Business Law Section

Facts:

Dale Bennett (“Bennett”) was employed by McNeil Engineering, Inc. (“MEI”). Sometime after his initial employment, MEI was restructured to act as an “umbrella” company for three new LLC’s providing different engineering services. MEI itself no longer performed any engineering, but leased its employees to the three subsidiaries, including McNeil Engineering and Land Surveying, LLC (ME&LS). In addition to being a “leased” employee of ME&LS, Bennett also held a 26.5% membership interest in ME&LS. Eventually Bennett resigned from MEI. ME&LS took the position that Bennett’s resignation from MEI also constituted a withdrawal from ME&LS under the provisions of the ME&LS operating agreement, giving ME&LS the right to purchase Bennett’s membership interest at book value. Bennett argued that he did not withdraw from ME&LS and was entitled to member distributions. Specifically, the operating agreement stated that “[f]or purposes of this Section, a member shall be deemed to withdraw when the Member voluntarily resigns or terminates the Member’s employment with the Company...” The “Company” was defined in the agreement as ME&LS. ME&LS argued that “employment” was broad enough, however, to encompass Bennett’s “leased employee” relationship with ME&LS. Bennett argued that since he was not directly employed by ME&LS, the provision was inapplicable. The trial court agreed with Bennett.

Procedural Posture:

Trial court granted partial summary judgment to Bennett on interpretation of contract, ME&LS appealed.

Good Business Law Rules:

1. “Under well‐accepted rules of contract interpretation, we look to the language of
the contract to determine its meaning and the intent of the contracting parties. We also consider each contract provision . . . in relation to all of the others, with a view toward giving effect to all and ignoring none.” ¶ 8.
2. “A contractual term or provision is ambiguous if it is capable of more than one reasonable interpretation because of uncertain meanings of terms, missing terms, or other facial deficiencies.” ¶ 8.
3. “In determining whether a contract is ambiguous, we consider any credible evidence but will not conclude that the contract is ambiguous unless both interpretations are reasonably supported by the language of the contract.” ¶ 8.
4. “Contractual ambiguity can occur in two different contexts: (1) facial ambiguity with regard to the language of the contract and (2) ambiguity with regard to the intent of the contracting parties. To determine if a contract is facially ambiguous, a judge must first review relevant and credible extrinsic evidence offered to demonstrate that there is in fact an ambiguity. However, a finding of ambiguity is justified only if the competing interpretations are reasonably supported by the language of the contract.” ¶ 10.
5. A contractual “interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect.” ¶ 17.

Holding:

Extrinsic evidence in the case suggested at least two plausible meanings of “employment” as used in the operating agreement and each interpretation was reasonably supported by the language of the contract. Reversed and remanded for further proceedings regarding the parties’ intent at the time of contracting.