                               UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT


                               No. 05-1491



THEDA L. VAUGHAN; JAMES RICKY VAUGHAN,

                                             Plaintiffs - Appellees,

           versus


RECALL    TOTAL     INFORMATION    MANAGEMENT,
INCORPORATED, a Delaware corporation; BRAMBLES
USA, INCORPORATED, a Delaware corporation,

                                             Defendants - Appellants.


Appeal from the United States District Court for the District of
South Carolina, at Greenville. Henry F. Floyd, District Judge.
(CA-02-402-6-HFF)

Argued:   September 20, 2006             Decided:    February 14, 2007


Before MOTZ and GREGORY, Circuit Judges, and Richard L. VOORHEES,
United States District Judge for the Western District of North
Carolina, sitting by designation.


Affirmed in part, reversed in part, and remanded by unpublished per
curiam opinion.

ARGUED: Michele L. Odorizzi, MAYER, BROWN, ROWE & MAW, L.L.P.,
Chicago, Illinois, for Appellants.    Ellis Murray Johnston, II,
HAYNSWORTH, SINKLER & BOYD, P.A., Greenville, South Carolina, for
Appellees. ON BRIEF: Maggie J. Schneider, MAYER, BROWN, ROWE &
MAW, L.L.P., Chicago, Illinois, for Appellants. Theodore Sanders
Stern, Jr., COVINGTON, PATRICK, HAGINS, STERN & LEWIS, P.A.,
Greenville, South Carolina, for Appellees.


Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

     This dispute involves interpretation of a Stock Purchase

Agreement (“SPA” or “Agreement”) entered into by the parties. The

Agreement   governs    the    terms    of   sale    of    a    document   shredding

business previously owned and operated by Appellees Theda L.

Vaughan   (“Theda”)    and     James   Ricky       Vaughan      and   purchased    by

Appellants Recall Total Information Management, Inc. (“Recall”),

and Brambles USA, Inc ( “Brambles”).           The Agreement provides that

the purchase price is to be paid as follows: 1) a lump sum payment

upon closing; and 2) a             percentage of the business’s “Sales

Revenues” for the following year (“Earnout” payment).                   The parties

disagree on what constitutes “Sales Revenues” under the terms of

the contract as well as the proper method of calculation of the

Vaughans’   Earnout.       Recall also asserts a Counterclaim that seeks

to recover a portion of the Earnout monies already paid to the

Vaughans or a set-off against any award the Vaughans receive.

Appellant Recall challenges the trial court’s interpretation of

certain   portions    of     the   Agreement   and       the    dismissal   of    its

Counterclaim.



                                       I.

     The Vaughans are former shareholders of Secured Data of

America, Inc. (“SDA”), a Tennessee corporation. SDA was a document

destruction     company     that   specialized       in       the   destruction    of


                                        2
confidential    documents   and   data.   SDA   was   headquartered   in

Greenville, South Carolina, and maintained operating facilities

located primarily on the East Coast.       SDA also had a facility in

Texas.

     Recall is an information management company incorporated in

Delaware with its principal place of business in Atlanta, Georgia.

Recall provides services such as physical and electronic document

storage and retrieval, protection of computer backup data, and

destruction of sensitive documents. Brambles is the parent company

of Recall, which likewise has its principal place of business in

Atlanta, Georgia.1

     In November 1999, the Vaughans had an offering memorandum

prepared for the purpose of determining the estimated market value

of SDA.   Among other things, the offering memorandum boasted SDA’s

existing client base, operating capacity figures demonstrating an

ability to expand, and the potential for significant growth in

sales.    The offering memorandum generated interest in SDA by other

companies.

     On August 2, 2000, the Vaughans contracted to sell SDA to

Recall pursuant to a Stock Purchase Agreement.        (J.A. at 530-83;

Pl.’s Exh. 1)    Theda Vaughan was the general manager of SDA and

James Ricky Vaughan was Chief Executive Officer.         The Agreement



     1
      Brambles is a party to the SPA and is jointly and severally
liable with Recall.

                                   3
provided that Theda would remain employed at SDA as Executive Vice

President and be responsible for company sales. In addition to

retaining Theda, Recall entered into employment agreements with two

other SDA employees, one of whom was Christopher Lupo (“Lupo”).2

Recall agreed that if it materially changed the job positions of

these employees, it would provide Theda with comparable or better

support.   Mr. Vaughan was to stay on as a consultant for up to six

months after closing.

     At closing, the Vaughans were paid $15,522,960.             The Vaughans

also had the potential to receive up to an additional $11,750,000

based on an Earnout formula contained in the Agreement.                     The

parties agreed to the Earnout as a means for providing additional

compensation    to     the   Vaughans   as   the   projected   sales   numbers

approached     their    targets.3   The      Earnout   was   payable   in   two




     2
      Under the terms of his employment agreement, Lupo was to
“assist with sales” but “be responsible for” other areas of the
business. (J.A. at 1112, ¶39) Lupo was later reassigned with
Theda’s blessing and Theda hired a national sales manager and three
other regional sales representatives to assist her with sales.
Theda asserted at trial that Lupo’s reassignment was one of the
events that hindered SDA’s ability to reach its sales potential.
     3
      During negotiations, Theda represented to Recall that SDA was
worth more than its past revenue figures suggested.           Theda
projected significant growth in sales for 2000 and 2001, based in
large part on anticipated increased sales from existing customers
such as Bank of America and First Union National Bank.        Theda
testified at trial that projected sales revenue from Bank of
America calculated as of the time the SPA was executed had proven
to be inaccurate when compared with actual sales.

