Oregon RSA No. 6 v. Castle Rock Cellular

• Decision Date: 15 December 1993
• Docket Number: CV No. 93-20-PA.
• Citation: 840 F. Supp. 770
• Parties: OREGON RSA NO. 6, INC., Plaintiff, v. CASTLE ROCK CELLULAR OF OREGON LIMITED PARTNERSHIP, a Colorado limited partnership, Cellular Inc., a Colorado corporation, Castle Rock Cellular, Inc., a Colorado corporation, and Pacific Telecom Cellular, Inc., a Delaware corporation, and certain unknown business organization defendants 1-10, Defendants.
• Court: U.S. District Court — District of Oregon

840 F. Supp. 770

OREGON RSA NO. 6, INC., Plaintiff, v. CASTLE ROCK CELLULAR OF OREGON LIMITED PARTNERSHIP, a Colorado limited partnership, Cellular Inc., a Colorado corporation, Castle Rock Cellular, Inc., a Colorado corporation, and Pacific Telecom Cellular, Inc., a Delaware corporation, and certain unknown business organization defendants 1-10, Defendants.

CV No. 93-20-PA.

United States District Court, D. Oregon.

December 15, 1993.

COPYRIGHT MATERIAL OMITTED

Duane A. Bosworth, Davis, Wright, Tremaine, Portland, OR, Richard J. O'Brien, Gerard D. Kelly, John M. Breen, Sidley & Austin, Chicago, IL, for plaintiff.

Mark A. Turner, Ater, Wynne, Hewitt, Dodson & Skerritt, Portland, OR, for defendants Castle Rock Cellular of Oregon Ltd. Partnership, Cellular, Inc., and Castle Rock Cellular, Inc.

Gregory A. Chaimov, Bruce L. Campbell, Miller, Nash, Wiener, Hager & Carlsen, Portland, OR, for defendant Pacific Telecom Cellular, Inc.

OPINION

PANNER, District Judge.

Plaintiff Oregon RSA No. 6, Inc. ("Oregon RSA") brings this diversity action against defendants Castle Rock Cellular of Oregon Limited Partnership ("CRCO"), Cellular, Inc., Castle Rock Cellular, Inc. ("CRCI"), and Pacific Telecom Cellular, Inc. ("PTCI") to resolve various disputes arising out of a limited partnership agreement. The parties each move for summary judgment on Count II. I grant plaintiff's motion, and deny defendants' motions.

BACKGROUND

The Crook County RSA Limited Partnership ("Partnership" or "CCRLP") was formed in May, 1989. The general partner was United Telephone of the Northwest ("UTN"), and the limited partners were U.S. West NewVector Group ("NewVector"), CRCO, and an entity that for unknown reasons is variously referred to as Telephone Utilities of Oregon, Inc. ("TUO") and "Telephone Utilities of Eastern Oregon, Inc." Each partner owned a 25% interest in the Partnership.

In 1991, four changes occurred in the membership of the Partnership. First, Telephone and Data Systems, Inc. ("TDS") was substituted as the general partner in place of UTN. This transaction was specifically provided for in § 14.1 of the Agreement. Second, TUO's interest was acquired by Pacific Telecom Cellular of Oregon, Inc. ("PTCO"), with the approval of the other members of the Partnership. Third, NewVector became concerned that its interest in the Partnership might violate antitrust laws. NewVector therefore conveyed its 25% interest to the other partners, but retained an option to repurchase its interest prior to December 31, 1992. Finally, TDS transferred its general partner interest to its affiliate, Oregon RSA, as permitted by § 11.1 of the Agreement. Thus at the end of 1991, Oregon RSA, PTCO, and CRCO each held a one-third interest in the Partnership, subject to the NewVector repurchase option.

In November, 1992, NewVector gave the partners notice that it intended to sell its option to non-partner Pacific Telecom, Inc., grandparent of limited partner PTCO. If Pacific Telecom exercised that option, it would acquire NewVector's 25% interest, in addition to the 25% interest held by its subsidiary, PTCO. In accordance with the right of first refusal described in § 11.1 of the Agreement, the existing partners were given an opportunity to match Pacific Telecom's offer. Plaintiff informed the other partners that it would exercise its right of first refusal. PTCO did the same. CRCO sent the other partners a written waiver disclaiming any interest in purchasing the NewVector option, but several weeks later announced that it wished to rescind that waiver and exercise the right of first refusal. The validity of that attempted rescission is the subject of Count I.

At about the same time, Cellular, Inc. (grandparent of limited partner CRCO) entered into a secret agreement with PTCI (parent of limited partner PTCO), by which Cellular, Inc. agreed to convey to PTCI all its interest in CRCI and CRCO.¹ When plaintiff learned of that agreement, it notified the other partners it intended to exercise its right of first refusal to acquire CRCO's interest. Defendants countered that plaintiff had no such right, since PTCI was not purchasing a partnership "interest" but rather was purchasing the partner itself, who would technically remain a partner even though CRCO would be controlled by PTCI. Whether that transaction is subject to plaintiff's right of first refusal is the subject of Count II.

