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Coca-Cola Enterprises Inc. v. Novelis Corporation, 08-12214 (2008)

Court: Court of Appeals for the Eleventh Circuit Number: 08-12214 Visitors: 27
Filed: Oct. 24, 2008
Latest Update: Feb. 21, 2020
Summary: [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT _ FILED U.S. COURT OF APPEALS ELEVENTH CIRCUIT No. 08-12214 October 24, 2008 Non-Argument Calendar THOMAS K. KAHN _ CLERK D. C. Docket No. 07-00753-CV-RWS-1 COCA-COLA ENTERPRISES INC., ENTERPRISES ACQUISITION COMPANY, INC., THE COCA-COLA COMPANY, THE COCA-COLA TRADING COMPANY, INC. Plaintiffs-Appellants, versus NOVELIS CORPORATION, Defendant-Appellee. _ Appeal from the United States District Court for the Northern Di
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                                                         [DO NOT PUBLISH]


             IN THE UNITED STATES COURT OF APPEALS

                     FOR THE ELEVENTH CIRCUIT
                      ________________________                    FILED
                                                       U.S. COURT OF APPEALS
                                                         ELEVENTH CIRCUIT
                             No. 08-12214                    October 24, 2008
                         Non-Argument Calendar            THOMAS K. KAHN
                       ________________________                  CLERK

                  D. C. Docket No. 07-00753-CV-RWS-1

COCA-COLA ENTERPRISES INC.,
ENTERPRISES ACQUISITION COMPANY, INC.,
THE COCA-COLA COMPANY,
THE COCA-COLA TRADING COMPANY, INC.

                                                         Plaintiffs-Appellants,

                                  versus

NOVELIS CORPORATION,



                                                         Defendant-Appellee.


                       ________________________

                Appeal from the United States District Court
                   for the Northern District of Georgia
                     _________________________

                            (October 24, 2008)

Before TJOFLAT, BLACK and CARNES, Circuit Judges.
PER CURIAM:

       Coca-Cola Enterprises appeals the district court’s judgment granting

dismissal under Rule 12(b)(6) to the defendants Novelis Corporation and Alcan

Corporation.1 Coca-Cola alleges that Novelis breached the most-favored nation

(MFN) provision of its aluminum supply contract by offering Anheuser-Busch the

same ceiling metal price as Coca-Cola received, but for a period of time that

extended beyond the end of the Coca-Cola contract. The district court dismissed

Coca-Cola’s complaint after finding that Novelis’ deal with Anheuser-Busch did

not trigger the MFN clause. We affirm.

                                              I.

       In January 2002 the parties entered into a Long Term Marketing Agreement

under which Alcan—and later, Novelis—would provide aluminum can sheet to

Coca-Cola bottling companies. The Long Term Marketing Agreement was to

terminate on December 31, 2006. Under the contract, the parties established that

the can sheet’s price, designated “P1 of the Pricing Schedule” would be a floating

amount computed by combining the market price of aluminum with Novelis’

charge to convert that aluminum into can sheet. The parties also agreed that,


       1
         Novelis Corporation is, by merger and name change, the successor to Alcan Corporation’s
rights and obligations under this contract.

                                               2
regardless of the market price for aluminum, that component of Coca-Cola’s price

would be capped at 85 cents per pound.

      The parties also settled on a most-favored nation provision, designed to

prevent Novelis from underselling its Coca-Cola deal by offering better terms to

another aluminum buyer. Under the MFN, if Novelis offered any other customer

either “(A) a lower conversion cost/lb for at least three months . . . (B) a lower

ceiling or floor, for at least six months . . . [or] (C) any other element, except

Investment Related Discounts, that [made] the offer more advantageous as a whole

to the customer than P1 of the Pricing Schedule,” then Novelis would have to offer

the same element to the Coca-Cola bottlers “for the same duration covered by the

offer to the other customer.”

      In June 2004 Novelis entered into a similar five-year aluminum supply

contract with Anheuser-Busch. Anheuser-Busch received the same 85-cent cap on

its metal price component, but because that contract began in 2004, its price

ceiling was effective through 2009.

