From Casetext: Smarter Legal Research

Nowcom Corp. v. Equifax Credit Information Services, Inc.

California Court of Appeals, Second District, Second Division
Oct 28, 2009
No. B209781 (Cal. Ct. App. Oct. 28, 2009)

Opinion

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of Los Angeles County No. BC361149, Richard L. Fruin, Jr., Judge.

Barger & Wolen, John C. Holmes, Richard B. Hopkins II, and James C. Castle for Plaintiff and Appellant.

Orrick, Herrington & Sutcliffe, William A. Molinski and Frank D. Rorie for Defendants and Respondents.


ASHMANN-GERST, J.

Plaintiff and appellant Nowcom Corporation (Nowcom) appeals from a trial court order awarding summary judgment to defendants and respondents Equifax Credit Information Services, Inc. and Equifax Information Services, LLC (Equifax). Nowcom contends that the trial court erred in finding that Equifax had the right to terminate the parties’ agreement.

FACTUAL AND PROCEDURAL BACKGROUND

The Parties

Equifax is one of three national repositories of credit information in the United States. It provides its information, in the form of credit reports and services, to individual consumers, as well as to a variety of business and credit grantors that require regular access to credit information.

Equifax is a dual distributor of credit information to auto dealers: (1) It sells credit information directly to auto dealers; and (2) it sells information to auto dealers through resellers.

Nowcom provides Web-based information services to auto dealers, including the provision of credit reports. In this capacity, it resells credit information to auto dealers across the country.

The Parties’ Agreement

On July 20, 2001, Equifax and Nowcom entered into an agreement for resale of information services (the agreement). Under the terms of the agreement, Equifax charged Nowcom a competitive rate for credit information based on a volume-tiered pricing scheme.

Negotiation of the Agreement and Relevant Sections of the Agreement

The agreement was negotiated primarily by Rufus Hankey (Hankey) on behalf of Nowcom and Dennis Mohagen on behalf of Equifax. Equifax supplied the initial version of the agreement, and Nowcom made revisions, including changes to paragraph 7.1, which governs the term of the agreement.

Paragraph 7.1 originally provided: “This Agreement... will continue for an initial term of one (1) year and shall automatically renew for successive one (1) year periods unless terminated by either party in writing at least ninety (90) days in advance of the then current term.” This provision was unacceptable to Nowcom because Nowcom did not want a reseller agreement that would permit Equifax to arbitrarily cut Nowcom off from Equifax consumer credit reports; in other words, Nowcom did not want an agreement that allowed Equifax to terminate the agreement for any reason in any given year. Equifax informed Nowcom that it would not agree to change the termination provisions. It did, however, assure Hankey that Equifax’s business model was not to have resellers build a dealer network and then shut down the reseller.

Ultimately, Nowcom proposed the following modification to paragraph 7.1: “This Agreement... will continue for an initial term of one (1) year and shall automatically renew for successive one (1) year periods unless terminated by either party, in writing, in the event of a material breach of this Agreement by the other party, after giving the breaching party a thirty (30) day period to cure such breach.” Equifax accepted this modification. However, Nowcom never informed Equifax that it thought that this change would lock Equifax into an indefinite or perpetual term contract (that could only be terminated because of an uncured material breach or other condition of termination).

The agreement also provides, at paragraph 7.2: “This Agreement will terminate (a) in the event that Equifax or [Nowcom] ceases to conduct business in a normal course, becomes insolvent, makes a general assignment for the benefit of creditors, suffers or permits the appointment of a receiver for its business or assets, or avails itself of, or becomes subject to, any proceeding under the Federal Bankruptcy Code of 1978, as amended, or any similar state insolvency or bankruptcy statutes (each, an ‘Insolvency Event’), and the other party gives written notice of termination to the party that is subject to the Insolvency Event following that event; or (b) as otherwise provided in this Agreement. In addition, if either party materially breaches this Agreement, the nonbreaching party may terminate this Agreement after providing written notice of the breach to the breaching party with thirty (30) days to cure. Equifax may, in its own discretion, suspend services during any cure period. Either party, by written notice to the other party, may immediately terminate this Agreement or suspend any services if based on a reasonable belief that the other party has violated or is violating the FRCA, the ECOA, any of the state law counterparts to the FCRA or ECOA, or any other applicable law or regulation.”

