Winthrop Resources v. CommScope, Inc.

Filing 71

ORDER granting Winthrop's 61 Motion for Summary Judgment; denying Commscope's 62 Motion for Summary Judgment. Parties will address issue of amount and reasonableness of attys' fees as follows: Winthrop shall submit Mot/Attys' Fees within 14 days; Commscope may file response to the motion within 14 days; Winthrop may file a reply within 7 days. Signed by District Judge Richard Voorhees on 2/10/2015. (cbb)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
STATESVILLE DIVISION
CIVIL ACTION NO. 5:11-CV-00172
WINTHROP RESOURCES
CORPORATION,

)
)
)
Plaintiff/Counter-Defendant )
)
v.
)
)
COMMSCOPE, INC. OF NORTH
)
CAROLINA,
)
)
Defendant/Counter-Claimant )
)

MEMORANDUM AND ORDER

BEFORE THE COURT are cross-motions for summary judgment filed by Winthrop
Resources Corporation (“Winthrop”) and Commscope, Inc. of North Carolina (“Commscope”).
(Docs. 61, 62). Each party has filed a response and a reply. (Docs. 64-67). For the reasons
stated below, the Court GRANTS Winthrop’s Summary Judgment Motion in its entirety and
DENIES Commscope’s Summary Judgment Motion.
I.

PROCEDURAL HISTORY
This case commenced on December 1, 2011, upon the filing of Winthrop’s Complaint

seeking a declaratory judgment pursuant to 28 U.S.C. §§ 2201 and 2202. Winthrop seeks a
declaration that the Commencement Date of Lease Schedule 001R is October 1, 2008 and
obligates Commscope to make thirty-six (36) monthly lease payments in the amount of $200,763
each and that Commscope is not entitled to a refund of money paid. Further, Winthrop seeks
attorneys’ fees.

1

This Court granted Winthrop’s motion to dismiss several counter-claims filed by
Commscope (Doc. 25), and Commscope ultimately filed a Second Amended Answer. (Doc. 48).
Commscope pled twelve affirmative defenses, namely:
1.
Winthrop’s Complaint fails to state a cause of action;
2.
The contract is ambiguous and extrinsic evidence shows that
Commscope’s view is correct
3.
Commscope has paid the entire amount due under the contract
4.
The Lease does not allow Winthrop to collect attorneys fees
5.
Applicable law does not allow recovery of attorneys fees in the absence
of statutory authority
6.
General equitable principles bar Winthrop’s claim for attorneys fees as
well as principles addressing the size and composition of a reasonable free
7.
Winthrop’s claims are barred by the inequitable conduct of wrongly
collecting sales tax on Commscope’s SAP software licenses
8.
If the Court finds that Winthrop was permitted to collect taxes, Winthrop
should have taken steps to prevent Commscope from paying double the amount
of taxes necessary and should have sought reimbursement from the North
Carolina taxing authority
9.
Any amount the Court may find that Commscope owes to Winthrop
should be offset by the down payment made and the amount Commscope
overpaid Winthrop for taxes
10.
Winthrop modified the contract after the Lease was created
11.
Waiver
12.
Reliance

(Doc. 48, 8-15). Further, Commscope asserted two counterclaims alleging that it is entitled to
amounts it claims were overpaid. These claims are (1) breach of contract; and (2) breach of a
modified contract.
II.

FACTUAL BACKGROUND
The parties have signed three documents integral to the instant dispute. They are entitled

Lease Agreement (“Lease”), Lease Schedule No. 001, and Lease Schedule No. 001R.
The Lease is dated January 28, 2008. (Doc. 1-1, at 2). Commscope signed the Lease on
January 28, 2008 and Winthrop signed on January 30, 2008. (Doc. 1-1). The Lease purports to
grant Commscope, the lessee, the right to use certain hardware and software as described on
Lease Schedules. (Doc. 1-1, at 2).

2

There are two Lease Schedules signed by the parties, No. 001 and No. 001R. Both
incorporate the terms of the Lease by reference. (Doc. 1-2, Doc. 1-7). Lease Schedule No. 001
was signed by the parties on the same dates as the Lease. It states as follows:
Term of Lease from Commencement Date: 36 months
Monthly Lease Charge: January – September 2008: $0.00 per month;
Thereafter: $198,883.00 per month.
Anticipated Delivery and Installation: January – February 2008

(Doc. 1-2). Under Lease Schedule No. 001 Commscope agreed to lease a minimum of
$4,801,735.00, with $300,000.00 of the minimum being hardware. (Id.). Further, under
“Equipment Description”1 it lists SAP2 Software Licenses and Technology-Related Hardware.
(Id.).
Lease Schedule No. 001R was executed by Commscope on October 14, 2008 and
Winthrop on October 15, 2008. (Doc. 1-7, at 2). It provides that “[t]his Lease Schedule No.
001R replaces Lease Schedule No. 001.” (Id.). It states as follows:
Term of Lease from Commencement Date: 36 months
Monthly Lease Charge: January – September 2008: $0.00; Thereafter: $200,763.00.

Commscope was required to lease $5,052,323.85 in Equipment, with at least $447,232.34
of total being hardware.
Sections 1 and 2 determine when any schedule for the Lease commences. (Doc. 1-1, §§
1-2). Section 3 defines and describes Lease Charges. (Doc. 1-1, § 3).
The Lease also has specific provisions governing taxes, (Doc. 1-1, § 4), and attorneys’
fees, (Doc. 1-1, § 18).

1

The term “Equipment” includes Hardware, Software, and Services. (Doc. 1-1, at 2).
“SAP” refers to entity known as “SAP SE” a European Company dealing in software and software-related
services.
2

3

The parties stipulated that the Lease and any Schedules “shall be governed by the internal
laws (as opposed to the conflicts of law provisions) and decisions of, the State of Minnesota.”
(Doc. 1-1, § 25).
III.

