Willesen v. Ernest Commc'ns, Inc.

Decision Date16 July 2013
Docket NumberNo. A13A0349.,A13A0349.
PartiesWILLESEN d/b/a 2W Communications. v. ERNEST COMMUNICATIONS, INC.
CourtGeorgia Court of Appeals

OPINION TEXT STARTS HERE

Steven William Hardy, Atlanta, for Appellant.

Donald Lloyd Swift III, Duluth, Elizabeth L. Clack–Freeman, for Appellee.

BRANCH, Judge.

Marvin G. Willesen, d/b/a 2W Communications (“2W”) filed suit against Ernest Communications, Inc. (“ECI”) for commissions allegedly due under a contract between the parties. 2W now appeals from orders granting ECI's motion for a directed verdict and denying 2W's motion for a new trial. Specifically, 2W contends that the trial court erred in finding (i) that the contract's exculpatory clause barred 2W's claim for payment of its earned commissions and (ii) that 2W had failed to prove its damages. We agree and therefore reverse the trial court's orders.

The record shows that ECI is a telecommunications carrier authorized by both the FCC and a number of state public utility commissions to provide and sell telecommunication services to the public. On March 1, 2004, 2W and ECI entered into an “ECI Authorized Sales Agent Agreement.” Under that agreement, 2W agreed to market and sell ECI's services to third parties (referred to by the parties as “end users”), and ECI agreed to pay 2W a commission on the services it sold.1 Additionally, the agreement granted ECI the right to terminate the agreement “without cause at any time by providing [2W] at least one (1) month prior written notice.” With respect to 2W's sales commissions, the agreement provides, in relevant part:

ECI will send an invoice to each End User ... each month detailing the End Users charges for the Service(s).... These invoices shall direct End Users to remit payments directly to ECI. An End User's payment shall be applied to the End User's oldest applicable outstanding invoice.... Within ten (10) business days after the End User invoices are distributed to End Users by ECI, ECI shall forward a monthly commission statement to Sales Agent [2W].... Commission payments shall be paid by ECI to Sales Agent within thirty (30) days after the date of the corresponding monthly statement. ECI will hold all commission payments on any End User accounts that are more than 30 days past due. Once an End User's accounts [are] brought current, the supporting details and commission payments associated with that End User's account will be reflected on the Sales Agent's next monthly commission statement.... ECI will continue to pay commissions to Sales Agent on any new or existing End User accounts attributable to Sales Agent provided the End User remains an ECI customer, including after termination or expiration of this Agreement.

The agreement also contains an exculpatory clause, captioned “Limitation of Liability,” that provides:

Sales Agent acknowledges that service provisioning failures and service interruptions in the telecommunications industry frequently are due to circumstances beyond a carrier's normal control and are difficult to assess as to cause or resulting damages. Accordingly, Sales Agent's sole remedy for ECI's failure or inability to perform its obligations under this Agreement shall be to terminate this Agreement. ECI MAKES NO WARRANTY EITHER EXPRESSED OR IMPLIED, CONCERNING ITS TELECOMMUNICATIONS SERVICES, INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR

FITNESS FOR A PARTICULAR USE OR PURPOSE. IN NO EVENT SHALL ECI BE LIABLE TO SALES AGENTS OR TO ANY END USERS FOR ANY AMOUNTS REPRESENTING LOSS OF PROFITS, LOSS OF BUSINESS, INDIRECT, SPECIAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING FROM THE PERFORMANCE OR NONPERFORMANCE OF THIS AGREEMENT OR ANY ACTS OR OMISSIONS ASSOCIATED THEREWITH OR RELATED TO THE USE OF ANY ITEMS OR SERVICES FURNISHED HEREUNDER, WHETHER THE BASIS OF LIABILITY IS BREACH OF CONTRACT, TORT ..., STATUTORY, OR ANY OTHER LEGAL THEORY. ECI'S OBLIGATIONS TO END USER ARE LIMITED BY ITS ORDER FORMS, AGREEMENTS, AND APPLICABLE STATE AND FEDERAL TARIFFS.

(Emphasis in original.)

Sometime in or around late 2007, a dispute arose between 2W and ECI regarding commissions owed 2W on the accounts of two corporate customers to whom 2W had sold ECI's services. As a result of this dispute, ECI terminated its agreement with 2W on February 26, 2008. After ECI refused to pay any further commissions on the disputed accounts, 2W filed this lawsuit, seeking to recover those commissions. The case proceeded to trial in March 2012. To prove the amount of commissions it was allegedly owed, 2W introduced evidence showing the amounts that had been billed to the two disputed clients between December 2007 and March 2012 2 and the commission that would be owed on those billed amounts under the terms of the parties' agreement.