                                        4
installments:        1) the Vaughans were entitled to a partial Earnout

after six months if sales revenues exceeded $6,150,000; and 2) the

Vaughans were entitled to a final Earnout after 12 months if sales

revenues exceeded $12,300,000.              To maximize that final Earnout

payment, SDA needed to achieve sales revenues in the amount of

$17,950,000         for the year following execution of the SDA - the

period August 2, 2000 through August 1, 2001 (“Earnout period”).

If   accomplished, this gain in sales would represent a growth of

nearly 50%.

     During the Earnout period, Recall acquired several other

document shredding businesses, including InstaShred, DocuShred(PA),

DocuShred (TN), SecureShred (Greenville) and MobilShred. With the

exception of MobilShred, Recall was entirely responsible for these

acquisitions. Although Recall financed the purchase of MobilShred,

Theda and Chris Lupo are credited with helping to facilitate the

MobilShred acquisition.

         In   May    2001,   after   Recall   acquired   InstaShred,   Recall

reorganized its document destruction operations into two separate

companies - “SDS West” and “SDS East” (or SDA). InstaShred was

primarily serving the West Coast or western United States and SDA

was primarily serving the East Coast plus Texas. Recall elected to

divide    the       businesses   geographically,    placing    SDA’s   Texas

operations under SDS West and all operations east of Texas under

SDS East.


                                        5
     After acquisition, DocuShred (PA and TN) and SecureShred

ceased to operate. The accounts previously serviced by these

businesses were absorbed and serviced by SDS East (SDA).4 SDA’s

servicing of these accounts means SDA picked up, shredded, and

baled the trash in addition to selling the paper and billing the

client.    SDA   also   took   over    former   InstaShred   operations   in

Virginia and Florida.      The rest of InstaShred’s business made up

Recall’s SDS West operations.         MobilShred’s operations were placed

under SDS West since its operations were centered in Vancouver and

Calgary.

     SDA did not meet its sales goals for the Earnout period.

Instead, based upon estimated sales revenues of $15,706,000, the

Appellees were paid $1,236,000 after the first six months and an

additional $5,847,000 at the end of the Earnout period, for a total

Earnout payment of $7,083,000.5            Thus, the total payout for the

sale of SDA was $22,305,960.

     In February 2002, the Vaughans commenced the underlying civil

action alleging breach of contract. Specifically, the Vaughans

complained that 1) Recall wrongfully excluded $522,649 of sales

revenues generated by SDA during the Earnout period; and 2) Recall,



     4
      The sales revenues earned or generated as a result of
subsequently acquired entities’ accounts are referred to by the
parties as “acquisition revenues.”
     5
      The total Earnout payment of $7,083,000 was $4,667,000 less
than the maximum Earnout.

                                       6
in violation of the “good faith” (express and implied) provisions

of the SPA, prevented Theda from maximizing her Earnout.

     In     May    2003,       Recall   amended      its   Answer   to    include    a

counterclaim, the gist of which was that Recall had overpaid

rather than underpaid Theda.            According to Recall, the Earnout was

not calculated properly because SDA had been over billing one of

its clients -        Bank of America.          Following the Earnout period,

Recall reached an agreement with Bank of America                    whereby Recall

repaid a portion of the overcharge and negotiated a new contract.

         The district court presided over a three-day bench trial. At

the conclusion of the trial, the district court rejected the

Vaughans’ allegation that Recall, in bad faith, prevented SDA from

reaching its projected sales goal.6             (J.A. at 1111-20, ¶¶21-84, and

1128, ¶1)         However, the district court ruled in favor of the

Vaughans    on     the    acquisition     revenue     issue,   finding     that     SDA

performed     the    actual       services     and    “generated”    the    revenue

previously attributable to the acquired entities. (J.A. at 1121-23,

¶¶86-92) In essence, the district court found that SDA helped

Recall     absorb        the    newly   acquired       businesses    by    assuming

responsibility for some, if not all, of the work.                    The district

court expressly noted that the Vaughans’ evidence was more credible

on this claim.       (J.A. at 1127 , ¶116)           Alternatively, the district


     6
      Although not entirely successful on their claims in the
district court, Appellees did not cross-appeal.


                                           7
court found that Recall was estopped from contesting this claim in

that Recall had waived its right to challenge the calculation of

Theda’s Earnout payment.         (J.A. at 1121, ¶86)       With respect to the

MobilShred acquisition, the trial judge found that the good faith

provision within the Agreement required Recall to credit MobilShred

revenues    to    SDA    because   Theda     and   Chris   Lupo    were   largely

responsible      for    the   acquisition.    (J.A.   at   1123,    ¶¶93-5)    The

district court treated Recall’s counterclaim as an indemnification

or breach of warranty action and deemed it untimely pursuant to the

terms of the Agreement.         (J.A. at 1124-1128, ¶¶106-11)

     The district court’s rulings were based on its interpretation

of the Stock Purchase Agreement as a matter of law.                 Finding the

Agreement     unambiguous,      the   district     court   did     not    consider

extrinsic evidence.


                                      II.

     On appeal, the trial court’s judgment following a bench trial

is subject to a “mixed standard of review – factual findings may be

reversed only if clearly erroneous, while conclusions of law,

including contract construction, are examined              de novo.”       Roanoke

Cement Co., LLC v. Falk Corp., 413 F.3d 431, 433 (4th Cir.2005).



                                      III.

     Recall raises the following issues on appeal: 1) Whether the

trial court erred as a matter of law by construing the SPA’s “Sales

                                        8
Revenue” definition to include acquisition revenues of document

shredding operations serviced by SDA during the Earnout period; 2)

Whether the trial court’s factual findings with respect to estoppel

or waiver of Recall’s right to challenge calculation of the Earnout

payment are clearly erroneous; 3) Whether the trial court erred as

a matter of law by construing the SPA’s good faith and sales

revenue provisions as requiring Recall to credit SDA for the

MobilShred acquisition revenues; and 4) Whether the trial court

erred as a matter of law by dismissing Recall’s counterclaim as

untimely pursuant to the 18-month limitations period within the

SPA.       Each of these issues is addressed in turn.

