Fed Cetera, LLC v. Nat'l Credit Servs., Inc.

Decision Date17 September 2019
Docket NumberNo. 18-1243,18-1243
Citation938 F.3d 466
Parties FED CETERA, LLC, a New Jersey limited liability company, Appellant v. NATIONAL CREDIT SERVICES, INC., a Washington Corporation
CourtU.S. Court of Appeals — Third Circuit

Michael J. McCaney, Jr. [ARGUED], Keller & Goggin, 1528 Walnut Street, Suite 900, Philadelphia, PA 19102, Counsel for Appellant Fed Cetera, LLC.

Leigh Ann Benson, Arthur P. Fritzinger [ARGUED], David J. Walton, Cozen O’Connor, 1650 Market Street, One Liberty Place, Suite 2800, Philadelphia, PA 19103, Counsel for Appellee National Credit Services, Inc.

Before: KRAUSE, COWEN, and FUENTES, Circuit Judges

OPINION OF THE COURT

FUENTES, Circuit Judge.

National Credit Services (National Credit), a debt collection agency, sought opportunities to contract with the federal government to provide debt collection services. In the hopes of winning such a contract, it reached an Agreement with a company called Net Gain, which was in the business of offering networking relationships to its clients. In return for introductions, National Credit agreed to pay Net Gain a finder’s fee for any related contract that National Credit "consummated" during the term set in the Agreement. A few years later, Net Gain assigned its rights in the Agreement to Appellant Fed Cetera.

During the effective period of the Agreement, National Credit signed a contract with the federal government. It did not begin performance on that contract until late 2016, after the Agreement’s applicable period ended. Because National Credit had not begun performance during the contract period, it refused to pay Fed Cetera the finder’s fee, arguing that it had not "consummated" the federal contract. Fed Cetera sued, and National Credit moved for judgment on the pleadings.

After reviewing the Agreement, the District Court concluded that the Agreement required some amount of performance on the federal contract to trigger a finder’s fee, which had not occurred during the Agreement’s relevant period. Thus, it granted judgment in National Credit’s favor. Fed Cetera appeals that ruling now.

The question before us, then, is whether the terms of the Agreement required some degree of performance while the Agreement was in force in order for a contract to be "consummated." We conclude that it did not, and, for the reasons stated here, we reverse.

I.

To win a student debt collection contract from the federal government, a debt collector typically must follow a convoluted but—within the industry—well-known path. The company must begin by working as a subcontractor to a current federal contractor. If that subcontract goes well, then the company may have an opportunity to receive a direct federal contract the next time around.

National Credit sought such an arrangement. In an effort to find a federal contractor with which it could subcontract, National Credit sought out Net Gain for networking opportunities. National Credit and Net Gain entered into their Agreement on February 1, 2010. Under that agreement, National Credit owed Net Gain—and later Net Gain’s assignee Fed Cetera1 —the finder’s fee for any related contract Net Gain consummated between the signing date and February 1, 2016.

Specifically, the Agreement states that National Credit owes a fee any time a "Fee Transaction ... is consummated."2 A "Fee Transaction," further, can mean either one of two things: (1) "the consummation, with any Federal Contractor, of any transaction related to ‘teaming’ or ‘subcontracting.’ "; and (2) the "subsequent consummation of any contract with any Federal government agency for which the Principal has been invited to compete, and is later awarded a contract to perform" where that contract "shall have arisen due to any ‘teaming’ or ‘subcontracting’ engagement [Net Gain] may have facilitated in advance of any such award."3 Once a Fee Transaction is consummated, the fee was "due and payable until fees are no longer generated from any and all Fee Transactions, within thirty (30) days after each receipt during such period by Principal ... of revenue resulting from or in any way related to the Fee Transaction, including any fees paid after the expiration or termination of any contract."4

In other words, Net Gain agreed to introduce National Credit to a federal contractor. If the introduction worked out, National Credit would get a subcontract with that contractor. That subcontract could ultimately lead National Credit to win a direct federal contract of its own. National Credit would owe Net Gain a 2.5% finder’s fee for both contracts—assuming they were "consummated" within the period set by the Agreement. National Credit needed to pay Net Gain that fee within thirty days after it received any revenue related to the Fee Transactions.