      In late 2005 the price of aluminum rose above 85 cents per pound. Novelis

honored its contractual ceiling for that component in Coca-Cola’s contract until it

expired in December 2006. However, in negotiating a new contract with Coca-

Cola, Novelis refused to include a price ceiling for the period from 2007 through

                                           3
2011. Instead, the parties entered into a new contract, the Soft-Toll Agreement,

which contained no ceiling on the price of aluminum but did contain an MFN

provision. Coca-Cola then sued Novelis in Georgia state court, alleging that its

aluminum sales to Anheuser-Busch at 85 cents per pound violate the Soft-Toll

Agreement. That case is pending.2

      In April 2007 Coca-Cola filed a separate complaint against Novelis and its

predecessor Alcan in the United States District Court for the Northern District of

Georgia. Coca-Cola alleged that Novelis’ refusal to extend its 85-cent price

ceiling through 2009 was a breach of the Long Term Marketing Agreement’s

MFN provision. Novelis filed a Rule 12(b)(6) motion to dismiss, which the

district court granted. Coca-Cola timely appeals.

                                                II.

      We review de novo the dismissal of a complaint under Fed. R. Civ. P.

12(b)(6), “applying the same standard as did the district court.” Rivell v. Private

Health Care Sys. Inc., 
520 F.3d 1308
, 1309 (11th Cir. 2008).

      The Long Term Marketing Agreement dictates, and the parties agree, that

New York law applies. Under New York law, ambiguity in a contractual

provision creates a question of fact, and all ambiguities must be resolved in the

      2
          Attempts to remove that case to federal court failed for lack of complete diversity.

                                                 4
plaintiff’s favor at this stage. Eternity Global Master Fund Ltd. v. Morgan Guar.

Trust Co., 
375 F.3d 168
, 178 (2d Cir. 2004) (applying New York law) (“[A] claim

predicated on a materially ambiguous contract term is not dismissible on the

pleadings.”). However, a plaintiff cannot create ambiguity in a contract simply by

alleging a different interpretation of a contractual provision. Elletson v. Bonded

Insulation Co., 
272 A.D.2d 825
, 827, 
708 N.Y.S.2d 511
, 513 (N.Y. App. Div.

2000) (“[A]n ambiguity does not exist simply because the parties urge different

interpretations.”) (quotation marks omitted). An unambiguous contractual

provision has a “definite and precise meaning, unattended by danger of

misconception . . . and concerning which there is no reasonable basis for a

difference of opinion.” Krystal Investigations & Sec. Bureau, Inc. v. United

Parcel Serv. Inc., 
35 A.D.3d 817
, 818, 
826 N.Y.S.2d 727
, 728 (N.Y. App. Div.

2006).

      If the agreement unambiguously supports the defendant’s interpretation, the

plaintiff’s complaint may be dismissed on the pleadings. 
Id., 826 N.Y.S.2d
at 729

(“Contrary to the plaintiff’s contention, the agreement between the parties was

clear and unambiguous . . . . Accordingly, the court correctly granted the

defendant’s motion to dismiss the complaint.”); see also Bell Atl. Corp. v.

Twombly, 550 U.S. ___, 
127 S. Ct. 1955
, 1968 (2007) (holding that dismissal

                                         5
under Rule 12(b)(6) is appropriate for complaints that fail to state “plausible”

claims for relief).

                                           III.

      The relevant provision of the Long Term Marketing Agreement, Section

10.1, states:

      If, taking into account all incentives, discounts, rebates, credits, Scrap
      Spreads and the like, but not “Investment Related Discounts”. . .
      ALCAN, or any ALCAN Affiliate, offers (offer includes any offer or
      proposal, including, but not limited to, those initiated by ALCAN or
      those made in response to a request, initiative, or counter of another
      purchaser, except as otherwise provided in Section 9.2) to any
      customer, or other user of Aluminum Can Stock, for delivery in North
      America,

                (A) a lower conversion cost/lb for at least three months or
                consecutive periods totaling at least three months, not to
                exceed three months in a year, then X1 in the Pricing Schedule
                (Exhibit 2), or

                (B) a lower ceiling or floor, for at least six months or
                consecutive periods totaling at least six months, not to exceed
                six months in a year, than that provided in Section 4 of the
                Pricing Schedule (Exhibit 2) or

                (C) any other element, except Investment Related Discounts,
                that makes the offer more advantageous as a whole to the
                customer than P1 of the Pricing Schedule (Exhibit 2),

      then the elements included in such offer shall be offered to
      PARTICIPANTS [Coca-Cola bottlers] for the same duration covered
      by the offer to the other customer. Each PARTICIPANT may accept
      or decline the offer for its volume. If accepted, the price for the

                                            6
      accepted volume is provided in Section 2.5 of the Pricing Schedule
      (Exhibit 2).

      The parties agree that Sections 10.1(A) and 10.1(B) were not violated,

because Anheuser-Busch did not receive a lower conversion cost or a lower

ceiling than Coca-Cola’s 85 cents per pound. Instead, Coca-Cola alleges that

Novelis violated Section 10.1(C) when it gave Anheuser-Busch an 85-cent ceiling

price valid until 2009, while Coca-Cola’s ended in 2006.