       For the reasons set forth, we AFFIRM in part, REVERSE in part,

and REMAND for further proceedings consistent with this opinion.



                                    IV.

       A.     Acquisition Revenues / “Sales Revenues” Under The SPA

       Recall contends that the district court erred as a matter of

law in construing the SPA. Recall claims that the SPA’s definition

of “Sales Revenues” should not have been interpreted to include

SDA’s sales from contracts acquired by SDA as a result of Recall’s

business       acquisitions   during       the   Earnout   Period.7   In   the

alternative,      Recall   argues   that     the   Agreement   is   ambiguous,


       7
      Recall suggests that a construction of the SPA consistent
with their argument would result in a finding that the Vaughans’
Earnout payment must be reduced by approximately $1,068,923.

                                       9
requiring the consideration of extrinsic evidence.             We disagree

with both propositions.


     i.    Applicable Rules Of Contract Construction Under South
     Carolina Law8

     In construing the SPA, it is our function “to ascertain and

give effect to the intention of the parties, looking first to the

written instrument itself.” Campbell v. Bi-Lo, Inc., 301 S.C. 448,

392 S.E.2d 477, 479 (Ct. App.1990).

     The Court must first determine, as a matter of law, whether or

not the Agreement is ambiguous.         South Carolina Dep’t of Natural

Ress. v. Town of McClellanville, 345 S.C. 617, 550 S.E.2d 299, 302-

303 (2001).    “[A] contract is ambiguous only when it may fairly and

reasonably be understood in more ways than one.” Goldston v. State

Farm Mut. Auto. Ins. Co., 358 S.C. 157, 594 S.E.2d 511, 519 (Ct.

App.2004) (emphasis added); South Carolina Dep’t of Natural Ress.,

550 S.E.2d at 302.

     Our construction of the Agreement is guided by common sense

and good faith. See C.A.N. Enters., Inc. v. South Carolina Health

and Human Servs. Fin. Comm’n, 296 S.C. 373, 373 S.E.2d 584, 586

(1988).   In   other   words,   “where    one   construction    makes   the

provisions unusual or extraordinary and another construction which

is equally consistent with the language employed, would make it


     8
      South Carolina contract law governs construction of the Stock
Purchase Agreement. (J.A. at 579, Pl.’s Ex. 1 at §9.6)

                                   10
reasonable, fair and just, the latter construction must prevail.”

Id. (citing Farr v. Duke Power Co., 265 S.C. 356, 218 S.E.2d 431,

434 (1975)).

      In determining the question of ambiguity, the Court considers

the Agreement in its entirety. See Yarborough v. Phoenix Mut. Life

Ins. Co., 266 S.C. 584, 225 S.E.2d 344, 349 (1976)(“As a rule of

construction, the Court must consider the entire contract between

the parties to determine the meaning of its provisions.”)

      “If the contract’s language is clear and unambiguous, the

language      alone     determines     the   contract’s    force    and   effect.”

Goldston, 594 S.E.2d at 518.


      ii. The SPA , Taken As A Whole, Can Reasonably Be Construed
      Only As Encompassing Acquisition Revenues Earned and Billed
      (Or Generated) By SDA

      According to Recall, acquisition revenues do not fall within

the   scope    of     SDA’s   “Sales   Revenues”   as     defined   by    the   SPA.

Specifically, Recall contends that subsection (2) – “All gross

revenue generated by the Company from new contracts or agreements

from any source” - does not include new contracts or agreements

obtained      via   a   subsequent     acquisition.       As   explained    below,

Recall’s argument is contrary to the plain language of SPA.

      Recall’s first two arguments hinge upon interpretation of the

SPA provisions addressing sales revenues, good faith, and the

restrictions on competition during the Earnout period. We turn now

to the relevant language in the SPA.

                                         11
     Section 1.4 of the SPA, entitled “Earnout Payments,” sets

forth how the Vaughans’ Earnout is to be calculated, beginning with

the “good faith” provision in Section 1.4(a).              Section 1.4(a)

provides insight as to the significance of the Earnout Payments as

well as the parties’ intent. See Goldston, 594 S.E.2d at 518 (“The

primary   purpose   of   all   rules   of   contract   construction   is   to

determine the intent of the parties.”)           Section 1.4(a) reads in

pertinent part:

     It is the parties’ intention that a significant part of
     the Purchase Price will be paid pursuant to this Section
     1.4, and Purchaser agrees to act reasonably in good faith
     to allow Theda to have a fair opportunity to qualify for
     the maximum payments provided for by this Section 1.4.
     The previous sentence shall also apply to Purchasers’
     Affiliates9, except as provided below.       Neither the
     foregoing nor anything in this agreement shall affect or
     apply to the current or subsequent operations of . . .
     any business subsequently acquired by [Recall] . . .
     engaged in document shredding services, including,
     without limitation, any current business . . . or any
     business subsequently acquired by Purchaser or its
     Affiliates and engaged in document shredding services
     (all such current and subsequent businesses being
     collectively referred to as “Purchaser / Affiliate
     Shredding Businesses”). The sole obligation of Purchaser
     / Affiliate Shredding Businesses shall be as set forth in
     this Section 1.4(f)(7) . . .


(J.A. at 545-46; §1.4(a))(emphasis added). Thus, Section 1.4(a)

imposes a good faith obligation on Recall and its Purchasers’




     9
      The “Affiliate” of any Person means “any other Person
directly or indirectly controlling, controlled by or under common
control with such Person.” (J.A. at 538.)

