Gregory S. Dalton v. Cellular South, Inc.
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IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2007-CA-00750-COA
GREGORY S. DALTON, INDIVIDUALLY AND
D/B/A LOUISVILLE ELECTRONICS
APPELLANT
v.
CELLULAR SOUTH, INC.
DATE OF JUDGMENT:
TRIAL JUDGE:
COURT FROM WHICH APPEALED:
ATTORNEYS FOR APPELLANT:
ATTORNEYS FOR APPELLEE:
NATURE OF THE CASE:
TRIAL COURT DISPOSITION:
DISPOSITION:
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
APPELLEE
04/05/2007
HON. JOSEPH H. LOPER, JR.
WINSTON COUNTY CIRCUIT COURT
WILLIAM LISTON
DEWITT T. HICKS
JOHN M. MONTGOMERY
SARA E. WOODRELL
CHARLES L. MCBRIDE
ANNE C. SANDERS
KATIE L. WALLACE
CIVIL - CONTRACT
SUMMARY JUDGMENT AND
DECLARATORY JUDGMENT ENTERED IN
FAVOR OF CELLULAR SOUTH
AFFIRMED - 09/16/2008
EN BANC.
ROBERTS, J., FOR THE COURT:
¶1.
Cellular South, Inc., sued Gregory S. Dalton and sought a declaratory judgment. Cellular
South claimed it properly terminated its agency relationship with Dalton. After discovery, both
parties filed motions for summary judgment. The Winston County Circuit Court found that the
agreement between Dalton and Cellular South was unambiguous and granted summary judgment
on behalf of Cellular South. Aggrieved, Dalton appeals and claims the circuit court erred when it
granted Cellular South’s motion for summary judgment. Dalton also claims the circuit court erred
when it denied his motion for partial summary judgment. Finding no error, we affirm the judgment
of the circuit court.
FACTS
¶2.
Dalton owned a Radio Shack in Louisville, Mississippi. In April 1992, Dalton entered into
an agreement with Cellular South to work as an agent selling cellular telephone service. Cellular
South drafted the initial agreement, which was replaced in March 1993. It is unclear whether Dalton
had any input as to the terms of either agreement. Dalton’s agency relationship with Cellular South
lasted for thirteen years. During that time, Dalton procured over six thousand customers for Cellular
South.
In return, Dalton received substantial commissions for his sales of Cellular South
subscriptions.
¶3.
In December 2003, Terrell Knight, then director of sales for Cellular South, sent Dalton a
letter informing him that his agreement with Cellular South was being terminated effective February
6, 2004, as a result of “a reorganization of Cellular South’s retail distribution plan . . . .” Cellular
South also sent Dalton a full and final release. Dalton refused to sign the full and final release.
¶4.
Cellular South filed suit against Dalton, requesting a declaratory judgment to the effect that
it had not acted contrary to the terms of the agency agreement. As mentioned, both parties filed
motions for summary judgment. The circuit court ultimately granted Cellular South’s motion for
summary judgment. Additionally, the circuit court denied Dalton’s motion for partial summary
judgment. Additional facts will be discussed as necessary.
ANALYSIS
WHETHER THE CIRCUIT COURT ERRED WHEN IT GRANTED CELLULAR
SOUTH’S MOTION FOR SUMMARY JUDGMENT.
¶5.
Summary judgment is properly granted when “there is no genuine issue as to any material
2
fact and . . . the moving party is entitled to a judgment as a matter of law.” Glover ex rel. Glover
v. Jackson State Univ., 968 So. 2d 1267, 1274 (¶18) (Miss. 2007) (quoting M.R.C.P. 56(c)). As
explained by the Mississippi Supreme Court, “the court must grant summary judgment unless – as
to each material issue of disputed fact raised by the moving party – the record demonstrates at least
the minimum quantum of evidence sufficient to justify a determination in favor of the non-moving
party by a reasonable juror.” Id. at 1274 (¶19). We will view all of the evidence “in the light most
favorable to the party against whom the motion has been made . . . .” Thomas v. The Columbia
Group, LLC, 969 So. 2d 849, 852 (¶10) (Miss. 2007).
¶6.
