's Equipment, and shall make all such day-to-day decisions in the reasonable exercise of its judgment.
(J.A. 220.) Relying on the language in Sec. 5.02 that ENVIPCO "shall make all ... day-to-day decisions in the reasonable exercise of its judgment," the district court found that ENVIPCO could make a reasonable decision not to remarket certain RVMs solely because of their advanced age or dilapidated condition. (J.A. 82-83.)
The issue confronting us is straightforward. We must determine whether "ENVIPCO is obligated by the Agreement as amended to remarket all of [King's] reverse vending machines regardless of age [or condition]." (Defendants' Answer and Counterclaims, J.A. 43.) We turn first to the unambiguous language of the contract. " 'If a court properly determines that the contract is unambiguous on the dispositive issue, it may then properly interpret the contract as a matter of law and grant summary judgment because no interpretive facts are in genuine issue.' " Goodman v. Resolution Trust Corp., 7 F.3d 1123, 1126 (4th Cir.1993) (quoting World-Wide Rights Ltd. v. Combe, Inc., 955 F.2d 242, 245 (4th Cir.1992)).
King points to the language in Sec. 5.02 and refers us to a plethora of provisions in the Agreement to buttress its argument that ENVIPCO has no discretion to decline to remarket any machines: Sec. 5.02 () (J.A. 220); Sec. 6.09 () (J.A. 223); Sec. 5.04 () (J.A. 220); Sec. 6.02 () (J.A. 222). We find that none of these provisions help us answer the question before us, for all of the provisions King cites deal with the long-term nature of ENVIPCO's remarketing responsibilities, but not a single one of these provisions discusses whether ENVIPCO must remarket every machine. Nothing in the Agreement requires ENVIPCO to remarket all machines regardless of age or condition.
On the other hand, Sec. 5.02 provides that ENVIPCO "shall make all ... day-to-day decisions in the reasonable exercise of its judgment." (J.A. 220.) To us, the import of this clause is very clear. Section 5.02 acknowledges that King must allow ENVIPCO to utilize its business expertise in this market--the expertise that prompted King to contract with ENVIPCO in the first place. The parties chose to give broad authority to ENVIPCO to control the "day-to-day" direction of its business--to require ENVIPCO to remarket...
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