                                       12
Affiliates “to act reasonably in good faith” such that Theda would

have a “fair opportunity” to maximize her Earnout Payment.

       “Sales Revenue” is defined broadly in the Stock Purchase

Agreement as:

            “[T]he aggregate of all the Company’s10        gross
       revenue earned and billed for the Earnout Period . . .
       and consisting of the following:
            ***
            (2) All gross revenue generated by the Company
            from new contracts11 or agreements from any
            source for document shredding services . . .


(J.A. at 546; §1.4(e))(emphasis added).           The terms “earned,” and

“generated” are not expressly defined within the SPA.               Likewise,

the SPA does not clarify what is meant by “new contracts or

agreements.”

       The SPA also includes a non-competition clause stating Recall’s

policy of preventing a “Purchased Business” from competing with SDA

under certain circumstances.         (J.A. at 549-50, ¶¶1.4(f)(7)(A) and

(B))    The non-competition clause within Section 1.4(f)(7) speaks

most   directly      to   the   intended   relationship   between    SDA   and

subsequent acquisitions during the Earnout period:

                    If Purchaser or Parent (or any of their
               Affiliates) purchase any business in North


       10
            “Company” means Secured Data of America, Inc. (J.A. at 538.)

       11
      “Contract” means “any contract, lease, commitment, sales
order, purchase order, indenture, mortgage, note, bond, instrument,
license or other agreement.” (J.A. at 539.)

                                      13
          America during the Earnout Period . . . (each
          such business being a “Purchased Business”),
          then with respect to each Purchased
          Business:

               (A)   Purchaser   and   Parent  will   not
          institute a corporate policy preventing the
          Company from competing against the Purchased
          Business for new business (being business not
          previously serviced by the Purchased Business);
          and

               (B) Purchaser and Parent will not permit
          the Purchased Business to compete against the
          Company for the services and locations (1)
          covered by the written customer contracts
          listed on item 5 to Schedule 2.16 and the
          contract resulting from rfp number 64960-001-
          001 dated April, 2000, and any subsequent
          variation thereof and (2) previously provided
          to Current Customers and serviced by the
          Company within the two year period prior to
          Closing; provided that the foregoing shall not
          restrict any service to any location of a
          Current Customer . . .

     Purchaser / Affiliate Shredding Businesses in North
     America shall be subject to the requirements of (A) and
     (B) above during the Earnout Period. The sole obligation
     of Purchaser / Affiliate Shredding Businesses shall be as
     set forth in this Section 1.4(f)(7). . .


(J.A. at 549-50.) (emphasis added) Section 1.4(f)(7) may be said to

provide for a level playing field for SDA and Recall and its

Purchaser / Affiliate Shredding Businesses during the Earnout

period.   SDA is free to compete with any Purchaser Affiliates for

“new business,” while its existing contracts and locations are

protected.

     Viewed as a whole, the SPA is not ambiguous.          Pursuant to the

Agreement,   for   revenues   to   fall   within   SDA’s   “Sales   Revenue”

                                    14
provision, SDA had to (1) generate or earn and bill the revenue, (2)

as a result of new contracts or agreements from any source (3) for

document shredding services.12   The district court found that SDA

“earned and billed,” or “generated” the acquisition revenue at

issue.    In construing the introductory language of   §1.4(e), the

district court applied an ordinary, every day meaning of the word

“earned” - “to acquire by labor, service, or performance.”    (J.A.

at 1121, ¶87) Based upon undisputed facts, the district court then

found that SDA performed under the contracts at issue by providing

the actual document shredding services and that SDA billed said

accounts.    The district court found that SDA, in fact, “generated”

the revenue.   (J.A. at 1121-22, ¶88)

     The district court also found that the acquisition revenues

resulted from “new contracts or agreements” because SDA had never

serviced these customers before.13      While the word “new” hardly

needs defining, its ordinary meaning is “having been made or come

into being only a short time ago; recent” or “recently arrived or

established in a place, position, or relationship.” See, e.g.,

American Heritage Dictionary of the English Language, Fourth (2000).



     12
      All of the revenues were derived from the performance of
document shredding services so the third criteria noted above is
not contested.
     13
      The SPA does not specify whether contracts coming under the
umbrella of SDA for service due to a subsequent acquisition by
Recall are to be treated as “new.”


                                 15
In addition to its ordinary meaning, the Court looks to                          Section

1.4(f)(7)(A),      which    defines    “new       business”       as   “business        not

previously serviced by the Purchased Business.”                        (J.A. at 549.)

Applying the same definition to SDA, we find that any contract not

previously serviced by SDA, whether obtained via acquisition or

otherwise, fits squarely within the language of the Agreement.

      Furthermore, because SDA’s sales revenues can be “from any

source,” the fact that the contracts resulted from Recall acquiring

and   dissolving     another    document         shredding       business       makes   no

difference. In short, the language “from any source” can reasonably

be interpreted only as inclusive of acquisition revenues.

      According    to    Recall,     the    language       within      Section    1.4(a)

referring    to   the    non-competition          clause     as    the    Purchaser      /

Affiliates’ “sole obligation” means that Recall owes Theda and SDA

nothing     for   the    services     SDA       performed    in     connection      with

acquisitions during the Earnout period.                   Read together, Sections

1.4(a) and (f)(7), undermine Recall’s argument.                        Section 1.4(a)

speaks in terms of         continuing document shredding “operations” of

a business subsequently acquired by Recall and contemplates that

“any business subsequently acquired . . . and engaged in document

shredding services” is subject to the anti-competition clause.