STANDARD OF REVIEW
Summary judgment is appropriate only “if the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). In order to support or oppose a summary judgment motion, a party is required
to cite to “materials in the record, including depositions, documents, electronically stored
information, affidavits or declarations, . . . admissions, interrogatory answers, or other
materials;” or show “that the materials cited do not establish the absence or presence of a
genuine dispute, or that an adverse party cannot produce admissible evidence to support the
fact.” Fed. R. Civ. P. 56(c)(1); Anderson v. Liberty Lobby, 477 U.S. 242 (1986) (applying
former version of Rule 56); Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (same). A genuine
dispute exists only if “the evidence is such that a reasonable jury could return a verdict for the
non-moving party.” Anderson, 477 U.S. at 248. In conducting its analysis, the Court views the
evidence in the light most favorable to the non-moving party. Celotex Corp., 477 U.S. at 325.
When considering cross-motions for summary judgment, a court “consider[s] each
motion separately on its own merits to determine whether either of the parties deserves judgment
as a matter of law.” Defenders of Wildlife v. North Carolina Dep't of Transp., 762 F.3d 374, 392
(4th Cir. 2014) (quoting Bacon v. City of Richmond, Va., 475 F.3d 633, 638 (4th Cir. 2007)). In
considering these motions, the court will “resolve all factual disputes and any competing,
rational inferences in the light most favorable to the party opposing that motion.” Id. (quoting
Rossignol v. Voorhar, 316 F.3d 516, 523 (4th Cir. 2003)).

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IV.

DISCUSSION
A.

Claims Involving Lease Charges

The parties have competing views on whether Commscope is obligated to pay thirty-six
months or twenty-seven months of Lease Charges under the Lease and Lease Schedule No.
001R. Therefore, the Court will examine the Lease and Schedule No. 001R, keeping in mind
that Minnesota law governs its interpretation.
“When the language of a contract is clear and unambiguous, [the court] enforce[s] the
agreement of the parties as expressed in the contract.” Caldas v. Affordable Granite & Stone,
Inc., 820 N.W.2d 826, 832 (Minn. 2012). “If the language is ambiguous – that is, susceptible to
more than one reasonable interpretation – parol evidence may be considered to determine the
intent of the parties.” Id. Determining ambiguity is a question of law for the court to decide. Id.
Section 1 of the Lease provides that:
The term of this Agreement, as to all Equipment designated on any particular
Lease Schedule, shall commence on the Installation Date for all Equipment on
such Lease Schedule and shall continue for an initial period ending that number
of months from the Commencement Date as set forth is such Lease Schedule.

The Installation Date “for each item of Equipment shall be the day said item of
Equipment is installed at the location of installation as designated on the applicable Lease
Schedule (the “Location of Installation”), ready for use, and accepted in writing by the Lessee.”
(Doc. 1-1, § 2). Lease § 2 specifically provides that “[t]he Commencement Date for any Lease
Schedule is the first of the month following the latest Installation Date of all the Equipment on
the Lease Schedule.” (Doc. 1-1, § 2). Commscope was required to “complete, execute, and
deliver a Certificate of Acceptance to [Winthrop] upon installation of the equipment.” (Id.).
Therefore, the Lease commenced once Commscope accepted the last piece of Equipment
identified on Attachment A of Lease Schedule No. 001R and provided a Certificate of

5

Acceptance. Winthrop Resources Corp v. Sabert Corp., 567 F. Supp. 2d 1084, 1087 (D. Minn.
2008).3 On October 14, 2008, Commscope signed the latest Certificate of Acceptance stating
that all the equipment on Schedule A “(i) have been received; (ii) are in good working order; (iii)
have been tested and inspected; (iv) are satisfactory in all respects; and (v) are acceptable for
use.” (Doc. 1-6). The Certificate stated that “all of the items of equipment on the attached
Schedule A were installed on the following date: 9-30-08 (the ‘Installation Date.’).” (Id.).
Accordingly, the terms of Lease unambiguously provide that the Commencement Date of the
Lease is October 1, 2008.
The next step is determining how long Commscope must pay the Lease Charge. The
following clause of Lease Schedule No. 001R governs:
Term of Lease from Commencement Date: 36 months
Monthly Lease Charge: January-September 2008: $0.00; Thereafter:
$200,763.00
Anticipated Delivery and Installation: February – September 2008

Commscope urges the Court to interpret “Monthly Lease Charge: January – September 2008:
$0.00; Thereafter: $200,763.00” to mean “Monthly Lease Charge: nine months: $0.00;
Thereafter: $200,763.00.” This interpretation is at odds with the plain language of the contract.
Commscope argues that this clause is ambiguous and that the Court should resort to
extrinsic evidence.

3

Judge Schiltz provided a useful example:
Suppose . . . that a computer monitor was installed (and ready for use and
accepted in writing) on July 1, 2003. Sabert was obligated to begin making
payments to Winthrop for the use of that monitor on July 1, 2003. To calculate
the date on which Sabert's obligations with respect to the monitor concluded,
one would have to first identify the lease schedule on which the monitor was
listed, then identify the date on which the last piece of equipment on that lease
schedule was installed (that is, the Commencement Date), and finally count
forty-two months forward from the first of the month following that date.
Winthrop Res. Corp. v. Sabert Corp., 567 F. Supp. 2d 1084, 1087 (D. Minn. 2008).

6

The first of Commscope’s arguments is that § 25 and § 3 of the Lease are at odds with the
Monthly Lease Charge in Schedule No. 001R. Section 25 is entitled “Miscellaneous” and the
applicable portion reads as follows: “[t]he Monthly Lease Charge for each Lease Schedule is
intended to be fixed from the Commencement Date to the end of the term applicable to such
Lease Schedule.” (Doc. 1-1, § 25). The applicable portion of § 3 states that “[t]he lease charges
for the Equipment leased pursuant to this Lease Agreement shall be the aggregate ‘Monthly
Lease Charge(s)’ as set forth on each and every Lease Schedule.” (Doc. 1-1, at § 3).
Commscope argues that this clause creates an ambiguity because “each month of delay in
Commencement Date that passed beyond January 2008, resulted in the loss of one $0.00
Monthly Lease Charge, and the addition of a $200,763 Monthly Lease.” (Doc. 62-1, at 28).
Commscope states that this is “contrary to Section 25 of the Lease” because “the ‘aggregate’ of
‘Monthly Lease Charges’ could vary and were not ‘fixed.’” (Id.).
However, this is exactly what the contract requires. The term “fixed” means
“[d]etermined; established; set” and “[n]ot subject to change or variation.” Amer. Heritage Dict.
688 (3d ed. 1992). However, the term “fixed” does not exist in a vacuum in § 25, rather, “[t]he
Monthly Lease Charge for each Lease Schedule is intended to be fixed from the Commencement
Date.” (Doc. 1-1, § 25) (emphasis added). As discussed earlier, the Commencement Date is
subject to change and could vary depending on the latest Installation Date. It is only after this
variable has been decided that the Monthly Lease Charge need be fixed. Further, the aggregate
of the Monthly Lease Charges cannot be determined without reference to the “term of lease”
clause. Therefore, a $200,763 Monthly Lease Charge will replace a $0.00 Lease Charge as
months pass after January of 2008. The language of Schedule 001R evidences that both parties
understood this to be because they only anticipated delivery and installation between the months

