                  NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                             File Name: 12a1165n.06

                                           No. 11-2022                                 FILED
                                                                                   Nov 09, 2012
                             UNITED STATES COURT OF APPEALS                  DEBORAH S. HUNT, Clerk
                                  FOR THE SIXTH CIRCUIT


OMNICOM GROUP, INC.,                                 )
                                                     )
       Plaintiff-Appellee,                           )       ON APPEAL FROM THE UNITED
                                                     )       STATES DISTRICT COURT FOR
v.                                                   )       THE EASTERN DISTRICT OF
                                                     )       MICHIGAN
880 WEST LONG LAKE ASSOCIATES, et al.,               )
                                                     )
       Defendant-Appellants.                         )       OPINION
                                                     )




       Before: COLE and DONALD, Circuit Judges; SARGUS, District Judge.*


       DONALD, Circuit Judge. Plaintiff-Appellee Omnicom Group, Inc. (“Omnicom”), guarantor

of tenant BBDO Detroit, LLC (“BBDO Detroit”), sought a declaratory judgment against BBDO

Detroit’s landlord, Defendant-Appellant 880 West Long Lake Associates, LLC (“880 West”)

regarding a twenty-year commercial lease (“the Lease”). Omnicom sought a declaration that the

lease was validly terminated. 880 West filed a counterclaim seeking a declaration that the Lease

remains in full force and effect. Omnicom filed a motion for partial summary judgment. After

denying Omnicom’s motion on the grounds that two terms in the Lease are ambiguous, the district

court held a bench trial. The district court entered judgment in favor of Omnicom, finding that the



       *
        The Honorable Edmund A. Sargus, Jr., United States District Judge for the Southern District
of Ohio, sitting by designation.
No. 11-2022
Omnicom Group, Inc. v. 880 West Long Lake Assoc., et al.

Lease was validly terminated. 880 West timely appealed the district court’s judgment. For the

reasons set forth below, we AFFIRM the judgment of the district court.


                                                 I.


       Plaintiff Omnicom owns BBDO Detroit, formerly known as Ross Roy Communications, Inc.

Omnicom is the guarantor of BBDO Detroit’s leasehold obligations. In 1998, BBDO Detroit

negotiated with 880 West to enter into a 20-year commercial lease to occupy a new office building

near Chrysler Corporation’s (“Chrysler”) corporate headquarters. BBDO Detroit needed office

space near Chrysler because BBDO Detroit was Chrysler’s primary advertising agency and because

Chrysler was essentially BBDO Detroit’s only client. Based on the Lease negotiations, Bank of

America approved 880 West for a loan to build a 180,565 square-foot building. The Lease contained

a Termination Condition clause, Section 3.3(a), which, in the preliminary lease drafts, permitted

BBDO Detroit to terminate the Lease in the event that they “no longer provide any advertising

services to Chrysler Corporation and/or its affiliates.”


       While 880 West and BBDO Detroit were negotiating the Lease, Chrysler and the German

automobile company Daimler-Benz AG publicly announced they were pursuing a merger to form

a new entity, “DaimlerChrysler AG.” No mention of the merger, however, was made in the

preliminary drafts of the Lease. On December 2, 1998, 880 West revised the Termination Condition

to account for the expected Daimler-Chrysler merger by replacing “Chrysler Corporation and/or its

affiliates” with “Daimler Chrysler AG and/or its affiliates,” but it did not provide BBDO Detroit


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with an explanation of the change or its impact on the negotiated intent of the Termination

Condition. Additionally, the Lease did not include a precise definition for the term “affiliates.” Less

than one month after the change to the Termination Condition, the Lease was executed on December

23, 1998 and commenced on January 1, 2000.


