                 United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 16-1223
                         ___________________________

                                    The Gap, Inc.

                        lllllllllllllllllllll Plaintiff - Appellee

                                           v.

               GK Development, Inc.; Columbia Grand Forks, LLC

                      lllllllllllllllllllll Defendants - Appellants
                                       ____________

                     Appeal from United States District Court
                      for the District of North Dakota - Fargo
                                   ____________

                            Submitted: October 19, 2016
                             Filed: December 8, 2016
                                  ____________

Before RILEY, Chief Judge, WOLLMAN, and BENTON, Circuit Judges.
                              ____________

BENTON, Circuit Judge.

      This case addresses the meaning of a lease for a Gap store at Columbia Mall in
Grand Forks, North Dakota. The Gap, Inc., says the lease does not require it to pay
for heating, ventilation, and air conditioning (HVAC) expenses and a share of mall
operation costs. The mall’s management company, GK Development, Inc., and
owner, Columbia Grand Forks, LLC, (collectively “GK”) disagree. The district court1
agreed with Gap, declaring that it has no obligation to pay for HVAC or common area
maintenance expenses. Having jurisdiction under 28 U.S.C. § 1291, this court
affirms, but modifies the declaratory judgment.

                                           I.

      On April 20, 2001, Gap agreed to a written lease with then-landlord
Metropolitan Life Insurance Company (MetLife) for premises at Columbia Mall.
Based on a lease for another mall, the final agreement has many insertions and strike-
throughs. It begins by describing “Basic Provisions,” including Gap’s rent obligations
and the duration of the lease (five years, with options to extend for two more five-year
terms). The lease later describes obligations for “Center Expenses” (costs associated
with mall operation), “Utilities Provided By Landlord,” and “HVAC Maintenance.”

       Gap opened its Columbia Mall store in July 2001. MetLife sold the mall a few
years later. GK Development became property manager in 2004. Columbia Grand
Forks became the owner in 2005. Gap extended the lease twice, in 2006 and 2011.

      The mall provides HVAC service for all its stores by HVAC units on the mall’s
roof. For the first ten years of the lease, Gap was not charged (and did not pay) for
HVAC or Center Expenses. In June 2011, GK sent Gap a bill for HVAC and
“common area maintenance” (“CAM”) expenses. GK said its previous failure to
charge for these expenses was an “oversight.” Gap paid this bill and other bills for
HVAC and CAM expenses for 2010, 2011, 2012, and part of 2013. In 2013, Gap
objected, telling GK it would stop paying, and requesting return of the payments. GK
continued to demand payment.


      1
        The Honorable Ralph R. Erickson, District Judge, United States District Court
for the District of North Dakota.

                                          -2-
       In January 2014, Gap sued GK for damages and a declaratory judgment that it
has no obligation to pay for HVAC or CAM expenses. GK counterclaimed for
damages and a declaratory judgment that the lease obligates Gap to “pay the Tenant’s
Share of Common Expenses which includes the Tenant’s Share of the common area
maintenance and HVAC expenses.” On cross-motions for summary judgment, the
district court granted summary judgment to Gap. Applying North Dakota law, it ruled
that the lease is unambiguous and does not require Gap to pay HVAC or CAM
expenses. It also said that even if the lease were ambiguous, extrinsic evidence shows
that Gap owes no HVAC or CAM payments. It ruled that GK had breached the lease,
that “Gap has no obligation to pay CAM expenses or HVAC expenses for the duration
of the Lease,” and that GK owed Gap damages.

                                          II.

       GK argues that the district court erred in granting summary judgment to Gap
because the lease unambiguously requires Gap to pay for HVAC and Center
Expenses. This court reviews de novo the district court’s grant of summary judgment
and its interpretation of the lease. Busch Props., Inc. v. Nat’l Union Fire Ins. Co. of
Pittsburgh, Pa., 815 F.3d 1123, 1126 (8th Cir. 2016).