(J.A. at 549-50.)          As already noted, several of the acquired

entities    ceased      operations    entirely       or     at    least    at    certain

facilities. The anti-competition clause within §1.4(f)(7) only makes


                                           16
sense if the integrity of the acquired entity is maintained and the

entity continues to be viable.          A dissolved entity simply poses no

competitive threat to SDA.         For this reason, it makes little sense

to construe the language as Recall suggests.                   Given the plain

language of the Agreement, a more reasonable construction would

provide    that   Recall   could    acquire   and    operate    other    document

destruction businesses without the need to credit SDA with the

revenue as long as, once acquired, the companies were operated

independently of SDA.

      It is also clear from Section 1.4(f)(7) that the parties

contemplated future acquisitions of document shredding businesses

by   Recall   when   the   SPA    was   drafted.    The   Agreement     expressly

addressed the treatment of acquisition revenues from Southland

Information Destruction (“Southland”).              The parties made their

intent clear regarding the revenues generated by SDA as a result of

the Southland acquisition. The Agreement provided that “[a]ll gross

revenues from customers acquired in the Southland Acquisition” would

be included within SDA’s sales revenues. (J.A. at 547.) At the

inception of the SPA, Southland was the only acquisition the parties

knew was a certainty.14          Southland was also the only acquisition

financed entirely by SDA rather than Recall. However, the fact that

Southland’s subsequently acquired revenues are expressly addressed


      14
      SDA and Southland entered into an Asset Purchase Agreement
on June 30, 2000. (J.A. at 542.) The SDA / Southland transaction
closed simultaneously with Recall’s purchase of SDA.

                                        17
within the SPA is instructive on at least three points. First, this

provision tells us that the parties knew how to include (or exclude)

acquisition revenues from sales revenues. Secondly, it distinguishes

between “customers acquired” from Southland and Southland itself -

a    distinction    not    made    in    the      SPA    with    respect    to     Recall’s

Purchasers’    Affiliates         or    Purchased        Businesses.        Finally,      it

demonstrates       the    parties’      recognition       that    issues        surrounding

calculation of Theda’s Earnout might arise post-merger with respect

to    subsequent    acquisitions.         While     it    is    conceivable       that   the

parties’ failure to be more explicit concerning Recall’s subsequent

acquisition revenue was due to poor drafting rather than the actual

intent of the parties, it is not the role of the court to speculate

or rewrite the terms of the Agreement where the language actually

used leaves no plausible room for Recall’s interpretation.

       Considering the Stock Purchase Agreement as a whole, the Court

finds there is only one reasonable interpretation of the Sales

Revenue provision. See C.A.N. Enters., 373 S.E.2d at 586 (noting

that an unambiguous contract “must be construed according to the

terms the parties have used, to be taken and understood in their

plain, ordinary and popular sense”). For these reasons, we find the

SPA    and    its    definition         of      “Sales     Revenues”        unambiguous.

Accordingly,    the      district       court     properly      relied     on    the   plain

language of the SPA in construing the Agreement.




                                             18
     B. The District Court’s Factual Findings Related To Waiver &
     Estoppel By Recall Are Not Clearly Erroneous

     Recall also challenges the district court’s alternative finding

of waiver and estoppel.     Section 1.4(g) of the SPA states:

          “Within twenty (20) days after the end of each
     calendar month, Purchaser shall furnish to Theda a report
     describing the amount of Sales Revenues for such month,
     the sources thereof for such month, and any revenues of
     the Company for such month which Purchaser believes do
     not qualify as Sales Revenues.”

(J.A. at 550.)(emphasis added) The district court found that Recall

never submitted any such monthly report as contemplated by the SPA.

(J.A. at 1123, ¶91) While the Agreement does not expressly identify

the purpose of this provision, the parties’ manifest intent was to

provide an avenue for contemporaneous identification and resolution

of any dispute about sources and calculation of sales revenues.

Significantly, the onus in this regard was on Recall - not SDA or

Theda.

     Nevertheless, Recall blames Theda for its own failure to act.

Recall points to two monthly reports reflecting revenue trends

submitted   by   Theda   during   the    Earnout   period.   In   both,   the

acquisition revenues are identified as such and placed under a

heading separate from other SDA accounts. (J.A. at 854-55.) Recall

contends there is nothing expressly stating that Theda considered

these acquisition revenues as SDA’s “Sales Revenues” for purposes

of calculating her Earnout payment.          Thus, according to Recall,

there was nothing for Recall to object to.           Recall’s argument is


                                    19
specious.      The inclusion of these revenues in the report purporting

to represent SDA’s monthly “revenue trends,” and the fact that the

acquisition revenue figures are included in SDA’s monthly revenue

totals, at least put Recall on inquiry notice. Recall took no

action. Furthermore, the language of §1.4(g) makes clear that the

mandatory report from Recall is not contingent upon receipt of any

monthly report from Theda or SDA.           Rather, the 20-day notice and

report requirement incumbent upon Recall is triggered by “the end

of each calendar month.”       In light of Recall’s failure to inquire

or contest SDA’s monthly revenue totals in any way, its protest in

this regard is unavailing. The district court’s reliance on estoppel

and waiver principles was appropriate and supports its ruling on

this issue.


