On September 3, 2014, Brent Williams, the Plan Trustee (“Trustee”) for Touch America Holdings, Inc., filed a complaint initiating an adversary proceeding against, among others, AT&T Corp. (AT&T”). In a 36 page decision dated April 25, 2017, Judge Carey of the Delaware Bankruptcy Court granted AT&T’s motion for summary judgment, bringing the litigation to an end. Judge Carey’s opinion is available here (the “Opinion”). The dispute hinged on a number of contracts entered into in Touch America’s bankruptcy, all of which had been approved by the Court.
Judge Carey’s Opinion
Judge Carey’s Opinion begins with a 20 page recitation of undisputed facts. He then provides an overview of the standard for summary judgment before addressing the decisive contract language. He begins with the primary factor that can prevent a summary judgment ruling in a contract interpretation case – ambiguity. “In a dispute over the meaning of a contract, the threshold question is whether the contract is ambiguous.” Opinion at *26 (quoting Lockhead Martin Corp. v. Retail Holdings, N.V., 639 F.3d 63, 69 (2d Cir. 2011)). “If a contract is unambiguous, the court should assign the plain and ordinary meaning to each term and interpret the contract without the aid of extrinsic evidence.” Id. (quoting Alexander & Alexander Servs. v. These Certain Underwriters at Lloyd’s, 136 F.3d 82, 86 (2d Cir. 1998)).
Despite the Trustee’s argument that there was ambiguity in one of the contracts at issue (which seems to undercut the Trustee’s argument for summary judgment), Judge Carey held that “the fact that something is not stated explicitly does not mean that the language of the contract is ambiguous. I do not find the pertinent language to be ambiguous, and will assign the plain and ordinary meaning to each term and interpret the contracts without the aid of extrinsic evidence.” Opinion at *28.
After summarizing the extrinsic evidence provided by the parties, Judge Carey held that “the terms of the SPC Settlement Agreement, as well as the other agreements at issue, [are] unambiguous. Accordingly, I will not consider the extrinsic evidence introduced by any of the parties.” Opinion at *35. In one paragraph, he cited to each of the controlling contract provisions to resolve this conflict, holding that the explicit, unambiguous language of the contracts and agreements at issue warranted a ruling on summary judgment in favor of AT&T.
One of the key issues, is language included in one of the agreements pursuant to which assets were transferred to AT&T. New York and other courts consistently maintain that the term “’related to’ … is clear and unambiguous.” Opinion at *27 (quoting Coregis Ins. Co. v. American Health Found., 241 F.3d 123, 129 (2d Cir. 2001).). One court has stated that such a provision “constitutes the broadest language the parties could reasonably use.” Opinion at *28 (quoting Fleet Tire Serv. v. Oliver Rubber Co., 118 F.3d 619, 621 (8th Cir. 1997)). While the Trustee suggested other possible meanings of the language, Judge Carey held that those arguments were insufficient to create an ambiguity, as the alternative interpretations are simply not reasonable. Id.
If a contract calls for the broadest language that parties could reasonably use, it is likely that the party for whose benefit that language was used will win the day. No matter how effective a litigator you employ, the attorneys drafting a contract have more impact on the outcome of future litigation. It can seem expensive to have a comprehensive contracted created. Yet, one has but to consider how much more this litigation would have cost if AT&T lost on its motion for summary judgment, to realize that the time of the drafters of these agreements was a worthwhile expense.