       Under North Dakota law, the rules of contract interpretation apply to leases.
Savre v. Santoyo, 865 N.W.2d 419, 424 (N.D. 2015). The lease is interpreted “to give
effect to the parties’ mutual intention” when it was executed. Id., citing N.D. Cent.
Code § 9-07-03. The court first tries to figure out the parties’ intent by looking only
at the lease’s language. Id., citing § 9-07-04. The court considers the entire lease.
Id. If the court figures out the parties’ intent based only on the lease’s language, the
interpretation of the lease is a question of law. Id.

      However, if the lease’s language is ambiguous, the court may look to extrinsic
evidence for the parties’ intent. Olander v. State Farm Mut. Auto. Ins. Co., 317 F.3d

                                          -3-
807, 809 (8th Cir. 2003) (en banc), citing Des Lacs Valley Land Corp. v. Herzig, 621
N.W.2d 860, 863 (N.D. 2001). “A contract is ambiguous when rational arguments can
be made for different positions about its meaning. . . . When a contract is ambiguous,
the terms of the contract and the parties’ intent become questions of fact.” Id.,
quoting Kaler v. Kraemer, 603 N.W.2d 698, 702 (N.D. 1999).

                                         A.

      GK argues that Article 10(B) of the lease requires Gap to pay for HVAC
services provided by GK. Article 10(B) says:

      Landlord reserves the right from time to time to provide any or all
      utilities to the Premises. In such case, Tenant shall pay such charges as
      Landlord may establish from time to time, which Landlord shall
      determine based on the quantity of utilities used or consumed at the
      Premises on a monthly or other regular basis. Such charges shall be
      based upon Tenant’s consumption and [(i)] shall not be in excess of the
      rate that Tenant would be charged directly by the utility company
      serving the general area in which the Center is located, (ii) if the
      Premises are separately metered for such utilities, Tenant shall pay for
      amounts of such utilities based on such meters, and (iii) if the Premises
      are not separately metered for such utilities, Tenant shall pay for
      amounts of such utilities based on the reasonable estimates of Landlord’s
      engineer or consultant . . . . If no such charges are established by
      Landlord, then the cost of such utilities shall be included as part of
      Center Expenses.

Article 10(A) defines “utilities” to include HVAC, along with other common utilities.

      According to GK, Article 10(B) means that if it establishes HVAC charges in
the manner specified, it can charge Gap for HVAC directly. This would mean that if
GK does not establish HVAC charges in the manner specified, HVAC costs are
included as part of Center Expenses. GK, however, did not argue before the district

                                         -4-
court that Gap owed it for HVAC costs under Article 10. It did not mention Article
10 in its Answer and Counterclaim. In its “Statement of Undisputed Material Facts”
(in its memorandum supporting summary judgment) it said: “In addition to Tenant’s
obligation to pay its share of the Center Expenses, common area expenses, and HVAC
expenses pursuant to Articles 5(B), 12(B), and 11(C) of the Lease, Article 10 of the
Lease requires Tenant to pay for any utilities, such as water and sewer, that Landlord
provides for the Premises.” Later in that memorandum, GK argued that Article 10(B)
obligated Gap to pay for water and sewer services, making no argument that 10(B)
required Gap to pay for HVAC.

       Ordinarily, this court “will not consider an argument raised for the first time on
appeal.” United States v. Hirani, 824 F.3d 741, 751 (8th Cir. 2016). However, this
court has “the discretion to consider an issue for the first time on appeal where the
proper resolution is beyond any doubt . . . or when the argument involves a purely
legal issue in which no additional evidence or argument would affect the outcome of
the case.” Weitz Co.v. Lloyd’s of London, 574 F.3d 885, 891 (8th Cir. 2009). This
court has “addressed new arguments raised on appeal where the new issue is
encompassed in a more general argument previously raised and no new evidence is
presented on appeal.” Hirani, 824 F.3d at 751.

