SC Testing Technology, Inc. v. Department of Environmental Protection, Docket No. K

• Decision Date: 30 December 1996
• Docket Number: Docket No. K
• Citation: 688 A.2d 421
• Parties: SC TESTING TECHNOLOGY, INC., et al. v. DEPARTMENT OF ENVIRONMENTAL PROTECTION et al. Lawen-96-179.
• Court: Maine Supreme Court

Page 421

688 A.2d 421

SC TESTING TECHNOLOGY, INC., et al. v. DEPARTMENT OF ENVIRONMENTAL PROTECTION et al.

Law Docket No. Ken-96-179.

Supreme Judicial Court of Maine.

Argued Sept. 5, 1996.

Decided Dec. 30, 1996.

Daniel Amory (orally), Barbara Appleby, Drummond Woodsum & MacMahon, Portland, Jeffrey A. Thaler (orally), Paul F. Macri, Berman & Simmons, P.A., Lewiston, for Plaintiffs.

Peter J. DeTroy (orally), Christopher C. Taintor, Norman, Hanson & DeTroy, Portland, for Defendants.

Before WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD, RUDMAN, DANA, and LIPEZ, JJ.

ROBERTS, Justice.

SC Testing Technologies, Inc., along with its Maine subsidiary, Systems Control, Inc. (collectively SCI), appeals from a summary judgment entered in the Superior Court (Kennebec County, Alexander, J.) in favor of the Department of Environmental Protection (DEP) on SCI's action for contract damages. SCI argues that the trial court erred in granting a summary judgment because its interpretation of the underlying contract was erroneous and there exist genuine issues of material fact. We affirm the judgment.

I.

In 1991 the Legislature enacted the Motor Vehicle Emissions Inspection Program. P.L.1991, ch. 818, codified as 38 M.R.S.A. §§ 2401-2408 (Supp.1994). The program, part of a plan to comply with the federal Clean Air Act (CAA) Amendments of 1990, 42 U.S.C. §§ 7401-7671(q) (1995), was intended to reduce ozone emissions in seven counties: Androscoggin, Cumberland, Kennebec, Knox, Lincoln, Sagadahoc, and York. The legislation authorized the DEP to contract with a private entity to design, construct, equip, establish, and maintain emission inspection stations in each of the seven counties. The program was fine-tuned in 1993 by the enactment of a registration-based enforcement mechanism that required owners to present proof of compliance prior to vehicle registration. P.L.1993, ch. 418, codified as 29-A M.R.S.A. § 403 (Supp.1994). The program was to be financed entirely by the imposition on vehicle owners of an inspection fee, a portion of which would be retained by the private contractor.

In November 1992 the DEP began the process of selecting a contractor by issuing a Request for Proposals (RFP). In December 1992 the DEP held a proposer's conference, at which prospective contractors presented questions regarding specific aspects of the program and the RFP. Questions were also submitted directly to the DEP, which responded by providing written answers to all prospective bidders.

The proposer's conference and the submission of written questions revealed that a concern among prospective contractors was the potential economic effect of a legislative repeal of the program. ¹ In February 1993 the DEP issued an amended RFP. Section 5.N of that document, entitled "Replacement of the Contractor," concluded with the following language:

Note: In the event the Maine Legislature repeals all or part of the program, the Department and the State of Maine shall bear no responsibility to compensate the Contractor.

Thereafter, SCI submitted a proposal and was awarded the contract the following April. Contract negotiations between the DEP and SCI concluded with a final agreement that became effective on February 4, 1994. During the course of negotiations, the DEP repeatedly refused to agree to contract terms that would have partially compensated SCI for its investment in the event of legislative repeal of the program. Specifically, the DEP rejected contract language that would have compensated SCI for its investment in the event of termination of the contract for the State's convenience. The DEP also rejected proposed language that would have permitted SCI to treat repeal of the program as a change in the scope of the work of the contract, for which SCI could seek compensation by way of a contractual amendment.

The substantive provisions of the contract between SCI and the DEP were contained in an attached rider referred to as Rider A. Much of Rider A's language closely tracked the amended RFP, and certain of its provisions were explicitly incorporated by reference into the contract. SCI's proposal, approximately 1000 pages in length, was explicitly incorporated by reference into Rider A. Neither Rider A nor SCI's proposal contains the language of section 5.N of the amended RFP, allocating to the contractor the economic risk of repeal of the program.

