Amerifactors Financial Group LLC v. Windstream Supply LLC

Filing 103

ORDER granting Windstream's renewed motion for summary judgment as supplemented, 75 & 92 . Windstream's motion to exclude evidence, 82 , denied as moot. Signed by Judge D. P. Marshall Jr. on 8/20/2014. (jak)

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
WESTERN DIVISION

AMERIFACTORS FINANCIAL GROUP LLC

v.

PLAINTIFF

No. 4:12-cv-202-DPM
DEFENDANT/
THIRD-PARTY PLAINTIFF

WINDSTREAM SUPPLY LLC

v.
HAL-TEC CONSTRUCTION INC.

THIRD-PARTY DEFENDANT

ORDER
1. We're finally at the core of this case- whether Windstream broke its
contract with Hal-Tee when the parties wound down their business
relationship. This Court's prior Orders give the details. NQ 34 & 59. Hal-Tee
is in the margins: it assigned its contractual rights to Amerifactors, who is the
Plaintiff here; and Hal-Tee is in default on Windstream' s third-party
complaint. Windstream seeks summary judgment, while Amerifactors says
disputed facts require a trial.

The parties agree that their contract is

unambiguous. The Court concurs. And viewing the record in the light most
favorable to Amerifactors, the Court sees no genuinely disputed material

facts. Hyman Freightways v. Carolina Freight Carriers Corp., 942 F.2d 500, 502

(8th Cir. 1991).
2. Windstream, it's agreed, terminated the parties' relationship in late
April 2009 effective at the end of July. The parties' contract allowed for
immediate termination for cause. NQ 1-1

at~

33(a). Windstream had cause

because Hal-Tee wasn't installing communication lines and related equipment
in a timely and efficient fashion. NQ 97-1 at 25, 29, 33-35, 40; NQ 97-2 at 4-9.
So the ninety days was an accommodation. In early May, Windstream sent
Hal-Tee a confirming letter about the ninety-day period for wrapping up the
approximately fifty projects Hal-Tee had in hand. NQ 75-2. The letter is
quoted in the margin.* The letter noted that, during the transition period, the

*

Windstream Supply, Inc.
13560 Morris Rd.
Alpharetta, GA 30004
800-533-3161
www.windstream.com
May 7,2009
VIA NEXT DAY AIR
Hal-Tee Construction, Inc.
Attn: Robert Hales
405 North Reo St.
Tampa, FL 33609
Re:

Termination of Master Contractor Agreement No. 081028A14

-2-

parties' master agreement continued to govern.
Around the time of the confirming letter, though, things changed again.
It turned out that, notwithstanding promise of best efforts, Hal-Tee might not

be able to complete all its projects by late July.

Windstream pulled

approximately forty projects- all those where Hal-Tee had not already started

Dear Mr. Hales,
Windstream Supply, LLC hereby notifies you that it is terminating its Master
Contractor Agreement (MCA) with Hal-Tee Construction, Inc., dated January
1, 2009 in accordance with section33(a). This termination will be effective on
July 31,2009. It is our expectation that Hal-Tee will perform under the terms
of the MCA and provide for a smooth and orderly transition. The
Windstream point of contact for the transition will be Mr. Ken Allison. Ken
can be reached at 918-451-3436 or via email at [e-mail].
If you have any questions do not hesitate to contact me.

Sincerely,
Andy Chappina
Manager, Contractor Services
678-351-8436
[e-mail]
cc:

Bobby Daenen
Tim Mortensen
Ken Allison
AI Schroeder
Reneatta Austin

-3-

work. When the parties parted ways, Hal-Tee possessed several hundred
thousand dollars of contract-related supplies that it had, as the contract
required, bought from Windstream.
Hal-Tee's main point is that Windstream back tracked on the ninety
days. That period, the contractor says, would have allowed it to use up the
supplies, or most of them. Pulling most of the current projects, and then not
buying the materials back, was a one-two punch that (Amerifactors argues)
violated both the parties' oral contract about how to unwind their relationship
and the parties' foundational agreement.
3. The meaning of the parties' unambiguous "Master Contractor
Agreement for Network Services" presents questions of law. Artman v. Hoy,
370 Ark. 131, 136-37,257S.W.3d 864,869 (2007). The parties agreed that there
could be no change in their agreement without a writing signed by both sides:
"No modification or amendment of the terms of this Agreement other than as
specifically provided herein, shall be effective except through a writing
executed by both parties."

NQ 1-1 at ,-r38(g).