At the outset, we quote at length from the relevant portions of the contract between Dalton
and Cellular South:
3.1 Term:
The term of the Agreement shall be one year, commencing on the
date specified in Exhibit D of this Agreement, unless otherwise
terminated or renewed pursuant to the provisions hereinafter
provided. Cellular Holding1 is cognizant of the increasing value of
the Agency relationship to a successful AGENT and therefore will
terminate a successful Agency relationship only if Cellular Holding
determines that the continuation of the Agency relationship would be
detrimental to the overall well[-]being, reputation and goodwill of
Cellular Holding.
....
3.4 Default:
In the event AGENT fails to perform any of its obligations under this
Agreement and such failure continues unremedied for a period of
thirty (30) days after written notice is given by Cellular Holding to
AGENT, then Cellular Holding may thereupon elect to cancel and
terminate this Agreement, which termination shall be effective
immediately upon the expiration of said thirty-day period.
3.5 Termination:
Either party may terminate this Agreement by giving the other party
written notice of its desire to terminate at least thirty (30) days prior
to the intended date of termination.
[The section goes on to list specific instances under which Dalton’s
1
The agreement refers to Cellular South as Cellular Holding.
3
conduct could result in termination by Cellular South.]
....
4.6 Sales Activity:
AGENT shall act as a sales AGENT appointed by Cellular Holding
for Cellular Holding’s Cellular Telephone Service. AGENT shall
provide appropriate sales facilities and use its best efforts to enhance
the sale of Cellular Holding service and to solicit customers using
administrative procedures established from time to time by Cellular
Holding;
....
(Emphasis added).
¶7.
Dalton claims that the court erred by failing to follow the proper rules of contract
construction. Specifically, Dalton complains that the court “erred in its negotiation of the threetiered approach by determining that the Agreement was unambiguous based on matters outside the
four corners of the instrument, namely, the self-serving Affidavit of Hu Meena . . . .”
¶8.
Mississippi uses “a three-tiered approach to contract interpretation.” One South, Inc. v.
Hollowell, 963 So. 2d 1156, 1162 (¶10) (Miss. 2007) (quoting Facilities, Inc. v. Rogers-Usry
Chevrolet, Inc., 908 So. 2d 107, 111 (¶7) (Miss. 2005)). As explained by the Mississippi Supreme
Court:
First, the “four[-]corners” test is applied, wherein the reviewing court looks to the
language that the parties used in expressing their agreement. . . . We must look to
the “four corners” of the contract whenever possible to determine how to interpret
it. McKee v. McKee, 568 So. 2d 262, 266 (Miss. 1990). When construing a contract,
we will read the contract as a whole, so as to give effect to all of its clauses. Brown
v. Hartford Ins. Co., 606 So. 2d 122, 126 (Miss. 1992). Our concern is not nearly so
much with what the parties may have intended, but with what they said, since the
words employed are by far the best resource for ascertaining the intent and assigning
meaning with fairness and accuracy. . . . On the other hand, if the contract is unclear
or ambiguous, the court should attempt to “harmonize the provisions in accord with
the parties’ apparent intent.” Pursue Energy Corp. [v. Perkins], 558 So. 2d [349,]
352 [(Miss. 1990)]. Only if the contract is unclear or ambiguous can a court go
beyond the text to determine the parties’ true intent. Id.
Id. (quoting Facilities Inc., 908 So. 2d at 111 (¶7) (emphasis in original)). If the four corners of the
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contract fail to yield a clear understanding, the court then looks at the canons of contract
construction and parol evidence if necessary. Id. at 1162-63 (¶10) (quoting Facilities Inc., 908 So.
2d at 111 (¶7)).
¶9.
Our review of the circuit court’s opinion reveals that Dalton is mistaken as to how the court
interpreted the agency agreement. The court did not refer to Meena’s affidavit in determining
whether the contract was ambiguous. Rather, the court determined as follows:
After reading the Agreement and giving effect to all of its clauses this court is
satisfied that it is unambiguous and that there is only one reasonable interpretation
of the terms for terminating the contract. It is clear to this court that it need not go
any further than the first tier of contract interpretation . . . . The termination terms
in the Agreement are unambiguous when read as a whole.