Section AA of Article I of Rider A dealt with potential conflicts between language contained in Rider A and elsewhere. Section AA provided:

Conflicts. This Contract shall control in the event of any conflict between the provisions hereof and the provisions of either the RFP or the Proposal. Furthermore, only as between the RFP and the Proposal, the RFP shall control in the event of any conflict between the provisions of the RFP and the provisions of the Proposal.

In anticipation of the program's July 1, 1994, start-up date, SCI established inspection facilities in the seven Maine counties. Motor vehicle inspections occurred as scheduled during July and August of 1994, but implementation of the plan generated sharp public criticism. In response, on September 1, 1994, the DEP and SCI signed a memorandum of agreement suspending mandatory emissions testing from that date until March 1, 1995. During that period, testing would be strictly voluntary and the inspection fee would be reduced.

On February 28, 1995, prior to the resumption of mandatory emissions testing, the Legislature enacted P.L.1995, ch. 6, which suspended registration-based enforcement of the program from March 1 until May 1, 1995. The program was permanently repealed effective April 26, 1995, through the enactment of P.L.1995, chs. 49 and 50.

In May 1995 SCI filed a complaint against the DEP alleging, inter alia, a breach of contract and a breach of the implied duty of good faith and fair dealing. The court entered a summary judgment in favor of the DEP, finding that the contract allocated to SCI the entire risk of loss in the event of repeal of the program.

II.

SCI argues that the trial court erred in construing the contract to place on SCI the entire risk of loss in the event of legislative repeal of the program. On an appeal from a summary judgment, we view the evidence in the light most favorable to the party against whom the judgment was entered to determine whether the record supports the trial court's conclusion that there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Simpson v. Central Maine Motors, Inc., 669 A.2d 1324, 1325-26 (Me.1996).

The trial court found that the risk-of-repeal note contained in section 5.N of the amended RFP was incorporated into the express agreement between SCI and the DEP by means of Rider A's conflicts clause, section AA of Article I. The court determined that the conflicts clause was unambiguous, and that its purpose was to incorporate into the contract those provisions of the amended RFP that did not conflict with the provisions of Rider A. Thus, because Rider A was silent as to the risk of loss in the event of the repeal of the program, and because nothing in Rider A conflicted with the allocation of risk expressed in the risk-of-repeal note contained in section 5.N, that note was to be read as part of the contract. In effect, the trial court concluded, the contract between SCI and the DEP was composed of Rider A, those provisions of the amended RFP that were not addressed in Rider A and that did not conflict with it, and those parts of SCI's proposal that did not conflict with either.

"[T]he paramount principle in the construction of contracts is to give effect to the intention of the parties as gathered from the language of the agreement viewed in light of all the circumstances under which it was made." Lynch v. Ouellette, 670 A.2d 948, 949 (Me.1996). When the language of a contract is not ambiguous, the contract's interpretation is a question of law for the court. F.O. Bailey Co. v. Ledgewood, Inc., 603 A.2d 466, 468 (Me.1992). We agree with the trial court that the conflicts clause contained in Rider A expresses a clear intention on the part of SCI and the DEP to incorporate into their agreement those provisions of the amended RFP that were not addressed in Rider A and that did not conflict with it. Otherwise, the parties' reference to the amended RFP in the conflicts clause would be meaningless. In construing a contract, we should avoid an interpretation that renders meaningless any particular provision in the contract. Top of the Track Assocs. v. Lewiston Raceways, Inc., 654 A.2d 1293 (Me.1995). Thus, the risk-of-repeal note contained in section 5.N of the amended RFP was incorporated in the contract by the operation of the conflicts clause. This interpretation of the contract gives effect to the unambiguous intention of the parties, as shown both by the language of the conflicts clause and the circumstances surrounding their agreement, that SCI would bear the risk of loss in the event the Legislature repealed the program.

The contract between SCI and the DEP allocated to SCI the risk of legislative repeal of the program. Moreover, when a party enters into a contract with a state agency, it does so with the understanding that the Legislature may at some future time take action that nullifies the subject matter of the contract and, necessarily, the respective performance obligations of the parties. "The Legislature of Maine may enact any law of any character or on any subject, unless it is prohibited, either in express terms or by necessary implication, by the Constitution of the United States or the Constitution of this State." League of Women Voters v. Secretary of State, 683 A.2d 769, 771 (Me.1996) (quoting Baxter v. Waterville Sewerage Dist., 146 Me. 211, 215, 79 A.2d 585, 588 (1951)).

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