Flying J Inc., a Utah Corporation; Cfj Properties, a Utah Partnership; Ton Services, a Utah Corporation; Tfj, a Utah Partnership; Ncr; Tch, a Utah Corporation, Plaintiffs-appellees, v. Comdata Network, Inc., a Maryland Corporation, Defendant-appellant, 405 F.3d 821 (10th Cir. 2005)

This appeal is the latest episode in a lengthy antitrust suit brought by Plaintiffs Flying J, Inc., TCH, L.L.C., CFJ Properties, TON Services, Inc., and CFJ (collectively "Flying J") against Defendant Comdata Network, Inc. ("Comdata"). The underlying lawsuit, filed in 1996, arose out of Comdata's alleged monopolization of two product markets related to the U.S. truck stop industry. In May 2001, after nearly five years of discovery and pretrial motions, the parties entered into a settlement agreement. Comdata agreed to pay $49 million in damages and grant Flying J two licenses intended to open the markets at issue. Conflict soon resumed, however, when the parties could not agree about the meaning of one of the two licenses. Aggrieved by what it interpreted as Comdata's refusal to honor one of the licenses, Flying J filed a motion to enforce the settlement agreement in May 2002. The district court determined that Comdata had breached the settlement agreement and ordered Comdata to implement the license as interpreted by Flying J. Exercising jurisdiction under 28 U.S.C. § 1292(a), we REVERSE. In so doing, we emphasize that it is not our task to determine what would best remedy the underlying antitrust violation, but solely to interpret the agreement reached between the parties, in light of its plain language and the intent of the parties.

Plaintiff Flying J, Inc. owns and operates a nationwide chain of approximately 160 truck stops. Flying J estimates that there are approximately 4000 truck stops in the United States, roughly 1000 of which offer services comparable to its own truck stops. This appeal involves two markets closely related to the trucking industry: point-of-sale systems and trucker fuel cards.

Comdata provides transaction-processing services to the trucking industry. Among other things, it sells the Trendar System, a PC-based point-of-sale system that allows merchants to process customers' card transactions. When the customer's payment card is swiped through the Trendar card reader, Trendar software sends the transaction data to a third-party financial institution for authorization and settlement. Flying J presented evidence in the underlying litigation that Comdata had secured approximately 90% of the point-of-sale systems market by 2001. Virtually every major U.S. truck stop other than Flying J used the Trendar System.

Comdata also issues fuel cards to trucking companies, including a proprietary payment card ("the Comdata Card") and a Comdata MasterCard, referred to as the Comdata Fleet Card. According to Flying J, Comdata cards have dominated the trucker fuel card market for many years, securing a 70% share by 2001.

Proprietary payment cards offer two features relevant to this litigation. The first, called data capture, requires the truck driver to enter certain data at the time of the fuel purchase, typically including driver identification and odometer readings. The data is relayed in real time to the trucking company, allowing it to monitor the driver's location and activities. The second feature, called purchase control, allows trucking companies to restrict the type and quantity of items that the driver can purchase with the fuel card. A trucking company might, for example, allow its drivers to purchase motor oil and a certain amount of diesel fuel each day but prevent them from purchasing alcoholic beverages, a truck stereo, or enormous bags of pork rinds. Each trucking company can tailor purchase controls to suit its preferences. According to Flying J, data capture and purchase controls are essential to effective management of a long-haul trucking fleet, and they provide the principal incentive for trucking companies to give trucker fuel cards to their drivers rather than ordinary credit cards. Ordinary MasterCards do not have these features.

Comdata and Flying J (through its subsidiaries, TAB and TCH) issue proprietary cards with no logo other than their own, as well as MasterCards. The Flying J propriety card is called the TCH Fuel Card; its MasterCard is called the TCH Mastercard. Comdata MasterCards are called the Comdata MasterCard or Comdata Fleet Card, which mean the same thing. The Comdata and TCH MasterCards can be used either as ordinary MasterCards or as proprietary cards, depending on the arrangements reached with the particular merchant. These are called "dual function" cards.

As a condition of participating in the MasterCard network, MasterCard requires merchants to accept all MasterCards, regardless of the issuer. It is up to the particular merchant to decide whether to accept proprietary cards. In the discretion of the merchant, MasterCard regulations permit use of a "dual function" MasterCard as a proprietary card for a "proprietary account," defined as "an account ... that is separate from a MasterCard account and is maintained by a company or organization other than the MasterCard member." MasterCard Bylaws and Rules, October 2002, Rule 6.6, JA 546. The proprietary account rules require a preexisting account, established according to a separate agreement, with each merchant.

