Opinion
Civil Action No. 3:02CV-644-S.
August 9, 2004
MEMORANDUM OPINION
This matter is before the court on motion of the defendant, Master Spas, Inc., for summary judgment in this action alleging breach of contract and fraud. The plaintiff, Southern Comfort Waterbeds and Spas, Inc., filed the action in the Jefferson County, Kentucky, Circuit Court. The defendant, Master Spas, Inc., removed the case to this court under our diversity jurisdiction. 28 U.S.C. § 1332.
A party moving for summary judgment has the burden of showing that there are no genuine issues of fact and that the movant is entitled to summary judgment as a matter of law. Adickes v. S.H. Kress Co., 398 U.S. 144, 151-60, 90 S. Ct. 1598, 16 L. Ed. 2d 142 (1970); Felix v. Young, 536 F.2d 1126, 1134 (6th Cir. 1976). Not every factual dispute between the parties will prevent summary judgment. The disputed facts must be material. They must be facts which, under the substantive law governing the issue, might affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505, 2510 (1986). The dispute must also be genuine. The facts must be such that if they were proven at trial, a reasonable jury could return a verdict for the non-moving party. Id. at 2510. The disputed issue does not have to be resolved conclusively in favor of the non-moving party, but that party is required to present some significant probative evidence which makes it necessary to resolve the parties' differing versions of the dispute at trial. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-89 (1968). The evidence must be construed in a light most favorable to the party opposing the motion. Bohn Aluminum Brass Corp. v. Storm King Corp., 303 F.2d 425 (6th Cir. 1962).
The action arose from a distributorship agreement between Master Spas, a spa, hot tub, and gazebo manufacturer, and Southern Comfort, a retailer of these and other products. In May of 2000, Master Spas entered into an agreement granting Southern Comfort an exclusive right to sell Master Spas products in Louisville under certain conditions. The terms of the agreement were set out in a letter dated May 12, 2000 from Brian Dotlich of Master Spas to Don and Todd Gibson of Southern Comfort (hereinafter, the "Agreement"). The parties do not dispute that this letter constituted the agreement of the parties concerning the exclusive distributorship. The parties do dispute the meaning of the terms of the agreement, however. There is no dispute that the letter was accompanied by a price code information sheet detailing the prices to be honored by Master Spas, and that the sheet, which was part of the agreement, was signed by all of the parties. It is also undisputed that the parties immediately began to perform under the Agreement.
The Agreement states, in pertinent part, "Exclusive rights to Louisville, with 100 units sold for the 2000 season." Master Spas contends that the term is clear and unambiguous, entitling Southern Comfort to an exclusive distributorship only if they sold 100 units or more for the 2000 season. Southern Comfort contends that the language "with 100 units sold" was not intended as an escape valve to enable Master Spas to terminate the distributorship in the event that Southern Comfort did not sell 100 units. Rather it contends that the "100 units sold" term was a "target number" that Southern Comfort intended to try to achieve. Southern Comfort does not view its failure to sell 100 units for the 2000 season as a breach of the Agreement. Southern Comfort cites deposition testimony of Dotlich, the National Accounts Manager for Master Spas, who stated that the "100 units sold" was a "shared expectation between Master Spas and Southern Comfort." Dotlich depo., pg. 168.
The construction and interpretation of a contract, including questions regarding ambiguity, are questions of law for the court to decide. Island Creek Coal v. Wells, 113 S.W.3d 100, 103 (Ky. 2003), citing, First Commonwealth Bank of Prestonburg v. West, 55 S.W.3d 829, 835 (Ky.App. 2000). Under Kentucky law, a contract "must be construed as a whole, giving effect to all parts and every word in it if possible." United States v. Hardy, 916 F.Supp. 1373, 1380 (W.D.Ky. 1995), citing, City of Louisa v. Newland, 705 S.W.2d 916 (Ky. 1986). The clear and unambiguous provisions of the agreement control, and may not be rewritten here by the plaintiff. See, ie. Consolidated Jewelers, Inc. v. Standard Financial Corporation, 325 F.2d 31 (6th Cir. 1963); State Farm Mutual Auto. Ins. Co., 268 S.W.2d 420 (Ky. 1954).
[W]here the instrument is so clear and free of ambiguity as to be self-interpretive, it needs no construction and will be performed or enforced in accordance with its express terms. An ambiguous contract is one that is susceptible to more than one reasonable interpretation . . . In reviewing contractual agreements, a court is not permitted to create an ambiguity where none exists, and an otherwise unambiguous contract does not become ambiguous merely because one of the parties asserts, post-hoc, that the contract failed to state what the parties truly intended.Fidelity Construction Company, Inc. v. T.A. Blair, Inc., 2004 WL 1699770 (Ky.App. July 30, 2004), citing, Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99 (Ky. 2003); Ex parte Walker's Executor, 68 S.W.2d 745 (Ky. 1933); Central Bank Trust Co. v. Kincaid, 617 S.W.2d 32 (Ky. 1981); First Commonwealth Bank of Prestonburg v. West, 55 S.W.3d 829 (Ky.App. 2000). See also, Island Creek Coal Company v. Wells, 113 S.W.3d 100 (Ky. 2003).