Based upon paragraphs 7.1 and 7.2, Nowcom understood that the agreement would automatically renew each year and continue on a long-term basis so long as neither party breached the agreement and the conditions for termination set forth in paragraph 7.2 did not exist. Nowcom never informed Equifax of this interpretation of the agreement.

Paragraph 17 of the agreement contains a choice of law provision. “This Agreement will be governed by and construed in accordance with the laws of the State of Georgia, without regard to the principles of conflicts of law.”

Finally, paragraph 23 of the agreement, titled “Entire Agreement,” provides: “This Agreement, including exhibits and attachments, constitutes the entire Agreement between the parties with respect to the subject matter hereof and supersedes and cancels any and all prior contemporaneous agreements, understandings, and commitments between the parties relating to its subject matter.”

The Agreement’s Initial Terms and Four Consecutive Renewal Terms

The initial term of the agreement lasted one year and ran from July 20, 2001, through July 19, 2002. Thereafter, the agreement automatically renewed for four consecutive renewal terms. Neither Equifax nor Nowcom voiced any opposition or withheld its consent to these renewals of the agreement.

Efforts to Negotiate a New Agreement

In early 2006, Equifax attempted to negotiate a new agreement with Nowcom for the provision of Equifax credit information. Specifically, Equifax sought to adjust Nowcom’s pricing so that it would be consistent with the pricing that Equifax was charging other resellers for Equifax credit information. In April 2006, Equifax presented Nowcom with a new agreement for its review and signature. Nowcom refused to sign.

Termination of the Agreement

On June 26, 2006, after months of trying to negotiate a new agreement with Nowcom, Equifax notified Nowcom that it was terminating the agreement effective July 20, 2006, at the conclusion of the then current term. While Equifax wanted the parties’ relationship to continue, Nowcom’s refusal to accept a new agreement with pricing that was consistent with what Equifax was charging other resellers left Equifax with no choice but to terminate.

Continuing Efforts to Negotiate a New Agreement

After Equifax gave notice that it was terminating the agreement, Nowcom expressed a desire to continue its business relationship with Equifax. As an accommodation to Nowcom, Equifax agreed to postpone the termination of the agreement to give the parties additional time to negotiate. While communications were exchanged and the parties attended at least one meeting, ultimately the parties were unable to come to a consensus on terms.

The 2006 Agreement

On October 13, 2006, Equifax notified Nowcom that it would no longer delay in terminating the agreement. Equifax sent Nowcom a new broker agreement for resale of Equifax credit information (the 2006 agreement). It advised Nowcom that the continued provision of credit information to Nowcom after October 20, 2006, would be deemed acceptance of the 2006 agreement.

Nowcom did in fact continue to access Equifax credit information after October 20, 2006, and Nowcom paid for this information.

Nowcom Initiates This Action

On October 31, 2006, Nowcom filed its original complaint against Equifax.

The operative pleading is the second amended complaint, which sets forth the following causes of action: two for declaratory relief, one for injunctive relief, one for interference with contractual relations, one for interference with prospective economic advantage, and one for promissory estoppel. The gravamen of the second amended complaint is that Equifax did not have the authority to terminate the agreement.

The Parties’ Motion for Summary Judgment

On February 21, 2008, Equifax moved for summary judgment and/or summary adjudication of issues. It argued that pursuant to Georgia law, Equifax was allowed to terminate the agreement because mutual assent was required for the agreement to renew; thus, Equifax was within its rights to terminate the agreement on its anniversary date.

At the same time, Nowcom filed a cross-motion for summary adjudication, seeking a judicial declaration that Equifax could not terminate the agreement; therefore, the agreement was still in force and effect. In support of its motion, Nowcom offered a declaration from Hankey, which purported to set forth Nowcom’s intent in entering into the agreement.

Trial Court’s Order Granting Equifax’s Motion for Summary Adjudication

On May 8 and 13, 2008, the trial court heard oral argument on the parties’ competing motions. Thereafter, the trial court granted Equifax’s motion for summary adjudication of Nowcom’s first (declaratory relief), second (declaratory relief), third (injunctive relief), and sixth (promissory estoppel) causes of action. The trial court found: “The parties’ Agreement is not ambiguous with respect to its termination provisions contained in para. 7.1 and para. 7.2. Therefore, parol evidence will not be considered in interpreting these terms of the Agreement. GA. Ann. Code section 13-2-2.