The structure of this arrangement is not at issue. Nor is whether a given contract falls within the terms of the Agreement.5

National Credit signed two relevant contracts during the Agreement’s operative period. The first was a subcontract with a third-party federal contractor. National Credit regularly made finder’s fee payments for that subcontract without apparent dispute.

The second, which is in dispute, was a direct contract with the federal government, signed in 2014. However, National Credit did not begin performance on that contract until September 2016, several months after the Agreement’s term concluded. Because it had not yet begun performance, National Credit refused to pay Fed Cetera the finder’s fee, asserting that the language of the Agreement did not require it to because no Fee Transaction had been consummated.

Fed Cetera sued. National Credit moved for judgment on the pleadings, arguing that the terms of the contract were plainly in its favor. The District Court agreed with National Credit. The District Court concluded that in order for a Fee Transaction to be consummated, the Agreement required some degree of performance on the contract. Since National Credit had not yet begun that performance by the end of the Agreement’s applicable period, the federal contract fell outside the terms of the Agreement, and National Credit owed no finder’s fee. The District Court entered judgment in National Credit’s favor, and Fed Cetera timely appealed.6

II.

The parties agree that New Jersey law applies.7 "To establish a breach of contract claim, a plaintiff has the burden to show that the parties entered into a valid contract, that the defendant failed to perform his obligations under the contract and that the plaintiff sustained damages as a result."8 Under New Jersey law, courts enforce contracts looking at the intent of the parties, "the contractual terms, the surrounding circumstances, and the purpose of the contract."9 "Whether a contract is clear or ambiguous is a question of law."10 "If the language of a contract is plain and capable of legal construction, the language alone must determine the agreement’s force and effect."11 "Even in the interpretation of an unambiguous contract, we may consider all of the relevant evidence that will assist in determining its intent and meaning."12 If the contract is "ambiguous, the ‘fact-finder must attempt to discover what the contracting parties ... intended [the disputed provisions] to mean,’ " and accordingly, judgment on the pleadings would not be appropriate.13

The only question here is when, under the terms of the Agreement, National Credit’s second contract was "consummated." The Agreement’s applicable period lasted until February 2016. If the federal contract was consummated before that date, then National Credit owes a finder’s fee. If it was consummated after, then National Credit does not.

The Agreement does not define any form of "to consummate." Both parties argue that the term "consummate" is clear on its face, although they differ on what is clear about it. Fed Cetera argues that, in the context of the Agreement, "consummated" means "signed," "formed," or "executed," and asserts that National Credit consummated the second contract when National Credit executed it with the government in 2014. National Credit argues the opposite, asserting that the District Court correctly found that "consummated" requires some degree of performance of a contract.

New Jersey courts have not provided dispositive guidance on the meaning of the term "consummate." The cases offer competing, context-specific definitions. The case most cited by National Credit and the District Court is Todiss v. Garruto , a New Jersey Superior Court Appellate Division decision.14 Todiss concerned whether a broker was still owed a commission from a seller even after a third-party buyer backed out.15 The court in Todiss relied on the explicit provision in the parties’ agreement that stated "the commission was to be ‘contingent upon the transaction being consummated and in the event that said transaction is not consummated then and in that event no commission shall be payable to said brokers.’ "16 The court held that "[i]n common acceptation the meaning of the transitive verb ‘consummate’ is ‘to bring to completion that which was intended or undertaken to be done.’ "17 Todiss concluded that, because the sale never took place, the broker wasn’t owed a fee.18

This case, however, does not involve a sale of something, and so Todiss is not entirely on point. A classical contract is formed, and the legal duties attach, with offer, acceptance and consideration, not upon the completion of some sort of performance—except, of course, where acceptance is communicated by performance.19 Fed Cetera’s position here, then, is consistent with Todiss ; what was arguably "brought to completion" here was the negotiation and formation of the federal contract.

Shortly after Todiss , the New Jersey Supreme Court decided Klos v. Mobil Oil Co .20 Klos involved a question of when a particular life-insurance policy became effective. The Supreme Court held that when a plaintiff "mailed in his completed [insurance] application, he ac...

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