The first sentence of section 3.5 establishes the only way that Dalton may terminate
the Agreement. He may terminate the Agreement for any reason as long as he gives
thirty (30) days written notice of his intent to terminate.
Cellular South may terminate the Agreement by giving thirty (30) days written notice
pursuant to the first sentence in section 3.5, but its reasons for termination are limited
by the second sentence in section 3.1. It may terminate the Agreement only if it
determines that a continuation of the agency relationship will be detrimental to the
overall well[-]being, reputation and goodwill of Cellular South.
....
Dalton has the freedom to terminate the agreement for any reason, or for no reason
at all, as long as he gives thirty (30) days written notice to Cellular South. However,
Cellular South’s right to terminate is limited by the standard in section 3.1. Only if
it determines that a continuation of the Agreement would be detrimental to its overall
well-being, reputation and goodwill could it terminate the Agreement. However, just
as Dalton has the right to terminate the Agreement for the reason of his choosing,
Cellular South pursuant to section 3.1 has made itself the sole arbiter of what would
be detrimental to its overall well-being, reputation and goodwill. There is nothing
in the second sentence of section 3.1 that limits Cellular South’s right to terminate
the Agreement only in the event that Dalton does something that is detrimental to the
overall well-being, reputation and goodwill of the company. “Overall” means
company wide, not just the seven counties where Dalton was serving as an agent.
Here, Cellular South for the reasons stated in the affidavit of Hu Meena, decided that
a continuation of the agency agreement with Dalton, or with any other agent, would
be detrimental to the overall well-being, reputation and goodwill of the company.
5
Although Dalton contends that a jury must make the determination as to whether the
continuation of the agency agreement with him would be detrimental to the overall
well-being, reputation and goodwill of Cellular South, it is clear from the terms of
the Agreement that Cellular South had the right to make that determination. Because
the terms of the Agreement are clear and unambiguous, this court cannot second
guess the corporate decision of Cellular South to terminate the relationship with
Dalton.
It is clear from the circuit court’s opinion that the court did not find the contract ambiguous and did
not go beyond the first tier of contract construction in resolving the dispute. We agree with the
circuit court’s conclusion that the contract was not ambiguous.
¶10.
The agreement stated that its term would be for only one year, “unless otherwise terminated
or renewed pursuant to the provisions hereinafter provided.” The agreement went on to state that
Cellular South would “terminate a successful Agency relationship only if Cellular Holding
determine[d] that the continuation of the Agency relationship would be detrimental to the overall
well[-]being, reputation and goodwill of Cellular Holding.”
¶11.
Cellular South’s stated reasons for finding it detrimental to continue its agency relationship
with Dalton were as follows:
[1] the administrative burdens that [Cellular South] had experienced in managing
independent agents throughout the service area . . . includ[ing] assigning a dedicated
management employee to oversee the agents, keeping up with commissions earned
by the agents . . . and insuring that agents were marketing Cellular South’s service
in a manner consistent with Cellular South’s corporate marketing strategy.
[2] [providing] uniformity of the customers’ experiences in dealing with Cellular
South, regardless of whether they contact Cellular South by visiting its stores, calling
on the telephone or using the Cellular South website.[2]
[3] [the impracticality of maintaining] some agents while terminating others, since
the administrative burden of maintaining a few agents would have been very similar
to the burden of maintaining them all.
2
According to the affidavit of Meena, president of Cellular South, uniformly consistent
customer service was “critical to Cellular South’s ability to maintain and grow its customer base,”
and Cellular South was “better able to maintain its overall customer service standards without the
use of independent agents.”
6
It is essential to note what is not in the agreement. No provision in the agreement requires that
Cellular South announce or discuss its reasoning for finding it detrimental to continue an agency
relationship. There is no provision that requires an agent to agree with Cellular South’s reasoning
or find it satisfactory. Additionally, the agreement does not require that a detached third party agree
with Cellular South’s determination of detriment. The agreement only requires that Cellular South
determine that a continued agency relationship would be to its detriment. Cellular South did not
abdicate its responsibility to decide what is in its own best interest. To the contrary, the agreement
explicitly preserved that right.
¶12.