The court concludes that no genuine issue of material fact exists to preclude summary judgment in favor of Master Spas. The agreement states "Exclusive rights to Louisville, with 100 units sold for the 2000 season." The plain, ordinary meaning of this provision is that Southern Comfort was required to sell 100 Master Spas units in 2000 in order to claim entitlement to exclusive rights under the Agreement. It is undisputed that Southern Comfort sold only 34 units in 2000. The fact that Master Spas chose not to terminate the distributorship at the end of 2000, but rather allowed Southern Comfort to continue to sell their products for a period of time, does not alter Master Spas' right to terminate. The relationship became terminable at will at the end of 2000, neither party thereafter being obligated under the Agreement. The fact of the matter is that Southern Comfort was not able to satisfy the "100 units sold" term in any year that it was selling Master Spas products. It sold 44 units for the year 2001 and 52 units for part of the year 2002.
Southern Comfort asserts that the "actions and inactions" of Master Spas with respect to the operation of the contract constituted a waiver of the right to terminate the Agreement. It urges that Master Spas' conduct in permitting Southern Comfort to continue selling the products evidences the intention of the parties that "with 100 units sold" meant only that Southern Comfort would attempt but was not required to reach that goal. However, as noted in Fidelity Construction, supra., "The so-called `doctrine of contemporaneous construction embraces no more than the practice of looking to the voluntary and positive acts of the parties in executing and fulfilling the terms of the contract.' [footnote omitted]. However, the doctrine may only be invoked where the contract at issue is ambiguous and susceptible to more than one reasonable interpretation." 2004 WL 1699770, *6.
Southern Comfort argues that it was not provided reasonable notice of the intention of Master Spas to terminate the agreement after having permitted Southern Comfort to continue operating under the agreement for an additional year. To the extent that reasonable notice could be required of Master Spas under such a scenario, Southern Comfort was afforded such reasonable notice. "Reasonable notice is that period of time which, under the circumstances of the case, would allow one to make alternate arrangements upon cessation of the contract and minimize losses." Pharo Distributing Co. v. Stahl, 782 S.W.2d 635, 638 (Ky.App. 1990).
Southern Comfort contends that notice to it was unreasonable insofar as it intended to offer Master Spas products at the 2002 Kentucky State Fair. Master Spas claims that it had reached a separate contractual arrangement with Southern Comfort concerning the fair which was reduced to writing but which Southern Comfort refused to execute. This purported contract for the 2002 fair is the subject of Master Spas' counterclaim the merits of which are not currently before the court. We need not decide, at this juncture, what, if any, agreement governed the parties' rights concerning the sale of Master Spas products at the fair inasmuch as we find that reasonable notice, if required, was given.
Southern Comfort alleges that it "had to take whatever [it] could get [its] hands on" (Gibson depo., pg. 114) to have enough products for the fair. In fact, Southern Comfort did not showcase Master Spas products for the 2001 fair the previous year, and declined to execute the agreement to exclusively showcase Master Spas for the 2002 fair. Southern Comfort obtained and showcased products from an alternate manufacturer in addition to the products it had already planned to sell at the 2002 fair. Southern Comfort does not allege that it was prevented from selling spa products at the fair. Rather it suggests that its damages should be measured by the Master Spas products which were sold by another dealer. Southern Comfort's allegations do not support its contention that it was unable to effectively sell products at the fair. Rather, the claim of damages tends to support its contention that it was denied the market opportunity to make sales of Master Spas products — the very opportunity which it lost, under the terms of the Agreement, when it failed to meet the sales expectation for 2000.
Interestingly, Southern Comfort stated that it did not agree to exclusively showcase Master Spas products because Master Spas had been unable to meet the necessary price point for the market.
Southern Comfort was able to fulfill its outstanding orders for Master Spas products, and was refunded for products it returned or that it had not received. Southern Comfort was told that warranty and repair issues for products already sold would be addressed. The termination of the agreement by Master Spas was not unreasonable in either its timing nor its terms.
Finally, Master Spas has moved for summary judgment on the claim of fraud. As Southern Comfort has not responded to Master Spas' contentions concerning this claim, the claim is deemed abandoned.
For the reasons set forth herein, the motion of Master Spas for summary judgment will be granted and the claims against it will be dismissed. A separate order will be entered herein this date in accordance with this opinion.