7

of February and September. (Doc. 1-7, at 2). Once the latest Installation Date occurs, the
Monthly Lease Charges are not subject to change and may be “aggregate[d]” with certainty.
Therefore, the Court declines to find an ambiguity based on this argument.
Commscope’s second argument is that the phrase “thereafter” makes the Monthly Lease
Charge clause in Schedule No. 001R ambiguous. (Doc. 64-1, at 11). Commscope argues that
“[i]f ‘thereafter’ refers to September 2008, so that the $200,763.00 payments were to start in
October 2008, the Lease would not say whether there are 27, 36, or some other amount of
Monthly Lease Charges of $200,763.00 due.” (Id.).
The Court finds no ambiguity. The term “thereafter” means “[f]rom a specified time
onward; from then on.” Amer. Heritage Dict. 1862. Accordingly, “from [September] onward”
the Monthly Lease Charges were to be $200,763.00. However, as discussed above, Monthly
Lease Charges cannot begin until the Commencement Date. The term of the Lease will always
be thirty-six months from the Commencement Date because that is what Schedule 001R
specifically provides. Accordingly, Commscope’s argument is contradicted by language of the
Lease.4
Commscope’s last argument deals with the concept of “interim rent.” “[T]he lease
contemplates that there may be an interim period between the Installation Date of a particular
item of equipment, which is the beginning of the lease term as to that item of equipment, and the

4

Commscope also makes an argument that Winthrop, in prior lawsuits, has stated that the total “Lease Charge” is
the aggregate of “Term of Lease from Commencement Date” multiplied by the “Monthly Lease Charge.” (Doc. 64,
at 11-12). However, all of the leases Commscope cites do not have a clause analogous to “January-September:
$0.00; Thereafter: $200,763.” Rather, they all had the same rate specified for every month. Accordingly, it was
easy to create total lease charge by performing multiplication because the Commencement Date variable did not
impact the total amount. In this case, the Commencement Date has such an impact. The fact that Monthly Lease
Charges between January and September would have a value of $0.00 means that the total sum cannot be computed
without regard to the Commencement Date. Therefore, the fact that Winthrop calculated the total differently in prior
cases is of no import to the current issue before the Court.

8

Commencement Date applicable to that item of equipment.” Sabert, 567 F. Supp. 2d at 1088-89.
There are two clauses dealing with interim rent. Lease § 3 states that
The Lease Charge for the period from the Installation Date to the
Commencement Date (the “Installation Period”) shall be an
amount equal to the applicable “Monthly Lease Charge” divided
by thirty (30) and multiplied by the number of days from and
including the Installation Date.
(Doc. 1-1, § 3). Schedule 001R specifies that “[t]he Monthly Lease Charge will be prorated and
charged as interim rent between the date an item of equipment is accepted and the
Commencement Date.” (Doc. 1-7).
Winthrop states that Commscope still received a benefit from the disputed clause because
it was not able to charge interim rent. Commscope argues that Winthrop did not invoice the
interim rent because it would have “alert[ed] Commscope to its scheme.” (Doc. 62-1, at 28).
Commscope claims that Winthrop is taking an inconsistent position from its prior litigation
strategies and requests the Court to invoke the doctrine of judicial estoppel5 to preclude
Winthrop from doing so.
The doctrine of judicial estoppel is not applicable because Winthrop has not taken
inconsistent positions. As Commscope’s citations confirm, Winthrop has argued in the past that
Interim Rent does not modify the Monthly Lease Charges. (See Doc. 62-1, at 27). However, this
is not inconsistent with the fact that interim rent is created by multiplying the prorated amount
against “an amount equal to the applicable “Monthly Lease Charge” divided by thirty (30) and

5

“Judicial estoppel precludes a party from adopting a position that is inconsistent with a stance taken in prior
litigation. The purpose of the doctrine is to prevent a party from playing fast and loose with the courts, and to
protect the essential integrity of the judicial process.” Lowery v. Stovall, 92 F.3d 219, 223 (4th Cir. 1996). The
doctrine will not be invoked unless three elements are met (1) the party sought to be estopped must be attempting to
adopt a factual, as opposed to legal, position that is inconsistent with its stance taken in prior litigation; (2) “the prior
inconsistent position must have been accepted by the court,” id. at 224; and (3) the “party sought to be estopped
must have intentionally misled the court to gain an unfair advantage,” id. (quoting Tenneco Chems. V. William T.
Burnett & Co., 691 F.2d 658, 665 (4th Cir. 1982)).

9

multiplied by the number of days from and including the Installation Date.” (Doc. 1-1, at § 3).
It is evident that interim rent is derived, in part, from the applicable Monthly Lease Charge. The
applicable Monthly Lease Charge from February to September 2008 was $0.00. Therefore, if a
party were to attempt to charge interim rent during this time period they would have to multiply
zero (zero divided by thirty is zero) by the prorated amount. The result will always be zero.
Therefore, Winthrop had no right to invoice interim rent under the contract during this period.
Accordingly, Winthrop’s position is not inconsistent with its prior positions regarding interim
rent and the Court will not invoke judicial estoppel.
B.

Commscope’s Breach of Contract and Modification Theory

Commscope, in its counterclaim for breach of a modified contract, contends that an oral
modification occurred prior to the execution of Lease Schedule No. 001R.
Minnesota “court[s] respect[] written contracts and subject[] allegations of an
inconsistent oral contract to a rigorous examination.” Bolander v. Bolander, 703 N.W.2d 529,
541-42 (Minn. Ct. App. 2005). Accordingly, the party asserting that there has been an
enforceable oral modification of the terms of a written contract bears the burden of proving the
modification by clear and convincing evidence. Id. at 541. “Both the existence and terms of an
oral contract are issues of fact, generally to be decided by the fact-finder.” Rios v. Jennie-O
Turkey Store, Inc., 793 N.W.2d 309, 315 (Minn. Ct. App. 2011).
The Court notes that the parties’ agreement has a no oral modification clause. However,
“a written contract can be varied or rescinded by oral agreement of the parties, even if the
contract provides that it shall not be orally varied or rescinded.” Larson v. Hill’s Heating and
Refrig. of Bemidji, Inc., 400 N.W.2d 777, 781 (Minn. Ct. App.1987).