The agreement contemplates that Cellular South can terminate the agreement if termination
is in Cellular South’s “overall well[-]being.” If termination of Dalton’s agency agreement helps
Cellular South achieve maximum profitability, that certainly flows from Cellular South’s “overall
well[-]being.” After all, Cellular South is a “for profit” corporate entity. To hold that Cellular South
cannot terminate the agency relationship under these circumstances requires an implied modification
of the agreement, and we “do not have the power to . . . modify, add to, or subtract from the terms
of [an agreement].” Citizens Nat'l Bank v. L.L. Glascock, Inc., 243 So. 2d 67, 70 (Miss. 1971).
Mississippi law requires that we “accept the plain meaning of a contract as the intent of the parties
where no ambiguity exists.” Ferrara v. Walters, 919 So. 2d 876, 882 (¶13) (Miss. 2005).
“[C]ontracts are solemn obligations and this Court is obligated to [give] them effect as written.” Id.
(quoting IP Timberlands Operating Co. v. Denmiss Corp., 726 So. 2d 96, 108 (¶50) (Miss. 1998)).
¶13.
There is no genuine issue of material fact that would require resolution by a fact-finder.
From a logistical standpoint, any such resolution would reach the same conclusion. A fact-finder
could only resolve a remanded question in one of two ways: (a) Cellular South terminated the
agreement to avoid paying commissions to Dalton, or (b) Cellular South did not terminate the
7
agreement to avoid paying commissions to Dalton. If a fact-finder reaches the first result, it cannot
be said that maximization of profits would fail to affect Cellular South’s “overall well[-]being.” If
Cellular South would lose money by continuing its agency relationships, it would be detrimental to
Cellular South’s “overall well[-]being” to continue them. Profitability is a component of Cellular
South’s “overall well[-]being.” That is, it is in Cellular South’s best interest to retain money that
it would otherwise pay to independent agents if in so doing Cellular South maximizes its
profitability and achieves uniform customer service at terms it can control.
¶14.
Moreover, if a fact-finder reached the second possible result, then the question becomes moot
based on Cellular South’s other stated reasons for finding the continued agency relationship
detrimental. Under either possible conclusion, the result is the same – Cellular South acted within
its contractual rights to terminate the agency relationship with Dalton. Thus, one could argue that
the agreement had no real “teeth,” and it was a bad bargain on Dalton’s behalf. That may very well
be true, but “experience shows that people often imprudently make contracts . . . yet every person
must presume to know the law, and in the absence of some misrepresentation or illegal concealment
of facts, the person must abide by the consequences of his contracts and actions.” Royer Homes of
Miss., Inc. v. Chandeleur Homes, Inc., 857 So. 2d 748, 757 (¶26) (Miss. 2003) (citation omitted).
In summary, either of the two possible resolutions on remand requires the same result; therefore,
there is no genuine issue of material fact, and we find no error in the circuit court’s decision to grant
Cellular South’s motion for summary judgment. M.R.C.P. 56(c).
¶15. THE JUDGMENT OF THE WINSTON COUNTY CIRCUIT COURT IS AFFIRMED.
ALL COSTS OF THIS APPEAL ARE ASSESSED TO THE APPELLANT.
KING, C.J., MYERS, P.J., BARNES, ISHEE AND CARLTON, JJ., CONCUR.
IRVING, J., DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY LEE, P.J.,
AND CHANDLER, J. GRIFFIS, J., NOT PARTICIPATING.
IRVING, J., DISSENTING:
8
¶16.
With respect for my colleagues in the majority, I must dissent from the majority’s decision
to affirm the trial court’s grant of summary judgment in favor of Cellular South, Inc. (Cellular
South). I agree with the majority that the contract that Gregory S. Dalton and Cellular South
executed is not ambiguous and that under the terms of the contract Cellular South is given the
unilateral right to determine whether it is in Cellular South’s best interest to continue the agency
relationship created by the contract. However, I cannot agree that there is no genuine issue as to
whether Cellular South terminated the contract in accordance with the terms of the contract.
¶17.
Cellular South sued Dalton, seeking a declaratory judgment to the effect that Cellular South
had acted properly in terminating its agency relationship with Dalton. After discovery, both parties
filed motions for summary judgment. The Winston County Circuit Court found that the agreement
between Dalton and Cellular South was unambiguous and granted summary judgment on behalf of
Cellular South.
