                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


1-12-2004

Assoc ACC Intl Ltd v. DuPont Flooring Sys
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-1593




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"Assoc ACC Intl Ltd v. DuPont Flooring Sys" (2004). 2004 Decisions. Paper 1097.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/1097


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                                                                NOT PRECEDENTIAL



                  IN THE UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT

                                      No. 03-1593

                                 ASSOCIATED/ACC
                               INTERNATIONAL, LTD,

                                                    Appellant

                                              v.

                          DUPONT FLOORING SYSTEMS
                          FRANCHISE COMPANY, INC.;
                        DUPONT COMMERCIAL FLOORING
                        SYSTEMS INC.; DUPONT FLOORING
                                 SYSTEMS, INC.
                           _________________________

                    On Appeal from the United States District Court
                               for the District of Delaware
                   District Judge: The Honorable Joseph J. Farnan, Jr.
                                (D.C. No. 99-CV-00803)
                              _________________________

                    Submitted pursuant to Third Circuit LAR 34.1(a)
                                  on January 9, 2004

                      Before: BARRY and SMITH, Circuit Judges,
                             and POLLAK, District Judge*

                                (Filed: January 12, 2004)


                                ____________________


  *
   The Honorable Louis H. Pollak, Senior District Judge for the Eastern District of
Pennsylvania, sitting by designation.
                                OPINION OF THE COURT
                                 _____________________

SMITH, Circuit Judge.

       Plaintiff Associated/ACC International, Ltd. (“Associated”) initiated this diversity

suit alleging breach of contract, tortious interference with that contract, fraud, and

defamation against DuPont Flooring Systems Franchise Co., Inc., DuPont Commercial

Flooring Systems, Inc., and DuPont Flooring Systems, Inc. (“DuPont Defendants”).1

       The contract at issue was executed on September 17, 1998, establishing Associated

as a franchisee of DuPont Flooring Systems Co., Inc. Exhibit four to the franchise

agreement, titled Special Stipulations, detailed additional provisions unique to the

Associated franchisee agreement including the “Handling of Business Leads.” Under this

provision the parties agreed that

       [Associated] and [DuPont Flooring Systems Franchise Co., Inc.] shall, as
       set forth below, share leads that they uncover to business in these market
       segments. It is not intended or expected that [Associated] or Owned
       Operation shall forgo or refrain from bidding on any business they feel
       competent to handle; rather, the purpose of this exchange of leads is to
       insure that each client receives the best possible service from DuPont
       Flooring Systems and its franchise members.

       (a)    All Owned Operations locations will be informed of [Associated’s]
              status as a National Retail Store Specialist and will be encouraged to
              inform [Associated] of leads that they uncover involving business in
              this segment, with the exception of business involving relationships
              strategic to its business . . . .



  1
   The District Court properly exercised jurisdiction pursuant to 28 U.S.C. § 1332. We
have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291.
                                              2
An “Owned Operation” is a DuPont owned local store.

      The relationship between Associated and the DuPont Defendants deteriorated and

Associated filed the present lawsuit on November 23, 1999. Associated claimed that: (1)

the DuPont Defendants breached their contract by failing to adequately encourage Owned

Operations to share leads with Associated; (2) the DuPont Defendants made fraudulent

and/or negligent misrepresentations during and prior to contract negotiations; (3) DuPont

Commercial Flooring Systems, Inc. and Dupont Flooring Systems, Inc. tortiously

interfered with the contract between Associated and DuPont Flooring Systems Franchise

Co.; and (4) Dupont Flooring Systems, Inc. defamed Associated. Defendants

counterclaimed for defamation and breach of contract, and sought to have the contract

terminated.

      The DuPont Defendants filed a motion for summary judgment on all of

Associated’s claims as well as the DuPont Defendants’ counterclaims.2 The District

Court granted summary judgment in favor of the DuPont Defendants on all counts on

March 28, 2002. The District Court rejected Associated’s claim that the term

“encourage” was ambiguous and found that the DuPont Defendants had submitted

sufficient evidence to show that they had not breached their contract with Associated. In

addition, the District Court concluded that Associated’s fraudulent misrepresentation


  2
    Associated does not challenge on appeal the District Court’s grant of summary
judgment in favor of the DuPont Defendants’ breach of contract counterclaim. The
District Court denied the DuPont Defendants’ motion for summary judgment on their
defamation counterclaim.
                                            3
claim could not survive summary judgment because Associated’s reliance on allegedly

fraudulent misstatements made by DuPont officials as to the definition of “encourage,”

was not justifiable in light of the unambiguous contract provision. Subsequently, the

District Court entered a final judgment order, granting the DuPont Defendants $27,154.95

in damages, plus interest at a rate of eighteen percent per annum, on January 28, 2003.3

Associated filed a timely notice of appeal on February 21, 2003.4

                                              I.

       We exercise plenary review over the District Court’s grant of summary judgment,

applying the same standard as the District Court. Kane v. BOC Group, Inc., 234 F.3d 160,

162 (3d Cir. 2000). Summary judgment is appropriate where “there is no genuine issue

as to any material fact and . . . the moving party is entitled to a judgment as a matter of

law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Fed. R. Civ. Proc. 56(c). A

genuine issue of material fact exists where the “evidence is such that a reasonable jury

could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 248 (1986).