     C. The District Court Erred In Construing The SPA To Credit
     MobilShred Sales Revenues To SDA

     Recall      also   contends   that    the    district    court   erred    in

concluding SDA was entitled to credit for MobilShred’s revenues

earned and billed (or generated) during the Earnout period. We

agree.   The    district   court   found   that    revenues    resulting   from

Recall’s acquisition of MobilShred, whose accounts were ultimately

assigned to SDS West for service, should have been included in SDA’s

aggregate sales revenues figure and the Earnout calculation.                  The

district court relied heavily on the good faith language within

§1.4(a) in support of this interpretation of the Agreement. The


                                     20
trial judge found that Theda and Lupo were “principally responsible”

for the acquisition of Mobil Shred.     (J.A. at 1123, ¶93)   Despite

its own findings regarding the absence of bad faith on the part of

Recall, the trial judge was troubled by the fact that Recall

utilized Theda and Lupo to make the acquisition, which purportedly

eliminated potential SDA customers, and then assigned the contracts

to SDS West.   (J.A. at 1123, ¶94)     Although SDA did not actually

perform the document shredding services - said performance having

been previously equated by the lower court with the generation of

revenue - the district court found that good faith required Recall

to credit SDA with these revenues.     (J.A. at 1123, ¶95)

      This aspect of the district court’s ruling cannot be reconciled

with the rationale correctly employed to construe Section 1.4(e).

Even if we found that Theda and Lupo “earned” the revenues as a

result of their pre-acquisition contributions, SDA did not “bill”

any of the MobilShred revenues.       The definition applied earlier

requires both - to earn and bill.     Therefore, we cannot find that

SDA   generated the MobilShred revenues.     Further, the good faith

language within §1.4(a) should not be read effectively to impair the

SPA’s explicit definition of “Sales Revenues.”     Hardee v. Hardee,

355 S.C. 382, 558 S.E. 2d 264, 267 (Ct. App.2001) (court should

employ a construction that gives effect “to the whole instrument and

each of its various parts and provisions”).   Finally, we are unable




                                 21
to find any other language within the SPA to support the lower

court’s finding on this issue.


     D.   Recall’s Counterclaim Is Not Subject To The 18-Month
     Limitations Period Within §8.1 Of The SPA Applicable To
     Representations Or Warranties Prior To Closing

     Recall also challenges the district court’s legal conclusion

that its counterclaim was barred by Section 8.1 of the SPA.       We

agree with Recall on this issue.

     As already noted, Bank of America was one of SDA’s largest

customers when Recall purchased SDA.       After the Earnout period,

Recall discovered that SDA had been over-billing Bank of America.

Without any contractual authority, SDA began to use an average

weight (versus actual weight) of bins from the bank’s high rise

offices to determine the billing amount.    The parties refer to this

as the “274 pound convention” or a “fixed weight billing practice.”

In September 2002, Bank of America learned of the mistake and

demanded repayment. Recall eventually paid Bank of America a sum of

approximately $1.5 million and negotiated a new contract.15 (J.A. at

819-24.)




     15
      The Vaughans question how much money was actually repaid to
Bank of America as a result of SDA’s actions. Recall admits that
even after learning of the over-billing, Recall continued to employ
the “274 pound convention.” The new contract with Bank of America
may also have some bearing on this issue in that Recall contends
that the renegotiated contract provided for “discounted” services
or a “preferential rate”(a value of $1.8 million) negotiated in
connection with the settlement between Recall and Bank of America.

                                 22
     Recall’s Amended Answer & Counterclaim originally alleged two

claims for relief complaining of SDA’s over-billing of Bank of

America - Fraudulent Inducement (Count I) and Breach of Stock

Purchase   Agreement   (Count   II).16   However,   Recall   ultimately

abandoned its fraudulent inducement claim.      Count II, labeled by

Recall as “The Breach of Stock Purchase Agreement” alleges that Bank

of America “rejected the invoices for the amounts that it was

overbilled” and “demanded repayment of those overbillings.” It

further alleges that Recall, as Counter-plaintiff, is “entitled

under the SPA to a refund of the earn-out amounts paid to Counter-

Defendants which were attributable to the overbillings to BoA.”

(J.A. at 32-3, ¶¶26-8)

     The Vaughans do not dispute the fact that Recall incurred a

liability to Bank of America as a result of SDA’s prior practice.

It is also undisputed that Theda’s Earnout included Bank of America




     16
      The fraudulent inducement claim within Count I alleged that
SDA was intentionally manipulating the billing of its Bank of
America accounts to artificially inflate its sales figures; that
SDA’s 1999 financial statements reflecting the alleged inflated
sales figures constituted a misrepresentation; and that Recall
reasonably relied on SDA’s 1999 financial statements in agreeing to
the terms of the SPA. Recall’s appellate filings note its decision
not to pursue an action alleging that the Vaughans misrepresented
material facts or breached any warranties based on the over-billing
of Bank of America or any other pre Closing obligation. Recall’s
Post-Trial Proposed Findings Of Fact & Conclusions Of Law refers to
a single counterclaim based upon a breach of contract theory
limited to the post Closing conduct. (J.A. at 1102-03, ¶¶226-27)


                                  23
sales revenues given the overlap between the contract terms and the

Earnout period.17

     The district court rejected Recall’s contract theory, finding

that Section 1.4 of the Agreement created no contractual duty on the

part of the Vaughans.   Instead, the district court characterized

Recall’s counterclaim as one for indemnification based upon an

alleged misrepresentation or breach of warranty prior to closing and

found that Recall did not provide timely notice of its claim under

Section 8.2 of the Agreement.   (J.A. at 1127, ¶112)   The district

court also found that any breach of warranty claim Recall could have

brought against the Vaughans was now time-barred as a result of the

18-month limitations period within Section 8.1 of the SPA.    (J.A.

at 1125-27, ¶¶106-11)   On appeal, Recall asserts, for the first

time, that its counterclaim alleging breach of contract should be

characterized as an action for “set-off,” or merely a defense to any

damages the Vaughans may be awarded.