       In 2007, during the Lease term, DaimlerChrysler AG transferred its Chrysler business, then

called Chrysler LLC, to Cerberus Capital Management, L.P.. Subsequently, DaimlerChrysler AG

changed its name from “DaimlerChrysler AG” to “Daimler AG.” In April 2009, Chrysler filed for

bankruptcy, and all of its assets were sold to a new entity named Chrysler Group LLC, which was

incorporated by the Italian car company Fiat. The owners of Chrysler Group LLC consisted of Fiat,

the United Auto Workers Union, and the United States and Canadian governments. Chrysler Group

LLC assumed Chrysler LLC’s contract with BBDO Detroit.


       In July 2009, Chrysler Group LLC’s Senior Vice President Scott R. Garberding provided

BBDO Detroit six-month’s notice that effective January 29, 2010, it would be terminating its

contract with BBDO Detroit for advertising services. On April 8, 2010, BBDO Detroit notified 880

West that it was exercising its right to terminate the Lease early, effective October 8, 2010, in

accordance with Section 3.3(a). 880 West subsequently notified its lender, Bank of America, that

BBDO Detroit “lost its contract with Chrysler, which gives them the right to terminate the 880

lease.” In talks with BBDO Detroit, however, 880 West refused to recognize that the Termination

Condition was satisfied. As a result, Omnicom sought a declaration that BBDO Detroit validly

terminated the Lease and that BBDO Detroit’s only obligation was to pay the contractual early

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Omnicom Group, Inc. v. 880 West Long Lake Assoc., et al.

termination fee. 880 West filed a counterclaim seeking a declaratory judgment that Omnicom may

not terminate the Lease early and that Omnicom must continue to meet BBDO Detroit’s lease

obligations.


       Omnicom filed a motion for partial summary judgment. On July 20, 2011, the district court

denied the motion, finding that the terms “affiliates” and “Daimler Chrysler AG” in the Lease’s

Termination Condition were ambiguous. After a bench trial, the district court again held that the

terms were ambiguous but nonetheless found that Omnicom did in fact satisfy the Termination

Condition of the Lease. Defendant 880 West now appeals the district court’s judgment.


                                                  II.


       We review a district court’s contract interpretation de novo and its findings of fact under the

clear error standard. Dillon v. Cobra Power Corp., 560 F.3d 591, 599 (6th Cir. 2009). Because

jurisdiction in this case is based on diversity of citizenship, we will apply the substantive law of

Michigan. Hickson Corp. v. Norfolk Southern Railway Co., 260 F.3d 559, 566 (6th Cir. 2001).


       880 West argues that the district court erred in (1) finding that the terms “affiliates” and

“Daimler AG” were ambiguous as used in the Lease and (2) in considering extrinsic evidence to

make that determination. 880 West further contends that the district court committed reversible error

by ignoring the integration clause in the Lease. In the alternative, 880 West argues that even if the

lease terms were ambiguous, the district court committed legal and factual errors in the interpretation

and application of the terms. In response, Omnicom asserts that the district court correctly consulted

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extrinsic evidence in finding ambiguity, and that, viewed in context, the terms were indeed

ambiguous and that the evidence at trial amply supports the district court’s interpretation of both

terms.


         Under Michigan law, “[t]he cardinal rule in the interpretation of contracts is to ascertain the

intention of the parties. To this rule all others are subordinate.” McIntosh v. Groomes, 198 N.W.

954, 955 (Mich. 1924). To that end, courts often bear the responsibility of determining what the

parties intended by specific terms within a contract. Terms are deemed either unambiguous or

ambiguous. “Where a contract is unambiguous on its face, extrinsic evidence is inadmissible

because no outside evidence can better evince the intent of the parties than the writing itself.” Sault

Ste. Marie Tribe of Chippewa Indians v. Granholm, 475 F.3d 805, 812 (6th Cir. 2007) (citing City

of Grosse Pointe Park v. Mich. Mun. Liab. & Prop. Pool, 702 N.W.2d 106, 113 (Mich. 2005)).