Comdata MasterCards and TCH MasterCards therefore must be accepted by all merchants in the MasterCard network. But only if the merchants have an agreement with the issuer do the merchants treat these cards as proprietary cards (meaning that they effectuate the data capture and purchase control features of these cards). If the particular merchant is part of the MasterCard network but has not made any agreement with Comdata or THC, Trendar must process the transaction through the MasterCard network as an ordinary MasterCard transaction, without the data capture or purchase control features. If the merchant has agreed to accept the issuer's proprietary card, the merchant processes the issuer's MasterCard transaction as a proprietary card transaction, meaning that the transaction will be authorized and settled over a private network as opposed to the MasterCard network.

In an ordinary MasterCard transaction, Trendar sends transaction data to the merchant's chosen third-party financial institution, known as the acquirer. The acquirer, through its own system, sends the transaction data through the MasterCard network for authorization by the card issuer's bank and settlement through the MasterCard network. When a dual function card, such as the TCH MasterCard or the Comdata Fleet Card, is processed as an ordinary MasterCard, it does not provide trucking companies with real-time data capture or purchase control because the MasterCard network does not relay data quickly enough.

When Flying J entered the trucker fuel card market in the mid-1990s, it faced two significant barriers to entry. First, the Trendar System did not accept the TCH Fuel Card. Merchants using Trendar could not process TCH Fuel Card transactions; therefore, Flying J customers could not use the TCH Fuel Card at Trendar locations. Given the ubiquity of the Trendar System, this was a big problem for Flying J.¹  Second, the record shows that Comdata engaged in a campaign to pressure truck stops not to accept the TCH Fuel Card. Prior to the 2001 settlement, Comdata placed over four hundred telephone calls to truck stops and threatened to raise transaction fees on Comdata cards if they agreed to accept the TCH Fuel Card.

In 1996, Flying J filed suit, charging Comdata with violation of the Sherman Act, 15 U.S.C. §§ 1-7, through monopolization of the trucker fuel card market and the point-of-sale systems market. The parties settled in 2001. Comdata agreed to pay $49 million in damages and grant Flying J two licenses: the Comdata License and the Trendar License. In accordance with the parties' request, the district court reserved jurisdiction to enforce the terms of the settlement agreement. See Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 114 S. Ct. 1673, 128 L. Ed. 2d 391 (1994). This appeal concerns only the Trendar License as it pertains to processing the TCH MasterCard at unaffiliated merchants; that is, merchants who have not agreed to accept the proprietary TCH Fuel Card.

The Trendar License grants to TCH a "nonexclusive license... to access and use the Trendar System solely for the Permitted Uses." Trendar License Art. 4.1 Permitted uses include "access and use of the Trendar System by TCH and its cardholder customers." Id. Art. 1. In short, the Trendar License provides TCH access to the Trendar System, and it enables TCH to effect data capture and purchase controls in transactions involving the TCH MasterCard. Pursuant to the Trendar License, Comdata and Flying J configured the Trendar System to accept the TCH Fuel Card. They also configured Trendar to process TCH MasterCards as proprietary transactions if the merchant had agreed to accept the TCH Fuel Card.

This cooperative endeavor soon reached an impasse when Comdata refused to configure Trendar to process TCH MasterCards as proprietary transactions at retail outlets where the merchants had not agreed to accept the TCH Fuel Card. The dispute centers on Article 4.2 of the Trendar License, which provides:

All TCH Card Transactions processed through the Trendar System, including without limitation TCH Cards bearing a MasterCard or Visa brand, shall be cleared directly through TCH as opposed to any third party network, such as and without limitation the MasterCard network or Visa network, to the fullest extent permitted by the policies, rules, or regulations, as amended from time to time (including their interpretations thereof) by third party network providers.

Trendar License Art. 4.2. Many Flying J competitors, such as Pilot, Petro, and Travel Centers of America, do not accept the TCH Fuel Card. Because truck stops operated by these competitors accept MasterCard, they must accept the TCH MasterCard, but they do so as an ordinary MasterCard transaction, not as a proprietary transaction. Thus, if Trendar processes the TCH MasterCard through the MasterCard network at these locations, the transaction does not provide the trucking company with data capture and purchase control. This restriction on TCH MasterCard processing hinders Flying J's ability to compete in the trucker fuel card market. Flying J argues that in order for the TCH MasterCard to be fully effective, and therefore attractive to trucking companies, all TCH MasterCard transactions must provide data capture and purchase control.

