Martin Marietta Corp. v. International Telecommunications Satellite Organization

• Decision Date: 21 October 1992
• Docket Number: No. 92-1094,92-1094
• Citation: 978 F.2d 140
• Parties: MARTIN MARIETTA CORPORATION, Plaintiff-Appellee, v. INTERNATIONAL TELECOMMUNICATIONS SATELLITE ORGANIZATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 140

978 F.2d 140

MARTIN MARIETTA CORPORATION, Plaintiff-Appellee, v. INTERNATIONAL TELECOMMUNICATIONS SATELLITE ORGANIZATION Defendant-Appellant.

No. 92-1094.

United States Court of Appeals Fourth Circuit.

Argued June 3, 1992.

Decided Oct. 21, 1992.

William Dill Rogers, Arnold & Porter, Washington, D.C., argued (Douglas A. Dworkin, Eric A. Rubel, Matthew Frumin, Arnold & Porter, Washington, D.C., and J. Hardin Marion, and William W. Carrier, III, Tydings & Rosenberg, Baltimore, Md., on brief), for defendant-appellant.

Andrew Lewis Frey, Mayer, Brown & Platt, Washington, D.C., argued (Evan M. Tager, Donald M. Falk, Mayer, Brown & Platt, Washington, D.C., and Benjamin R. Civiletti, James A. Dunbar, and John A. McCauley, Venable, Baetjer & Howard, Baltimore, Md., on brief), for plaintiff-appellee.

Before ERVIN, Chief Judge, WILLIAMS, Circuit Judge, and TILLEY, United States District Judge for the Middle District of North Carolina, sitting by designation.

OPINION

ERVIN, Chief Judge:

Martin Marietta agreed to launch a satellite for the International Telecommunications Satellite Organization (INTELSAT), but the satellite ended up in a useless orbit. Martin Marietta then sought a declaratory judgment that it owed INTELSAT nothing under the agreement between the parties, and INTELSAT counterclaimed for negligence, negligent misrepresentation, gross negligence, and breach of contract. Martin Marietta moved to dismiss INTELSAT's counterclaims for failure to state a claim upon which relief may be granted, under Federal Rule of Civil Procedure 12(b)(6), and the district court granted the motion as to all of INTELSAT's claims. Finding that INTELSAT has stated two claims upon which relief may be granted, breach of contract and gross negligence, we affirm in part, reverse in part, and remand.

I

Martin Marietta and INTELSAT reached an agreement under which Martin Marietta would launch two satellites for INTELSAT. The relevant provisions of the parties' contract follow. In Article 2, Martin Marietta contracted to "make its Best Efforts to furnish Launch Services for the purpose of delivering INTELSAT's payload into orbit." In Article 1.2, the parties defined "Best Efforts" as "[d]iligently working in a good and workman-like manner as a reasonable, prudent manufacturer of launch vehicles and provider of Launch Services." Article 6 was entitled "Best Efforts Replacement Launch." Article 6.1 stated, "INTELSAT may request a Replacement Launch in the event that following any Launch under this Contract, the Titan III Mission or the Payload Mission has not been accomplished for any reason." In Article 6.7, the parties stated that a replacement launch "shall be the sole and exclusive remed[y] of the Buyer from Martin Marietta in the event the Titan III mission fails for any reason." Article 17 was entitled "Allocation of Certain Risks." In Article 17.1, the parties agreed that:

The following risks, arising out of or incident to the Launch Services to be provided by Martin Marietta and its subcontractors at every tier under this Contract are allocated between INTELSAT and Martin Marietta as set forth in this ARTICLE 17, notwithstanding any other provision of this Contract.

Article 17.5.1 provided:

Martin Marietta and INTELSAT agree that, with respect to injury to or death of persons involved in, or damage to property used in connection with, Launch Services to be furnished under this Contract, neither Party will make any claim against the other ..., and each Party shall bear its own risk of loss with respect to injury to or death of its own employees or damage to its own property howsoever caused.

Article 17.6, entitled "Limitation of Liability," stated:

Martin Marietta's liability to INTELSAT ... whether or not arising under contract, or in negligence, strict liability, or under any other theory of tort or liability, shall not include any loss of use or loss of profit or revenue or any other indirect, special, incidental or consequential damages. In no event shall Martin Marietta's liability to INTELSAT for any claim arising out of a particular Launch Services exceed the price for that Titan III Launch Services to be paid by INTELSAT ..., provided however that nothing in this paragraph shall affect any right of INTELSAT to a Replacement Launch ... under Article 6....