     Before addressing the merits of Recall’s claim, we first

determine whether it is properly before the Court. We have often

held that an issue raised for the first time on appeal ordinarily

will not be considered. See Muth v. United States, 1 F.3d 246, 250

(4th Cir.1993)(citing Nat’l Wildlife Fed. v. Hanson, 859 F.2d 313,

318 (4th Cir.1988); Stewart v. Hall, 770 F.2d 1267, 1271 (4th


     17
      SDA’s contract with Bank of America was effective July 1,
1999, through June 30, 2002. The Earnout period was from August 2,
2000, through August 1, 2001.

                                24
Cir.1985); Maynard v. General Elec. Co.,486 F.2d 538, 539 (4th

Cir.1973).   Nonetheless, we have made exceptions to this rule and

recognized new arguments on appeal where the error is “plain” or

failure to do so otherwise would result in a miscarriage of justice.

Id. (citing Nat’l Wildlife, 859 F.2d at 318 (remanding to district

court for recalculation of attorneys’ fees under historic rather

than current rate)).   Such is the case here.     Because this action

seeks to ensure that the Earnout payment was calculated properly

under the terms of the Agreement, failure to consider Recall’s

counterclaim would constitute a miscarriage of justice.

     Although Recall pled a breach of contract claim, we find

Recall’s pleading more akin to an action for equitable recoupment.

“Recoupment is the right of the defendant to have the plaintiff’s

monetary claim reduced by reason of some claim the defendant has

against the plaintiff arising out of the very contract giving rise

to the plaintiff’s claim.” See FDIC v. Marine Midland Realty, Credit

Corp., 17 F.3d 715, 722 (4th Cir.1994)(the “doctrines of setoff and

recoupment   are   often   confused”)(citing   First   Nat’l   Bank   of

Louisville v. Master Auto Serv. Corp.,693 F.2d 308, 310 n.1(4th

Cir.1982)); Tuloka Affiliates, Inc. v. Moore, 275 S.C. 199, 268

S.E.2d 293, 295 (1980)(noting that recoupment only reduces the

plaintiff’s claim and construing what appellant described as his

“second defense and counterclaim” as a recoupment defense)(citing

Mullins Hosp. v. Squires, 233 S.C. 186, 104 S.E.2d 161 (1958); See


                                  25
generally, Para-Chem Southern, Inc. v. M. Lowenstein Corp., 715 F.2d

128, 131 (4th Cir.1983). In its counterclaim, Recall asks for “a

reduction in the amount of the Sales Revenues subject to the earn-

out and a corresponding reduction in the amount of the earn-out due

to Counter-defendants.”             (J.A. at 33, ¶27)

       Recall’s recoupment claim may also be considered a compulsory

counterclaim.18            Fraser v. Astra Steamship Corp., 18 F.R.D. 240,

241-42 (S.D. N.Y. 1955) (Under Rule 13 of the Federal Rules of Civil

Procedure,        “a   counterclaim        now    encompasses     both   set-off        and

recoupment.”)          A    compulsory      counterclaim    “arises      out      of    the

transaction or occurrence that is the subject of the opposing

party’s claim.” FED. R. CIV. P. 13(a); Painter v. Harvey, 863 F.2d

329,   332   (4th      Cir.1988).     The    following     four   inquiries       may    be

relevant in determining whether a counterclaim is compulsory: 1)

whether     the    issues      of   fact    and   law   raised    in   the    claim     and

counterclaim are largely the same; 2) whether res judicata would bar

a   subsequent         suit    on   the     party’s     counterclaim;        3)   whether

substantially the same evidence supports or refutes the claim as

well as the counterclaim; and 4) whether there is any logical

relationship between the claim and counterclaim.                   Painter, 863 F.2d


       18
      A compulsory counterclaim does not require an independent
basis for federal subject matter jurisdiction because the
counterclaim arises out of the original action, as to which subject
matter jurisdiction has already been established. See Fraser, 18
F.R.D. at 241-42 (“jurisdiction to entertain a permissive
counterclaim must be affirmatively alleged and proved”)(emphasis
added).

                                             26
at 331 (indicating it is not necessary for all of the four inquiries

to be answered in the affirmative) (citing Sue & Sam Mfg. Co. v. B-

L-S Constr. Co., 538 F.2d 1048 (4th Cir.1976)).             Here, accurate

calculation of the Earnout under the SPA is at the heart of the

Vaughans’ action as well as Recall’s counterclaim.          Therefore, the

issues of fact and law are similar, the evidence will overlap, and

there is a logical relationship between the two actions.           Applying

these criteria, we treat Recall’s counterclaim as compulsory.

Notwithstanding Recall’s inartful pleading, the objectives of Rule

13 are also best served by our entertaining Recall’s recoupment

defense.     Painter, 863 F.2d at 332(noting the purposes of Rule

13(a), including “to prevent the relitigation of the same set of

facts” and to dispose of all the disputes between the parties in one

action).    We now turn to the merits of Recall’s claim.