The trial court’s order is curious. It correctly indicates that Equifax’s notice of motion and separate statement violated California Rules of Court, rule 3.1350; thus, the trial court treats the motion as one for summary judgment and purports to grant summary judgment. However, the trial court’s order does not resolve the entirety of the pleading. As a practical matter, by denying Equifax’s motion as to the fourth and fifth causes of action, the trial court actually granted Equifax summary adjudication of the remaining four causes of action. For purposes of this appeal, the error is of no moment. Following the trial court’s order, Nowcom voluntarily dismissed its interference causes of action, leaving no causes of action to be resolved and making way for entry of judgment in Equifax’s favor. And, Nowcom fails to raise this issue on appeal, thereby forfeiting any review of this error. (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852.)

“The Court, as required by the Agreement, has applied Georgia law in interpreting the Agreement.

“The parties’ Agreement provides a one year term but that term is renewed annually without further consent of the parties. See para. 7.1. Under Georgia law, each side’s assent is required to enforce an automatic renewal of a contract once the current term is completed. [Citations].

“The parties’ Agreement, because it renews automatically, contains no specific duration period. Such an Agreement, under Georgia law, is terminable at will. [Citations.]

“(Similarly, under California law, a contract with no fixed term is terminable at will upon reasonable notice. [Citations.])

“Equifax gave written notice to Nowcom on October 13, 2006 that the Agreement was terminated effective one week later. Equifax acted within its rights under the contract.”

The trial court denied Equifax’s motion as to Nowcom’s fourth and fifth causes of action (the interference claims). It also denied Nowcom’s cross-motion in its entirety.

Nowcom’s Voluntary Dismissal; Judgment; Nowcom’s Appeal

On June 5, 2008, Nowcom voluntarily dismissed with prejudice its interference claims against Equifax. On July 2, 2008, judgment was entered for Equifax; Nowcom’s case was dismissed.

On July 30, 2008, Nowcom timely filed its notice of appeal, challenging that portion of the judgment that dismissed its first, second, third, and sixth causes of action.

DISCUSSION

I. Standard of review

“A trial court properly grants summary judgment where no triable issue of material fact exists and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) We review the trial court’s decision de novo.” (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.)

II. Equifax had the right to terminate the agreement

We first consider Nowcom’s contention that the automatic renewal provision of the agreement did not require the parties’ mutual assent. As the parties agree, pursuant to the agreement’s choice of law provision, Georgia law applies.

Under Georgia law, a contract with an automatic renewal term provision requires mutual assent of both parties to renew. (See, e.g., Nikas v. Hindley (1959) 99 Ga.App. 194, 198 [108 S.E.2d 98, 102] [“The provision for automatic renewal when given a reasonable construction will not be held to require the renewal or extension of the contract for additional five-year periods except upon the mutual assent of the parties thereto at or before the date of renewal”]; Williams v. Aflac, Inc. (1993) 209 Ga.App. 841, 844 [434 S.E.2d 725, 729] [“Applying the fundamental rules of construction to the terms of the automatic renewal provision contained within the retainer agreement, [the plaintiff] cannot recover damages based upon the renewal period because the parties did not mutually assent to the renewal of the retainer agreement at or before the date of the renewal”]; Dominy v. National Emergency Services (1994) 215 Ga.App. 537, 538 [451 S.E.2d 472, 474], overruled in part on other grounds in AGA, LLC v. Rubin (2000) 243 Ga.App. 772, 774 [533 S.E.2d 804, 806] [parties’ conduct confirmed their assent to the contract’s yearly renewals].)

Here, the agreement contains an automatic renewal provision. It provides: “This Agreement... will continue for an initial term of one (1) year and shall automatically renew for successive one (1) year periods unless terminated by either party, in writing, in the event of a material breach of this Agreement by the other party, after giving the breaching party a thirty (30) day period to cure such breach.” Following Georgia law, Equifax had the right to terminate the agreement by withholding consent to a fifth renewal term.

On appeal, Nowcom attempts to distinguish this well-established legal authority by arguing that nothing in Georgia law “suggests that all automatic contract renewals require mutual assent.” What Nowcom ignores, however, is that the contrary is true. There is no indication that this rule of contract interpretation is limited to the specific types of contracts (employment and attorney retainer agreements) at issue in those three cases. Likewise, Nowcom fails to direct us to any legal authority to support its assertion that “[t]here simply is no rule under Georgia law that every renewal under every contract requires an assent by the parties.” (Benach v. County of Los Angeles, supra, 149 Cal.App.4th at p. 852.) Under these circumstances, we have no reason to conclude that Georgia’s requirement of mutual assent for automatic contract renewals is limited to particular types of agreements.

