National Tax Institute v. Topnotch at Stowe Resort, 03-1924.

• Decision Date: 05 November 2004
• Docket Number: No. 03-1924.,03-1924.
• Parties: NATIONAL TAX INSTITUTE, INC., Plaintiff, Appellant, v. TOPNOTCH AT STOWE RESORT AND SPA, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

388 F.3d 15

NATIONAL TAX INSTITUTE, INC., Plaintiff, Appellant, v. TOPNOTCH AT STOWE RESORT AND SPA, Defendant, Appellee.

No. 03-1924.

United States Court of Appeals, First Circuit.

Heard August 4, 2004.

Decided November 5, 2004.

Appeal from the United States District Court for the District of Massachusetts, Edward F. Harrington, J James M. Wodarski with whom Paul D. Abbott and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. were on brief for appellant.

Allen C.B. Horsley with whom Christopher L. DeMayo and LeBoeuf, Lamb, Greene & MacRae, L.L.P. were on brief for appellee.

Before BOUDIN, Chief Judge, SELYA and HOWARD, Circuit Judges.

BOUDIN, Chief Judge.

National Tax Institute ("the Institute")—an organization that puts on conferences—sued Topnotch, a resort hotel at Stowe, Vermont, with a capacity of 90 rooms. The suit concerned the meaning of a contract provision between the parties as to the number of rooms to be provided to the Institute at a reduced rate. The district court granted summary judgment in favor of Topnotch, and this appeal by the Institute followed.

Since 1995, the Institute has run an annual week-long seminar for accountants and attorneys at Topnotch. The dates have been in October, typically at or near the peak foliage season when travel in and to New England tends to be popular. Under its contract with Topnotch, first negotiated in 1994 and since amended several times, the Institute secures a block of rooms from Topnotch at a discounted "group rate" and then provides the rooms to those who attend the seminar, charging them a marked-up room rate and a seminar fee.

The original contract negotiated in September 1994 used a standard Topnotch agreement for group rates; but the terms critical to the present dispute appear in a detailed addendum drafted by the Institute's representative. The contract specified, for October 1995, a block of 40 rooms for one week at $90 each per night. The addendum obligated Topnotch to re-offer the contract for the next ten years "with identical terms and conditions (excluding group rates) should the [Institute] decide to book another meeting in any year from 1996 through 2005."

The addendum then listed specific October dates and a group rate for each of the next ten years. The rates set in 1994 (later revised) ranged from $99 to $132 per room, depending upon the year, with a $92 rate in any year that the Institute elected a later week in October. The renewal option given to the Institute applied "separately for each year." Also in the addendum appeared a further provision—around which this case centers—stating: "Additional rooms may be blocked at the group rate subject to availability."

In November 1995, the parties renegotiated the dates and the size of the block reserved for the 1996 conference; they increased the Institute's block to 45 rooms in exchange for moving the dates to ones preferred by Topnotch. In August 1996, the dates for the 1997 conference were again changed by agreement, raising the block to 50 rooms. The 1996 revisions made clear that the 50-room block would be available through 2005, stating: "The group shall have a first right of refusal [sic] on the following dates at the following group rates for which the hotel shall set aside fifty (50) rooms per night for each peak night...."

In September 2000, the Institute, seeking to enlarge its attendance, wrote to Topnotch requesting 70 rooms for all future years through 2005, relying upon the "additional rooms" clause quoted above. Topnotch replied that the Institute had no option for more than 50 rooms; it also remarked that Topnotch did not intend to extend the arrangement beyond the specified years because the Institute's contracted-for rates fell short of the group rates Topnotch was willing to offer after 2005. Compared with Topnotch's retail rates, which ranged from $230 to $740 depending on the year and type of room, the (revised) flat rates offered to the Institute were much discounted, starting at $132 in 2001 and rising to $144 by 2005.

A few months later, the Institute sued Topnotch in Massachusetts state court, seeking (along with damages) a declaration that the "additional rooms" clause entitled the Institute during the term of the contract to reserve, at the group rate, any rooms not yet booked by others. Topnotch removed the case to federal court on diversity grounds. Following discovery, including experts' reports, Topnotch moved for summary judgment, saying it had full discretion whether to offer at the group rate more than 50 rooms.

In a decision filed on May 27, 2003, the district court sided with Topnotch. The opinion rested primarily on "the rule of the last antecedent" and on the conclusion that Topnotch's position was the only reasonable construction of the "additional rooms" clause. The court deemed that provision unambiguous, adding that if the proffered extrinsic evidence were considered, it too would support Topnotch.

On the Institute's appeal, our review of the grant of summary judgment is de novo, drawing inferences in favor of the Institute. Filiatrault v. Comverse Tech., Inc., 275 F.3d 131, 134 (1st Cir.2001). Because the parties have plausibly treated Massachusetts law as governing on substantive issues, we may follow their lead. AccuSoft Corp. v. Palo, 237 F.3d 31, 40 n. 5 (1st Cir.2001). We agree with the district court that the contract is not ambiguous—only Topnotch has advanced a plausible reading of the disputed provision. See Lohnes v. Level 3 Communications, Inc., 272 F.3d 49, 53 (1st Cir.2001). The proffered extrinsic evidence, if considered, would not alter the result.

If one looked solely at the bare language of the amended contract, it might well be difficult to know which of the two proffered readings to adopt for the disputed sentence: "Additional rooms may be blocked at the group rate subject to availability." The Institute says that a room is "available" if not already reserved by another customer; Topnotch says that it is up to the management to decide whether to make the group rate "available" for more than 50 rooms.

The Institute drafted the addendum, and courts sometimes construe uncertain contract language against the drafter. Kerkhof v. MCI WorldCom, Inc., 282 F.3d 44, 51 (1st Cir.2002). But the canon is a qualified one, Principal Mut. Life Ins. v. Racal-Datacom, 233 F.3d 1, 4 (1st Cir.2000), a default rule that arguably has more force where the parties differ in sophistication or where standard forms are used (e.g., insurance contracts). In any event, the canon has little to do with actual intentions and should only be used, as a last resort, if other aids to construction leave the case in equipoise. Id.

The district court invoked a different canon, one presuming that the last antecedent term (here, "group rate") is what the parties intended to be modified by the qualifier that follows (here, "subject to availability"). See Deerskin Trading Post v. Spencer Press, Inc., 398 Mass. 118, 495 N.E.2d 303, 307 (1986). The canon formally applies, but it is not conclusive; and anyway the opaque sentence in question—inserted seemingly at random between unrelated provisions—was not drafted with any noticeable precision.

Often, related provisions may cast light on meaning. Here, the Institute points out that in the original contract, another term provided for "[g]roup rates [to] apply for days before and after the group dates, at the discretion of the hotel's management and subject to availability." This reference to "discretion" presents a contrast, abstractly helpful to the Institute, with the clause in question; but, again, the document is too haphazard to justify assigning much weight to the discrepancy.

What is clear is that the number of rooms to be made available at the discounted rate was a matter of importance expressed in precise figures. When in 1996 Topnotch increased the block to 50 rooms, the addendum was reworded to say: "The group shall have a first right of refusal [sic] on the following dates at the...