10

Here, the Court finds that Commscope has not provided sufficient evidence for a
reasonable jury to conclude, under the clear and convincing evidence standard, that an oral
modification occurred. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254 (1986) (“[I]n ruling
on a motion for summary judgment, the judge must view the evidence presented through the
prism of the substantive evidentiary burden.”).
The evidence presented regarding the oral modification involves Commscope’s assertion
that the parties orally agreed to a $200,000 addition to the Lease in spring of 2008. Commscope
asserts that several Winthrop representatives admit that an oral agreement occurred but the
undersigned has not found these admissions in the transcripts submitted. Rather, the transcripts
show that the parties entered into discussions involving the addition of new equipment which
culminated in the signing of Schedule 001R. Brian Slipka, Winthrop’s representative to
Commscope, communicated to Kap Kim, Commscope’s former Vice President and Chief
Information Officer, that the lease factor and cost factor of Schedule No. 001 would remain the
same if Winthrop added more equipment. (Doc. 62-1, App’x C, Slipka Dep., at 72, 103-104).
Commscope cites to the deposition of Kap Kim in order to prove acceptance. However, his
testimony indicates that a deal had not been reached until the parties executed the revised
schedule.
Moreover, representations made by Winthrop, even if sufficiently definite to amount an
offer, were not accepted as shown by emails sent between Slipka and Kim in June and
September of 2008.
On June 12, 2008, Slipka emailed Kim about the hardware shortfall and the fact that
ordering the hardware would exceed the total amount on the lease. (Doc. 61-6). He stated that
he received approval to accept the additional cost to meet the hardware limit and that the

11

adjusted payments, once they begin in October, would use the same “cost factor.” (Id.). Kim
responded that he thought he had purchased more hardware than what Slipka represented and
that he would get back to him.6
On September 26, 2008, Slipka sent Kap Kim an email stating that “[w]e will be sending
out today the final CofA for Kap’s signature – which reflects the actual dollar amounts funded
and overall hardware content.” (Doc. 61-7). The email also states that “we used the same lease
factor to keep everything consistent with what we agreed to in January.” (Id.). Kim’s response,
dated September 26, was that he received the package and “forwarded to Barry for his review.
Barry is on vacation for next week and so will be delayed for delivery.” (Id.).
These emails show that no modification was made apart from Schedule 001R. No
reasonable jury could find that clear and convincing evidence exists. Both parties are extremely
sophisticated and have experience in negotiating leases such as this one. The Lease itself was
heavily negotiated. The Lease, in § 25, specifically provides that modifications must be agreed
to in writing and signed by an officer of Winthrop and Commscope. The parties showed that
they understood this ostensible obligation7 by complying with it when executing Schedule 001R.
The parties’ conduct and exchanges shows that no new deal had been agreed upon until they
signed Schedule 001R.
As an additional ground for granting summary judgment as to the modification
counterclaim and affirmative defense, the Court finds that the prior discussions between the
parties, even if they amounted to a contract, merged into Schedule 001R. The representations are
barred by the parol evidence rule.

6

Commscope had yet to decide even how much hardware it was going to buy at this point. (Doc. 62-5, at 49).
The Court does not mean to imply that the parties were incapable of modifying the contract without complying
with § 25’s mandate. As noted above, Minnesota law does not require compliance in order for the modification to
be effective.
7

12

“Whether an agreement is completely integrated and not subject to variance by parol
evidence is an issue of law.” Maday v. Grathwohl, 805 N.W.2d 285, 284 (Minn. Ct. App. 2011)
(quoting Borgersen v. Cardiovascular Sys., Inc., 729 N.W.2d 619, 625 (Minn. Ct. App. 2007)).
Lease Schedule No. 001R states that “[t]he terms of the Lease Agreement . . . are a part hereof
and are incorporated by reference herein.” (Doc. 1-7, at 2). Schedule 001R is a seven page
document which is extremely detailed as to Equipment. The Lease is a seven page document
with thirty separate sections. Also present is a merger clause which states that “This Lease
Agreement and associated Lease Schedules(s) (including any riders thereto) constitute the entire
understanding and agreement . . . superseding all prior agreements, understandings, negotiations,
discussions . . . representations . . . and offers between the parties whether oral or written.” See
Alpha Real Estate Co. of Rochester v. Delta Dental Plan of Minnesota, 664 N.W.2d 303, 312
(Minn. 2003) (“A merger clause establishes that the parties intended the writing to be an
integration of their agreement.”).
Section 25 of the Lease also states that “[t]here are no unwritten or oral agreements
between the parties.” (Id.). Commscope argues that this clause is only relevant as of the date the
Lease was signed in January of 2008. Neither party has directed the Court to a Minnesota case
directly dealing with this issue. However, when a party incorporates a will by reference, it
speaks as if it were set out fully therein. There is no reason to deviate from this here. Fahey
Bros. P'ship v. State of Minnesota, No. 89281, 1980 WL 1049, at *4 (Minn. Tax Oct. 24, 1980)
(prior lease incorporated by reference in new agreement speaks as of the date new agreement);
see also 17A C.J.S. Contracts § 402 (“Matters incorporated into a contract by reference are as
much part of the agreement as if they had been set out in the contract verbatim.”); BLACK’S LAW
DICTIONARY 766 (6th ed. 1990). It follows that the merger clause is not limited to January 2008

13

but bars consideration of extrinsic evidence prior to October of 2008, the date it was incorporated
by reference. Therefore, evidence of prior agreements is substantively barred from being
considered in the instant case. Sabert Corp., 567 F. Supp. 2d at 1092-94 (finding that Schedule
001R and Lease are unambiguous and integrated and applying parole evidence rule).
Given that the Lease and Lease Schedule No. 001R are fully integrated and
unambiguous, the parol evidence rule will bar any consideration of the prior discussions. “The
parole evidence rule is not a rule of evidence, but a substantive rule of contract interpretation.”
Maday v. Grathwohl, 805 N.W.2d 285, 287 (Minn. Ct. App. 2011) (quoting Danielson v.
Danielson, 721 N.W.2d 335, 338 (Minn. Ct. App. 2006)). “The parol evidence rule ‘prohibits
the admission of extrinsic evidence of prior or contemporaneous oral agreements, or prior written
agreements, to explain the meaning of a contract when the parties have reduced their agreement
to an unambiguous integrated writing.” Id. (quoting Alpha Real Estate Co. of Rochester v. Delta
Dental Plan of Minn., 664 N.W.2d 303, 312 (Minn. 2003)). Therefore, “[w]hen parties reduce
their agreement to writing, parol evidence is ordinarily inadmissible to vary, contradict, or alter
the written agreement.” Id. (quoting Flynn v. Sawyer, 272 N.W. 904, 907, 908 (Minn. 1978)).
“A prior oral agreement merges with and is integrated into the subsequent written
agreement.” United Artists Commc’ns v. Corporate Prop. Investors, 410 N.W.2d 39, 41 (Minn.
Ct. App. 1987). Matters discussed in negotiations that do not make it into the final writing are
considered waived or abandoned. Id. “[I[f a contract is a complete integration of the parties'
agreements, prior agreements within the scope of the contract are discharged regardless of
consistency.” Stromberg v. Smith, 423 N.W.2d 107, 109 (Minn. Ct. App. 1988).
In United Artists, the Minnesota Court of Appeals examined a transaction where United
Artists, as lessee, entered into a twenty-five year written lease agreement with a lessor. 410

