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Should these contract interpretations have been punished?

Anderson and Buck were in a contract relationship, under which Anderson bought gasoline from Buck.  At some point, Anderson notified Buck that it would be buying gasoline from another supplier as well.  Buck sent a cease-and-desist letter to Anderson, claiming that a particular provision of the contract supposedly prohibited Anderson from entering into agreements with other gasoline suppliers.  In response, Anderson filed a declaratory judg­ment action.  In due course the trial court granted summary judgment for Anderson; the state supreme court affirmed.  Ray Anderson, Inc. v. Buck’s, Inc.,  300 Neb. 434 (2018).

From reading the supreme court’s opinion, Buck should count itself fortunate that it wasn’t sanctioned for asserting its interpretation of the contract lang­uage. The supreme court all but accused Buck of selectively reading only the contract provision(s) it liked, while ignoring what the supreme court concluded was clearly-dispositive contrary language. See id. at 442-43.

So why wasn’t Buck sanctioned?  Well, apparently Buck wasn’t the only party to assert a questionable interpretation — Anderson, for its part, claimed that it had the right to terminate the con­tract; but both the district court and the supreme court held that under the con­tract’s clear lang­uage, only Buck had the right to terminate. See id. at 444-45.

Maybe that’s why the supreme court’s opinion says nothing about sanctions: Ap­par­ently, each party advanced untenable interpretations of different pro­vi­sions of the contract, and the courts might have regarded those as canceling each other out as far as sanctions were concerned.

But the fact remains that the courts had to spend time and money on what, judging from the supreme court’s opinion, was needless litigation. Perhaps each party should have been sanctioned, as a warning to others.

{ 2 comments… add one }
  • Michael S. Little 2018-07-09, 15:29

    D.C.: First, great point. I’ve said that forever about insurance companies. Have you read a liability policy lately? It’s incomprehensible gibberish. They should pay a surcharge to court system to interpret their crappy contracts. Insurers are only company that pays other people to interpret their contracts. Second, Here is good blurb on the great point you raise: “Without a doubt, in supporting the interests of their clients, counsel often urge upon the court interpretations of the language of a contract that are far removed from common and ordinary usage, without producing any substantial evidence that the other party to the transaction gave the unusual meaning to the language or had any reason to suppose that the first party did so. In such cases the harassed judge is justified in saying that the words are too plain and clear to justify such an interpretation. [citation] In cases like these, the words of the contract stand as written and will be enforced as interpreted
    . . . .”

    (Fpi Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 389, fn. 10.)

  • D. C. Toedt III 2018-07-10, 00:35

    Michael Little: Excellent points, and thanks for the citation. Parties — often egged on by their lawyers — will keep pulling this [stuff] because there’s no real downside to their doing so; this just gums up the works for everyone.

    As to insurance policies specifically: USAA’s policies are pretty easy to read; I found an online example at https://content.usaa.com/mcontent/static_assets/Media/ITAPSA.pdf?cacheid=2149693551_p

    Texas’s insurance commissioner is apparently trying to get insurance carriers to simplify their language; see the press release at http://www.tdi.texas.gov/news/2018/tdi05232018.html. (The press release reads like a puff piece, which of course is completely unrelated [wink wink, nudge nudge] to the fact that in Texas the insurance commissioner is an elected official ….)

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