HOWELL et al v. ADVANTAGE PAYROLL SERVICES INC et al
Filing
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ORDER ON DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT - granting 43 Motion for Partial Summary Judgment; granting 65 Motion for Leave to File Supplement to Summary Judgment Record. By JUDGE NANCY TORRESEN. (mnw)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
JAMES HOWELL et al.,
Plaintiffs,
v.
ADVANTAGE PAYROLL SERVICES,
INC. et al.,
Defendants.
PRECISION PAYROLL SERVICES,
INC.,
Plaintiff,
v.
ADVANTAGE PAYROLL SERVICES,
INC.,
Defendant.
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) Docket No. 2:16-cv-438-NT
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) Docket No. 2:16-cv-439-NT
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ORDER ON DEFENDANT’S MOTION FOR
PARTIAL SUMMARY JUDGMENT
Before me is Defendant Advantage Payroll Services, Inc.’s (“Advantage”)
motion for partial summary judgment on four counts. (ECF No. 43, Docket No. 16-cv438). Advantage requests summary judgment on Count One of the Amended
Complaint filed by Plaintiffs James Howell (“Howell”), Ronald Rode (“Rode”),
Chase, Mozzicato, Patz, Inc. (“CMP”), and Payroll, Etc., Ltd. (“Payroll”), all of whom
are Advantage franchisees. Amended Complaint (ECF No. 42, Docket No. 16-cv-438).
Advantage also requests summary judgment on Count One of the separate, but
related Complaint filed by Plaintiff Precision Payroll Services, Inc. (“Precision”), a
fifth Advantage franchisee. Complaint (ECF No. 1, Docket No. 16-cv-439). These two
counts are nearly identical requests for declaratory judgment that the Plaintiffs
(collectively, “the Associates”) have contractual rights to renew their franchise
agreements and that Associates’ recent attempts to renew are valid. Advantage
finally seeks summary judgment on Count One of its counterclaims in both cases,
requesting declaratory judgment that the Associates do not have a right to renew
their franchise agreements and that attempts to renew are invalid. Answer and
Counterclaims (ECF No. 32, Docket No. 16-cv-438; ECF No. 6, Docket No. 16-cv-439).
For the following reasons, the motion is GRANTED.
LEGAL STANDARD
Summary judgment is appropriate when there is no genuine dispute of
material fact and the moving party is entitled to judgment as a matter of law. See
Fed. R. Civ. P. 56(a). A fact is material where it could influence the outcome of the
litigation. Oahn Nguyen Chung v. StudentCity.com, Inc., 854 F.3d 97, 101 (1st Cir.
2017). A dispute is genuine where a reasonable jury could resolve the point in favor
of the non-moving party. Id. In deciding a motion for summary judgment, the court
must construe “all the facts in the light most flattering to the nonmoving party,
resolving any evidentiary conflicts in that party’s favor, and drawing all reasonable
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inferences therefrom to his behoof.” Id. (quoting Gomez v. Stop & Shop Supermkt.
Co., 670 F.3d 395, 396 (1st Cir. 2012)).
BACKGROUND
Between 1986 and 1997, each of the Associates entered into substantially
identical contracts with Advantage to operate an Advantage franchise (the “license
agreements”). JSMF ¶ 63. These license agreements granted the Associates a tenyear term, with an option to renew the license agreement for one additional ten-year
term.1 JSMF ¶¶ 3 (Howell), 9 (CMP), 14 (Payroll), 25 (Rode), 29 (Precision). The
License Agreements provide, in relevant part:
II. Term and Renewal
A. Except as otherwise provided herein, the term of this Agreement
shall expire ten (10) years from the date of execution of the
License Agreement.
There are a few substantive, but ultimately immaterial, variations in the license agreements.
