Filed: Aug. 08, 2012
Latest Update: Mar. 26, 2017
Summary: FILED United States Court of Appeals Tenth Circuit August 8, 2012 PUBLISH Elisabeth A. Shumaker Clerk of Court UNITED STATES COURT OF APPEALS TENTH CIRCUIT GOL TV, INC., a Florida corporation, Plaintiff–Appellee, No. 10-1435 v. ECHOSTAR SATELLITE CORPORATION, a Colorado corporation; ECHOSTAR SATELLITE, L.L.C., a Colorado limited liability company, n/k/a/ Dish Network, LLC, Defendants–Appellants. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO (D.C. No. 1:08-CV-02143-PAB
Summary: FILED United States Court of Appeals Tenth Circuit August 8, 2012 PUBLISH Elisabeth A. Shumaker Clerk of Court UNITED STATES COURT OF APPEALS TENTH CIRCUIT GOL TV, INC., a Florida corporation, Plaintiff–Appellee, No. 10-1435 v. ECHOSTAR SATELLITE CORPORATION, a Colorado corporation; ECHOSTAR SATELLITE, L.L.C., a Colorado limited liability company, n/k/a/ Dish Network, LLC, Defendants–Appellants. APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO (D.C. No. 1:08-CV-02143-PAB-..
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FILED
United States Court of Appeals
Tenth Circuit
August 8, 2012
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
GOL TV, INC., a Florida corporation,
Plaintiff–Appellee, No. 10-1435
v.
ECHOSTAR SATELLITE
CORPORATION, a Colorado
corporation; ECHOSTAR SATELLITE,
L.L.C., a Colorado limited liability
company, n/k/a/ Dish Network, LLC,
Defendants–Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 1:08-CV-02143-PAB-MJW)
Stewart McNab of Carver Schwarz McNab & Bailey, LLC, Denver, Colorado, for
Defendants–Appellants.
Christopher P. Beall of Levine Sullivan Koch & Schulz, L.L.P., Denver, Colorado, for
Plaintiff–Appellee.
Before BRISCOE, Chief Judge, McKAY and O’BRIEN, Circuit Judges.
McKAY, Circuit Judge.
This is a corporate breach-of-contract case involving licensing fees for television
programming. The specific disputes in this case involve two separate issues: (1) the
calculation of licensing fees for the final ten days of the contract period, and (2) the
accrual of interest for overdue payments.
BACKGROUND
Plaintiff Gol TV produces soccer-related television programming, while
Defendants EchoStar Satellite Corporation and EchoStar Satellite L.L.C. (now known as
DISH Network) distribute television programming to individual viewers via satellite.
From February 1, 2003, until August 1, 2008, Gol TV’s programming was made available
to subscribers of certain EchoStar service packages in exchange for EchoStar’s payment
to Gol TV of contractually determined licensing fees. Section 5.1.1 of the contract
explained the monthly licensing fee would include:
An amount derived by multiplying the average Residential Service
Subscribers by the applicable monthly per Residential Service Subscriber
License Fee (as specified in Exhibit B hereto). The average Residential
Service Subscribers for any given reporting month shall be calculated by
adding the number of Residential Service Subscribers authorized to receive
the Programming Service on the last day of the reporting month and the
number of Residential Service Subscribers authorized to receive the
Programming Service on the last day of the prior reporting month, and
dividing the resulting sum by 2.
(Appellants’ App. at 242.) Although the contract did not define what was meant by the
phrase “reporting month,” EchoStar consistently calculated payments based on a
reporting month that ran from the twenty-second day of one calendar month to the
twenty-first day of the next month.