       GK waived its Article 10(B) argument because it did not raise it below and the
exceptions do not apply. First, Gap’s obligation for HVAC charges under Article
10(B) was not encompassed within a more general argument raised below. GK
emphasized below that Article 11(C), specifically, required Gap to pay for HVAC
expenses; GK’s new argument invokes a separate portion of the lease. Second, while
lease interpretation is a question of law, the applicability of Article 10(B) is not “a
purely legal issue in which no additional evidence or argument would affect the
outcome of the case.” It is not clear that the lease unambiguously contemplates the
application of Article 10(B) here. GK said in its Counterclaim that the lease includes
HVAC expenses within Center Expenses. Article 1(I) states “Initial Estimated

                                          -5-
Monthly Center Expenses: $ N/A,” suggesting (as discussed below) that Gap had no
Center Expenses liability and thus no HVAC liability. Additionally, the form lease’s
Article 1(M) (“Other Initial Monthly Charges”) is crossed out, suggesting that the
parties intended that Gap would not be charged for HVAC. And even if Article 10(B)
did enable GK to charge Gap directly for HVAC, this court would have to determine
whether GK established HVAC charges in the manner required by Article 10(B). GK
waived the argument that Gap owes it for HVAC expenses under Article 10(B).

                                          B.

       GK argues that Article 5 of the lease requires Gap to pay Center Expenses. The
lease defines “Center” as follows:

      ‘Center’ shall mean the building or structure in which the Premises are
      located and any other buildings or structures owned or ground leased by
      Landlord . . . and operated in conjunction therewith . . . together with the
      Common Areas, and all parcels or tracts of land owned or ground leased
      by Landlord . . . on which all or any portion of the foregoing items are
      located and any fixtures, Systems and Equipment, furniture and other
      personal property owned or leased by Landlord located thereon or
      therein and used in conjunction therewith . . . .

      It defines “Center Expenses” at length. The definition begins:

      ‘Center Expenses’ shall mean all expenses, costs and amounts of every
      kind and nature which Landlord shall pay during any calendar year any
      portion of which occurs during the Term in connection with the
      management, repair, maintenance, replacement, insurance and operation
      of the Center, including, without limitation, any amounts paid for: (a)
      utilities, including but not limited to . . . heating, air conditioning and
      ventilating . . . .




                                          -6-
       Article 5(B) of the lease states that “Tenant shall pay Landlord an amount equal
to Tenant’s Proportionate Share of Center Expenses . . . .” (The “Tenant’s
Proportionate Share” is calculated by dividing the square footage of the tenant’s
premises by the total rentable square footage of the Center.) Article 5(B) then refers
to Article 5(1):

      Notwithstanding anything contained in this Lease to the contrary, Tenant
      shall pay no more than the amount set forth in Article 1(L) as Initial
      Estimated Monthly Center Expenses for the first twelve (12) months of
      the Term and thereafter the amount Tenant is obligated to pay on the
      annualized basis for Center Expenses for any one Lease Year shall not
      exceed the lesser of the following: (i) the actual amount of Tenant’s
      Proportionate Share of Center Expenses computed in accordance with
      Article 28, or (ii) the amount of Center Expenses payable by Tenant for
      the immediately preceding Lease Year increased by five percent (5%).
      . . . The cap on increases in Center Expenses provided for herein shall
      not apply to the portion of Center Expenses for utility charges, Taxes and
      snow removal and, therefore, the maximum permitted increase in the
      amount which Tenant is obligated to pay on an annualized basis for
      Center Expenses, as hereinbefore provided, shall be based on the Center
      Expenses net of the portion thereof for utility charges, Taxes and snow
      removal.

The parties agree that the reference to “Article 1(L)” should say “Article 1(I),” which
states “Initial Estimated Monthly Center Expenses: $ N/A.”

                                           1.

