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UNITED STATES v. SEARS

August 10, 1984

UNITED STATES OF AMERICA, Plaintiff
v.
SEARS, ROEBUCK AND CO., Defendant



The opinion of the court was delivered by: HOGAN

 THOMAS F. HOGAN, U.S.D.J.

 This case is before the Court on cross motions for summary judgment. At the hearing held on this matter the Court issued a bench ruling granting defendant's motion for summary judgment. This opinion supplements the bench ruling.

 The principal question presented in this case is whether Sears should be credited with interest for the period between May 9, 1980 and August 8, 1983 for $5.4 million it paid November 21, 1978 on an assessment for dumping TV receivers imported from Japan on the American market. The dispute arises out of a settlement contract finalized on April 28, 1980. Under the settlement terms, Sears agreed to pay the United States Departments of Commerce, Treasury and Customs Service a total of $19.8 million, $5.4 million of which was to be paid out of a refund Sears was to have received from the government for the 1978 payment. On May 9, 1980, a federal court enjoined the implementation of the settlement agreement. On November 6, 1980, Roderick M. Hills, counsel for Sears, wrote a letter to Lynn J. Barden, Assistant General Counsel for Import Administration of the Department of Commerce, confirming a phone conversation he had had with Barden. According to the letter, Hills and Barden agreed that the amount Sears owed the Department of Commerce was to be reduced by the amount of interest which had accrued between May 9, 1980, and the date the injunction was to be lifted. Barden consulted Homer Moyer, the General Counsel of the Department of Commerce, and countersigned the Hills' letter on November 7, 1980.

 In its motion for summary judgment, the United States contends that the April 1980 settlement agreement determines Sears' liability and that the parol evidence rule requires the exclusion of whatever prior or side agreements Sears claims to have been made between the parties. In its cross-motion for summary judgment, Sears presents several arguments to justify the extension of interest credit on the $5.4 million payment. Significantly, Sears contends that notwithstanding an integration clause the April 1980 agreement was only partially integrated. A collateral term to the agreement was allegedly the interest formula set out in a draft of the agreement. The formula was to be used to determine the amount by which interest was to accrue during the injunction period on the $5.4 million payment. In the alternative, Sears contends that the November 1980 letter represents an effective modification of the April 1980 agreement permitting the accrual of interest until the termination of the injunction.

 The Law

 1. The April, 1980 Settlement Agreement and the Parol Evidence Rule

 Under the parol evidence rule, "when the parties to a contract have reduced their entire agreement to writing, the court will disregard and treat as inoperative parol evidence of the prior negotiations and oral agreements." Giotis v. Lampkin, 145 A.2d 779, 781 (D.C. 1958). There are, however, exceptions to the parol evidence rule. For example, when the parties have not intended that the written document cover all of the subjects of negotiation or when there is a "collateral contract" in which the oral contract sought to be proved is separate from and independent of the written contract, the court may consider parol evidence. Id. Furthermore, when there is ambiguity in the language of the agreement, parol evidence may be admitted to clarify the intent of the parties. Dixon v. Wilson, 192 A.2d 289, 291 (D.C. 1963).

 While it is presumed that all of the terms of an agreement are embodied in a contract, the court must examine the intent of the parties to determine whether the contract represents a complete integration of the understanding of the parties. Stamenich v. Markovic, 462 A.2d 452, 456 (D.C. 1983); Luther Williams, Jr., Inc. v. Johnson, 229 A.2d 163, 165 (D.C. 1967). In measuring intent, the court looks to "the written contract, and the conduct and language of the parties and the surrounding circumstances." Standley v. Egbert, 267 A.2d 365, 367 (D.C. 1970) (citations omitted). Courts focus on a number of factors, including whether the contract appears to be comprehensive or simply devoted to a few issues and whether attorneys aided in the preparation of the document. Giotis v. Lampkin, supra, 145 A.2d 782. The presence of an integration clause strengthens the presumption that the written contract is the repository of the agreement between the parties. Luther Williams, Jr., Inc. v. Johnson, supra, 229 A.2d at 165.

 Examining the settlement agreement and the circumstances surrounding its execution, the Court concludes that it is a fully integrated contract. The contract itself is comprehensive. It provides for the terms and conditions of payment and stipulates what is to occur in the event that the agreement is subject to litigation. Paragraph 10 of the agreement is an integration clause which states that the agreement "represents the entire understanding and agreement between the Company . . . and the United States . . . and supersedes any prior negotiation, letter or understanding relating to the subject matter hereof." (Settlement Agreement of April 28, 1980, Brief in Support of Plaintiff's Motion for Summary Judgment, Exh. A at 11.) In addition, the parties were fully represented by counsel. Sears' ability to negotiate a reduction for the interest which had accrued between 1978 and the April 1980 settlement date indicates that the representation was effective. *fn1" All of these factors support the conclusion that the settlement agreement was fully integrated.

 Turning to the issue of whether the contract is ambiguous, it is well settled that in the absence of ambiguity the meaning of the contract is to be determined from the face of the contract "without resort to parol evidence or extrinsic circumstances." Appalachian Power Co. v. Federal Power Commission, 174 U.S. App. D.C. 100, 529 F.2d 342, 347-48 (D.C. Cir. 1976) (footnote omitted) (quoting Simpson Bros. Inc. v. District of Columbia, 85 U.S. App. D.C. 275, 179 F.2d 430, 434 (D.C. Cir. 1949), cert. denied, 338 U.S. 911, 94 L. Ed. 561, 70 S. Ct. 350 (1950)). A contract is not ambiguous "simply because the parties disagree on its interpretation." Clayman v. Goodman Properties, Inc., 171 U.S. App. D.C. 88, 518 F.2d 1026, 1034 (D.C. Cir. 1973), citing Dixon v. Wilson, supra, 192 A.2d at 291. The standard used by American courts for determining ambiguity in a contract is "'reasonably susceptible of different constructions or interpretations.'" Lee v. Flintkote Co., 193 U.S. App. D.C. 121, 593 F.2d 1275, 1282 (D.C. Cir. 1979) (quoting 1901 Wyoming Coop Ass'n v. Lee, 345 A.2d 456, 461 n.7 (D.C. 1975)). See Papago Tribal Utility Authority v. Federal Energy Regulatory Commission, 232 U.S. App. D.C. 424, 723 F.2d 950, 955 (D.C. Cir. 1983).

 Examining the April 1980 agreement, it is manifest that it is unambiguous on its face. The terms of settlement are clear. Paragraph 2 of the agreement states that Sears owed a total of $19.8 million, with $14.3 million payable within 15 days of the contract, and the remainder, $5.4 million, was payable within 10 days of the receipt of the refund of the $5.4 million Sears paid in November 1978. There is no oblique reference to additional terms or conditions for the payment.

 Sears contends that the lack of clarity of paragraph 7 of the agreement renders paragraph 2 ambiguous. Paragraph 7 of the contract states:

 
To the extent that this agreement is the subject of litigation contesting its validity during the pendency of which litigation of entries which are subject to this agreement are enjoined, the time limits for payments in paragraph 2 will be tolled, with continued accumulation of interest ...

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