First, Payroll entered into agreements for two franchises, the Midland Agreement in 1986 and the
Lubbock Agreement in 1998. JSMF ¶¶ 13, 18. The 1998 Payroll Lubbock Agreement granted an initial
eight-year term, with an option to renew for a ten-year term. JSMF ¶¶ 19-20. (Payroll does not seek to
renew the Lubbock Agreement. JSMF ¶ 48.)
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Second, Rode entered into a renewal license agreement (as opposed to a renewal addendum,
discussed infra) in June 1999, approximately 9 months after his initial license agreement expired.
JSMF ¶ 24. The renewal license agreement was consistent with the license agreement in all material
respects; in particular, it authorized Rode to operate a franchise for ten years, and it granted an
express option to renew for one additional ten-year term. JSMF ¶¶ 24-25, 134.
Third, Howell’s 1994 license agreement included an addendum granting him a second option
to renew for an additional ten-year term “provided that no more than 50% of the outstanding shares
in the Company are acquired by new owners. JSMF ¶ 4. Paychex’s purchase of Advantage in 2002
nullified Howell’s second renewal option. JSMF ¶ 4.
Finally, later agreements entered into by CMP and Precision in 1997, Payroll in 1998, and
Rode in 1999 reflect minor stylistic changes. Compare Payroll-Midland License Agreement (ECF No.
45-5); Rode Initial License Agreement (ECF No. 45-9); Howell License Agreement (ECF No. 45-1) with
CMP License Agreement (ECF No. 45-3); Payroll-Lubbock Agreement (ECF No. 45-7); Rode Renewal
License Agreement (ECF No. 45-10); Precision License Agreement (ECF No. 45-12).
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B. Associate may, at its option, renew this Agreement for one (1)
additional term of ten (10) years . . .
1. Associate shall give Company written notice of Associate’s
election to renew not less than six (6) months nor more than
twelve (12) months prior to the end of the initial term;
....
5. Associate shall execute Company’s then-current form of
renewal license agreement, which agreement shall supersede
this Agreement in all respects, and the terms of which may
differ from the terms of this Agreement, including, without
limitation, a higher fee for company services . . .
See, e.g., Payroll-Midland License Agreement (ECF No. 45-5).
Each of the Associates exercised its option and entered into substantially
identical renewal addenda to extend their contracts for an additional ten-year term.
JSMF ¶ 63. Each renewal addenda was a one-page document that consisted of four
numbered paragraphs. JSMF ¶ 68. In relevant part, each renewal addenda
referenced the original license agreement and then stated:
1. . . . Effective as of 12:01 A.M. on [expiration date of current term] the
term of the License Agreement shall be renewed for a period of ten (10)
years and shall expire on [date ten years from expiration of current
term].
....
3. Licensee acknowledges that it has not received, and is not relying on
any promise, representation or warranty, express or implied, outside the
express terms of this Addendum.
4. This Addendum constitutes an integral part of the License Agreement
between the parties hereto, and the terms of this Addendum shall be
controlling with respect to inconsistent provisions and the subject
matter hereof. Except as modified or supplemented by this Addendum,
the terms of the License Agreement are hereby ratified and confirmed.
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JSMF ¶ 68; Defs.’ Ex. B, D, F, H, K, M (ECF Nos. 45-2, 45-4, 45-6, 45-8, 45-11, 4513). Paragraph two, omitted from the above quotation, provided a general release.
JSMF ¶ 69.
As the renewal terms have expired or neared expiration, the Associates have
sought to renew the license agreements for additional ten-year terms. JSMF ¶¶ 33,
41, 47, 59. Advantage, however, has stated that the Associates have no contractual
right to renew, and Advantage would not grant further renewals.2 JSMF ¶¶ 34, 42,
49, 60.
DISCUSSION
The question before me is whether each of the Associates has a contractual
right to renew the license agreement upon the expiration of the renewal addendum.
Under Maine law,3 the analysis depends on the nature of the contract: interpretation
of an unambiguous contract is a question of law and interpretation of an ambiguous
contract is a question of fact. Tate & Lyle Ingredients Americas, Inc. v. Transp.
