Tigg Corp. v. Dow Corning Corp.
| Decision Date | 15 June 1987 |
| Docket Number | No. 86-3480,86-3480 |
| Citation | 822 F.2d 358 |
| Parties | 4 UCC Rep.Serv.2d 44 TIGG CORPORATION v. DOW CORNING CORPORATION, Appellant. |
| Court | U.S. Court of Appeals — Third Circuit |
Erwin N. Griswold (argued), Michael A. Nims, Charles M. Trippe, Jr., Jones, Day, Revis & Pogue, Cleveland, Ohio, Edward G. O'Connor, Mark A. Willard, Eckert, Seamans, Cherin & Mellott, Pittsburgh, Pa., for appellant.
R. Dell Ziegler (argued), Buchanan Ingersoll, Professional Corp., Pittsburgh, Pa., for appellee.
Before SLOVITER and MANSMANN, Circuit Judges, and SCIRICA, District Judge. *
In this diversity action for contract damages under Michigan law, we consider the certified question whether the district court was correct in applying the parol evidence rule of the Michigan Uniform Commercial Code to exclude from the court's consideration extrinsic evidence offered to support an alternative interpretation of a contract which, from the linguistic perspective of the court, appears to be facially unambiguous. We find that the district court erred in refusing to consider all proffered evidence when determining whether, as a matter of law, the contract was reasonably susceptible of more than one interpretation. Therefore we will reverse the entry of partial summary judgment for the plaintiff.
Plaintiff Tigg Corporation ("Tigg") is a Pennsylvania corporation which manufactures filtration systems intended for industrial and commercial liquids. Defendant Dow Corning Corporation ("Dow Corning") is a Michigan corporation engaged in, among other things, the manufacture of silicone fluid used in electrical transformers. 1
In late 1981 representatives of Tigg and Dow Corning met in Pittsburgh, Pennsylvania, to discuss the possibility of a joint development effort directed toward a system for filtering polychlorinated biphenyls ("PCBs") from silicone fluids used to cool electrical transformers. This technology was eventually designated as the "RetroSil" system.
On February 9, 1982 Tigg and Dow Corning entered into a preliminary agreement for the joint development effort which contemplated that Tigg would supply two components for use in the RetroSil system, absorbers and control stations. On June 11, 1982 Tigg and Dow Corning entered into the written agreements that are the subject of the present dispute, the "Absorber Agreement" and the "Control Station Agreement." The contracts provided for expected quantity requirements as well as annual minimums. Dow Corning failed to purchase the specified minimums for 1983 and 1984, and Tigg filed this suit.
The contracts were drafted by Dow Corning's attorney and the disputed provisions of the Control Stations agreement 2 read as follows:
1.2 Agreement
DOW CORNING shall purchase from TIGG, and TIGG shall sell to DOW CORNING, the Control Stations specified in Paragraph 1.3 in the quantities specified in Paragraph 1.4.
1.3 Product
RetroSil tm Contril produced exclusively for DOW CORNING in accordance with the DOW CORNING specifications attached as Exhibit 1.
DOW CORNING agrees to purchase annually the minimum quantity of RetroSil tm Control Stations to specifications set out in Exhibit 1, indicated in the table below.
RetroSil tm Control Stations
Contract Minimum Expected
Year
1982
3rd Quarter 66 165
4th Quarter 66 248
Total 132 413
1983 578 1115
1984 825 2228
1985 and 1986 To be provided by July 1, 1984
Remedy for Failure to Supply
In the event that TIGG is unable to supply at least fifty percent of the current annual minimum quantity during any calendar quarter, DOW CORNING may make up the deficiency by purchasing from another source and the quantity so purchased will be deducted from DOW CORNING'S annual minimum purchase requirement.
The terms and conditions herein represent the entire Agreement between the Parties with respect to the sales of goods indicated above and may be modified only by a writing signed by both Parties.
Each Agreement provided that DOW CORNING'S "minimum purchase obligations" would be reduced for any period when TIGG'S equipment failed to "perform properly for the removal of PCBs from transformer fluid" and the parties were attempting to rectify such a deficiency.
Each Agreement also provided that:
The parties shall meet annually in November to adjust quarterly forecasts for the next contract year and to adjust annual minimums, if necessary.
Tigg Exhibit A.