No such writing exists.

Windstream's confirming letter wasn't signed by Hal-Tee. Locking in a
ninety-day grace period would have been a substantial change in the parties'

-4-

master agreement, which allowed immediate termination.
Windstream's primary argument-the no-oral-modification clause
entitles it to judgment-fails. As counter-intuitive as it may seem on first
thought, this kind of clause is unenforceable in this kind of case. Article 2 of
the Uniform Commercial Code, which the clause echos, is inapplicable to this
services agreement. ARK. CODE ANN.§ 4-2-101. The parties' agreement is not
within the statute of frauds. ARK. CODE ANN.§ 4-59-101. The common law
applies. And that law, in Arkansas and elsewhere, allows contracting parties
such as Windstream and Hal-Tee to rescind or vary their obligations by
making a new contract notwithstanding the terms of their existing one.
National American Insurance Co. v. Hogan, 173 F.3d 1097, 1107 (8th Cir.

1999)(summarizing and applying the Arkansas cases); see generally, RICHARD
LORD, 29 WILLISTON ON CONTRACTS§ 73:22 (4th ed.); SARAH JENKINS, 13
CORBIN ON CONTRACTS§ 71.2(2) (2003).
Those who make a contract may unmake it. The clause which forbids
a change may be changed like any other. The prohibition of oral waiver
may be waived. Every such agreement is ended by the new one which
contradicts it. What is excluded by one act is restored by another. You
may put it out by the door; it is back through the window. Whenever
two men contract, no limitation self imposed can destroy their power
to contract again.

-5-

Beatty v. Guggenheim Exploration Co., 225 N.Y. 380,387-88,122 N.E. 378,381
(1919)(Cardozo, J., on the rule at common law, with quotations and citations
omitted).
This is not the end of the analysis, though. Windstream' s decision in
late April not to terminate the parties' relationship entirely at that point was
a waiver: a voluntary and intentional relinquishment of a known right. Ellis

v. Block, 212 Ark. 264, 267-68, 205 S.W.2d 708, 710 (1947); Lester v. Mount

Vernon-Enola School District, 323 Ark. 728, 732, 917 S.W.2d 540, 542 (1996).
This waiver was undoubtedly effective in law. Windstream confirmed it in
writing- remember the May letter, which the parties' master agreement
required. NQ 1-1

at~

38(c). What did Windstream waive? It's right in late

April to terminate immediately and completely then.
Taking the record in the light most favorable to Amerifactors,
Windstream did not waive its right to terminate for non-performance during
the ninety-day period. Hal-Tee and Windstream's transition arrangement
remained subject to the parties' master agreement. Windstream' s letter said
so. Hal-Tee's president confirmed this on deposition:
I'm reading this [letter] and it's effective July 31st. 'It is our expectation
that Hal-Tee will perform under the terms of the MCA and provide a
-6-

smooth and orderly transition.' Based on my knowledge of what my
conversation was with Mr. Brennan is that Hal-Tee will perform under
that, finish up what you got and thank you very much.
NQ 97-1 at 26-27. Underthemasteragreement, Windstreamretained the right

to pull the plug on some, or all, of the projects if and when Hal-Tee failed to
perform. NQ 1-1 at

~

33. The parties' agreed, moreover, that Windstream' s

forbearance on any contractual point would not waive the company's right
to later assert the parties' agreement. "Waiver by Windstream of any default
by [Hal-Tee] shall not be deemed a waiver of any other default." NQ 1-1

at~

38(c).
The result is the same if the parties' transition arrangement is evaluated
in terms of consideration. Windstream got none. Hal-Tee neither gave nor
promised any performance that it wasn't already bound to give. This is not
a case where both sides got some new or different benefit. E.g.,]. C. Engleman,
Inc. v. Briscoe, 172 Ark. 1088, 291 S.W. 795, 797 (broker's commission

decreases, but he's now authorized to employ subagents). It's not a case
where performance under the parties' original contract was disputed. E.g.,
Cox v. McLaughlin, 315 Ark. 338, 344-45, 867 S.W.2d 460, 462-63 (1993). This

is, instead, the paradigm case of no consideration: Hal-Tee promised to do

-7-

duringthetransitionperiodonlywhatitwasalreadyobligatedtodo,perform
under the parties' master agreement. Windstream' s promise to let Hal-Tee do
so is not enforceable because it was unsupported by any consideration. Ibid;
3 WILLISTON ON CONTRACTS§ 7:36.

