CALAIS COMPANY INC v. IVY (2013)

The Opinion entirely “overlooked” well-established, “material ․ proposition[s] of law” regarding interpreting and applying contracts, especially settlement(s), in concluding, under the parties' Settlement Agreement, Calais Company (“Calais”) was entitled to seek and obtain judicial review of the appraisal panel majority's expert substantive methodology and conclusions, regarding substantive decisions and opinions as to the valuation of Calais (“Valuation”).¹

The Opinion bases that conclusion on Paragraph 23 of the Agreement—described by Calais' attorney as a “boilerplate” provision² —which merely provides the Superior Court “shall retain jurisdiction over this matter for the purpose of enforcing all terms and conditions of this Settlement Agreement.” [Exc. 257] The Opinion concludes, at pages 11–15, this general provision for judicial enforcement of the Agreement overrides Paragraph 5(d) of the Agreement, that the appraisal panel majority's “valuation [i.e., substantive decisions and opinions regarding “value” and the settlement amount] shall be binding on the parties andshall not be subject to further review, dispute or appeal.” [Exc. 249] Proceeding on that premise, the Opinion reviews, sets aside, and remands the Valuation.³ In contrast, paragraph 5(d) is not “boilerplate.” It was among the intensively negotiated and drafted provisions the parties agreed would govern the appraisal, i.e., settlement process.⁴ Its unambiguous, unqualified preclusion of any “review, dispute or appeal” of the Valuation was intended to advance what Calais attorney Feldman described as a fundamental Calais settlement objective: “finality.” In order to ensure that Calais could “stop ․ having to fund the litigation,” he explained, it was “important that the litigation be ended in a way that it could not be resurrected and reopened down the line for whatever reason.” [Exc. 466] [E.A]. Feldman emphasized Paragraph 5(d)'s essential role in that regard:

[The Agreement] does not require a unanimous result by the three appraisers. Two of the three alone, if they reach a conclusion, is sufficient to reach a result. And then that number, that appraised value, whatever it may be. will then be binding on the parties. Neither party has any right to any further review, dispute, or appeal. So once they give us the number, everybody has to live with it no matter what it may be. [Exc. 467, p. 20, lines 23–25, p. 21, lines 1–6 (emphases added) ]⁵

In subordinating Paragraph 5(d) to Paragraph 23 and thereby vitiating the express preclusion of any “review, dispute or appeal” of the Valuation, the Opinion “overlooked” or “failed to consider” several fundamental principles regarding agreements and settlement. First, it ignored the cardinal principle that, “[i]n contracts, as in statutes, ‘where one section deals with a subject in general terms and another deals with a part of the same subject in a more detailed way, the two should be harmonized if possible; but if there is a conflict, the specific section will control over the general.’ “⁶ Paragraph 5(d) addresses the question of appeal and review of the appraisal panel majority's valuation explicitly and, indisputably, more specifically than does Paragraph 23. It thus should “control over” Paragraph 23's general, boilerplate provision that the Superior Court could enforce “all terms and conditions of this Settlement Agreement.”

Where there is an “apparent inconsistency ․ between a clause that is general and broadly inclusive in character and one that is more limited and specific in its coverage, the latter should generally be held to operate as a modification and pro tanto nullification of the former.”⁷ Thus, framed in oft-used contract language, Paragraph 23 should be read to provide that the Superior Court “shall retain jurisdiction over this matter for the purpose of enforcing all terms and conditions of this Settlement Agreement; provided, however, that the Valuation shall be binding on the parties and shall not be subject to further review, dispute or appeal.” Instead, the Opinion effectively reads Paragraph 23 as providing that the Superior Court “shall retain jurisdiction over this matter for the purpose of enforcing all terms and conditions of this Settlement Agreement; provided, however, that the Court shall not enforce Paragraph 5(d)'s provision precluding review, dispute or appeal of the Valuation, but instead shall ignore that provision and review the [substantive decisions of the majority appraisers regarding the substantive opinions and methodology they used] Valuation.” The Opinion thus turns well-established, fundamental contract and settlement interpretation principles on their head.⁸ In contrast, if the two provisions are harmonized as suggested above, Paragraph 23 retains substantial effect, providing for judicial enforcement of numerous terms and conditions of the Agreement, including Paragraph 5(d)'s express, unqualified preclusion of appeal and review.

