between the two phases of the venture.
Wharton's argument essentially is that "when required" should be read as the equivalent of "when requested by Wharton." However, the Agreement indicates that the parties knew how to use the word "requested" when they intended to leave a particular decision to Wharton's discretion. Section 3.1 refers to "support services as requested by Wharton"; the parties could have included similar language in Section 3.3(i) as well, if that had been their intention. On balance, JPC's interpretation of the contract is both logical and supported by the overall structure of the Agreement, while Wharton's interpretation possesses neither quality. Since there is only one reasonable interpretation of the contract, the terms must be considered unambiguous and summary judgment is appropriate. See, e.g., Bear Brand Hosiery Company v. Tights, Inc., 605 F.2d 723, 726 (4th Cir. 1979).
C. Extrinsic Evidence Of The Parties' Intent
Summary judgment would be appropriate even if the Court were to conclude that the agreement's language was sufficiently ambiguous to make both JPC's and Wharton's interpretation reasonable. Where ambiguity exists, the Court may reach beyond the text of a contract to examine extrinsic evidence, including evidence of the circumstances surrounding the contract's execution. Department of Transportation v. Bracken Construction Company, 72 Pa. Commw. 620, 457 A.2d 995, 998-99 (1983). When extrinsic evidence demonstrates that only one possible interpretation is reasonable, the Court may grant summary judgment. Hewes v. McWilliams, 412 Pa. 270, 194 A.2d 339, 342 (1963); see also Over The Road Drivers, Inc. v. Transport Insurance Company, 637 F.2d 816, 818-19 (1st Cir. 1980).
JPC has provided several declarations to support its claim that the contracting parties intended to obligate Wharton to pay the annual support fee regardless of whether Wharton actually requested such services during a particular year. Joel Popkin, JPC's president and chief negotiator of the Agreement, states that he originally requested one-third of the Models' profits in exchange for his ongoing support service. Wharton rejected this proposal, offering instead a five percent interest in the profits, coupled with "an annual support fee of $ 45,000 'for the life of the contract'" with adjustment to the annual fee to reflect inflation.
While the self-serving statements of a party ordinarily would add little force to the motion, JPC goes a step further by providing corroborative declarations from individuals involved in the negotiations on behalf of Wharton. Charles B. Warden, Jr., the Chief Executive Officer of one of Wharton's sister companies at the time the Agreement was negotiated, attended several negotiation sessions. Warden confirms Popkin's description, and claims that such "guaranteed" consulting contracts were often executed on behalf of Wharton's parent company at that time, Ziff-Davis Publishing Company. Additionally, Lee R. Morris, Wharton's president at the time the Agreement was negotiated and executed, States that when he first learned of the terms of the Agreement, he questioned the fiscal responsibility of making such a large financial commitment in connection with a product that had yet to be developed. Morris was informed that such an arrangement was necessary to ensure the continuous availability of Popkin's services. He confirms Warden's statement that such agreements were not unusual at that time, and states that while president of Wharton, he considered the annual support fee to be an obligation that could be avoided only by terminating the Agreement.
Taken as a whole, JPC's declarations provide authoritative and credible support from both sides of the negotiating table for its position. Unrefuted, they are sufficient to resolve any factual dispute over the parties' intent. Wharton, rather than presenting extrinsic evidence to refute JPC's declarations, clings to the faulty premise that this Court may not rely on unopposed affidavits to resolve factual disputes at the summary judgment stage. See Defendants' Reply at 10 ("extrinsic evidence that may provide insight into the intent of the parties should be considered only in the context of a complete inquiry at trial"). While the Court might be inclined to accept such a proposition if faced with conflicting affidavits, that is not the case here.
Wharton's responsibility to controvert JPC's declarations is found in Fed. R. Civ. P. 56(e), which provides in relevant part:
When a motion for summary judgment is made and supported [by affidavits] as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.
This language was added in 1963 to address just the type of situation presented here. See Notes of Advisory Committee on Rules, 1963 Amendment to Fed. R. Civ. P. 56 ("The very mission of the summary judgment procedure is to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial."); see also Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2554, 91 L. Ed. 2d 265 (1986). Although Wharton has produced affidavits in support of its cross-motion for summary judgment, none address the material factual issue of the contracting parties' intent. Wharton thus has failed to identify any evidence that would justify ultimate submission of the issue to the finder of fact. Accordingly, summary judgment is appropriate, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2510-12, 91 L. Ed. 2d 202 (D.D.C. 1978).
Having held that, as a matter of law, Wharton was obligated to pay JPC for support services, the Court addresses the issue of damages. Wharton breached the Agreement when it failed to pay JPC for the fourth quarter of the 1983-84 year, and continues to breach the Agreement by refusing to pay JPC for subsequent quarters, as they occur. Moreover, Wharton Anticipatorily breached the Agreement in July of 1984, when Wharton's president informed JPC that Wharton no longer intended to pay JPC the annual fee. See Wolgin v. Atlas United Financial Corp., 397 F. Supp. 1003, 1014 (E.D. Pa. 1975), aff'd mem., 530 F.2d 966 (3d Cir. 1976) (applying the Pennsylvania rule on anticipatory breach). Under Pennsylvania law, an employer who anticipatorily breaches an employment contract by announcing his intention to cease payments is liable "for the stipulated salary for the balance of the employment term." Id. The Court sees no principled difference between an employment contract and the consulting contract at issue here, nor does Wharton suggest one. Accordingly, JPC is entitled to the support payments due from August 1, 1984, to the expiration of the Agreement on May 7, 1991.