When the contractual arrangement terminated on August 1, 2008, EchoStar was
several months in arrears on its payments. In September 2008, Gol TV sent EchoStar a
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demand letter requesting payment of the overdue amounts, but EchoStar still failed to
make any payment. On October 3, 2008, Gol TV filed a federal complaint on the basis of
diversity jurisdiction, raising claims of breach of contract and quantum meruit. More
than one month later, on November 17, 2008, EchoStar finally paid Gol TV the overdue
amounts for the period between March 22 and July 21. For the final ten days of the
contract, however, EchoStar paid Gol TV only $38,724.42, less than one-sixth of the
amount EchoStar paid for each of the preceding full reporting months. To reach this
figure, EchoStar calculated the “average Residential Service Subscribers” under the
contract by adding the number of subscribers on July 21 (1,397,520) to the number of
subscribers on August 21 (zero) and dividing by two. After thus effectively cutting in
half the true average number of subscribers during the service period, EchoStar then
further reduced its calculated fee payments by dividing the applicable per subscriber
license fee by thirty-one and multiplying by ten. EchoStar argued it was permitted to
prorate the per subscriber fee in this fashion to reflect the partial month of service, since
the contract described this fee as a “monthly” fee.
On cross motions for summary judgment, the district court held that EchoStar
correctly calculated the “average Residential Service Subscribers” according to the
contractual formula. The court held, however, the contract did not permit EchoStar to
additionally prorate the monthly per subscriber license fee. The court thus held that
EchoStar should have paid Gol TV $81,318.43 for the final ten days of the contract
period.
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The court additionally held that EchoStar owed Gol TV interest for its late
payments of licensing fees for the reporting periods between March 21 and July 31. The
court rejected EchoStar’s argument that interest only began to accrue after Gol TV sent its
September demand letter, since the contract did not make the accrual of interest
conditional on a formal demand of interest. Pursuant to the contractual language, the
court held that interest began to accrue forty-five days after the end of each reporting
month. This interpretation resulted in a further award of $57,442.55 in interest.
DISCUSSION
We review the district court’s summary judgment decision de novo, applying the
same standards as the district court. See Adler v. Wal-Mart Stores, Inc., 144 F.3d 664,
670 (10th Cir. 1998). The parties agree that our interpretation of the contract in this
diversity case is governed by Colorado law. Under Colorado law, “a contract must be
construed to ascertain and effectuate the intent of the parties as determined primarily from
the language of the contract.” East Ridge of Fort Collins, LLC v. Larimer & Weld
Irrigation Co.,
109 P.3d 969, 974 (Colo. 2005). “To determine the intent of the parties,
the court should give effect to the plain and generally accepted meaning of the contractual
language.” Copper Mountain, Inc. v. Indus. Sys., Inc.,
208 P.3d 692, 697 (Colo. 2009).
Unless the contract is ambiguous, extrinsic evidence cannot be used to vary the terms of a
written contract. See Level 3 Commc’ns, LLC v. Liebert Corp.,
535 F.3d 1146, 1154
(10th Cir. 2008). However, a court may conditionally admit extrinsic evidence to
determine whether the contract is in fact ambiguous. See id. In general, a court “should
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not allow a hyper-technical reading of the language in a contract to defeat the intentions
of the parties,” Ad Two, Inc. v. City & Cnty. of Denver, 9 P.3d 373, 377 (Colo. 2000), and
“[a]n interpretation which makes the contract or agreement fair and reasonable will be
preferred to one which leads to a harsh or unreasonable result.” Hutchinson v. Elder,
344
P.2d 1090, 1092 (Colo. 1959).
We first consider whether the district court correctly interpreted Section 5.1.1. of
the contract to permit EchoStar to calculate the “average Residential Service Subscribers”
using an end count of zero. As previously stated, Section 5.1.1 provides in relevant part:
The average Residential Service Subscribers for any given reporting month
shall be calculated by adding the number of Residential Service Subscribers
authorized to receive the Programming Service on the last day of the
reporting month and the number of Residential Service Subscribers
authorized to receive the Programming Service on the last day of the prior
reporting month, and dividing the resulting sum by 2.
