Legal Lode: Disputably Indefinite

Fuzzy phrasing thwarts firm's attempt to walk away from purchase agreement.

During the 1980 presidential debates, candidate Ronald Reagan skewered his opponent, Jimmy Carter, by asking voters, “Are you better off now than you were four years ago?” To the nation, which elected Reagan in a 49-state landslide, the answer was obvious. Seven elections later, John McCain, hoping to distance himself from George W. Bush, answered Reagan's query in a campaign commercial: “We're worse off than we were four years ago.”

Generally understood in terms of financial well-being, the phrase “better off” summons information expressed in economic terms. More about facts than feelings, but is it a measure of life as actually lived? “Delight, serenity and gratitude have values not easily priced in cash,” observed columnist George Will, urging interpretive parity for these “assets.”

What it really means to be “better off” is arguably imprecise and debatable. So, too, said the West Virginia Supreme Court, is a similar phrase used in a waste company purchase agreement.

Jacob Jochum and his son signed a contract with Waste Management of West Virginia (WM) calling for WM to buy the assets of the Jochums' hauling company for $465,000. These assets included state-mandated certificates of convenience and necessity, which allowed the Jochums to provide waste disposal services via motor carrier in Ohio and Marshall counties. Transferring the certificates would enable WM to transport solid waste within the two counties and across the state line.

Among other guarantees, WM wanted an escape valve if certain circumstances arose. The contract contained a provision letting WM back out of the deal before the closing date if, for example, a court judgment made the asset purchase “less economic” for the buyer.

In 2005, state officials approved the transfer of the certificates to WM. However, a federal appeals court later ruled that the state could not require haulers engaged in the interstate transportation of solid waste to obtain a state certificate before providing these services. [Harper v. Public Service Comm'n, 427 F.Supp.2d 707 (S.D.W.Va. 2006)] As a result of the decision, the certificates were never actually transferred to WM.

Two weeks later, WM notified the Jochums that it was terminating the agreement. As WM saw it, the court decision diminished the value of the certificates.

The Jochums responded by filing suit in state court, alleging that WM breached the contract. WM filed a motion for summary judgment, claiming that, prior to closing, an indisputable adverse condition — the Harper ruling — made the sale “less economic.” The trial judge agreed and, without hearing any testimony, ruled in favor of WM.

On appeal, the Jochums argued that the lower court mistakenly refused to consider key issues of fact regarding whether the pre-conditions were satisfied and whether the phrase “less economic” is ambiguous. The Jochums said they interpreted the phrase to mean less profitable. And, they claimed they could prove their business actually became more profitable in 2006 and 2007 for reasons unrelated to the certificates, which, notably, had no assigned value in the contract. WM, for its part, shrugged off the Jochums' argument, pointing out that the sellers actively and knowingly participated in negotiating the contract language.

“[W]e are not persuaded by Waste Management's contention that ‘less economic’ was an unambiguous term … . To the contrary, the evidence … illustrates significant confusion surrounding the meaning of that provision,” said the unanimous supreme court opinion. The justices reversed the lower court judgment and remanded the case for trial on what the parties meant by the phrase.

[Jochum v. Waste Management of West Virginia, Inc., No. 34264, May 19, 2009.]

Barry Shanoff is a Rockville, Md., attorney and general counsel of the Solid Waste Association of North America.

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail: [email protected].

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