Distribution, LLC, 746 F. Supp. 2d 189, 195 (D. Me. 2010).
A contract is ambiguous where its terms allow for more than one reasonable
interpretation. Blackie v. Maine, 75 F.3d 716, 721 (1st Cir. 1996). A contract need not
“negate every possible construction of its terms in order to be unambiguous,” and “a
Advantage has granted shorter term extensions to franchisees during the resolution of this
dispute. JSMF ¶¶ 35 (Howell), 50 (Payroll).
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The parties’ choice of law provision selects Maine law, and the parties do not dispute this issue.
See Sebascodegan Enters., LLC v. Petland, Inc., 647 F. Supp. 2d 71, 74 (D. Me. 2009) (Maine choice of
law doctrine generally will enforce a contractual choice of law provision).
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contract is not ambiguous merely because a party to it, often with a rearward glance
colored by self-interest, disputes an interpretation that is logically compelled.” Id.;
see also Champagne v. Victory Homes, Inc., 897 A.2d 803, 806 (Me. 2012) (quoting
Blackie, 75 F.3d at 721).
Courts interpret a contract “from the perspective of an ordinary or average
person.” Alt. Energy, Inc. v. St. Paul Fire & Marine Ins. Co., 267 F.3d 30, 34 (1st Cir.
2001); see also Ackerman v. Yates, 847 A.2d 418, 422 (Me. 2004) (contract language
should be given its “plain meaning”). Courts also prefer an interpretation that “gives
effect to all the terms of a contract” over an interpretation that takes provisions out
of context. Blackie, 75 F.3d at 722; see also PowerShare, Inc. v. Suntel, Inc, 597 F.3d
10, 16 (1st Cir. 2010) (applying Massachusetts law).
Finally, in Maine, the parol evidence rule “exclude[s] from judicial
consideration extrinsic evidence offered to alter or vary unambiguous contractual
language.” Rogers v. Jackson, 804 A.2d 379, 381 (Me. 2002) (quoting Astor v. Boulos
Co., 451 A.2d 903, 905 (Me.1982)).4
Advantage argues that the terms of the license agreement and the renewal
addenda are unambiguous and do not grant the Associates an additional option to
renew. The Associates claim that the renewal addenda unambiguously do grant an
additional option to renew—or, if the contract is found ambiguous, that the extrinsic
The Plaintiffs move for leave to supplement the summary judgment record (ECF No. 65,
Docket Nos. 16-cv-438, 16-cv-439), and the Defendant does not object. (ECF No. 67, Docket Nos. 16-cv438, 16-cv-439.) Accordingly, the motion is GRANTED. Because, however, the supplement contains
extrinsic evidence offered to alter or contradict the unambiguous language of the parties’ agreement,
I do not consider it in my analysis of the motion for partial summary judgment. See Rogers v. Jackson,
804 A.2d 379, 381 (Me. 2002).
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evidence strongly indicates an additional renewal right.5 I agree with Advantage for
the following reasons.
First, the license agreement unambiguously created just one option to renew
for one, ten-year term. The renewal addenda honored that option, setting an
expiration date for ten years after the renewal went into effect. In both the license
agreements and renewal addenda, the expiration deadline was clearly expressed with
the provision that the term “shall expire” ten years from the agreement date.
Significantly, Section II.A of the initial license agreements qualified the
expiration date with the conditional clause “[e]xcept as otherwise provided herein.”
This condition opened up the possibility for an exception—the renewal option—which
Section II.B subsequently outlined. By contrast, the renewal addenda eliminates the
conditional language from the “shall expire” clause. This change frees the
agreement’s expiration from any “except as otherwise provided” condition. On this
basis, I reject the Associates’ arguments that the “only modification” in the renewal
addenda was a reset of the expiration date, and “nothing” extinguished the
Associates’ options. See Pls.’ Opp’n 6, 9 (ECF No. 46).