(Appellants’ App. at 242.) In the district court proceedings, Gol TV argued the phrase
“reporting month” effectively meant “reporting period,” whatever the duration of that
period might be. Gol TV thus contended the final reporting month of the contract was the
ten-day period between July 22 and July 31, meaning the “average Residential Service
Subscribers” should have been calculated by adding the number of subscribers on July 21
to the number of subscribers on July 31, then dividing by two. However, we agree with
the district court that the “plain and generally accepted meaning,” Copper Mountain, 208
P.3d at 697, of the term “month” is a period of approximately thirty days, not any period
of undetermined duration. See, e.g., Webster’s II New College Dictionary 711 (1995)
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(listing several definitions of the term “month,” all of which describe a period of time
somewhere between twenty-seven and thirty-one days long). The extrinsic evidence cited
by Gol TV does not indicate the term “reporting month” as used by the parties was
ambiguous and could have referred to a time period other than the commonly understood
meaning of the word “month.” Nor are we persuaded by Gol TV’s alternative argument
on appeal that EchoStar should have used the average number of subscribers authorized
to receive the service packages that had previously included Gol TV’s programming. The
plain language of the contract ties the calculation of the average to the number of
subscribers “authorized to receive the Programming Service [i.e., Gol TV] on the last day
of the reporting month.” (Appellants’ App. at 242.) While it is true that “average
Residential Service Subscribers” calculated in this fashion underestimates the true
average number of subscribers by approximately fifty percent when service stops or starts
within a reporting month, this is what the unambiguous language of the contract requires.
However, we agree with the district court that EchoStar was not permitted to
additionally prorate the “monthly per Residential Service Subscriber License Fee” that is
multiplied by the “average Residential Service Subscribers” to determine the licensing
fees owed under the contract each month. The contract nowhere provides for proration of
this monthly per subscriber fee. We are not persuaded by EchoStar’s argument that the
word “monthly” inherently authorizes proration in order to reflect the fact that service
was not provided for the entire reporting month. The contract already contains a
mechanism for accounting for partial months of service, since the calculation of “average
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Residential Service Subscribers” effectively cuts the licensing fee in half for any partial
month of service. There is no reason to find an implied right to proration to account for
partial months when the contract already contains an explicit mechanism for doing so.
Indeed, finding such an implied right would lead to a harsh and unreasonable result, since
it would essentially permit EchoStar to obtain a double discount on licensing fees
whenever service starts or stops during a reporting month. We are also unpersuaded by
EchoStar’s argument that extrinsic evidence of the parties’ course of conduct during the
contractual period reveals an ambiguity in this term. The other instances of rate
adjustments over the course of the contract differed from this situation in material
respects and do not suggest any ambiguity in the phrase “monthly per Residential Service
Subscriber License Fee.” We conclude that the plain language of the contract does not
allow EchoStar to prorate the per subscriber fee for partial months of service. We
therefore affirm the district court’s holding that EchoStar owed Gol TV $81,318.42 for
the final ten days of the contract period.
We turn now to the question of the accrual of interest. The contract provides in
pertinent part:
5.1 Rates and Payments. On or before the 45th day following the last day
of each reporting month during the Term, EchoStar will pay to Network
[i.e., Gol TV], at the address specified by Network, a license fee equal to
the sum of the following 5.1.1. through 5.1.3. In the event that payments
are not received by Network within forty-five (45) days after the end of the
month for which payment is due, then Network may, in addition to any
other rights or remedies that it may have, charge interest at a rate equal to
the lesser of one percent (1%) per month or the maximum legal rate permitted under Colorado law
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(Appellants’ App. at 242.) EchoStar argues interest does not automatically accrue under
the contract because this provision states Gol TV “may . . . charge” interest, and thus
interest only began to accrue when Gol TV stated in its September 2008 demand letter
that it would be charging interest for EchoStar’s overdue payments. However, the
contract’s permissive language simply means that Gol TV may exercise its discretion not
to demand the payment of interest for overdue payments. It does not mean the accrual of
interest is conditional on Gol TV making a formal demand for interest. Nothing in the
contract requires a formal demand of interest, nor does the contract tie the calculation of
interest to the date of such a demand. Under the plain terms of the contract, we agree
with the district court that interest began accruing for each late payment forty-five days
after each payment was due.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s decision.
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