       GK urges that Article 5 unambiguously requires Gap to pay no Center Expenses
for the first 12 months of the lease, but then obligates Gap to pay the “Tenant’s
Proportionate Share of Center Expenses” for the remainder of the lease. The district
court concluded that Article 5 unambiguously requires Gap to pay no Center Expenses
for the duration of the lease. According to the district court, the lease requires Gap to


                                          -7-
pay no Center Expenses for the first 12 months of the lease, then caps increases in
Center Expenses at five percent of the preceding Lease Year’s Center Expenses
payable by Gap. The amount payable by Gap for the first 12 months was nothing.
And since five percent more of nothing is nothing, the district court reasoned that Gap
owes nothing.

      Contrary to the district court’s conclusion, the lease’s language is ambiguous
as to whether Gap is required to pay the Tenant’s Proportionate Share of Center
Expenses.

       The key ambiguity is Article 1(I)’s statement that Gap’s “Initial Estimated
Monthly Center Expenses” are “$ N/A.” “N/A” means “not applicable.” N, n.,
Oxford English Dictionary (online version September 2016), available at
http://www.oed.com/view/Entry/124731 (last visited December 5, 2016). A rational
person could interpret “Initial Estimated Monthly Center Expenses: $ N/A” to mean
that Gap does not owe Center Expenses for the first 12 months of the lease. But a
rational person could interpret Article 1(I)—located at the beginning of the lease, and
a “Basic Provision” of the lease—as saying that Center Expenses are not relevant to
Gap’s obligations at all. Had Article 1(I) said “$0,” it would clearly indicate an
introductory reprieve from Center Expenses liability. But saying “N/A” potentially
indicates a permanent exemption.

       A permanent-exemption reading is rational when “N/A” is read in context.
True, this reading does not give effect to Article 5(1), and the lease should be
interpreted “to give effect to every part if reasonably practicable.” N.D. Cent. Code
§ 9-07-06. However, it is not always “reasonably practicable” to give effect to every
part of a contract. Indeed, Article 1(I)’s “N/A” necessarily renders Article 5(1)
ungrammatical and illogical. Article 5(1) refers to “the amount set forth in Article
1([I]).” But the parties did not set forth an “amount” in Article 1(I)—they wrote
“N/A.” If one inserts “N/A” into Article 5(1), it reads: “Tenant shall pay no more

                                         -8-
than ‘N/A’ for the first twelve (12) months of the Term.” Since “no more than ‘not
applicable’” has no grammatical or logical meaning, it is not “reasonably practicable”
to give effect to all parts of Article 5(1).

        A rational argument can be made that Article 5(1) is inoperative in this
agreement. In certain contexts, parts of a contract are inoperative when inconsistent
with “introductory language” and the contract’s “general intent.” See Langer v.
Pender, 764 N.W.2d 159, 167 (N.D. 2009). See also § 9-07-15 (“Particular clauses
of a contract are subordinate to its general intent.”). A rational person could argue that
this is such a context: Article 1(I) is part of the “Basic Provisions” at the beginning
of the lease, and can plausibly reflect the parties’ intent that Gap not be liable for
Center Expenses for the duration of the lease. Since two rational arguments can be
made about the meaning of Article 1(I)’s “N/A,” the lease is ambiguous whether Gap
owes for Center Expenses at all.2

                                           2.

       Because the lease contains an ambiguity, the parties’ intent becomes a question
of fact. Kaler, 603 N.W.2d at 702. That question is answered with reference to
extrinsic evidence. Id. See also N.D. Cent. Code § 9-07-12 (“A contract may be
explained by reference to the circumstances under which it was made and the matter
to which it relates.”). “[T]he parties’ conduct in the course of performance after the
contract’s formation can help determine the meaning of ambiguous language.” Nat’l
Bank of Harvey v. Int’l Harvester Co., 421 N.W.2d 799, 803 (N.D. 1988). Gap is
entitled to summary judgment if a rational factfinder interpreting the facts most
favorably to GK could not find for GK. See Torgerson v. City of Rochester, 643 F.3d

      2
        GK also argues that the district court erred in interpreting Article 5(1)’s
limitation on increases. But a court only reaches that question if it resolves the
ambiguity noted above by determining that Gap is obligated to pay for Center
Expenses.