According to the parol evidence rule, a court may not use extrinsic evidence to interpret contract

language that is unambiguous. Shay v. Aldrich, 790 N.W.2d 629, 641 (Mich. 2010). Only when

terms within a contract are deemed ambiguous may a court look to outside evidence to determine

their meaning. Sault Ste. Marie, 475 F.3d at 812.


                                                   A.


         A contract term’s ambiguity can be either patent or latent. Shay, 790 N.W.2d at 641. Patent

ambiguities clearly appear on the face of the document. Id. However, a latent ambiguity is not

readily apparent from the language of the contract, “but instead arises from a collateral matter when


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the document’s terms are applied or executed.” Id. Latent ambiguities exist when contract language

“is clear and intelligible and suggests but a single meaning, but some extrinsic fact or extraneous

evidence creates a necessity for interpretation or a choice among [two] or more possible meanings.”

McCarty v. Mercury Metalcraft Co., 127 N.W.2d 340, 344 (Mich. 1964) (quoting Black’s Law Dict.,

4th ed.); see also Shay, 487 Mich. at 668. Often a latent ambiguity will only be resolved when the

term is applied in context. Sault Ste. Marie, 475 F.3d at 812.


       Here, the district court did not distinguish between patent or latent ambiguities in finding the

terms “affiliates” and “Daimler Chrysler AG” ambiguous. However, the district court cited case law

finding ambiguity where provisions are capable of conflicting interpretations, and, given the need

to consult extrinsic evidence, the ambiguity is likely latent as opposed to patent.          Although

Omnicom argues that the ambiguities are both patent and latent, its interpretation is inconsistent with

its argument that the district court properly considered extrinsic evidence; “resort to extrinsic

evidence is unnecessary to detect a patent ambiguity,” but, the detection and resolution of a latent

ambiguity “require[s] consideration of factors outside the instrument itself.” City of Grosse Point

Park, 702 N.W.2d at 113 (quoting McCarty, 127 N.W.2d at 344). Thus, if the terms are ambiguous

and the district court considered extrinsic evidence, the court must have considered the terms latently

ambiguous and not patently ambiguous.


       880 West maintains that Black’s Law Dictionary, the Michigan Business Corporation Act,

and Michigan case law have routinely concluded that the term “affiliates” is unambiguous. 880

West asserts that the term “affiliates” always includes sibling corporations, and, as such, would mean

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that all Omnicom-owned companies around the world could not continue to do business with any

“Daimler Chrysler AG” entity if the Lease is to be validly terminated. While 880 West is correct that

courts often look to other sources, such as Black’s Law Dictionary, to aid in interpretation, courts

also consistently consider the context in which a term is used.


        Black’s Law Dictionary defines affiliate as “a corporation that is related to another

corporation by shareholdings or other means of control; a subsidiary, parent, or sibling corporation.”

Black’s Law Dictionary (9th ed. 2009). The Michigan Business Corporation Act defines affiliate

as “a person who directly, or indirectly through [one] or more intermediaries, controls, is controlled

by, or is under common control with a specified person.” Mich. Comp. Laws § 450.1776(1).

However, as both parties recognize, case law is not so quick to strictly define the term, instead

choosing to rely on context.


        In Wyrembelski v. City of St. Clair Shores, the Michigan Court of Appeals described the

many different interpretations of the term “affiliate” as applied across varying jurisdictions according

to the facts of each case. 553 N.W.2d 651, 653-54 (Mich. Ct. App. 1996). The court discussed the

following cases in its analysis with regard to the term “affiliate.” For instance, the Ninth Circuit

found that “[m]ore is required than common ownership” and despite “overlapping or common

ownership and control, and mutuality of interest . . . the entities were not affiliated[.]” Id. at 653

(citing Travelers Indem. Co. v. United States, 543 F.2d 71, 76 (9th Cir. 1976)). The Southern

District of New York rejected the idea that “‘a simple and arm’s length’ contractual relationship

between two corporations made them ‘affiliated’” Id. (quoting In re Marine Sulpher Transp. Corp.,

