Litigating the Meaning of Contract Language? Consider Retaining an Expert – Part I

May 31, 2016

check-list(Editor’s Note: This is part one in a two-part series that explains how to reduce the chances of the confusion that results when a judge or litigator without a grounding in the subject analyzes ostensibly ambiguous contract language.)

One source of fights between parties to a contract is ambiguity. Does a particular provision allow for alternative meanings? If so, which should prevail, if any?

A problem with resolving disputes over ambiguous, or allegedly ambiguous, contract language is that ambiguity is a complex topic—it arises in different ways, many of them far from obvious. So when a judge or litigator without a grounding in the subject analyzes ostensibly ambiguous contract language, confusion often results.

To reduce the chances of such confusion, litigators should consider retaining an expert in contract language.

Judicial Confusion

Despite the strength of the U.S. judicial system, it’s not hard to find instances of courts resolving disputes over the meaning of contract language in ways that don’t make sense. For example, consider how the Second Circuit Court of Appeals invoked a principle of interpretation that’s markedly at odds with English usage (see my article here), how the Third Circuit Court of Appeals opted for an unreasonable interpretation of an or (see my article here), and how the Federal Circuit misanalyzed the phrase at least one of X and Y (see my blog post here).

Obviously, this sort of confusion isn’t limited to appellate courts—it’s commonplace for courts at all levels to misanalyse contract language. Here’s an example that a reader pointed out to me.

In Dynamic Aviation Group Inc. v. Dynamic International Airways, LLC, No. 5:15-CV-00058, 2016 WL 1247220 (W.D. Va. Mar. 24, 2016) (PDF here), the parties to a contract disagreed over the meaning of the following provision:

On or before October 9, 2014, the Company shall discontinue the use of (i) the name “Dynamic Airways” and (ii) any logo or trademark substantially similar to that mark used by Dynamic Aviation, Inc., or previously used by the Company while owned by the Seller or the Seller’s Members.

The court held that clause (ii) had two possible meanings and so was ambiguous. It is indeed ambiguous, but not in the way the court describes.

The first meaning the court offered was the one the plaintiffs sought—that the phrase “substantially similar” in clause (ii) modified the phrases “that mark,” “used by Dynamic Aviation, Inc.,” and “previously used by the Company.” That would result in clause (ii) encompassing marks substantially similar to “Dynamic Airways,” marks substantially similar to all the logos and trademarks used by Dynamic Aviation, Inc., and substantially similar to all the logos and trademarks used by the Company when it was owned by the Seller or the Seller’s Members.

But the first meaning cannot be derived from the language at issue unless you supplement the text of clause (ii) as marked in square brackets below (the enumeration is mine):

Plaintiffs’ Interpretation

any logo or trademark substantially similar to (A) that mark[,] (B) [any logo or trademark] used by Dynamic Aviation, Inc., or (C) [any logo or trademark] previously used by the Company while owned by the Seller or the Seller’s Members

There’s no basis for so rewriting clause (ii).

The second meaning the court offered was the one the defendant sought (the enumeration is mine):

Defendant’s Interpretation

any logo or trademark substantially similar to that mark (A) used by Dynamic Aviation, Inc., or (B) previously used by the Company while owned by the Seller or the Seller’s Members

That’s a natural reading of clause (ii). But the court suggested that other possible interpretations might exist, and indeed, here’s another interpretation, the only other interpretation to which clause (ii) is susceptible (again, the enumeration is mine):

Third Interpretation

any logo or trademark (A) substantially similar to that mark used by Dynamic Aviation, Inc., or (B) previously used by the Company while owned by the Seller or the Seller’s Members

The ambiguity on display in clause (ii) is syntactic ambiguity, which involves uncertainty over what part of a sentence a phrase modifies, or what part of a phrase a word modifies. In this case, the question is exactly what the phrase “substantially similar to that mark” modifies.

So the court was inadvertently correct in stating that clause (ii) was ambiguous. The question of whether the court’s misreading of clause (ii) affected its analysis is beyond the scope of this article. What matters for our purposes is that the sort of misreading on display in Dynamic Aviation Group occurs sufficiently often in caselaw as to be unexceptional.