                                              II.


  3
    The judgment awarded defendants two-thirds of their claimed $388,433.17 attorneys’
fees and costs.
  4
    Associated’s brief addresses only the District Court’s grant of summary judgment on
the issues of defendants’ breach of contract and fraudulent and/or negligent
misrepresentation. Our analysis is therefore limited to those issues. Laborers’ Int’l Union
of N. Am. v. Foster Wheeler Corp., 26 F.3d 375, 398 (3d Cir. 1994) (“An issue is waived
unless a party raises it in its opening brief . . . .”).
                                              4
       As the Supreme Court of Delaware explained, “[i]t is an elementary canon of

contract construction that the intent of the parties must be ascertained from the language

of the contract.” Citadel Holding Corp. v. Roven, 603 A.2d 818, 822 (Del. 1992) (citing

Myers v. Myers, 408 A.2d 279 (Del. 1979)); DuPont v. Wilmington Trust Co., 45 A.2d

510 (Del.Ch. 1946)).5 Where the language is unambiguous, the Court may not look

beyond the language of the contract. Capital Mgmt. Co. v. Brown, 813 A.2d 1094, 1097

(Del. 2002). Language is unambiguous where “a reasonable person in the position of

either party would have no expectations inconsistent with the contract language.” Eagle

Industries, Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997).

       Associated contends that the term “encourage” is ambiguous because it can mean

both the meaning ascribed by the District Court–“to spur on” or “to stimulate” an

individual to act–and “to impel,” “to push,” “to force.” We disagree. A reasonable

person would expect that the term “encourage” means “to spur on” or “to stimulate.”

This is the term’s common and ordinary usage. Because we find the term to be

unambiguous, we decline to consider any extrinsic evidence regarding its meaning.

Capital Mgmt., 813 A.2d at 1097.

       We then turn to the question of whether, on this definition of encourage,

defendants are entitled to summary judgment. Summary judgment must be entered



  5
   The parties agree that the contract is governed by Delaware law.
                                             5
against a party who bears the burden of proof at trial but fails to establish the existence of

evidence necessary for an essential element of that case. Celotex, 477 U.S. at 322. Here,

Associated must show that defendants actually breached the contract by failing to

encourage Owned Operations to turn over business leads, applying the ordinary definition

of “encourage.” Associated asserts that the fact that it received no viable leads from

defendants is proof that the defendants did not adequately encourage its Owned

Operations to forward leads. Associated, however, did not provide any factual basis for a

connection between the lack of leads and defendants’ alleged lack of encouragement. Out

Front Prod., Inc. v. Magid, 748 F.2d 166, 172 (3d Cir. 1984)(“a party resisting the motion

cannot expect to rely merely on bare assertions, conclusory allegations or suspicions.”)

(emphasis omitted). Defendants, in contrast, put forward evidence that they did

encourage their Owned Operations to turn over leads. This consisted primarily of a

memo from the Dupont Defendants to their Owned Operations location managers,

announcing the relationship established between the DuPont Defendants and Associated.

The memo explained how and why the Owned Operations managers should turn over new

business leads to Associated. Additionally, the DuPont Defendants informed suppliers of

the new relationship, outlined the relationship in its newsletter, provided Associated a

chance to speak with defendants’ entire network, and explained the relationship between

the DuPont Defendants and Associated at their national meeting.6 Associated has


  6
    Federal Rule of Civil Procedure 56(a) specifically allows answers to interrogatories to
be used in support of a motion for summary judgment. We therefore reject Associated’s
                                              6
provided no evidence which disputes these facts. The District Court’s grant of summary

judgment in defendants’ favor was therefore proper.

                                            III.

       Associated next claims that statements made by Ron Rose, President of DuPont

Flooring Systems Franchise Co., Inc., during negotiations for the contract in question

were false and fraudulently misled plaintiff as to the meaning of the term “encourage.”

Because we find the term “encourage” to be unambiguous, we reject Associated’s

fraudulent misrepresentation claim.

       One element of the prima facie case for fraudulent misrepresentation is that

Associated’s reliance on the alleged misrepresentations must be justifiable reliance. Lord

v. Souder, 748 A.2d 393, 402 (Del. 2000). In light of our holding that the term

“encourage” is unambiguous, Associated’s claim must fail. We agree with the District

Court that “[i]t was unreasonable for [p]laintiff to have simply accepted Mr. Rose’s

alleged representations as to the meaning of ‘encouraged,’ when such interpretation

contradicts the meaning that an ordinary person would ascribe to it.” Because any

reliance on a novel interpretation of “encouraged” was unreasonable, Associated could

not establish a prima facie case. Lord, 748 A.2d at 402. We therefore affirm the District

Court’s grant of summary judgment in favor of the defendants on Associated’s fraudulent

misrepresentation claim. Celotex, 477 U.S. at 322.


contention that the District Court erred in relying on defendants’ answer to plaintiff’s
interrogatories. Fed. R. Civ. Proc. 56(a).
                                             7
    For the foregoing reasons, we will affirm the judgment of the District Court.



TO THE CLERK:

    Please file the foregoing opinion.

                                         By the Court,

                                          /s/ D. Brooks Smith
                                         Circuit Judge




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