The theory of Tigg's case is that the parties intended that Dow Corning be obligated to purchase at least the annual minimums specified by the contracts. Tigg argues that the contract minimums can be reduced or increased only by agreement and that, as required by the merger clause in each contract, any agreed-upon change must be in writing and signed by both parties.
In defense, Dow Corning contends that the contracts are only "requirements contracts" entailing no obligation on Dow Corning's part to purchase the minimum quantities identified in the contracts. Dow Corning further contends that the agreements on their face support such an interpretation by providing for necessary revision of quantity forecasts and annual adjustments of the minimum quantities. The only purpose of the specified minimums, according to Dow Corning, was to establish the conditions under which the parties were to deal with each other on an exclusive basis. Dow Corning argues that the contracts provided for firm orders by Dow Corning on a quarterly basis only, showing that the minimums were merely forecasts of expected sales by Dow Corning to others.
Dow Corning proffered extrinsic evidence in support of its interpretation, including letters exchanged during negotiations which could be interpreted as supporting Dow Corning's assertion that the parties, throughout their negotiations, contemplated that the requirements of Dow Corning would govern the annual minimums. See Deposition Exhibits Filed April 12, 1985, reprinted in appendix at 749-59a. Dow Corning's evidence also shows that after the 1982 meeting required by the agreements, the minimum quantity for control stations was in fact reduced. See Deposition of Robert Sanford at 42-45, reprinted in Appendix at 199a-1 to 4. We need not review each and every piece of evidence proffered by Dow Corning because, as will later be apparent, these exhibits are sufficient evidence of a contrary construction to withstand a motion for summary judgment.
Upon motion by the plaintiff Tigg, the district court entered partial summary judgment in its favor and against Dow Corning on the issue of the parties' intent. Although other issues, including Dow Corning's defense of major technical failure remain to be determined, the district court on June 23, 1986, amended its order of partial summary judgment to certify the contract interpretation issue.
In reviewing a grant of summary judgment we must apply the same standard that should have been applied by the district court. Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir.1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977). We must reverse unless it is plain that no genuine issue as to a material fact remains for trial and that the moving party is entitled to summary judgment as a matter of law. See Fed.R.Civ.P. 56.
The standard for summary judgment mirrors the standard for a directed verdict. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). As with a Rule 50 directed verdict, a motion for summary judgment may be granted only if, as a matter of law, viewing all the evidence which has been tendered and should have been admitted in the light most favorable to the party opposing the motion, no jury could decide in that party's favor. Indian Coffee Corp. v. Procter & Gamble Co., 752 F.2d 891, 894 (3d Cir.), cert. denied, 474 U.S. 863, 106 S.Ct. 180, 88 L.Ed.2d 150 (1985). In reviewing a summary judgment on an issue of contract interpretation we have said:
[I]n order for us to affirm the district court with respect to summary judgment, we must determine that the contract is so clear that it can be read only one way. If the non-moving party presents us with a reasonable reading of the contract which varies from that adopted by the district court, then a question of fact as to the meaning of the contract exists which can only be resolved at trial.
Landtect Corp. v. State Mut. Life Assur. Co., 605 F.2d 75, 79 (3d Cir.1979).
The dispute before us now centers on the determination of what constitutes the agreement of the parties regarding adjustments to the annual minimums expressed in the contracts. The burden at trial is on the plaintiff, Tigg, to establish the terms of the contract upon which it bases its claim. Zukoski v. Baltimore & Ohio R.R. Co., 315 F.2d 622 (3d Cir.), cert. denied, 375 U.S. 856, 84 S.Ct. 118, 11 L.Ed.2d 83 (1963). Therefore it is Tigg's burden, as movant for summary judgment, to produce credible evidence that would entitle it to a directed verdict if not controverted at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2556, 91 L.Ed.2d 265 (1986) (Brennan, J., dissenting), citing 10A C. Wright, A. Miller & M. Kane Sec. 2727 (2d ed. 1983). "Such an affirmative showing shifts the burden of production to the party opposing the motion and requires that party either to produce evidentiary materials that demonstrate the existence of a 'genuine issue' for trial or to submit an affidavit requesting additional time for discovery." Id. However, the ultimate burden of persuasion always remains with the moving party. Id.
Tigg attempted to meet its burden of production by showing that each contract was, on its face, susceptible of only...
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