Although summary judgment is appropriate on the issue of liability, the Court cannot grant summary judgment with respect to the amount of damages because of uncertainties as to the proper total due under the Agreement. First, Section 3.3(i) mandates an adjustment in the yearly fee based on the effects of inflation during the preceding twelve months. Plaintiff presents no method by which the Court can calculate the future values of the support fee, and therefore a material issue of fact remains in genuine dispute. Second, although the Agreement was to expire on May 7, 1991, the last full 12-month support period will end on October 31, 1990. The Agreement provides no guidance as to how the remaining seven months of the contract life should be treated under Section 3.3(i), thus creating another material factual issue to be resolved. Contrary to JPC's assertion that calculation of damages is merely "a simple mathematical calculation," there are factual issues precluding summary judgment as to the amount of liability.
II. Request For Rule 54(b) Certification
In light of the factual issues that remain with regard to the amount of damages due for breach of the Agreement, entry of a final judgment on behalf of JPC pursuant to Fed. R. Civ. P. 54(b) would be inappropriate.
III. Wharton's Cross-Motion For Summary Judgment
The Court's resolution of JPC's motion for summary judgment requires denial of Wharton's cross-motion for summary judgment on the breach of contract and conversion claims because Wharton's position with respect to both is that no breach of the Agreement ever occurred. However, JPC's "best efforts" claim rests on an entirely distinct legal and factual basis, and therefore warrants independent consideration.
Section 5 of the Agreement defines Wharton's rights and obligations incident to the marketing of the Models:
Subject to the rights of JPC specifically set forth in this agreement, Wharton shall have all ownership rights in the Models and shall have full discretion in the marketing and management of the Models including, without limitation, the sole right to determine the scope of services offered, discontinuation or commencement of any services, configuration, pricing, consultation, support, staff, salaries and other similar marketing management policies and decisions except that Wharton shall not discontinue offering any services based upon the Models prior to December 31, 1983, and while Wharton continues to offer services based upon the Models during the term of this agreement, Wharton shall use its best efforts, commensurate with the reasonable potential market for those services and the resources reasonably available to Wharton for those efforts, to diligently market those services.
JPC alleges that Wharton breached its duty under Section 5 by unnecessarily restricting its marketing efforts and expenditures, by employing incompetent marketing personnel, and by failing to make personal computer applications of the Models available in a timely manner. JPC's sole support for its allegations comes from Joel Popkin.
In support of its motion for summary judgment, Wharton provides the affidavits of Bruce R. Lippke, present president of Wharton, and Nariman Behravesh, manager of Wharton's U.S. operations division. Lippke relates that Wharton expended "substantial financial resources" and devoted "numerous marketing personnel" to marketing the Models, and describes several efforts that Wharton made in conjunction with Joel Popkin in an effort to make the Models profitable. Behravesh goes even further, stating that the services built around the Models have "been the object of greater marketing efforts than those used to promote Wharton's other U.S. services."
The standard to be applied here is analogous to the standard applied by the Court on a motion for a directed verdict. Anderson v. Liberty lobby, Inc., supra, 106 S. Ct. at 2511. Thus, the Court must determine if the parties' evidence, if introduced at trial, would justify submission of the issue to a jury. Id. at 2512. In light of the substantial discretion granted to Wharton under Section 5, the Court concludes that JPC has failed to demonstrate any likelihood that it can meet its burden of proof at trial. In essence, JPC has done nothing more than allege that Wharton made a number of bad business decisions, yet these are just the sort of decisions delegated by Section 5 to Wharton's judgment. The fact that Wharton stood to lose 95 percent of the potential profits, compared to JPC's five percent, negates any unsupported inference of intentional mismanagement. In short, JPC chose to bargain away its right to "second guess" Wharton's business judgment, and Wharton's motion for summary judgment is granted on the "best efforts" issue.
The Court concludes that plaintiff's motion for summary judgment should be granted in part and denied in part. There are no genuine issues of material fact with respect to Wharton's liability for breach of the Agreement and therefore summary judgment is granted on the issue of liability under Count One of the complaint. However, factual issues remain with respect to the amount of damages due under the Agreement, and therefore summary judgment is denied on the issue of damages. Because of the remaining factual issues involving damages, entry of final judgment under Fed. R. Civ. P. 54(b) is inappropriate. Moreover, the court concludes that factual disputes preclude the granting of defendants' motion for summary judgment on Count Two of the complaint, but not on Count Four. Thus, Count Two and the issue of damages under Count One remain for trial. An appropriate Order accompanies this Memorandum Opinion.
This case now is before the Court on plaintiff's motion for partial summary judgment pursuant to Fed. R. Civ. P. 56 and for an entry of final judgment as to Count One of the complaint pursuant to Fed. R. Civ. P. 54(b), and on defendants' cross-motion for summary judgment. Upon careful consideration of the pleadings and exhibits and the entire record, for the reasons set forth in the accompanying Memorandum Opinion it hereby is
ORDERED, that plaintiff's motion for partial summary judgment is granted with respect to defendants' liability under Count One of the complaint, and denied with respect to the amount of damages recoverable under Count One of the complaint. It hereby further is
ORDERED, that plaintiff's motion for entry of final judgment on Count One of the complaint is denied. It hereby further is
ORDERED, that defendants' cross-motion for summary judgment is granted with respect to Count Four of the complaint, and denied with respect to Counts One and Two of the complaint. It hereby further is
ORDERED, that Count Four of the complaint is dismissed with prejudice.