14

N.W.2d at 40. The lease provided that United Artists would pay $.20 per square foot per year to
a merchant’s association in the mall, “subject to annual upward adjustments approved by a twothirds majority” of the association. Id. Between 1981 and 1982, the lessor and United Artists
negotiated to modify the lease terms. Id. The parties discussed recently increased dues by the
association and the ability to install video games in the leased space. Id. The parties then
entered into a written modification of the original lease which allowed United Artists to install
the games and increased the dues to $.30, but delayed the effective date of the increase. Id. at 41.
The written modification stated that the lease “as herein modified and supplemented, is in all
other respects ratified and confirmed.” Id. In 1985, the association again increased the dues and
United Artists refused to pay by claiming that, during the discussions with the lessor, the parties
orally agreed that there would be no increase over the $.30 per square foot. Id. The trial court
held that (1) there was insufficient evidence of any oral modification and (2) any such oral
modification would merge into the subsequent written modification. Id. at 42.8 Particularly
important regarding the issue of merger were clauses that the lease “contains the entire
agreement between the parties” and that the written modification ratified and confirmed the
original written lease. Id. Further, the parol evidence rule barred the consideration of
contradictory terms to the upward adjustment clause, which had been reaffirmed in the written
modification. Id.
The Court finds that the situation in United Artists is similar to the case at bar. Here,
Winthrop and Commscope have one written agreement comprising of the Lease and Schedule
001 made in January of 2008. Next, Commscope alleges that the parties made an oral agreement
modifying the terms of the January 2008 agreement by asserting the existence of certain
discussions. Afterwards, the parties signed Schedule 001R which expressly supersedes and
8

The Minnesota Court of Appeals affirmed only on the merger doctrine and the parol evidence rule.

15

modifies Schedule 001. Therefore, under United Artists, the prior alleged oral modification is
deemed to have merged into the written agreement signed by the parties. Accordingly, the
parole evidence rule stands as a separate ground for granting Winthrop Summary Judgment on
Commscope’s breach of contract counterclaim.9
C.

Commscope’s Affirmative Defense of Good Faith and Reliance

Commscope claims that Winthrop breached the implied duty of good faith and fair
dealing by preventing it from performing under the Lease 001. Lease Schedule No. 001 had a
hardware requirement of $300,000. (Doc. 1-2, at 2). Lease Schedule No. 001R, the governing
lease, has a requirement of $447,232.34. (Doc. 1-7, at 2). Commscope claims, by way of
extrinsic evidence, that Winthrop overstated an alleged shortfall on the $300,000 hardware
requirement and delayed in approving additional equipment.
In Minnesota, “every contract includes an implied covenant of good faith and fair dealing
requiring that one party not ‘unjustifiably hinder’ the other party’s performance of the contract.”
In re Hennepin County 1986 Recycling Bond Litig., 540 N.W.2d 494, 502 (Minn. 1995). “Bad
faith is defined as a party’s refusal to fulfill some duty or contractual obligation based on an
ulterior motive, not an honest mistake regarding one’s rights or duties.” Sterling Capital
Advisors, Inc. v. Herzog, 575 N.W.2d 121, 125 (Minn. Ct. App. 1998).
This defense fails for the same reasons Commscope’s breach of contract and modification
counterclaims fail. These representations and discussions all merged into the final agreement
and are barred by the parol evidence rule. Commscope is attempting to use the implied duty of
good faith and fair dealing to sue on Schedule 001. Schedule 001 is not the operative lease
schedule and may not be sued upon because the parties agreed that Lease Schedule 001R

9

The parol evidence rule also bars consideration of Winthrop’s internal memoranda, such as the ST forms, and other
extrinsic evidence advanced by Commscope.

16

replaced it. (Doc. 1-7, at 2). Given that Schedule 001 is not the governing instrument, its terms
do not provide a basis for a suit involving the duty of good faith and fair dealing. “[A]n
enforceable contract must exist before the duty of good faith and fair dealing can be implied by
law into it.” Cox v. Mortgage Elec. Registration Sys., Inc., 685 F.3d 663, 670 (8th Cir. 2012);
see also Beer Wholesalers, Inc. v. Miller Brewing Co., 426 N.W.2d 438, 441-42 (Minn. Ct. App.
1988) (breach of implied duty of good faith and fair dealing may not be based off letter that does
not amount to agreement between parties); Capital Bank v. Sorenson, Capital Bank v. Sorenson,
No. C4-90-1122, 1990 WL 211991, at *1 (Minn. Ct. App. Dec. 24, 1990) (unpublished) (“The
implied covenant of good faith and fair dealing . . . only extends to the performance of actions
within the scope of the written agreement between the parties.”).
D.

Taxation

Winthrop also moves for summary judgment on Commscope’s counterclaim regarding
payments of tax. Commscope’s counterclaim alleges that Winthrop wrongly billed Commscope
for taxes attributable to the SAP software licenses and that Winthrop should have sought a
refund from the appropriate taxing authorities. (Doc. 48, ¶¶ 107-08).
The Lease addresses taxes in § 4. Section 4 provides that:
In addition to the Lease Charges set forth in Section 3, the Lessee shall
reimburse the Lessor for all license or registration fees, assessments,
sales and use taxes . . . gross receipts taxes, personal property taxes and
other taxes or fees now or hereafter imposed by any government,
agency, province or otherwise upon the Equipment, the Lease Charges
or upon the ownership, leasing, renting, purchase, possession, use,
recycling or disposal of the Equipment, whether the same be assessed
to Lessor or Lessee (the “Taxes”).

Section 4 also states that
Lessee, upon notice to Lessor, may, in Lessee’s own name, contest or protest
any Taxes, and Lessor shall honor any such notice except when in Lessor’s
reasonable and good faith opinion such contest is futile or will cause a levy or
lien to arise on the Equipment or cloud Lessor’s title thereto.