      As an initial matter, the district court mischaracterized

Recall’s counterclaim as an action arising out of an alleged

misrepresentation or breach of warranty prior to closing.           Indeed,

Appellees’ counsel conceded as much during oral argument.           Section

8.1   of   the   Stock   Purchase   Agreement   is   entitled   “Survival   /

Indemnification,” and provides in part:

      “[N]o party will have any liability (for indemnification
      or otherwise) with respect to any representation or
      warranty, or covenant or obligation to be performed and
      complied with on or prior to the Closing, unless on or
      before eighteen (18) months after the Closing the
      complaining party notifies the other party in writing of
      a claim specifying the factual basis of that claim in
      reasonable detail.   Notwithstanding the foregoing, (x)

                                      27
     the representations and warranties set forth at Sections
     2.1, 2.2, 2.3, 2.4, 2.19, 3.1 and 3.2 [Representations
     And Warranties Of Sellers] shall survive indefinitely
     and (y) the representations and warranties at Section
     2.17 [Employee Benefit Plans] and Section 2.21 [Taxes]
     shall survive . . . until the 90th day after the
     expiration of the applicable statute of limitations.
     Notwithstanding anything in this Agreement to the
     contrary, the limitations set forth in this Section 8.1
     shall apply to any claims brought by Purchaser . . .
     based on any fact or circumstance which is alleged to be
     a breach of or inaccuracy in any representation or
     warranty    or a failure to perform a covenant or
     obligation to be performed and complied with on or prior
     to the Closing     regardless of whether the claim is
     brought pursuant to this agreement or otherwise and
     regardless of the theory upon which the claim may be
     based,   whether   contract,   tort,   warranty,   strict
     liability, Federal and State Securities Laws or any other
     theory of liability.

(J.A. at 571-72; Pl.’s Exh. 1, §8.1) (emphasis added). Section 8.1,

which focuses entirely on 1) representations and warranties prior

to Closing, or 2) covenants or obligations to be performed and

complied with on or prior to Closing, does not control.    Even if

Recall’s counterclaim were based upon a representation or warranty,

the conduct Recall complains of did not occur prior to Closing.   In

fact, neither Recall nor Bank of America learned of SDA’s 274 pound

convention until well after the Closing.

     The district court also erred in finding that Recall failed to

comply with the 20-day notice provision described in Section 1.4(g)

and the prescribed procedures for seeking indemnification contained




                                28
within Sections 8.2 and 8.4.19          The §1.4(g) notice could not bar

Recall’s counterclaim given that Recall couldn’t have possibly

challenged SDA’s sales figures for the Bank of America accounts

until after it discovered the over-billing.20           Similarly, because

Recall’s    counterclaim     is    not       properly   construed    as   an

indemnification action within the purview of Section 8.1, Sections

8.2 and 8.4 do not apply.

     Although the SPA does not expressly provide a defined remedy21,

the implicit mutual obligation to calculate the Earnout payments

accurately encompasses Recall’s right to contest the amount of

damages    Theda   is   entitled   to    collect   based   upon   inaccurate

calculations or “unearned” sales revenues arising from Bank of

America contracts.      Recall contends that the over-billing resulted



     19
      Section 8.2 identifies the circumstances under which the
Purchaser (Recall) may be entitled to indemnification by the Seller
(Vaughans).    Section 8.4 governs the notice of claims of
indemnification and requires that the party seeking indemnification
give timely notice of the dispute, tender the defense, and give
advance notice of any proposed settlement.      The district court
found that Recall did not observe any of these requirements. (J.A.
at 1125-27, ¶¶112-13)
     20
      The district court recognized the problem with relying on
§1.4(g)but still found Recall’s notice untimely because Recall
failed to notify Theda of the potential claim until Fall of 2002
(more than 20 days past its discovery).
     21
      There is nothing within the language of the SPA expressly
providing for either of the remedies sought by the parties -
recalculation of the Earnout if 1) an error is made by Recall in
determining Theda’s Earnout; or 2) an error is discovered after a
customer has paid the invoice and corrected it beyond the one-year
Earnout period.

                                        29
in payment of Earnout monies not actually “earned.”                     In addition to

Section 1.4(e)’s requirement that Sales Revenues be “earned and

billed” by SDA, Recall points to language within §1.4(e)(5), which

sets forth specifically how Bank of America accounts are to be

treated     for    purposes   of      determining      Sales     Revenues.        Section

1.4(e)(5)provides that:

            “No bill or invoice rejected by the customer shall
       be considered “earned” or included in Sales Revenues for
       purposes of this Section 1.4, except to the extent
       subsequently paid by the customer.”

(J.A. at 548.)        Here, the invoices were paid by Bank of America

prior to the discovery of the 274 pound convention. Recall posits

that had Bank of America known of the overcharge prior to the end

of the Earnout period, the bank would have rejected the charges and

not submitted payment.             In any event, we find that SDA did not

actually earn the portion of Sales Revenues attributable to the

over-billing of Bank of America.

       Recall’s counterclaim, an equitable recoupment action, will be

remanded to the district court for further proceedings consistent

with this opinion.        In its ruling below, the district court noted

that   it    did    not   need     to    consider      the     defenses     to   Recall’s

counterclaim       asserted      by     the    Vaughans,     namely,    volunteer      and

ratification. (J.A. at 1127, ¶113) For this reason, remand is

required to determine if these defenses preclude Recall’s recovery

and,   if   not,    the   extent        to    which   Recall    may    be   entitled   to

recoupment.

                                              30
                                 V.

     The district court noted that Recall conceded at trial it may

have inadvertently omitted from its Earnout calculation Sales

Revenues generated by SDA’s Texas facility in July 2001.   (J.A. at

1124, ¶99) The district court stated that the July 2001 Sales

Revenues for SDA Texas were estimated at $25,000, and found that,

if included, the July 2001 Sales Revenues would increase the amount

due under the Earnout to approximately $7,070,191. Id. However, the

district court did not expressly address this adjustment to the

Earnout within its Conclusions Of Law.    In addition, the Judgment

does not reflect the judge’s factual   finding on this issue.   (J.A.

at 1107.)   Upon remand, the trial judge should consider this

omission in recalculating the Vaughans’ Earnout Payment.



                                VI.

     For the reasons stated herein, we AFFIRM in part, REVERSE in

part, and REMAND to the district court for further proceedings

consistent with this opinion.

                                                  AFFIRMED IN PART,
                                                  REVERSED IN PART,
                                                      AND REMANDED




                                 31
