By Tyler Baker and Sean Cornely
In Ashwood Capital, Inc. v. OTG Management, Inc., No. 652087/10 (N.Y. App. Div. 1st Dep’t Jul. 10, 2012), the New York Appellate Division’s First Department unanimously affirmed the dismissal by the Supreme Court Commercial Division (Ramos, J.) of a claim for breach of contract, which refused to permit a party to infuse ambiguity into a commercial contract where the plain terms of the agreement were clear. The First Department reasoned that where the contract at issue, which governed concession payments at New York’s JFK Airport, unambiguously read “Terminal 6,” the contract could not be read to also cover Terminal 5 at the airport, irrespective of what either party understood that term to mean during the drafting process.
The case arose from a 2003 agreement between Ashwood Capital, Inc. (“Ashwood”) and OTG Management, Inc. (“OTG”), through which Ashwood agreed to transfer to OTG its concessionaire rights surrounding JetBlue Airways at JFK Airport. Ashwood had previously negotiated with JetBlue for such rights and subsequently opened three restaurants in Terminal 6 of the airport, the terminal out of which JetBlue operated. Ashwood then sought a manager (OTG) for the concessions on a day-to-day basis, and assigned to OTG its concessionaire rights in exchange for 1.5% of all gross sales each month from OTG’s concession “at Kennedy Airport, (Terminal 6).”
In September 2008, Terminal 6 closed and JetBlue began operating out of Terminal 5. Thereafter, OTG discontinued payment to Ashwood under the parties’ agreement and began its own operation of the concessions at Terminal 5. Unbeknownst to Ashwood, OTG had previously contracted with JetBlue to be the sole food concessionaire at the new terminal. In November 2010 Ashwood brought suit against OTG alleging breach of contract, breach of guaranty, and unjust enrichment. Ashwood contended that although the contract used the words “Terminal 6,” the parties meant to create a long-term relationship, awarding Ashwood an equity interest in OTG and rights to the concessions sales at Terminal 5.
The First Department disagreed with Ashwood, and found the agreement as written did not confer rights to Terminal 5. In affirming the dismissal of the breach of contract claim, the court stated that “according to well-established rules of contract interpretation, when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms.” The court noted that this rule is applied “with even greater force in commercial contracts negotiated at arm’s length by sophisticated, counseled businesspeople.” Further, the court instructed that any implied meaning advocated by a party should not be read into a document which neglects to include the nuanced connotation. The court reiterated that whether a contract is ambiguous is “[a] matter of law, [with the court] looking solely to the plain language used by the parties within the four corners of the contract to discern its meaning and not to extrinsic sources.” Concluding that there was no alternative meaning for the phrase “Terminal 6,” the court found no ambiguity in either the term itself or when read in the context of the agreement as a whole.
Further, the court noted that the term “Terminal 6” was repeated “a total of five times [in the contract] and consistently refer[red] to JetBlue’s facilities at JFK.” Additionally, Ashwood —a company whose chairman and sole stockholder was an investment banker with more than 40 years’ experience, some of which spent advising JetBlue directly—drafted the agreement. Moreover, the court explained that the agreement contained a “no-oral-modification clause and a broad merger clause.” Thus, even if there were in fact some additional oral understanding between the parties, “Ashwood could not rely on that understanding, as it was not included in the mutually executed written document.”
The court further found that there was nothing in the agreement mentioning or implying that the parties intended to grant Ashwood an equity stake in OTG, and thus there was no basis to find an implicit long-term contractual relationship between the parties.
However, the First Department unanimously modified the Commercial Division’s decision to dismiss Ashwood’s unjust enrichment claim in its entirety. Ashwood was seeking compensation for alleged consulting services that Ashwood provided to OTG and JetBlue. The court determined that these services fell outside the scope of the parties’ agreement, and thus were not barred by the legal claims on the contract. Further, the court found that New York’s statute of frauds did not apply to the unjust enrichment claim—because Ashwood allegedly provided advice to OTG regarding financing, its CFOs, and raising the quality of its concessions, and did not purely act as an intermediary between OTG and JetBlue, the statute of frauds was not applicable to bar the claim.