                                           -9-
1031, 1042 (8th Cir. 2011) (en banc); Mandan Educ. Ass’n v. Mandan Pub. Sch.
Dist. No. 1, 610 N.W.2d 64, 66-67 (N.D. 2000).

      Gap offers two pieces of evidence that the parties intended that Gap would not
be required to pay for Center Expenses. First, Gap emphasizes the course of
performance of the lease—for the first ten years of the lease, neither GK nor its
predecessors ever charged Gap for Center Expenses (or CAM or HVAC). This
suggests that the parties intended Article 1(I)’s “N/A” to exempt Gap from Center
Expenses liability: A commercial landlord has incentives to collect money its tenants
owe. Thus, GK and its predecessors’ decision not to collect Center Expenses from
Gap suggests they understood the language of the lease to impose upon Gap no
obligation to pay for Center Expenses.

       Second, Gap highlights an April 2005 “Estoppel Certificate” that GK sent to
Gap. It states that Gap’s “Monthly CAM Expenses” were “N/A/ mo.” It also says
that no amendments or modifications had been made to the lease. It states Gap’s
obligations to pay rent, taxes, and a percentage of its gross sales over a breakpoint.
But it states no obligation to pay any Center Expenses or HVAC costs. The tenant
estoppel certificate suggests that GK understood the lease not to require Gap to pay
for Center Expenses. Together, the course of performance and estoppel certificate
strongly support that “Initial Estimated Monthly Center Expenses: $ N/A” means that
Gap has no obligation to pay Center Expenses for the duration of the lease.

       Gap also offers evidence from lease negotiations (showing CAM and HVAC
were included in Gap’s rent) and a “Lease Analysis Worksheet” prepared by MetLife.
GK argues that rational factfinders would have reasons not to credit the evidence from
lease negotiations and that the worksheet is inadmissible. Accepting GK’s points for
the sake of argument, this court does not consider this evidence as part of its summary
judgment analysis.



                                         -10-
       GK offers no extrinsic evidence or any reason that a rational factfinder would
draw inferences in its favor from the course of performance or from the 2005
“Estoppel Certificate.” Reading the ambiguous lease language in conjunction with the
extrinsic evidence, a rational factfinder can reach only one conclusion in this case:
The parties intended that Gap not be obligated to pay for Center Expenses for the
duration of the lease. The district court’s grant of summary judgment to Gap is
affirmed.

                                         C.

      GK argues that under Article 11(C) of the lease, Gap must pay for maintenance
and repair costs for HVAC units serving its space. Article 11(C) states:

      If the Premises are served by one or more HVAC units or other such
      systems or equipment that also serve one or more other tenants, Tenant
      shall at Landlord’s option made by Landlord from time to time in writing
      either: (a) make arrangements directly with such other tenant or tenants
      to reasonably share responsibility and expenses for inspection,
      maintenance, repairs, operation and replacements of such items, or (b)
      reimburse Landlord for Tenant’s reasonable share of all costs incurred
      by Landlord in making such arrangements or performing such work
      (such share to be based on the ratio of the square footage of the Premises
      to the square footage of the areas leased to such other tenant or tenants,
      or at Landlord’s option such other factors as Landlord shall deem
      reasonable).

       GK is correct that, under Article 11(C), it can charge Gap for costs related to
HVAC maintenance and repair. The district court’s declaration that “Gap has no
obligation to pay CAM expenses or HVAC expenses for the duration of the Lease”
is too broad. On remand, the district court should modify its decision to state that
“Gap has no obligation to pay CAM expenses or HVAC expenses, except those
established under Article 11(C) of the Lease, for the duration of the Lease.” Because


                                        -11-
GK points to no evidence that its past HVAC charges were established under Article
11(C), this modification does not affect the district court’s determination that GK
breached the lease or its damages award.



                                    *******



       The judgment of the district court is affirmed, modified in part, and remanded
for proceedings consistent with this opinion.
                       ______________________________




                                        -12-