Finally, Article 21 specified that the contract was to be governed by Maryland law.

The first launch was unsuccessful. The satellite failed to separate from the launch vehicle when it was supposed to, due to Martin Marietta's wiring mistake. Eventually, INTELSAT separated the satellite from the launch vehicle, but the process of doing so (which involved separating the satellite from its booster rocket) made it impossible for the satellite to attain its proper orbit. The satellite is the one that the National Aeronatics and Space Administration (funded by INTELSAT) recently rescued. The second launch the parties contracted for, which involved another satellite, was successful.

After INTELSAT threatened to sue over the first launch, Martin Marietta filed a declaratory judgment action in the District of Maryland, seeking a declaration that it owed INTELSAT nothing under their contract. INTELSAT counterclaimed for breach of contract, negligence, gross negligence, and negligent misrepresentation. INTELSAT sought $400 million in damages for the lost value of the launch services, the lost use of the satellite, lost profit, damage to the satellite, and the cost of rescuing the satellite. Martin Marietta then made a 12(b)(6) motion to dismiss the counterclaims. The district court granted the motion to dismiss the tort claims in April 1991, in an opinion published in edited form in May 1991, Martin Marietta Corp. v. INTELSAT, 763 F.Supp. 1327 (D.Md.1991), and granted the motion to dismiss the breach of contract claim in November 1991, in an unpublished opinion.

As to INTELSAT's negligence and negligent misrepresentation claims, the district court held that INTELSAT had not shown a tort duty of due care distinct from the duties the contract between the parties created. As for gross negligence, the district court held that the Commercial Space Launch Act Amendments of 1988 established a federal policy that overrode Maryland's common law rule that parties ordinarily cannot waive liability for gross negligence. Later, in ruling on the breach of contract claim, the district court held that the parties' contract clearly and unambiguously barred a breach of contract action. Citing Article 6.7 of the contract, the court reasoned that INTELSAT's sole remedy for a "mission failure" was a replacement launch and that the satellite's failure to separate from the rocket at the proper time constituted a "mission failure." The court also quoted Article 17.6 (the Limitation of Liability section) and stated that "[h]ere, again, the contract unambiguously bars any contract claim beyond that permitted in Article 6." J.A. at 656.

II

We first consider the breach of contract claim, bearing in mind that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). In considering a motion to dismiss, the claims must be construed in the light most favorable to the non-moving party and its allegations taken as true. Jenkins v. McKeithen, 395 U.S. 411, 421-22, 89 S.Ct. 1843, 1848-49, 23 L.Ed.2d 404 (1969). Most importantly, dismissals for failure to state a claim are reviewed de novo on appeal. Revene v Charles County Comm'rs, 882 F.2d 870, 872 (4th Cir.1989). INTELSAT's theory is that Martin Marietta breached its obligation to use its "best efforts," a duty established in Article 2 of the contract and defined in Article 1. The district court found that the contract clearly and unambiguously barred that claim. As the district court noted, the construction of ambiguous contract provisions is a factual determination that precludes dismissal on a motion for failure to state a claim. Wolman v. Tose, 467 F.2d 29, 34 (4th Cir.1972).

After our required de novo review, we find that the contract is not free from ambiguity and that the district court erred in granting Martin Marietta's motion to dismiss. First, the district court stated that failure of the satellite to separate from the rocket was a "mission failure" under the contract, limiting INTELSAT's remedy to a replacement launch. In support for that proposition, the court cited Article 1.19 of the contract and the "Interface Control Document," a separate agreement addressing "the design and operations of each company's flight and ground equipment." J.A. at 329. However, Article 1.19, a definitional section, does not define "mission failure." Instead, it defines the term "Title III Mission" as "[t]he mission assigned to the Titan III as specified in [the] Interface Control Document." We have searched the Interface Control Document, 80 pages of tables, graphs, and technical information, in vain for any sign that the parties intended it to shed light on what would constitute a mission failure.

While, as a matter of common sense, it seems reasonable to label what happened as a "mission failure," INTELSAT argues that its claim is not for mission failure, but for failure of separation of the Titan III payload and booster. With the parties' contract and Interface Control Document silent on this point, the district court erred in accepting Martin Marietta's construction of the contract.

Second, the district court found that the "Limitation of Liability" provision in Article 17 unambiguously barred any contract claim other than the replacement launch remedy in Article 6. INTELSAT claims that the contract is ambiguous because Article 6.7 states that a replacement launch is INTELSAT's "sole and exclusive" remedy, while...