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312 F. Supp. 1081, 1103 (S.D.N.Y. 1970). The Louisiana Court of Appeals decided not to extend

the scope of the term “affiliates” to a husband’s corporation where he was the sole shareholder

despite the agreement’s language releasing “his predecessors, affiliates, insurers, representatives,

agents, successors, assigns and employees.” Id. at 653-54 (citing McCall v. Cameron Offshore

Boats, Inc., 635 So.2d 263 (La. App. 3 Cir. 1994). Additionally, the Northern District of Illinois’s

decision in Precision Devices Corp. v. Intermedics, Inc., 766 F. Supp. 666, 668 (N.D. Ill. 1991),

stands for the proposition that the circumstances surrounding a contract will aid in the interpretation

of the word “affiliate.” (emphasis added).


       The aforementioned examples, coupled with the definitions from Black’s Law Dictionary

and the Michigan Corporations Act, overwhelmingly convey that there is no one definition of

“affiliates,” and it is well known that “[a] contract is ambiguous if its words may reasonably be

understood in different ways.” UAW-GM Human Res. Ctr. v. KSL Recreations Corp., 579 N.W.2d

411, 414 (Mich. Ct. App. 1998) (internal quotation marks and citation omitted). As such, the district

court did not err in finding that the term “affiliates” is ambiguous, in the context of the Lease, and

it proceeded to interpret the term with the assistance of parol evidence.


       As for the term “Daimler Chrysler AG,” in denying Omnicom’s motion for summary

judgment, the district court found that the term could in fact mean, as Omnicom alleges, that the

term refers only to the Chrysler and its brands. See Sault St. Marie, 475 F.3d at 812 (“the burden is

on the party alleging the ambiguity to present an interpretation of the contract that is equally as

plausible as the common sense interpretation.”). The district court found that Omnicom’s

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interpretation was indeed plausible, and thus appropriately denied summary judgment so that the

issue could be resolved at trial.


                                                  B.


        880 West argues that because the Lease contained an integration clause, the district court was

not permitted to consult extrinsic evidence, including prior or contemporaneous negotiations. This

argument is unpersuasive. Parties include integration clauses into a contract to indicate that the final

written agreement is the “exclusive basis for determining their intentions.” UAW-GM, 579 N.W.2d

at 416 (quoting 3 Corbin, Contracts, § 577, p. 401). The existence of an “integration clause does not

preclude the consideration of extrinsic evidence[.]” Karibian v. Village Green Management Co.,

2010 WL 1138028, at *4 (Mich. Ct. App.); see also Hesse v. Superior Bus. Forms, Inc., 2008 WL

441603, at *3 (Mich. Ct. App.) (“if a contract contains an integration clause, extrinsic evidence may

be necessary, and is permissible, to assist in the interpretation of an ambiguous contract term.”)

(citing 6 Corbin, Contracts (Revised ed), § 578, p. 119.). Thus, the district court did not commit

clear error by consulting extrinsic evidence even though the Lease contained an integration clause.


                                                  C.


        Lastly, 880 West’s alternative argument that the district court committed legal and factual

errors in interpreting the terms also fails. A “court must consider the extrinsic evidence to determine

if there exists an ambiguity and then, if an ambiguity does exist, the court must consider extrinsic

evidence to resolve that ambiguity.” Sault St. Marie, 475 F.3d at 812. The district court relied on

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witness testimony and documentary evidence to interpret the ambiguity. The district court credited

the testimony of Omnicom’s representatives, who indicated that they never would have agreed to the

lease terms if “affiliates” and “Daimler Chrysler AG” were to be read as expansively as 880 West

argues. The district court also found that based on the testimony of 880 West’s counsel and its

principal, the term “affiliates” only referred to those companies to which BBDO Detroit could “shift

the work” that it had historically done for Chrysler. Further, the district court found that the weight

of the evidence supported a finding that the change from “Chrysler Corporation” to “Daimler

Chrysler AG” was not a change in scope, but rather a change in name only. Moreover, the district

court did not believe that 880 West would have notified its mortgage lender that Omnicom was

exercising its right to terminate the Lease if Omnicom did not actually have a right to terminate the

Lease.