At the close of 2W's case, ECI moved for a directed verdict on two grounds. First, ECI argued that 2W had failed to prove its damages because it had shown only the amounts billed to the disputed clients, but had failed to show that the clients had, in fact, paid those bills. And according to ECI, no commissions were earned under the contract unless and until the end user paid the bills; thus, because 2W had failed to show that the bills had been paid, it had failed to prove that it had earned a commission on the billed amounts. Additionally, ECI argued that the agreement's exculpatory clause barred 2W from suing to recover any unpaid commissions owed it under the contract. The trial court agreed with both of ECI's arguments, and granted a directed verdict in its favor.

Following the entry of the written order granting ECI a directed verdict, 2W filed a motion for a new trial, which was denied. This appeal followed.

1. The questions presented by this appeal require us to interpret the contract between the parties. The interpretation of a contract is normally a question of law to be resolved by the court, and the orders of the lower court in this case are therefore subject to de novo review. Goody Products v. Dev. Auth. of City of Manchester, 320 Ga.App. 530, 535(2), 740 S.E.2d 261 (2013). This review requires us first to decide whether the contract provisions at issue are ambiguous. Id. If there is no ambiguity, then we simply enforce the contract according to its terms. Holmes v. Clear Channel Outdoor, 284 Ga.App. 474, 476(2), 644 S.E.2d 311 (2007). Where an ambiguity exists, however, we resolve that ambiguity by applying the statutory rules of construction to ascertain the intent of the parties. Garrett v. Southern Health Corp. of Ellijay, 320 Ga.App. 176, 182(1), 739 S.E.2d 661 (2013); OCGA § 13–2–2. Those rules require us to interpret any isolated clauses and provisions of the contract in the context of the agreement as a whole, Jones v. Destiny Indus., 226 Ga.App. 6, (2), 485 S.E.2d 225 (1997); to construe any ambiguities most strongly against the party who drafted the agreement, Hertz Equip. Rental Corp. v. Evans, 260 Ga. 532, 397 S.E.2d 692 (1990); and to give the contract a “reasonable construction that will uphold the agreement rather than a construction that will render the agreement meaningless and ineffective.” (Citation omitted.) McLendon v. Priest, 259 Ga. 59, 60, 376 S.E.2d 679 (1989).

2. We first address whether the contract's exculpatory clause bars 2W from suing to recover any unpaid commissions owed it under the contract. We find that it does not.

In analyzing this issue, we note that “because exculpatory clauses may amount to an accord and satisfaction of future claims and waive substantial rights, they require a meeting of the minds on the subject matter and must be explicit, prominent, clear and unambiguous.” (Citation and punctuation omitted.) Holmes, supra at 477(2), 644 S.E.2d 311. Moreover, because the contract at issue is a form agreement created by ECI, any ambiguity in the exculpatory clause must be construed against ECI. Id. Additionally, the clause must be read in the context of the contract as a whole, bearing in mind the essential purpose of that contract. Garrett, supra at 188(3)(a), 739 S.E.2d 661. In this case, the essential purpose of the contract was to make 2W an authorized sales agent of ECI. Thus, 2W agreed to market and sell ECI's services and, in exchange, ECI agreed to compensate 2W for its successful efforts.

Bearing in mind the essential purpose of the contract, we now turn to the exculpatory clause. That clause contains five sentences; ECI, however, relies on only one sentence to support its argument that the clause prevents 2W from seeking to recover the unpaid commissions it is owed under the contract. And in making this argument, ECI takes the sentence out of context, i.e., it does not read that sentence in conjunction with the remainder of the exculpatory clause or in the context of the entire contract. When placed in context, however, it becomes clear that the exculpatory clause does not preclude the claims asserted by 2W in this case.

Notably, the exculpatory clause begins by stating:

Sales Agent acknowledges that service provisioning failures and service interruptions in the telecommunications industry frequently are due to circumstances beyond a carrier's normal control and are difficult to assess as to cause or resulting damages. Accordingly [i.e., because of the facts acknowledged in the preceding sentence], Sales Agent's sole remedy for ECI's failure or inability to perform its obligations under this Agreement shall be to terminate this Agreement. ECI MAKES NO WARRANTY EITHER EXPRESSED OR IMPLIED, CONCERNING ITS TELECOMMUNICATIONS SERVICES, INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE.

(Emphasis supplied.) Additionally, the fifth and final sentence of the exculpatory clause provides: “ECI'S OBLIGATIONS TO END USER ARE LIMITED BY ITS ORDER FORMS, AGREEMENTS, AND APPLICABLE STATE AND FEDERAL TARIFFS.”

When read together, it is clear that these four sentences of the exculpatory clause are intended to shield...

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