17

The facts show that the SAP licenses were contracted for, invoiced, and received on or
before January 30, 2008, which is the date Winthrop signed the Lease. (See Doc. 1-1, § 25,
“This Lease Agreement shall not become effective until delivered to Lessor at its offices at
Minnetonka, Minnesota and executed by Lessor.”). Commscope was invoiced for the software
on January 29, 2008. (Doc. 61-17, at 3). However, SAP did not receive payment or a certificate
of acceptance until after the Lease was signed. (Doc. 62, App’x B, Ex. 90) (dated February 4,
2008). The terms of payment were stated as follows: the license fees of $4,401,765.00 were paid
from a “financing arrangement” with Winthrop and the taxes related to the licenses,
$301,486.53, were paid by Commscope.
The parties dispute how to interpret of the applicable statutes governing sales and use
taxes in North Carolina.
North Carolina imposes a privilege tax on a retailer’s net taxable sales or gross receipts,
depending on what is sold. N.C. Gen. Stat. § 105-164.4(a). The general rate of tax applies to the
sales price of retail sales of tangible personal property, unless a specific provision covers the
item. § 105-164.4(a)(1).
A “sale” is “[t]he transfer for consideration of title, license to use or consume, or
possession of tangible personal property or digital property or the performance for consideration
of a service.” N.C. Gen. Stat. § 105-164.3(36). The term “sale” includes “[a] lease or rental.” §
105-164.3(36). A “lease” is “[a] transfer of possession or control of tangible personal property
for a fixed or indeterminate term for consideration” subject to certain exceptions not relevant
here. N.C. Gen. Stat. § 105-164.3(17). This definition of “lease” should be used regardless “if a
transaction is characterized as a lease or rental under generally accepted accounting principles,
the Internal Revenue Code, or other provisions of federal, state, or local law.” N.C. Dep’t of

18

Revenue, Sales and Use Technical Bulletins, Section 23-1 (Apr. 1, 2007) available at
http://www.dor.state.nc.us/practitioner/sales/bulletins/.
A retail sale is a “sale, lease, or rental for any purpose other than for resale, sublease, or
subrent.” § 105.164.3(34). The same rate used to tax the sale of tangible personal property is
used to calculate the tax for leases and is applied to the “gross receipts derived from the lease . . .
of tangible personal property by a person who is engaged in business of leasing.” § 105164.4(a)(2); 17 N.C. Admin. Code 7B.4401. The lessor is also required to “collect the tax
imposed by this section on the separate retail sale of the property.” § 105-164.4(a)(2). “The tax
is due and payable at the time the lessor bills the lessee for the rent whether such billing is for the
lump sum rental or on a monthly or other periodic basis.” 7B.4401.
The term “gross receipts” is given the same meaning as sales price. § 105.164.4.
Therefore, the “gross receipts” of an item are “[t]he total amount or consideration for which
tangible personal property . . . [is] sold, leased, or rented.” N.C. Gen. Stat. § 105-164.3(37). It
does not include “[i]nterest, financing, and carrying charges from credit extended on the sale, if
the amount is separately stated on the invoice, bill of sale, or a similar document given to the
consumer.” § 105-164.3(37)b.2.
The SAP licenses are “tangible personal property” because they are “prewritten computer
software” that is “perceptible to the senses.” N.C. Gen. Stat. § 105-164.3(46). The computer
hardware is also tangible personal property.
It appears to the Court that, if the transaction were constructed appropriately, there would
only be a single payment of sales tax on the SAP licenses. If the SAP transaction were treated as
a sale from SAP to Winthrop, it would be a sale for resale which would be a non-taxable event.
Therefore, when Winthrop leased the licenses to Commscope, there would be taxes imposed

19

because the transaction would qualify as a retail sale. However, if the sale were made directly to
Commscope, Commscope would be responsible for paying the sales tax. In this situation,
Winthrop would be seen as a financer and the money given pursuant to the financing
arrangement would not qualify as “tangible personal property.”
Instead of choosing either arrangement, the parties decided to include the SAP licenses in
an agreement entitled “Lease Agreement” and with hardware that was given as an otherwise
valid “lease” under North Carolina tax law. Further, the Lease and Schedule No. 001R do not
allocate payments for the SAP licenses and hardware. They also do not allocate financing
charges. There is only a set Lease Charge. The Court notes that this transaction does not amount
to a bundled transaction because it is “[a] sale of two or more products whose combined price
varies, or is negotiable, depending on the products the purchaser selects.” See N.C. Gen. Stat. §
105-164.3(1b). As made apparent by the parties’ course of dealing, the final price is subject to
change and is negotiable based on the amount of software and hardware Commscope selects.
The issue is whether, under the facts as stated above, the North Carolina Sales and Use
Act (“Act”), N.C. Gen. Stat. § 105.164.1 et seq., mandates the additional taxes collected by
Winthrop from Commscope. “The burden of showing exemptions or exceptions from taxing
statutes is upon the one asserting the exemption or exclusion.” Telerent Leasing Corp. v. High,
174 S.E.2d 11, 15 (N.C. Ct. App. 1970).
A respected commentator on state taxation opines that “[a]s a general rule of sales and
use law and administration, if a single transaction has a taxable and nontaxable component, the
charge for the nontaxable component will be treated as nontaxable only if the consideration paid
for it is separately stated on the customer’s bill or invoice.” Walter Hellerstein, The Separate
Statement Rule, STATE TAXATION ¶ 17.12 (3d ed. 2014). This rule minimizes disputes over the