         This court will not disturb the credibility findings of the district court unless clear error on

the part of the district court is evident. Schroyer v. Frankel, 197 F.3d 1170, 1173 (6th Cir. 1999)

(“When factual findings rest upon credibility determinations, this Court affords great deference to

the findings of the district court.”) A review of the record does not reveal that the district court erred

in interpreting and applying the terms “affiliates” and “Daimler Chrysler AG.” While the term

“affiliates” can mean sibling corporations as 880 West argues it does, another reasonable

interpretation of the term in the context of the Lease is that it only refers to other Omnicom-owned

companies that could do advertising work for Chrysler. For 50 years, BBDO Detroit handled all of

the advertising work for Chrysler and its brands - Dodge, Plymouth, Eagle and Jeep. It is not


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unreasonable to find that a lease (1) executed in Michigan, (2) relating to property in Michigan, (3)

where the parties are Michigan residents, and (4) the entity in which the Termination Condition

referred is also in Michigan, does not encompass the business of Omnicom and Daimler AG

companies around the world that had no involvement in the negotiation or execution of the Lease.


        Once a contract term is determined to be ambiguous, its interpretation becomes a question

fact, Port Huron E. Ass’n v. Port Huron Area Sch. Dist., 452 Mich. 309, 323 (Mich. 1996), and the

district court is in the best position to judge the credibility of the witnesses. See Schroyer, 197 F.3d

at 1173. The preponderance of the evidence showed that the terms at issue were ambiguous and that

the parties did not intend as expansive a scope of the terms as 880 West suggests. 880 West

contends that any company controlled or owned by DaimlerChrysler is subject to the term “affiliates”

as it relates to “Daimler Chrysler AG.” However, the district court found that this interpretation was

too expansive, and 880 West lacked credible evidence to support such an assertion. Importantly,

the district court also held that the term “affiliates” was not so expansive as to include “the entities

which acquired Chrysler following its ‘divorce’ from Daimler and its subsequent bankruptcy.” This

finding would indicate that not even Fiat, the company that controlled Chrysler Group LLC after it

emerged from bankruptcy in 2009, is an affiliate as the term relates to the Lease. Such a finding is

supported by the history of dealings between BBDO Detroit and Chrysler, as well as the testimony

of Howard Wendy, Omnicom’s broker, that Chrysler was the only automobile company that was

discussed regarding the Lease.




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       Further, emails sent by BBDO Detroit representatives showed that the company actively

directed all companies to cease advertising business for Chrysler. Although this may imply that the

term “affiliates” encompasses companies beyond the scope of those that Omnicom argues are

affiliates for purposes of the Lease, the district court found that all Omnicom-owned companies did

in fact terminate all advertising business with Chrysler.2 The fact that all advertising business for

Chrysler ceased prior to the effective date of termination of the Lease supports the district court’s

determination that “affiliates” and “Daimler Chrysler AG” only referred to companies providing

advertising services for Chrysler. Additionally, because 880 West was responsible for the last-

minute change of name to “Daimler Chrysler AG,” the district court was properly construed the

ambiguous term against it as the drafter. See United Rentals (North America), Inc. v. Keizer, 355

F.3d 399, 409 (6th Cir. 2004). Thus, the district court did not commit clear error in finding that

“affiliates” did not mean all Omnicom-owned companies and that “Daimler Chrysler AG” did not

mean all companies under the Daimler umbrella.


                                                III.


       Given the foregoing, we AFFIRM the district court’s finding that Omnicom validly

terminated the Lease with 880 West.




       2
        Two Omnicom-owned companies continued doing business with Chrysler, but they were
not providing advertising services.

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