Alternatively, Nowcom asserts that the agreement’s requirement of a material breach “eliminate[s] any general mutual assent precondition to automatic renewal.” This argument is not compelling. Nikas v. Hindley, supra, 108 S.E.2d 98 is instructive. In that case, William F. Hindley (Hindley) sued Beverage Distributors, Inc., and Angelo G. Nikas, its president (collectively, the defendants), for breach of a written employment contract. (Id. at p. 101.) The parties’ agreement contained the following language: “‘The [defendants and Hindley] agree and mutually contract that this their contract shall remain in full force and effect for a period of five years from the date of execution thereof with automatic renewals thereof at the end of the first five-year period for an additional five-year period, and continuing on in renewals on basis of five years for each renewal until and unless [Hindley] should fail or refuse to comply with his part of the aforesaid agreement in the paragraphs hereinabove, by failing or refusing to devote all of his business time to the promotion, best interest, successes and income of the [defendants], or should not faithfully, adequately and completely perform his duties as executive vice-president and general manager as aforesaid in the promotion and production of said business, then and in that event the [defendants] shall have the right, privilege and election of declaring this contract null and void upon due showing that [Hindley] has been negligent in the exercise of his duties as aforesaid, and when it can be shown that the aforesaid corporation is losing or about to lose business, prospects, contacts, contracts, income due to the negligence or failures of [Hindley].’” (Nikas v. Hindley, supra, at pp. 100–101.) As noted above, the Georgia Court of Appeal concluded that the automatic renewal provision of this agreement required the parties’ mutual assent; the court gave no heed to the contract’s language suggesting that the agreement could only be terminated for Hindley’s poor job performance. (Id. at p. 102.)

Similarly, in Williams v. Aflac, Inc., supra, 434 S.E.2d 725, the parties’ agreement originally was for a seven-year period and “was subject to automatic renewal on the same terms... for an additional five years, unless terminated for just cause at least 90 days prior to the expiration of the term.” (Id. at p. 727.) Following the defendant’s termination of the agreement during the original term of the contract, the court found that the plaintiff could not recover damages based upon the renewal period because the parties did not mutually assent to the renewal of the agreement. (Id. at p. 729.) As in Nikas v. Hindley, supra, 108 S.E.2d 98, the court was not influenced by the agreement’s language regarding “just cause” for termination. (Williams v. Aflac, Inc., supra, at p. 729.)

We follow this analysis. The agreement’s automatic renewal provision required assent by both Nowcom and Equifax, regardless of the agreement’s indication that it could also be terminated in the event of a material breach. In other words: The agreement would automatically renew for one-year periods so long as the parties either expressly or impliedly consented to renewal. If one party did not assent to renewal, the agreement did not renew. Likewise, the agreement could terminate at any time in the event of a material breach. If the parties intended to eliminate the mutual assent requirement of the automatic renewal provision or if the parties intended to restrict their respective capacities to withhold consent only in the event of a breach, then the agreement should have so stated. Our analysis could stop here.

Even if we were to adopt Nowcom’s theory that the parties deleted any general mutual asset requirement to automatic renewal, Nowcom’s claim still fails. As Equifax points out, if the parties intended the agreement to continue indefinitely, then under Georgia law, it was terminable at will. (See, e.g., Atakpa v. Perimeter OB-GYN Associates, P.C. (N.D.Ga. 1994) 912 F.Supp. 1566, 1579 [“Under Georgia law, a contract with no fixed term of duration is terminable at will by either party”]; Voyles v. Sasser (1996) 221 Ga.App. 305 [472 S.E.2d 80, 81] [“the provision at issue was for an indefinite period and was thus terminable at either party’s will”]; Lineberger v. Williams (1990) 195 Ga.App. 186, 187 [393 S.E.2d 23, 25] [same].) Following this logic, if the agreement was terminable at will, Equifax could terminate the agreement at any time.

In an effort to save its claims, Nowcom contends that the agreement does not continue indefinitely. Rather, it continues until certain events, specified in paragraph 7.2, occur. In making this argument, Nowcom relies heavily, both in its appellate briefs and at oral argument, upon Coffee v. General Motors Acceptance Corp. (S.D.Ga. 1998) 5 F.Supp.2d 1365 (Coffee). We are not convinced.