¶18.
At the time that the complaint was filed, Dalton owned a Radio Shack in Louisville,
Mississippi. In April 1992, Dalton entered into an agreement with Cellular South to work as an
agent selling cellular telephone service. Cellular South drafted the initial agreement, which was
replaced in March 1993. It is unclear whether Dalton had any input as to the terms of either
agreement. Dalton’s agency relationship with Cellular South lasted for thirteen years, during which
time Dalton procured over six thousand customers for Cellular South. In return, Dalton received
substantial commissions for his sales of Cellular South subscriptions.
¶19.
In December 2003, Terrell Knight, then director of sales for Cellular South, sent Dalton a
letter informing him that his agreement with Cellular South was being terminated effective February
6, 2004, as a result of “a reorganization of Cellular South’s retail distribution plan . . . .” Believing
that the terms of his contract prohibited Cellular South from terminating the agreement as it did,
9
Dalton refused to sign the full and final release sent to him by Cellular South. On January 24, 2006,
Cellular South filed suit against Dalton, requesting a declaratory judgment to the effect that it had
not acted contrary to the contract’s terms. On April 5, 2007, the court ruled in favor of Cellular
South, finding that it had the right under the contract to terminate its relationship with Dalton.
¶20.
The relevant portions of the contract between Dalton and Cellular South state:
3.1 Term:
The term of the Agreement shall be one year, commencing on the
date specified in Exhibit D of this Agreement, unless otherwise
terminated or renewed pursuant to the provisions hereinafter
provided. Cellular Holding3 is cognizant of the increasing value of
the Agency relationship to a successful AGENT and therefore will
terminate a successful Agency relationship only if Cellular Holding
determines that the continuation of the Agency relationship would be
detrimental to the overall well-being, reputation and goodwill of
Cellular Holding.
****
3.4 Default:
In the event AGENT fails to perform any of its obligations under this
Agreement and such failure continues unremedied for a period of
thirty (30) days after written notice is given by Cellular Holding to
AGENT, then Cellular Holding may thereupon elect to cancel and
terminate this Agreement, which termination shall be effective
immediately upon the expiration of said thirty-day period.
3.5 Termination:
Either party may terminate this Agreement by giving the other party
written notice of its desire to terminate at least thirty (30) days prior
to the intended date of termination.
[The section goes on to list specific instances under which Dalton’s
conduct could result in termination by Cellular South.]
****
4.6 Sales Activity:
3
AGENT shall act as a sales AGENT appointed by Cellular Holding
for Cellular Holding’s Cellular Telephone Service. AGENT shall
provide appropriate sales facilities and use its best efforts to enhance
the sale of Cellular Holding service and to solicit customers using
administrative procedures established from time to time by Cellular
Holding;
The agreement refers to Cellular South as Cellular Holding.
10
¶21.
The majority finds that the loss of profits by Cellular South is a sufficient basis, under the
express terms of the contract, for Cellular South to terminate the contract. I disagree with this
myopic interpretation. The contract authorizes termination by Cellular Holding “only if Cellular
Holding determines that the continuation of the Agency relationship would be detrimental to the
overall well-being, reputation and goodwill of Cellular Holding.” (Emphasis added). It is clear to
me that the financial well-being of Cellular South is only one of three criteria that must be met
before termination is authorized. The other two are that there be a detriment to the reputation and
goodwill of Cellular South.
¶22.
In support of its motion for summary judgment, Cellular South offered the affidavit of Hu
Meena. Meena explained that Dalton’s agency relationship was being terminated because:
Mr. Dalton’s was one of approximately ninety (90) agency relationships terminated
by Cellular South at my direction in late 2003 and early 2004. Cellular South’s
decision to discontinue the use of independent agents was in large part due to the
administrative burdens that it had experienced in managing independent agents
throughout its service area. These administrative burdens included assigning a
dedicated management employee to oversee the agents, keeping up with
commissions earned by the agents, which did not vest until the customer had
remained with Cellular South for a pre-determined period of time, and insuring that
agents were marketing Cellular South’s service in a manner consistent with Cellular
South’s corporate marketing strategy.
At or about the same time that I made the decision to terminate the independent
agents used by Cellular South, Cellular South’s own network of company-owned
retail stores had become sufficient to perform its necessary retail functions.