Finally, the cases cited by the Opinion, at 12–15, to support a conclusion the Valuation should be subject to appeal and judicial review are simply not on point. While those appraisals were subject to limited judicial review, even though the relevant agreements characterized them as “binding” or, “final, binding and conclusive”: None of those cases involved provision(s) an appraisal would be both “binding” and expressly “not ․ subject to further review, dispute or appeal.”⁹ Reliance on those cases renders meaningless that additional Agreement provision.

The Court has recognized that its fundamental “duty,” in exercising its authority to interpret contracts, is to enforce the parties' contractual intentions.¹⁰ The Opinion, at 10 n.6, recognizes that “a contract may limit a court's authority to review it.” And the Settlement Agreement unambiguously provides that the Valuation [i.e., the amount of Settlement Proceeds] “shall not be subject to further review, dispute or appeal.” Yet the Opinion “subjects” the substantive decisions and opinions of the majority appraisers regarding Valuation to “review” in Calais' “appeal,” i.e., substantive review based on a reading of the Agreement that “overlooks” fundamental contract and settlement interpretation principles.¹¹ Ivy thus asks the Court to issue a revised opinion which respects and enforces the parties' clear agreement: that there could be no such appeal or review.¹²

FOOTNOTES

1.  Alaska R.App. P. 506(a)(2). It also “overlooked ․ or failed to consider ․ decision[s] or principle[s]” that should have controlled the contract analysis. Id., § (a)(l).

2.  Reviewing the Agreement at a Calais shareholders meeting, Calais attorney Jeff Feldman included Paragraph 23 among the provisions that were “pretty much boilerplate, standard in all agreements,” and thus did not discuss it. [Exc. 469]

3.  The Opinion, in essence, turns the “no further review, dispute, or appeal” provision on its head with the “enforcement” provision. That “no further review, dispute, or appeal,” provision was a crucial part of the settlement, from both the perspective of Calais and Ivy. As Judge Morse recognized, it precluded the trial court, and now precludes this Court, from making “substantive decisions” regarding the methodology of valuation visà-vis substantive determinations of the meaning of “fair value” of Calais as a measure of Settlement Proceeds (not value of stock in an actual involuntary liquidation). Judge Morse properly stated:The Court agrees with Ivy. The Court has a limited role. While it must enforce the Agreement,[FN 4], it must not review the panel's substantive decision. The panel has acknowledged the Court's instructions and indicated that it has followed them, including the requisite consideration of AS 10.06.630(a). The Court concludes that for it to inquire further into the merits of the panel's action or construction of AS 10.06.630(a) would mean it would exceed the authority granted to it by the parties' Settlement Agreement. [footnotes omitted]. [Exc. 1028; Order dated June 1, 2010].In contrast, this Court, at p. 17 to 21, in essence, interjects itself as “three additional appraisers,” to substantively override the majority opinion and decision of the appraisal panel.

4.  [Exc. 465, 466 (Calais attorney Feldman: Agreement was “aggressively negotiated” through more than 30 drafts; appraisal process provisions “took some time to craft”) ]

5.  Both parties thus assumed the risk an appraisal panel majority, having been instructed concerning a “fair value” determination of Calais [and thus the amount of Settlement proceeds] as provided in Paragraph 5(a) [and 5(b) ] of the Agreement [Exc. 248], might agree to a substantive determination regarding fair value, and the amount of said valuation, which one party—or both parties—considered to be inconsistent with their substantive interpretation of those instructions or otherwise erroneous. Calais assumed the risk and was and is so bound, and cannot ask this Court to do what it has now done, i.e., made its own review of and interpretation and implementation of substantive appraisal decisions.

