                                                                                                                           Opinions of the United
2009 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-15-2009

Amer Elec Components v. Agere Sys Inc
Precedential or Non-Precedential: Non-Precedential

Docket No. 08-1832




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                                                              NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                                ___________

                                     No. 08-1832
                                     ___________

                 AMERICAN ELECTRONIC COMPONENTS, INC.,
                                         Appellant
                                 v.

                             AGERE SYSTEMS, INC.
                      ____________________________________

                    On Appeal from the United States District Court
                              for the District of New Jersey
                           D.C. Civil Action No. 06-cv-04288
                     District Judge: Honorable Susan D. Wigenton
                     ____________________________________

                    Submitted Pursuant to Third Circuit LAR 34.1(a)
                                        April 16, 2009

          Before: McKEE, SMITH, and VAN ANTWERPEN, Circuit Judges

                             (Opinion filed: June 15, 2009)




                                       OPINION


SMITH, J., Circuit Judge.

      This appeal presents primarily a question of contract construction. American

Electronic Components, Inc. (“AECI”) sued Agere Systems, Inc. (“Agere”) for an alleged

breach of contract. AECI claimed that it was due a commission on a sale of surplus
equipment that was owned by Agere. The District Court granted summary judgment on

behalf of Agere. For the following reasons, we will affirm.

                                             I.

       Agere, a maker of communication chips and other telecommunications equipment,

and AECI, an electronic parts distributer, entered into a three-year contract on January 1,

2001.1 The non-exclusive contract identifies AECI as a technical sales representative for,

among other things, the marketing and selling of Agere’s surplus equipment. The

contract provided that:

       [Agere] may have the need to sell surplus capital equipment, as designated by
       [Agere], to outside third parties. As used herein, “Surplus Capital Equipment”
       or “Equipment” includes various types of semiconductor manufacturing
       equipment and related sub assemblies. [Agere] shall determine what
       Equipment is Surplus. . . . [AECI] agrees to act as [Agere]’s technical sales
       representative in the marketing and selling of Equipment to third parties in
       accordance with the terms and conditions set forth in this agreement.

       Although the contract does not define the term “designate,” AECI employees

testified in their depositions that the designation process often begins with general

discussions, but that Agere eventually authorizes, in writing, AECI to sell particular

equipment. The contract also provided that Agere may use other companies to sell its

equipment, and both parties recognize that the contract allowed Agere to sell its own

equipment.




       1
              We note that the parties had a long-standing relationship prior to the 2001
contract.

                                              2
       As to AECI’s remuneration,2 the contract stated that: “[AECI] shall receive from

[Agere] a percentage of the complete sale price for each item of Equipment sold to a third

party by [AECI].”

       The current dispute concerns whether Agere owes AECI a commission for the

2001 sale of surplus equipment from Agere’s Madrid, Spain subsidiary (“Madrid

equipment”). In June 2001, Chuck Novak, Agere’s employee responsible for the

disposition and sale of surplus equipment, informed AECI that the Madrid subsidiary was

closing, and that he (Novak) would “be in charge of,” “handle,” and “spearhead” the sale

of the subsidiary’s surplus equipment. The parties dispute whether Novak told AECI to

find buyers for the equipment or to merely inform him if anyone expressed an interest in

the type of equipment being sold in Madrid. Nevertheless, Agere sent AECI spreadsheets

that listed the Madrid equipment, and AECI employees traveled to Spain with Novak to

inspect and make a videotape of the Madrid equipment. Agere never, however, provided

written authorization for AECI to sell the Madrid equipment.

       AECI subsequently referred to Agere potential purchasers for the Madrid

equipment. One particular buyer was Advanced Technology Services, Inc. (“ATSI”).

AG Semiconductor Limited (“AG”), however, ultimately purchased the Madrid

equipment. There is some uncertainty regarding the relationship between AG and ATSI,



       2
               The contract also provides that, in certain situations, AECI can purchase the
designated surplus equipment and then sell it to a third party. That provision is not at
issue in this case.

                                             3
and AECI maintains that ATSI was the actual buyer due to a partnership and/or

investment relationship that it had with AG. AG’s managing director and CFO, however,

signed an affidavit stating that ATSI was not a partner of nor had an investment interest

in AG. Further, there is no dispute that Agere alone handled the sale of the Madrid

equipment to AG.

       AECI nevertheless believes that it is owed a commission because: (1) it expended

substantial time and effort to find a buyer for the Madrid equipment; or alternatively (2)

Agere allegedly designated the Madrid equipment for AECI to sell and cut it out of the

deal at the last minute. AECI thus filed a complaint for breach of contract and breach of

the implied covenant of good faith and fair dealing in New Jersey state court. Agere

properly removed the case to the United States District Court for the District of New

Jersey, and after engaging in discovery, Agere moved for summary judgment. The

District Court granted the motion, finding no genuine issue of material fact. The District

Court determined that the contract required AECI to consummate the sale of the

equipment to a third party in order to be eligible for a commission. Although AECI

rendered assistance to Agere, it did not consummate the sale, and was thus not eligible for

a commission. The District Court also determined that Agere did not designate the

Madrid equipment for AECI to sell.

