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First Bank & Trust, Formerly Known as First Bank & Trust of Evanston, Burling Bank, Cambridge Bank of Lake Zurich v. Firstar Information Services, Corporation, a Dissolved Wisconsin Corporation, and Firstar Corporation, a Wisconsin Corporation
Citations: 276 F.3d 317; 2001 U.S. App. LEXIS 27354Docket: 01-1757
Court: Court of Appeals for the First Circuit; December 30, 2001; Federal Appellate Court
Between 1994 and 1998, First Bank. Trust and ten other banks (collectively referred to as "Banks") entered into contracts with Firstar Corporation and its affiliate, Firstar Information Services Corporation ("Firstar"), for data processing services. Before the agreements expired, Firstar announced its intention to cease operations and terminate services, prompting the Banks to file breach of contract claims in Illinois state court. The case was removed to federal court, where the district court granted summary judgment in favor of Firstar, concluding that the contracts permitted Firstar's termination of services with proper notice.
The appellate court reversed this judgment and remanded the case for further proceedings. Each Bank independently negotiated contracts with similar terms, which included provisions on termination and modification. Each contract required the Banks to provide prior written notice for termination and allowed Firstar to modify or terminate services with notice. Notably, eight contracts included a clause that permitted the Banks to terminate the agreement without default if Firstar failed to replace a terminated "Core Service" with a comparable substitute. Initially, the contracts were executed without incident.
In October 1998, Firstar notified the Banks of its intention to cease data processing operations due to a merger with Star Bank, offering to continue services until June 30, 2000, despite existing agreements set to expire on July 31, 2001. In April 2000, the Banks filed a lawsuit against Firstar in Illinois state court, claiming breach of contract and violations of the Illinois Consumer Fraud Act. Firstar removed the case to federal court under diversity jurisdiction.
In federal court, Firstar sought judgment on the pleadings, arguing that Section 7 of the contract allowed it to terminate services with proper notice, interpreting "any" as meaning "all." Firstar contended that providing roughly two years' notice met its contractual obligations. Conversely, the Banks requested partial summary judgment, arguing "any" should be interpreted as "one" or "some" and contending that any breach did not trigger a limitation of remedies provision in the contracts.
The district court granted summary judgment for Firstar, finding Section 7 unambiguous and concluding that "any" permitted Firstar to terminate any or all services with proper notice. The court determined that Firstar had complied with the notice requirements, thus it was not liable for breach of contract.
The standard of review for the summary judgment is de novo, assessing whether there are genuine issues of material fact, with all facts construed in favor of the nonmoving party.
Principles of contract interpretation establish that the interpretation of an unambiguous contract is a legal question. Wisconsin law focuses on ascertaining the true intentions of the parties through the contract's language, prioritizing the plain meaning of terms unless defined otherwise. Words and phrases must be understood in context, considering the contract as a whole. If a contract is deemed unambiguous, it is enforced as written. However, a contract is ambiguous if it allows for multiple reasonable interpretations, in which case extrinsic evidence may be considered, turning the interpretation into a factual question unless the undisputed facts lead to a single inference. Ambiguities are construed against the drafting party, but interpretations resulting in unreasonable outcomes are avoided.
In the case at hand, the specific provision regarding "SYSTEMS MODIFICATION" allows Firstar to modify or terminate services with proper notice. The district court found this provision unambiguous, permitting Firstar to terminate all services to the Banks with notice. The Banks argue for a narrower interpretation, contending "any Service" should mean a "single Service," allowing for termination of only one service without breach. Alternatively, they claim termination is permissible only if it does not clearly frustrate the agreement's basic purpose.
Several key considerations support the district court's interpretation of Section 7 of the contracts. The term "any," which is not specifically defined in the agreements, should be understood in its plain and ordinary sense, including meanings such as "one or more," "every," and "all," as per dictionary definitions. Wisconsin law further clarifies this interpretation, as demonstrated in cases like Coutts v. Wisconsin Retirement Board and State v. Timmerman, where "any" was interpreted broadly to imply discretion in applying terms.
Section 7 explicitly allows Firstar to modify, amend, or terminate services with proper notice if deemed necessary, which indicates the intent to provide Firstar with flexibility in response to regulatory actions or technological changes. The interpretation of "any" as "all" aligns with this intent, suggesting that Firstar could cease all services if appropriate notice was given, which it did according to the contracts.
However, the interpretation is not singular; the meaning of a contract should consider all provisions collectively. Therefore, a reasonable interpretation could also suggest that Section 7 allows for the termination of some services but not necessarily all.
The agreements lack a specific termination clause but outline conditions under which termination is permissible. Section 2 provides that either party may terminate the agreement at the end of the specified term with prior written notice or in the event of a default. Section 7 states that if Firstar terminates a "Core Service" and fails to provide a comparable substitute, the Customer may terminate the agreement without being in default. The phrase "may terminate providing any Service," located in Section 7 under "Systems Modification," is interpreted as imprecise and does not imply unilateral termination of the agreements. The term "modification" generally indicates changes without fundamentally altering the contract, suggesting that the intent was not to allow complete termination of services. Wisconsin case law supports the notion that the term "any" can mean "some" rather than "all," depending on context, which reinforces the interpretation that the agreements do not authorize Firstar to completely cease all services under Section 7. Overall, it appears the parties intended for this section to permit the modification of services rather than their complete termination.
The Banks' interpretation of the agreements, suggesting that "any" meant "one," is rejected, as it would render Section 7 nonsensical by limiting Firstar to modifying or terminating only one service during the contract's term. This interpretation contradicts the intent that Section 7 should grant Firstar broad discretion in service provision. The Banks have seemingly conceded this point in their brief, acknowledging that Section 7 allows for broader discretion.
The contracts are deemed ambiguous, as they permit reasonable alternate interpretations regarding the phrase "may terminate providing any Service." This ambiguity means that while one reading could allow for the termination of all services, another could limit terminations to a range of services. Given these conflicting interpretations, summary judgment is inappropriate; extrinsic evidence is necessary to clarify the meaning of Section 7. As a result, the case is remanded for further proceedings to allow both parties to present extrinsic evidence.
The judgment of the district court is reversed, and the case is remanded. The Banks are entitled to recover the costs of the appeal.
Each contract includes a choice of law provision designating Wisconsin law as governing the agreement, which the parties accept. Notably, this provision is missing from the contracts of three Banks. The determination of how many services Firstar can terminate under Section 7 is not yet ripe for decision. Wisconsin law stipulates that every contract includes an implied duty of good faith and fair dealing, along with a duty of cooperation among the parties. While this implied covenant does not override explicit contract terms, it requires that those terms be performed in light of the implied obligations, particularly when gaps are present. Courts may invoke the principle of good faith to fill in terms not explicitly stated in the contract. Additionally, the Banks are seeking to clarify whether Firstar's potentially breaching conduct would trigger the limitation of remedies provision in several contracts, but this issue is not being addressed at this time.