As discussed more fully below, Comdata interprets the Trendar License as requiring Comdata to configure the Trendar System to treat TCH cards the same way that it treats its own. Accordingly, Comdata was willing to route TCH MasterCard transactions directly through TCH only if TCH secured MasterCard's approval. MasterCard, in turn, refused to agree to financial settlement through private networks except where the merchant entered into a separate agreement with the issuer. Although most merchants have entered into such agreements with Comdata, many have declined to enter such agreements with TCH. According to Comdata, the reason for this discrepancy is that Flying J is a competitor and Comdata (which does not operate truck stops) is not.

In an effort to provide data capture and purchase control in all TCH MasterCard transactions, Flying J filed a motion to enforce the settlement agreement. Flying J argues that at the time of the settlement, Trendar processed the Comdata Fleet Card as a proprietary card; therefore, the Trendar License obligated Comdata to provide universal private processing for TCH MasterCard transactions, regardless of whether the merchant accepts the TCH Fuel Card.

In support of its motion to enforce, Flying J presented two models for TCH MasterCard transactions. The primary model replicated the proprietary processing method used for Comdata MasterCards, which processed the entire transaction over a private network. In the alternative, Flying J proposed a split-transaction or dual-processing model, in which TCH would authorize the transaction over a private network, providing data capture and purchase control, but financial settlement would take place on the MasterCard network. Under the dual-processing model, Trendar would send data to TCH and MasterCard in two different steps, and financial settlement would occur in the same manner as in an ordinary MasterCard transaction.

Flying J's primary model did not conform to MasterCard regulations for proprietary accounts. Joan Hennessey, MasterCard's designated corporate representative, confirmed that Flying J's primary model depicted a proprietary transaction subject to MasterCard's proprietary account rules, which required prior agreement by the merchant. Addressing the dual-processing model, Ms. Hennessey testified that it was not prohibited by MasterCard rules; rather, transmission of authorization data to TCH was "outside of the MasterCard transaction and so it would be outside of our rules." Deposition of Joan Hennessey, JA 1898.

After the Hennessey deposition, Comdata moved for summary judgment, arguing that (1) Flying J failed to secure MasterCard's approval for the primary proposal, and (2) the split-transaction model did not satisfy the requirements of the Trendar License, specifically the requirement that clearing occur "directly through TCH as opposed to ... the MasterCard network." The court continued the hearing to permit Flying J to ensure compliance with MasterCard procedures. Shortly before the evidentiary hearing resumed, MasterCard confirmed in writing that Flying J's primary model did not meet its proprietary account rules. The dual-processing model fell outside of MasterCard rules. MasterCard noted, however, that it could not require that a merchant participate in the dual-processing arrangement, nor could it require a merchant to provide transaction data to Flying J. MasterCard suggested that the merchant and its acquirer authorize its participation in the dual-processing arrangement.

Because MasterCard rejected its original proposal, Flying J relied exclusively on the dual-processing model at the evidentiary hearing.

The district court held that Comdata had breached its obligations under the Trendar License, including Article 4.2, by failing to implement Flying J's dual-processing model for TCH MasterCard transactions. Order 27, JA 109 (Comdata breached its obligations "by failing promptly to implement a method for direct processing of TCH MasterCard transactions directly through TCH that is acceptable to TCH and does not violate MasterCard rules."). The court found the dual-processing method to be consistent with Comdata's own method of processing the Comdata Fleet Card, rejecting Comdata's argument that proprietary processing of the TCH MasterCard required merchant consent. In its conclusions of law, the court held that Article 4.2's requirement that all transactions be "cleared directly through TCH" included authorization and approval in addition to financial settlement, thereby permitting dual processing. The court granted Flying J's motion to enforce the settlement agreement and ordered Comdata to implement the dual-processing method for TCH MasterCards at all Trendar locations. Comdata appeals.

We review the district court's determination of state law de novo. See Salve Regina College v. Russell, 499 U.S. 225, 238-39, 111 S. Ct. 1217, 113 L. Ed. 2d 190 (1991); Grant v. Pharmacia & Upjohn Co., 314 F.3d 488, 491 (10th Cir. 2002). We review the district court's findings of fact for clear error. "A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 394-395, 68 S. Ct. 525, 92 L. Ed. 746 (1948) (internal quotation marks omitted). "Whether the district court failed to consider or accord proper weight or significance to relevant evidence are questions of law we review de novo." Harvey ex rel. Blankenbaker v. United Transport Union, 878 F.2d 1235, 1244 (10th Cir. 1989) (citing Pullman-Standard v. Swint, 456 U.S. 273, 291, 292, 102 S. Ct. 1781, 72 L. Ed. 2d 66 (1982)).