       AECI appeals.




                                             4
                                             II.

       We have jurisdiction pursuant to 28 U.S.C. § 1291 and exercise plenary review

over orders granting summary judgment. Elliot & Frantz, Inc. v. Ingersoll-Rand Co., 457

F.3d 312, 318 (3d Cir. 2006). We will affirm such orders if our review reveals that

“‘there is no genuine issue of material fact and that the moving party is entitled to

judgment as a matter of law.’” Id. (quoting Fed. R. Civ. P. 56(c)). A material fact is one

that would affect the outcome of the lawsuit, and a dispute is genuine if “evidence exists

from which a rational person could conclude that the position of the person with the

burden of proof on the disputed issue is correct.” Clark v. Modern Group Ltd., 9 F.3d

321, 326 (3d Cir. 1993).

       Because the contract between Agere and AECI is written, we are bound by its

terms, and our role is to “enforce [the contract] as written and not to make a better

contract for either of the parties.” Vanguard Telecomms., Inc. v. S. New England Tel.

Co., 900 F.2d 645, 651 (3d Cir. 1990) (quoting Klacik v. Kovacs, 268 A.2d 305, 307 (N.J.

Super. Ct. App. Div. 1970)) (internal quotation marks omitted).3 Nevertheless, in

determining whether any of the contract’s terms are ambiguous, we may, in addition to

reviewing the language of the contract, consider “the conduct of the parties that reflects

their understanding of the contract’s meaning.” Teamsters Indus. Employees Welfare




       3
             It is undisputed that New Jersey substantive law applies in this case. See
Cooper Labs., Inc. v. Int’l Surplus Lines Ins. Co., 802 F.2d 667, 672 (3d Cir. 1986).

                                              5
Fund v. Rolls-Royce Motor Cars, Inc., 989 F.2d 132, 135 (3d Cir. 1993).

       As the District Court determined, the contract clearly sets forth when AECI is

owed a commission: when AECI consummated a sale of equipment that was designated

by Agere. Thus, only factual disputes bearing on issues embedded in that statement are

material. No such disputes exist here.

       AECI argues that summary judgment is not appropriate because the parties dispute

whether: (1) Chuck Novak told AECI to “find a buyer” for the Madrid equipment; (2)

AECI expended substantial effort to find a buyer for the equipment; and (3) AECI found

the company that ultimately bought the equipment. That AECI concentrates on these

disputes is unsurprising, as it claims that it acted as Agere’s broker and is thus owed a

commission for merely finding a buyer for the Madrid equipment. This argument is

unavailing, as the contract specifically identifies AECI as a “technical sales

representative” and limits AECI’s entitlement to a commission to situations where it

actually sold the designated equipment. Holding that the contract gave AECI a right to

commissions for finding a buyer “would require us to enlarge our role from contract

construction to contract reformation, a role we decline to assume under the facts of this

case.” Vanguard, 900 F.2d at 651-52. Thus, whether Chuck Novak told AECI to find a

buyer, and whether AECI expended resources to—and did in fact—find a buyer for the

Madrid equipment, are not material to whether AECI is owed a commission.

       The record also supports the District Court’s determination that Agere did not



                                              6
designate the Madrid equipment for AECI to sell. AECI argues that Agere implicitly

designated the equipment through its actions. The contract does not define “designate,”

but there is no dispute that it is Agere’s practice to designate in writing its surplus

equipment for AECI to sell. See Teamsters, 989 F.2d at 135 (stating that courts may look

at course of performance to interpret a contract). AECI concedes that Agere did not “sign

off” on the designation of the Madrid equipment for sale. It thus cannot be genuinely

disputed that Agere did not designate the Madrid equipment.

       Finally, there is not sufficient evidence for a reasonable jury to conclude that

Agere should be required to pay AECI a commission because Agere improperly

prevented AECI from fulfilling the contract’s condition precedent—consummating the

sale. AECI correctly asserts that a party may not escape contractual liability by relying on

the failure of a condition precedent where the party wrongfully prevented the

performance of that condition. See Creek Ranch, Inc. v. N.J. Tpk. Auth., 383 A.2d 110,

116 (N.J. 1978). The record does not support this conclusion here, especially as Agere

never designated the Madrid equipment for AECI to sell, and because Chuck Novak of

Agere told AECI that he would be handling the sale of the equipment. The facts that

AECI located potential buyers for the Madrid equipment and that Agere eventually sold

the equipment do not lead to the inference that Agere engaged in some sort of subterfuge

to prevent AECI from earning a commission. Further, the non-exclusive contract allows




                                               7
Agere to sell its own equipment.4

      For the reasons stated above, we will affirm the District Court’s order granting

summary judgment on behalf of Agere.




      4
               Based on the conclusions reached above, we also find that summary
judgment was appropriate on AECI’s claim for breach of the implied covenant of good
faith and fair dealing.

                                            8