      The issue before this Court is whether Section 10.1(C) is ambiguous—that

is, whether it is reasonable to read it as triggered by Novelis offering a competitor

the same price terms for the same period of time, but starting later and thus ending

later than Coca-Cola’s Long Term Marketing Agreement. If the contractual

language cannot reasonably bear the interpretation that Coca-Cola requires in

order to state a claim for its breach, the district court did not err in granting Rule

12(b)(6) dismissal. See, e.g., Krystal 
Investigations, 35 A.D.3d at 818
, 826

N.Y.S.2d at 729.

      Most importantly, Section 10.1 is about price, not time. The section begins

by “taking into account all incentives, discounts, rebates, credits, Scrap Spreads

and the like.” All of these are price terms, and the principle of ejusdem generis

prevents an unrelated term like “duration of contract” from slipping in through



                                           7
“and the like.” See 242–44 East 77th St., LLC v. Greater New York Mut. Ins. Co.,

31 A.D.3d 100
, 103–04, 
815 N.Y.S.2d 507
, 510 (N.Y. App. Div. 2006) (“[T]he

meaning of a word in a series of words is determined by the company it keeps.”)

(citation and quotation marks omitted).

      Section 10.1(A) addresses conversion costs and prevents a competitor from

receiving a lower conversion price than X1, the equivalent term in Coca-Cola’s

contract. Section 10.1(B) addresses price ceilings and floors, and prevents a

competitor from receiving a lower floor or ceiling than those agreed to in Coca-

Cola’s contract. As Coca-Cola points out, both of these sections do include

periods of time. A lower conversion cost would not trigger the MFN under

Section 10.1(A) unless it lasted at least three months; similarly, a lower floor or

ceiling must last at least six months under Section 10.1(B) in order to trigger the

MFN. But these timing phrases exist only to constrain the lower conversion costs

and lower floors or ceilings that the MFN focuses on. Every time period in

Section 10.1 is expressly tied to a monetary form involving a lower price.

Nowhere does “time”—much less a date of contract termination—stand alone as

an element of price that could trigger Sections 10.1(A) or (B).

      Finally, following the “lower conversion cost” in Section 10.1(A) and the

“lower ceiling or floor” in Section 10.1(B), Section 10.1(C) covers “any other

                                          8
element”—except one specific kind of discount—that “makes the offer more

advantageous as a whole to the customer than P1 of the Pricing Schedule (Exhibit

2).” P1 of the Pricing Schedule is the sum of elements X1, Y1, and Z1, and

represents the total price of the can sheet to Coca-Cola. Thus, the phrase “any

other element” unambiguously means any other element that factors into that

price. The obvious comparison is between any element of a competitor’s deal that

factors into its price and the corresponding element that factors into P1, Coca-

Cola’s price.

      No allegation has been made that Novelis offered Anheuser-Busch any

element that made its pricing more advantageous than P1 of Coca-Cola’s Pricing

Schedule during the term of the Long Term Marketing Agreement. Instead, the

two competitors received the same 85-cent ceiling on the price of metal, meaning

that through December 31, 2006, when the Long Term Marketing Agreement

terminated, no competitor had received a better price than Coca-Cola. In fact,

even after the Long Term Marketing Agreement terminated, Anheuser-Busch

apparently did not receive a better price than Coca-Cola had received, but only a

better price than Coca-Cola was able to prospectively negotiate after its MFN

provision expired.




                                         9
      Reading Section 10.1 as Coca-Cola does would allow any other offer made

by Novelis between 2002 and 2006, regardless of its termination date and

regardless of its price (so long as it offered a price better than the 2007 open-

market price) to fall within the MFN for the other contract’s entire period. Under

Coca-Cola’s reasoning, unless Novelis terminated all other recent contracts on

December 31, 2006, Coca-Cola would always be able to glom onto a competitor’s

ongoing contract price to keep its own metal price down. All of this, according to

Coca-Cola, occurs at and after the expiration of Coca-Cola’s own deal on which

its contractual rights are allegedly based. It is difficult to imagine an MFN

provision that implicitly grants a party the right to the best price even after the

MFN itself, as part of a dated contract, explicitly expires. When an MFN

provision expires, it ends. Here, that provision ended on December 31, 2006.

      Coca-Cola has not alleged that before December 31, 2006, any other party

received a better price element than any of those in its own P1—and that is all that

Section 10.1(C) prohibits.

      AFFIRMED.




                                          10

Source:  CourtListener

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