20

allocation of taxes, such as the instant one, and reflects the “general rule that taxpayers are bound
to the form of their transactions.” Id.
Winthrop cites to the case of Rent-a-Car Co., Inc. v. Lynch, 259 S.E.2d 564 (N.C. 1979)
to establish that two payments of tax are appropriate in this case. In Rent-a-Car, the plaintiff
was a corporation that rented and leased automobiles. Id. at 565. The dealer collected sales tax
on the lease of vehicles but did not do so for the ultimate sale of the vehicles to the lessees. Id.
The Supreme Court of North Carolina held that leases and sales are separately taxable events and
that an exemption did not apply. This case has no bearing on the facts before the Court. The
Court recognizes that leases and sales are separately taxable events. This case does not clarify
whether the arrangement between Commscope and Winthrop amounts to a lease that required
payment of taxes.
Winthrop also cites to the definition of gross receipts and Sperry Corp. v. Lynch, 332
S.E.2d 757 (N.C. Ct. App. 1985) for the proposition that the payments made on the SAP licenses
“derive from” the Lease itself and therefore are taxable. In Sperry, the plaintiff taxpayer sought
to reverse the judgment of the Superior Court which found that payments for maintenance
charges derived from the lease of machines and were taxable. Id. at 757. If the lessees refused
the maintenance portion of the lease, the plaintiff would not have leased the machines at all. Id.
The Court of Appeals found that the sole issue was whether the payments the plaintiff received
were “derived from the lease or rental of tangible personal property” and concluded that they
were. Id. at 758 (quoting N.C. Gen. Stat. § 105-164.4(a)(2)). The court reasoned that “[t]he
maintenance payments Sperry received were made because its leases required the lessees to
make them; if the payments had not been made the lease agreements would have been broken.”
Id. Further, it was immaterial that the charges were separately stated, “the obligation to pay both

21

charges was established by the leases.” Id. Accordingly, the court found that “the maintenance
payments . . . were part of the gross proceeds derived from the renting of machines and
equipment.” Id.
Here, the Court need not determine whether the payments from the SAP licenses were
“derived from” the payments from the lease of the hardware. This is because the “gross
receipts” of the hardware are “[t]he total amount or consideration” received. N.C. Gen. Stat. §
105-164.3(37). The total amount received as consideration for the lease of the hardware amounts
to the entire Lease Charge because the payments are not separately stated. Accordingly, the
gross receipts include the entire amount of the Lease Charges, consistent with the separate
statement rule as articulated by Hellerstein. Therefore, Winthrop is granted summary judgment
on Commscope’s claims and affirmative defenses involving tax issues. 10
E.

Attorneys’ Fees

The parties dispute whether § 18 of the Lease gives Winthrop the ability to collect
attorneys’ fees. 11 Section 18 provides that:
In the event of any default, claim, proceeding, including a bankruptcy
proceeding, arbitration, mediation, counter-claim, action (whether legal or
equitable) appeal or otherwise, whether initiated by Lessor or Lessee . . . which
arises out of, under, or is related in any way to this Lease Agreement, any Lease
Schedule, or any other document, agreement or instrument executed pursuant
hereto or in connection herewith, or any governmental examination or
investigation of Lessee, which requires Lessor’s participation (individually and
collectively, the “Claim”), Lessee, in addition to all other sums which Lessee
may be called upon to pay under the provisions of this Lease Agreement, shall
pay to Lessor, on demand, all reasonable and documented costs, expenses, and
fees paid or payable in connection with the Claim, including, but not limited to,
reasonable and documented attorneys’ fees and out-of-pocket costs, including
travel and related expenses incurred by Lessor or its attorneys.

10

Given this conclusion, the Court need not determine what weight, if any, should be given to the advisory letter of
the Department of Revenue.
11
The Court notes that Winthrop has cited several cases where it was awarded attorneys’ fees pursuant to § 18 of a
lease agreement. See Winthrop Resources Corp v. Sabert Corp., 567 F. Supp. 2d 1084, 1087 (D. Minn. 2008);
Winthrop v. Diamond Home, 2001 WL 436118, at *3 (D. Minn. Apr. 24, 2001), All-Luminum Products v. Winthrop,
28 Fed. App’x. 611, 612 (8th Cir. 2002). Only Sabert’s Lease agreement is available via PACER. The Lease
language in §18 of the lease in Sabert is the same as § 18 in the instant case. (0:07-cv-0735, Doc. 1, Ex. A., § 18).

22

Commscope contends that because Winthrop was not “required” to bring the action, it is
not entitled to attorneys’ fees under § 18. However, that is not what the plain language of § 18
mandates. Section 18 explicitly covers any proceeding “whether initiated by Lessor or Lessee.”
Moreover, § 18 does not mandate that Winthrop be “required” to bring the action, but rather the
action requires Winthrop’s participation. This lawsuit requires Winthrop’s participation because
Winthrop filed it.
“The general rule in Minnesota is that ‘attorney fees are not recoverable in litigation
unless there is a specific contract permitting or a statute authorizing such recovery.’” Dunn v.
Nat'l Beverage Corp., 745 N.W.2d 549, 554 (Minn. 2008) (quoting Barr/Nelson, Inc. v. Tonto’s
Inc., 336 N.W.2d 46, 53 (Minn. 1983)). In Oleisky, the Minnesota Court of Appeals rejected the
contention that a contract must only provide for attorneys’ fees to the prevailing party and looked
to the contract to determine how to award fees. 398 N.W.2d 627, 629-30. Accordingly, it was
proper for the trial court to award a lender attorneys’ fees even though it failed to lift a
bankruptcy stay as part of its foreclosure efforts. Id.
However, “[w]here a litigant ‘is not a prevailing party . . . and considerations of public
policy militate against awarding attorney fees to a nonprevailing party’ the court will not award
attorneys fees.” Schmit Towing, Inc. v. Frovik, No. A12-0989, 2012 WL 6652637, at *6 (Minn.
Ct. App. Dec. 24, 2012) (unpublished) (quoting Jadwin v. Kasal, 318 N.W.2d 844, 848 (Minn.
1982)). “A prevailing party is one who prevails ‘on the merits in the underlying action,’ not one
who ‘was successful to some degree.’” Id. (quoting Elsenpeter v. St. Michael Mall, Inc., 794
N.W.2d 667, 673 (Minn. App. 2011)). “Generally the payment of damages or the award of some
other kind of performance is required to be deemed the prevailing party.” Id. (citing Hewitt v.
Helms, 482 U.S. 755, 760 (1987)). First, the Court finds that Winthrop is the prevailing party in