As a preliminary matter, Comdata complains that the district court adopted Flying J's proposed findings of fact and conclusions of law almost verbatim. Regrettably, this appears to be the case.²  The Supreme Court has criticized the verbatim adoption of findings of fact, "particularly when those findings have taken the form of conclusory statements unsupported by citation to the record." Anderson v. City of Bessemer City, 470 U.S. 564, 572, 105 S. Ct. 1504, 84 L. Ed. 2d 518 (1985). The court's wholesale adoption of one party's proposed findings of fact and conclusions of law provides little aid on appellate review, see Everaard v. Hartford Accident & Indem. Co., 842 F.2d 1186, 1193 (10th Cir. 1986), particularly in the likely event that the adopted submission takes an adversarial stance.³ 

The district court's adoption of a party's proposed findings does not change the standard of review, however. Though not made by the district judge himself, the findings "are formally his; they are not to be rejected out-of-hand, and they will stand if supported by evidence." United States v. El Paso Nat. Gas Co., 376 U.S. 651, 656, 84 S. Ct. 1044, 12 L. Ed. 2d 12 (1964) (citing United States v. Crescent Amusement Co., 323 U.S. 173, 184-85, 65 S. Ct. 254, 89 L. Ed. 160 (1944)); see also Sanpete Water Conservancy Dist. v. Carbon Water Conservancy Dist., 226 F.3d 1170, 1177 n. 7 (10th Cir. 2000) (" [E]ven if we believed the district court improperly adopted [the] proposed findings without reasoned consideration, we would still review the district court's decision under the clearly erroneous standard."). We therefore review the court's findings of fact for clear error.

For its part, Flying J suggests that the district court's familiarity with this case entitles its order to greater deference on appeal. See, e.g., Stone v. City and County of San Francisco, 968 F.2d 850, 856 (9th Cir. 1992); Ferrell v. Pierce, 743 F.2d 454, 461 (7th Cir. 1984). We reject this suggestion as well. It is true that the district court hosted this litigation for almost five years, and we have no doubt that it became excruciatingly well-acquainted with the long-distance trucking industry and the details of Flying J's antitrust claim. The record shows, however, that the question central to this appeal — whether Article 4.2 was intended to authorize a dual-processing model for TCH MasterCard transactions — did not arise until shortly before the evidentiary hearing, well after the parties settled their claims in the underlying suit. Even assuming that the district court's familiarity could increase the already substantial deference owed to findings of fact under the clear error standard, the rationale for such deference would not apply to the issue before us.

This case requires us to reconcile two competing interpretations of the mandate that all TCH Card transactions "shall be cleared directly through TCH as opposed to any third party network... to the fullest extent permitted by ... third party network providers." Trendar License Article 4.2. Comdata contends that the district court erred by failing to determine whether the contract was ambiguous, by refusing to give the term "cleared" its prevailing meaning in the financial industry, and by disregarding Comdata's evidence of intent. Comdata claims further that the district court's ultimate interpretation of the contract was clearly erroneous. Flying J responds that Comdata's interpretation of the contract is unreasonable and, in the alternative, that the court's factual findings are supported by the evidence. We hold that the court interpreted the term "cleared" under an incorrect legal standard, that differences in meaning of the term render Article 4.2 ambiguous, that accordingly the court should have considered Comdata's proffered evidence, and that in light of that evidence the court's factual findings regarding the meaning and intent of the contract are clearly erroneous.

We begin with an argument about whether the district court found the contract ambiguous. Comdata contends that the district court failed to make this threshold determination. Flying J responds that the court explicitly found Comdata's interpretation of the contract unreasonable, and that it follows that, if one of the two possible interpretations is unreasonable, Article 4.2 is not ambiguous. Fortunately, de novo review provides a narrow escape from this tangle of compound ambiguity. Because Flying J and Comdata each advance plausible interpretations of Article 4.2, we find the disputed language to be ambiguous.