The parties are experienced businesses. They tried to make the best of
their parting with a transition period. Performance problems arose almost
immediately. NQ 97-1 at 8-9, 39-40; NQ 97-2 at 7-9. Windstream disputes the
ninety-day promise. Accepting for present purposes that it was made, as HalTee's president testified and as Windstream' s letter shows, this promise was
not in a vacuum: the parties' master agreement was the air around the
delayed termination. When Hal-Tee could not ensure completion of all its
projects during the ninety days, Windstream moved on. NQ 97-1 at 39. It
retained the contractual right to do so. Just as Hal-Tee came in early and
finished some of its predecessor's incomplete projects before the formal HalTec/Windstream master contract was made, NQ 97-1 at 7, other contractors
stepped in to do Hal-Tees jobs when timely completion was in some doubt.
Windstream is entitled to judgment on Hal-Tee's claim about the ninety-days.

-8-

4. Hal-Tee has no solid claim about unused wire and other supplies
either. Reading all the material provisions of the parties' contract, NQ 1-1 at
~~

1, 10, 11, 33, 34, Windstream had the right, not the duty, to repurchase

these materials. "May" can be a murky word. First United Bank v. Phase II,
347 Ark. 879,901, 69 S.W.3d 33,48 (2002). But here the parties used it to mean
that Windstream could buy back the materials if it chose to do so. These are
the parties' words.
•

Upon termination of this Agreement, Windstream may request
Contractor to pick up, transport and return to a place of storage
designated by Windstream any unused materials Contractor
purchased from Windstream at Windstream' s Affiliate cost.
Contractor may invoice Windstream for such materials as if
utilized under this Agreement. In the event Contractor does not
return such materials in accordance with this Section 11,
Contractor may not invoice Windstream for reimbursement.
~11(d).

•

Windstream may interrupt, discontinue or halt work on a Project
being performed under this Agreement and, without prejudice to
any other right or remedy it may have, terminate this Agreement
and any or all PSA(s), immediately upon verbal notice followed
by a written notice to Contractor within seven (7) business days,
if . . . Contractor fails to diligently perform Services . . . If
Windstream terminates the Agreement under Section 33(a),
Windstream may take over the materials, tools and appliances
purchased from Windstream at Windstream' s Affiliate cost for
use in Services, and Windstream may complete Services under the
Agreement. ~33(a).
-9-

•

Upon any termination or suspension of this Agreement as herein
provided, Contractor shall ... transfer and deliver to Windstream,
in the manner and at the time directed by Windstream, all of its
right, title, and interest in and to completed and uncompleted
work, supplies, materials and all contracts, subcontracts,
guaranties, books, papers, records, plans, specifications,
drawings, surveys, schedules, reports and all other property
produced as a part of or acquired in connection with the
performance of Contractor's obligations under this Agreement
and the PSAs[.] ,-r34(b).

The "shall" in paragraph 34(b) casts a shadow. As Hal-Tee argues, the
word usually means a mandate. Marcum v. Wengert, 344 Ark. 153, 165, 40
S.W.3d 230, 238 (2001). This is not always so; shall can be murky too.
Gutierrez de Martinez v. Lamagna, 515 U.S. 417, 432 n.9 (1995). In any event,

this paragraph must be read with paragraphs 11 and 33(a) and, if possible,
harmonized. Asbury Automotive Used Car Ctr., L.L.C. v. Brosh, 364 Ark. 386,
392, 220 S.W.3d 637, 642 (2005).
Paragraph 34(b) covers more than the pre-ordered materials and
supplies; it includes uncompleted work contracts, records, plans,
surveys- everything Windstream would need to take over a project midway
through. It's thus the mandate for handling a mid-project termination. But
this clause also says Windstream dictates any hand off" in the manner and at
the time" it decides. N2 1-1 at ,-r 34(b). The discretion here conferred about
-10-

materials and supplies echos the" may" in the specific provisions about those
items. NQ 1-1 at ~~11(d),33(a). Under the parties' agreement as a whole, HalTee is stuck with the pre-ordered materials because Windstream didn't elect
to repurchase them. Amerifactor' s claims about these materials, made in HalTee's stead, fail as a matter of law.

*
Windstream' s

renewed

*

*

motion

supplemented, NQ 75 & 97, granted.

for

summary

judgment

Windstream's motion to exclude

evidence, NQ 82, denied as moot.
So Ordered.

D.P. Marshall Jr. (/
United States District Judge

-11-

as