Second, there is no language in the renewal addenda expressly creating an
additional renewal option. Courts are instructed not to “imply other and further
promises out of thin air” where the terms are reasonably clear. Triple-A Baseball Club
Assocs. v. Ne. Baseball, Inc., 832 F.2d 214, 221 (1st Cir. 1987). Here, the license
In their opposition to the Defendant’s motion for partial summary judgment, the Associates
request summary judgment in their favor under Fed. R. Civ. P. 56(f)(1). Pls.’ Opp’n 2 (ECF No. 46). To
the extent this effectively placed a motion under advisement of this Court, this Order renders it moot.
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agreement undisputedly created just one option to renew for one ten-year term, and
the renewal addenda set a clear durational deadline. The Associates’ interpretation
asks me to see an implied renewal option that would substantially alter these express
terms.
The Associates’ position is particularly dubious in the context of an option,
which is not merely a term of the license agreement but itself a binding offer. An
option traditionally constitutes a unilateral contract that requires consideration and
binds the offeror while granting the offeree a right within a specific period. See, e.g.,
Corbin on Contracts § 11.8; 11 Williston on Contracts § 5:16; Restatement Second of
Contracts § 87. The renewal option found in the license agreements fits this
definition. For example, Section II.B.1 stipulated that the specific period for notice of
renewal was not more than twelve months and not less than six months before the
term expired. Section II.B.5 further provided that exercise of the renewal option
would require a new, superseding written agreement and may involve the
renegotiation of some of the terms. This context indicates that silence with regard to
an additional renewal option does not imply the creation of a new option.
Third, I cannot accept the Associates’ argument that the terms “renew” and
“renewal” signify the parties’ intent to grant the Associates “multiple options to renew
for at least ‘1 additional term.’ ” Pls.’ Opp’n 7.
If I were to find that the renewal addenda impliedly resurrected the one-time
option in the license agreement, then the license agreements and renewal addenda
would have effectively created an endless renewal right. See Int’l Union v. ZF Boge
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Elastmetall LLC, 649 F.3d 641, 648 (7th Cir. 2011) (“It is reasonable to expect that
the parties would have provided explicitly for an unlimited duration for the obligation
. . . . It is not a reasonable interpretation of this instrument to view the obligation as
continuing.”). A one-time renewal that impliedly multiplies ad infinitum is not a
reasonable interpretation. See McLane & McLane v. Prudential Ins. Co. of America,
735 F.2d 1194, 1196 n.1 (9th Cir. 1984) (collecting cases). For these reasons, I find no
facial ambiguity to the meaning of the renewal provision. I therefore find the contract
unambiguous on the question of the renewal option.
If an unambiguous contract is an integrated written agreement, the parol
evidence rule operates to exclude from consideration extrinsic evidence that would
alter its meaning. Rogers, 804 A.2d at 381. Here, paragraph three of the renewal
addenda states that “[l]icensee acknowledges that it has not received, and is not
relying on any promise, representation or warranty, express or implied, outside the
express terms of this Addendum.” The next paragraph then begins: “[t]his Addendum
constitutes an integral part of the License Agreement between the parties hereto.”
This constitutes an unambiguous integration provision, and the Associates do not
dispute the point. See Greenell Corp. v. Penobscot Air Serv., Ltd., No. 99-31-P-C, 1999
WL 33117116, at *5 (D. Me. 1999). The parol evidence rule therefore applies, and my
analysis stops with the contractual text.
Where, as here, there is clear durational language in an integrated agreement
and the plaintiff provides no reasonable alternative meaning for the term, summary
judgment is warranted. See Coffin v. Bowater Inc., 501 F.3d 80, 99 (1st Cir. 2007).
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CONCLUSION
Because I find that there is only one reasonable interpretation of the
integrated licensing agreement and renewal addenda with respect to the one-time
renewal option, the Court GRANTS the Defendant’s motion for partial summary
judgment.
SO ORDERED.
/s/ Nancy Torresen
United States Chief District Judge
Dated this 11th day of December, 2017.
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