STANDARDS

Summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). If the moving party shows there are no genuine issues of material fact, the nonmoving party must go beyond the pleadings and designate facts showing an issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). Reasonable doubts about the existence of a material factual issue are resolved against the moving party. T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir.1987). Inferences drawn from the facts are viewed in the light most favorable to the nonmoving party. Id. at 630-31. However, a scintilla of evidence, or evidence that is merely colorable or not significantly probative, does not present a genuine issue of material fact. United Steelworkers of Am. v. Phelps Dodge Corp., 865 F.2d 1539, 1542 (9th Cir.), cert. denied, 493 U.S. 809, 110 S.Ct. 51, 107 L.Ed.2d 20 (1989).

DISCUSSION

The critical language in this Agreement reads as follows:

11.1 Limitation on Transfer; Right of First Refusal. The General Partner or any Limited Partner may transfer its Partnership Interest to an Affiliate thereof at any time without any consent or restriction from the General Partner or any other Limited Partner.... Except as provided in the preceding sentence and Section 14.1 of this Agreement, any other sale, exchange, transfer or assignment of the whole or any portion of any Partner's Partnership Interest shall require the prior written consent of the General Partner, which consent shall not be unreasonably withheld. Before the General Partner or any Limited Partner sells, exchanges, transfers or assigns all or any part of its Partnership Interest to a non-Affiliate of such Partner, it shall offer, by giving written notice to the General Partner, that interest to all of the other Partners for the price at which and the terms under which such non-Affiliate has offered in writing to pay for such interest.²

The question presented is whether PTCI may acquire CRCO and CRCI, and thereby acquire CRCO's interest in the Partnership, without first offering plaintiff an opportunity to match PTCI's bid in accordance with the right-of-first refusal clause. I believe that question should be answered no, for the reasons set forth in Perkins v. Standard Oil Co., 235 Or. 7, 383 P.2d 107 (1963), and subsequent cases establishing an implied obligation of good faith and fair dealing in the performance of every contract.

1. General Principles of Oregon Contract Law:

Under Oregon law, contracts are to be construed to effectuate the objectively reasonable intentions of the parties. Local 3-7, Int'l Woodworkers of America v. DAW Forest Products Co., 833 F.2d 789, 793 (9th Cir.1987) (citing Van v. Fox, 278 Or. 439, 564 P.2d 695 (1977)). Accord, Miller v. Miller, 276 Or. 639, 647, 555 P.2d 1246 (1976); Oregon School Employees Assoc. v. Rainier School Dist. No. 13, 311 Or. 188, 196, 808 P.2d 83 (1991). The parties' intention is found in the language used and the surrounding circumstances. U.S. National Bank v. Caldwell, 60 Or.App. 639, 642, 655 P.2d 180 (1982), rev. denied, 294 Or. 536, 660 P.2d 682 (1983). As a general rule, the construction of a contract is a question of law. Deerfield Commodities v. Nerco, Inc., 72 Or. App. 305, 317, 696 P.2d 1096, rev. denied, 299 Or. 314, 702 P.2d 1111 (1985). If the court determines that language of a contract is ambiguous, evidence may be admitted relating to the intention of the parties, and that question becomes one of fact. Id.

In determining whether a contract provision is ambiguous, the court may consider the circumstances under which it was made, including the situation of the subject and of the parties, so that the judge is placed in the position of those whose language he is interpreting. Sunset Coatings Co. v. State ex rel. Dept. of Transport., 62 Or.App. 53, 56, 660 P.2d 164, rev. denied, 294 Or. 792, 662 P.2d 728 (1983). Extrinsic evidence is admissible for that purpose without first having to establish the existence of an ambiguity. Id. Accord Welch v. U.S. Bancorp Realty & Mortgage Trust, 286 Or. 673, 690-91, 596 P.2d 947 (1979) (citing Card v. Stirnweis, 232 Or. 123, 130, 374 P.2d 472 (1962) (court must put itself in the position of the parties making the contract)); Deerfield Commodities, 72 Or.App. at 317, 696 P.2d 1096 (parol evidence may not vary the terms of the written agreement, but it can place the judge "in the position of those whose language is being interpreted.")

2. The Intent of the Parties:

The pleadings and briefs depict a cellular telephone industry that is for the most part organized around "families" of companies. One family is headed by communications giant Pacific Telecom, whose wholly-owned subsidiaries include defendant PTCI. PTCI is itself the parent of other subsidiaries, including PTCO and Pacific Telecom Cellular of Wisconsin, Inc. For convenience, I will refer to this as the Pacific Telecom "family".

Defendant Cellular, Inc. heads another family. It too has numerous wholly-owned subordinates, known as "affiliates" in the language of the industry. Defendant CRCI is a wholly-owned subsidiary of Cellular, Inc. CRCI is in turn the general partner and owner of a 51% interest in defendant CRCO. The remaining 49% limited partnership interest in CRCO is held directly by Cellular, Inc. Likewise, plaintiff is part of a family headed by United States Cellular Corp. ("USCC"), and...