Cellular South’s reputation for good customer service and the uniformity of the
customers’ experiences in dealing with Cellular South, regardless of whether they
contact Cellular South by visiting its stores, calling on the telephone or using the
Cellular South website, are critical to Cellular South’s ability to maintain and grow
its customer base. At the time I made the decision to terminate the use of agents, I
believed and still do believe that Cellular South is better able to maintain its overall
customer service standards without the use of independent agents.
To the best of Cellular South’s and my knowledge, Dalton’s agency was a
‘successful’ agency in terms of sales. However, it was impractical for Cellular South
to maintain some agents while terminating others, since the administrative burden
11
of maintaining a few agents would have been very similar to the burden of
maintaining them all. For these reasons, I determined that continuation of Cellular
South’s agency relationships, including Dalton’s, would be detrimental to the overall
well- being, reputation and goodwill of Cellular South.
As Meena explained in his affidavit, Cellular South allegedly determined that the continuation of
any agency relationship was detrimental to Cellular South’s business. However, the affidavit
contained no facts indicating that Dalton’s successful agency had caused harm to either Cellular
South’s reputation or goodwill. It seems obvious to me that an agency that brought over six
thousand customers to Cellular South could hardly be detrimental to either Cellular South’s
reputation or goodwill.
¶23.
As stated, the contract gives solely to Cellular South the right to terminate if and when the
relationship with Dalton becomes detrimental to Cellular South’s well-being, reputation, and
goodwill. However, it is important to note that these criteria are written in the conjunctive, not
disjunctive. This language indicates to me that while Cellular South is the sole arbiter of whether
the agency relationship has become detrimental to its well-being, reputation, and goodwill, that
determination cannot be arbitrary and capricious and must be factually undergirded. In other words,
since Cellular South at the time of the execution of the contract recognized and agreed that a
continuing agency relationship would be of “increasing value to the agent” and, by correlation, of
increasing burden, at least financially, to Cellular South, it could not later terminate the relationship
simply because an agency had, in fact, become of increased value – thus raising the amount of
commissions that Cellular South had to pay to the agent. To allow Cellular South to terminate the
contract based on its obligation to pay increasing commissions to a successful agent is to sanction
unfair dealings in contractual relations. I am not prepared to put the judicial stamp of approval on
such unfair tactics.
¶24.
In his letter, Meena indicated that Dalton’s relationship was being terminated because of the
12
rising costs of maintaining agency relationships. It appears from the record that the most significant
cost of Dalton’s agency relationship with Cellular South was the large commissions that Cellular
South was paying to Dalton. Therefore, I believe that there is a significant question as to whether
Cellular South terminated its agreement with Dalton because of a detriment to Cellular South’s
reputation and goodwill or because of a loss of profits occasioned by Cellular South’s contractual
obligations to pay higher commissions to Dalton, who had become a successful agent. Taking all
the evidence presented in the light most favorable to Dalton, I believe that there are genuine issues
of material fact that prevent the entry of summary judgment in this case.
¶25.
In his reply brief, Dalton claims that “the motivation for his termination was to capture the
commissions he was building up in the seven counties assigned to him. To put it more direct [sic],
Dalton’s termination occurred not because of detriment to the overall well-being, reputation and
good will [sic] to Cellular South, but to [sic] its greed.” My review of the record leads me to believe
that there is a significant question as to the truthfulness of the reasons presented in Meena’s
affidavit. The unilateral right given to Cellular South to determine when the agency had become
a detriment to Cellular South’s well-being, reputation, and goodwill did not encompass or include
the right to falsify the facts or the reason for the termination. As stated, since the costs of
maintaining Dalton’s agency were known and clearly anticipated by Cellular South, a question
remains as to whether Cellular South terminated Dalton’s relationship merely to avoid paying
commissions to him. I would reverse and remand this case for a trial on the merits, especially on
the question of whether Cellular South’s assertion – that maintaining the agency relation with Dalton
would result in a detriment to its reputation and goodwill – was pretextual or factual.
¶26.
For the reasons presented, I dissent.
LEE, P.J., AND CHANDLER, J., JOIN THIS SEPARATE OPINION.
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