23

the current litigation because it was successful in its arguments related to the Lease Charges and
taxation. The Court notes that damages were not awarded to Winthrop. However, the Helms
case refers to the award of “declaratory judgment” as something that may qualify as relief for a
prevailing party. Secondly, the Court finds that it is not inequitable to award damages.
Winthrop prevailed in the instant action. The filing of the instant action may not have been
“required” as stated by Winthrop’s president, but it was responsive to the threatening position
taken by Commcope.
Commscope also argues that enforcing the attorneys’ fee provision would violate
fundamental North Carolina public policy. North Carolina choice of law governs this case. See
In re Merritt Dredging Co., Inc., 839 F.2d 203, 205 (4th Cir. 1988) (in a diversity action a
federal court applies the choice of law rules of the state in which it sits). North Carolina
generally enforces provisions in contracts requiring that the substantive laws of another
jurisdiction shall govern the interpretation of the contract. Tanglewood Land Co. v. Byrd, 261
S.E.2d 655 (N.C. 1980).
However, North Carolina courts may refuse to give effect to a choice of law provision
where “application of the law of the chosen state would be contrary to a fundamental policy of a
state which has a materially greater interest than the chosen state in the determination of the
particular issue and which . . . would be the state of the applicable law in the absence of an
effective choice of law by the parties.” Broadway & Seymour, Inc. v. Wyatt, No. 91-2345, 1991
WL 179084, at *3 (4th Cir. Oct. 28, 1991) (quoting Rest (2d) of Conflict of Laws § 187(2)
(1971)); see also SAS Inst. Inc. v. World Programming Ltd., No. 5:10-CV-25-FL, 2014 WL
6978300, at *14 (E.D.N.C. Sept. 29, 2014).12

12

There is no dispute that Minnesota has a sufficient interest in the litigation under § 187(2)(a) because Winthrop is
a domiciliary of Minnesota. See Rest. § 187(2) cmt. f.

24

As an initial matter, North Carolina law would not be the state of the applicable law in
the absence of the choice of law provision. “[F]or a contract to be made in North Carolina, the
final act necessary to make it a binding obligation must be done” in North Carolina. Thomas v.
Overland Exp., Inc., 101 N.C. App. 90, 96, 398 S.E.2d 921, 925 (1990). This is known as the
“last act” test. Id. The lease provided that “[t]his Lease Agreement shall not become effective
until delivered to Lessor at its offices at Minnetonka, Minnesota and executed by Lessor.” (Doc.
1-1, §25). Accordingly, a condition precedent to contract formation was the signing in
Minnesota. Therefore, the last act was not made in North Carolina.
Further, allowing attorneys’ fees in this instance would not violate a fundamental policy
of North Carolina. “To render foreign law unenforceable as contrary to public policy, it must
violate some prevalent concept of good morals or fundamental principle of natural justice or
involve injustice to the people of the forum state.” Boudreau v. Baughman, 368 S.E.2d 849,
857-58 (N.C. 1988). “This public policy exception has generally been applied in cases such as
those involving prohibited marriages, wagers, lotteries, racing, gaming, and the sale of liquor.”
Id. “[T]he issue of a party’s entitlement to attorney fees is a question of substantive law.”
Tolaram Fibers, Inc. v. Tandy Corp., 375 S.E.2d 673, 676 (N.C. Ct. App. 1989). In Pinnacle
Group, Inc. v. Shrader, 412 S.E.2d 117, 173-74 (N.C. Ct. App. 1992), the North Carolina Court
of Appeals upheld the award of attorneys’ fees under an arbitration agreement that specified that
New York law would govern. A party argued that North Carolina law13 would not allow
attorneys’ fees in that instance. Id. However, the Court of Appeals upheld, under the deferential
Federal Arbitration Act standard, the award of attorneys’ fees by the arbitrators because New
York law was allowed to apply. Id. The same party challenged the trial court’s award of

13

Although the Court of Appeals did not make this specific finding, the discussion is predicated on the assumption
that North Carolina law would have otherwise governed.

25

additional attorneys’ fees as again violating North Carolina law. Id. at 174-75. The Court of
Appeals again upheld the determination under New York law. Id.
The Court notes that North Carolina has recently allowed commercial parties more
latitude in negotiating business contracts and allows attorneys’ fees provisions so long as they
are reciprocal. N.C. Gen. Stat. § 6–21.6. 14 However, this statute does not apply to the instant
case because the provision at hand is not reciprocal and the statute on its face only applies to
contracts entered after October 1, 2011. This statute does represent that commercial parties are
treated differently than consumers for purposes of attorneys’ fees clauses in North Carolina.
Therefore, while North Carolina has a well-established policy of refusing to award
attorneys’ fees in the absence of statutory authority, Stillwell Enterprises, Inc. v. Interstate
Equip. Co., 266 S.E.2d 812, 814 (N.C. 1980), this policy is not sufficiently fundamental as to
override the express will of sophisticated commercial parties who, represented by counsel, agree
to a choice of law provision and an attorneys’ fees provision that clearly establishes their
respective rights.15
IT IS, THEREFORE, ORDERED THAT
(1) Winthrop’s Motion for Summary Judgment is GRANTED;
(2) Commscope’s Motion for Summary Judgment is DENIED;

14

Also, attorneys’ fees would not allowed under N.C. Gen. Stat. § 6-21.2. North Carolina courts have determined
that the statute “allows (1) the party owed the debt (2) to recover attorney’s fees (3) after the debt has matured (4)
provided it in written in the note, conditional sale contract, or other evidence of indebtedness.” Lee Cycle Ctr., Inc.
v. Wilson Cycle Ctr., Inc., 545 S.E.2d 745, 752, aff'd, 556 S.E.2d 293 (N.C. 2001). A lease may qualify as
“evidence of indebtedness” for the purposes of § 6-21.2. See Stillwell Enterprises, Inc. v. Equipment Co., 266
S.E.2d 812, 817-818 (N.C. 1980). First, this is not a suit on a debt, as contemplated by § 6-21.2. Secondly, § 18
provides for payment of reasonable fees and costs. Section § 6-21.2(2) states that if the writing uses such
terminology, it “shall be construed to mean fifteen percent (15%) of the ‘outstanding balance’ ow[ed].” The
outstanding balance is “the principal and interest owing at the time suit is instituted.” Sec. 21.2(3). There is no
principal and interest owing. Therefore, § 6-21.2 does not provide a basis for attorney’s fees. Monsato Co. v. ARE108 Alexander Rd., LLC, No. 1:10CV898, 2014 WL 2815778, at *5 (M.D.N.C. June 23, 2014) (suit for declaratory
relief where no debt owed provides no basis for application of § 6-21.2).
15

This holding is limited to agreements between commercial parties.

26

(3) The parties will address the issue of the amount and reasonableness of the attorneys’ fees
as follows:
a. Winthrop shall submit its Motion for Attorneys’ Fees, including all
documentation in support of the amount and reasonableness of its attorneys’ fees,
within fourteen (14) days of this Order;
b. Commscope may file its Response to the motion within fourteen (14) days of the
date on which the motion is served in accordance with Local Rule of Civil
Procedure 7.1(E); and
c. Winthrop may file a Reply within seven (7) days of the date on which the
Response is served in accordance with Local Rule of Civil Procedure 7.1(E).

Signed: February 10, 2015

27