6.  Norville v. Carr–Gotstein Foods Company, 84 P.3d 996, 1004 (Alaska 2004), quoting Estate of Hutchinson, 511 P.2d 1074, 1075 (Alaska 1978). See also, e.g., Hussein–Scott v. Scott, 298 P.3d 179, 183 (Alaska 2013) (agreement line “specifically designated” for relevant term “contains the more important information on that topic”); Sourdough Development Services, Inc. v. Riley, 85 P.3d 463, 468 n.5 (Alaska 2004) (“more specific” settlement agreement section governed question concerning receivership expenses).

7.  Astra USA, Inc. v. Bildman, 914 N.E.2d 36, 55 (Mass.2009), cert. denied 130 S.Ct. 3276 (2010) (citing earlier decision, quoting A. Corbin, Contracts, § 547, at 176).

8.  Thereby stripping the critical language in Paragraph 5(d) of any real meaning or effect. The Opinion fails to distinguish between court allowed enforcement provisions for the Settlement, as to terms and conditions, and review of substantive decisions by the appraisers, which are committed to their sole discretion, and prohibited to the court. It also “overlooks” principle “an interpretation will not be given to one part of a contract which will annul another.” McBain v. Pratt, 514 P.2d 823, 828 (Alaska 1973) (footnote omitted).The Opinion at p. 17 states, the appraisers were to, “ “ determine the fair value of Calais in accordance with ․ AS 10.06.630(a)․” This omits “․ this Settlement Agreement and ․”, i.e., the actual procedural and substantive agreements for the “appraisal procedure,” which, under paragraph 5, includes both 5(a) and 5(b). The Opinion engrafts a strict interpretation of this Court's substantive view of AS 10.06.630(a), as to what would be the valuation, if there was an involuntary dissolution and/or sale [there was not, and never will be ] while, in contrast, the Settlement Agreement was crafted to provide Settlement Proceeds to Ivy [as to ail of her claims, and not merely involuntarily dissolution] equal to the valuation by the appraisers, with consideration of all of the terms of the Settlement Agreement, and not merely AS 10.06.630(a).

9.  The Opinion principally relies on Salt Lake Tribune Publishing Co. v. Management Planning Inc., 454 F.3d 1128 (10th Cir.2006). Though the agreement therein described the appraisal as “final, binding and conclusive,” the 10th Circuit reasoned that broad language providing for judicial enforcement of the agreement “demonstrates the parties' intent to allow the enforcement of the [agreement] in any court.” Given that “plain language,” the Court rejected the claim that “no judicial review of the appraisal is permitted.” Id. at 1137. The Court also relied on the fact that “the plain language” in the relevant agreement subparagraph made the appraisal “final, binding and conclusive” “only when it is ‘in accordance with the appraisal provisions of this paragraph .’ “ Id. Here, Paragraph 5(d)'s plain language provides that the appraisal is both “binding” and “not ․ subject to further review, dispute or appeal,” without any qualifying language.

10.  See, e.g., Western Pioneer, Inc. v. Harbor Enter., 818 P.3d 654, 656 (Alaska 1991).

11.  The Opinion essentially adopts appraiser Lowe's opinions/representations, such that this Court, through its “further review, dispute, or appeal,” [prohibited under the Agreement], overrides the provisions of the Agreement, by which those substantive decisions would be made by a majority of the appraisal panel. Lowes' opinions/representations were not subject to oath, examination or evidentiary hearing, or any other procedural or substantive safeguards, and Judge Morse properly determined they were not appropriately presented, and returned them to Lowe. See, Exc. 894–95; Appellant's Exc. 136–137.

12.  See U.S. v. Marine, 2013 WL 406080, at *1–2 (2nd Cir.2013) (enforcing no review provision).