The general rules of contract interpretation under state law apply to settlement agreements. See Sackler v. Savin, 897 P.2d 1217, 1220 (Utah 1995).⁴  When a court interprets a contract, it must make a threshold determination whether the contract is ambiguous. See Peterson v. Sunrider Corp., 48 P.3d 918, 925 (Utah 2002). A contract is ambiguous if it supports more than one reasonable interpretation. Id; see also Nielsen v. Gold's Gym, 78 P.3d 600, 601 (Utah 2003). Utah law is unsettled on the issue whether the court may go beyond the four corners of the contract to determine whether the contract is ambiguous. Compare WebBank v. Am. Gen. Annuity Serv. Corp., 54 P.3d 1139, 1145 (Utah 2002) ("If the language within the four corners of the contract is unambiguous, the parties' intentions are determined from the plain meaning of the contractual language, and the contract may be interpreted as a matter of law."), and Central Fla. Investments, Inc. v. Parkwest Associates, 40 P.3d 599, 605 (Utah 2002) ("We first look to the four corners of the agreement to determine the intentions of the parties."), with Nielsen, 78 P.3d at 601 (in determining ambiguity, the court may consider " [r]elevant, extrinsic evidence of the facts known to the parties at the time they entered the [contract])" (brackets in original) (quoting Yeargin, Inc. v. Auditing Div. of Utah State Tax Comm'n, 20 P.3d 287 (Utah 2001)), Peterson, 48 P.3d at 918 ("In determining whether a contract is ambiguous the court is not bound to consider only the language of the contract."), and Ward v. Intermountain Farmers' Ass'n, 907 P.2d 264, 268 (Utah 1995) ("When determining whether a contract is ambiguous, any relevant evidence must be considered."). Because both parties follow the expansive view, we assume that the court may look beyond the four corners of the contract to determine ambiguity.

Ambiguity is a question of law. Id. If the contract is ambiguous, the court can admit extrinsic evidence of intent to clarify the meaning of ambiguous terms. Id. If the court determines the contract to be ambiguous and admits extrinsic evidence, the court's interpretation of a disputed term is a finding of fact reviewed for clear error. Nielsen, 78 P.3d at 601 (citing Kimball v. Campbell, 699 P.2d 714, 716 (Utah 1985)).

Flying J contends that consideration of extrinsic evidence transforms the threshold determination of ambiguity into a finding of fact. That is not an accurate statement of Utah contract law. The cases cited by Flying J involve the admission of extrinsic evidence to determine the meaning of ambiguous terms, a question of fact. See Valley Improvement Ass'n, Inc. v. United States Fidelity & Guaranty Corp., 129 F.3d 1108, 1115 (10th Cir. 1997); Cavic v. Pioneer Astro Indus., Inc., 825 F.2d 1421, 1424 (10th Cir. 1987) (" [W]hen the trial court resorts to extrinsic testimony to ascertain the meaning of the contractual terms, the interpretation is factual."). In its threshold determination of ambiguity, however, the court decides whether there is anything for the trier of fact to find. Even if the court refers to extrinsic evidence to make that determination, contractual ambiguity presents a question of law that we review de novo. See Peterson, 48 P.3d at 925. We now explain our conclusion that Article 4.2 is ambiguous.

Comdata maintains that the language of Article 4.2 does not permit dual or split transactions through Trendar, but requires that financial settlement, authorization, and approval occur over the same network. It argues that the technical meaning of the term "cleared" for purposes of financial transactions, and in particular as reflected in MasterCard glossary, refers exclusively to financial settlement. The MasterCard glossary defines "clearing" as " [t]he process of exchanging financial transaction details between an acquirer and an issuer to facilitate posting of a cardholder's account and reconciliation of a customer's settlement position." MasterCard, Bankcard Glossary, JA 1151. Relying on this definition, Comdata argues that split transactions violate the requirement that all transactions be cleared directly through TCH as opposed to a third-party network. Comdata thus interprets "to the extent permitted" to mean in as many transactions as permitted by the third-party network provider.

Flying J urges reliance on a more general definition of "clear" found in the Merriam-Webster online dictionary: "5a: to submit for approval < clear it with me first> b: AUTHORIZE, APPROVE < cleared the article for publication>: as (1): to certify as trustworthy < clear a person for classified information> (2): to permit (an aircraft) to proceed usually with a specified action." Merriam-Webster Online Dictionary, at http://www.m-w.com/cgi-bin/dictionary, cited in Order 22, JA104 ("These meanings include the functions of authorizing and approving, in addition to financial settlement."). If clearing is defined in this way, Trendar can transfer authorization and approval data "directly through TCH," while financial settlement takes place in the MasterCard network. Thus, even if a merchant has not agreed to accept the TCH Card, Trendar could send authorization and approval data through a private network, thereby permitting data capture and purchase control on all TCH MasterCard transactions. Thus, Flying J reads "to the extent permitted" to mean as much of the transaction as permitted by MasterCard.