The litigation in Coffee arose out of an inventory financing arrangement between the parties. (Coffee, supra, 5 F.Supp.2d at p. 1368.) One of the agreements (a loan agreement) provided: “‘It is understood and agreed that [the defendant] may, at its option, terminate the line of credit and refuse to advance funds hereunder upon the occurrence of any of the following.’” (Id. at p. 1372, italics omitted.) The agreement then identified numerous specific conditions under which the defendant could terminate the line of credit. (Id. at pp. 1372–1373.)

In interpreting the parties’ agreement, the district court explained: “Under Georgia law, an agreement without a fixed term of duration is terminable at the will of either contracting party. [Citations.] Because none of the relevant documents contained an expiration date, [the defendant] contends that the agreement was terminable at will.” (Coffee, supra, 5 F.Supp.2d at p. 1376.) The district court did not agree. The parties’ loan agreement expressly identified certain conditions under which the defendant could terminate the agreement. “If the parties’ agreement [were] construed to be terminable at will, the enumeration of these contingencies would be rendered meaningless.” (Id. at p. 1377.)

The agreement at issue in Coffee differs sharply from the one at issue in the instant case. First, unlike the agreement in Coffee, the agreement here contains an initial term (one year), with a provision for automatic renewals. While Nowcom’s counsel disagreed at oral argument, this distinction changes the analysis. (See Coffee, supra, 5 F.Supp.2d at p. 1378 [“Here, there is no provision expressly stating that the agreement will continue indefinitely”].) In Coffee, there was no contractual term of duration and only a specified default event could terminate the agreement. (Ibid.) In contrast, in our case, the agreement could terminate after one year, or after one party withheld consent to renewal, or upon an event of default.

And, Nowcom’s oral argument notwithstanding, the agreement does not define “material breach” in paragraph 7.1 or otherwise tie it to an event of default, as defined in paragraph 7.2.

Second, unlike the termination events in the agreement in Coffee, the events of default in the agreement here are generic. “This Agreement will terminate (a) in the event that Equifax or [Nowcom] ceases to conduct business in a normal course, becomes insolvent, makes a general assignment for the benefit of creditors, suffers or permits the appointment of a receiver for its business or assets, or avails itself of, or becomes subject to, any proceeding under the Federal Bankruptcy Code of 1978, as amended, or any similar state insolvency or bankruptcy statutes (each, an ‘Insolvency Event’), and the other party gives written notice of termination to the party that is subject to the Insolvency Event following that event; or (b) as otherwise provided in this Agreement. In addition, if either party materially breaches this Agreement, the nonbreaching party may terminate this Agreement after providing writing notice of the breach to the breaching party with thirty (30) days opportunity to cure. Equifax may, in its own discretion, suspend services during any cure period. Either party, by written notice to the other party, may immediately terminate this Agreement or suspend any services if based on a reasonable belief that the other party has violated or is violating the FCRA, the ECOA, any of the state law counterparts to the FCRA or ECOA, or any other applicable law or regulation.” These events are a far cry from the specified events of default in the loan agreement in Coffee, which include, in addition to generic sorts of termination events (default by the plaintiff in the payment of an obligation, institution of a bankruptcy proceeding, appointment of a receiver), cancellation of the franchise, the filing of a tax lien, misrepresentations by the plaintiff for the purpose of obtaining credit or an extension of credit, and the refusal of the plaintiff to furnish financial information to the defendant to permit an examination of the plaintiff’s books and records. (Coffee, supra, 5 F.Supp.2d at pp. 1372–1373, 1378.)

Finally, in urging us to reverse, Nowcom directs us to Zee Medical Distributor Assn., Inc. v. Zee Medical, Inc. (2000) 80 Cal.App.4th 1 (Zee Medical). Because Georgia law, not California law, governs the resolution of this appeal, Zee Medical is irrelevant.

DISPOSITION

The judgment of the trial court is affirmed. Equifax is entitled to costs on appeal.

We concur: DOI TODD, Acting P. J. CHAVEZ, J.


Summaries of

Nowcom Corp. v. Equifax Credit Information Services, Inc.

California Court of Appeals, Second District, Second Division
Oct 28, 2009
No. B209781 (Cal. Ct. App. Oct. 28, 2009)
Case details for

Nowcom Corp. v. Equifax Credit Information Services, Inc.

Case Details

Full title:NOWCOM CORPORATION, Plaintiff and Appellant, v. EQUIFAX CREDIT INFORMATION…

Court:California Court of Appeals, Second District, Second Division

Date published: Oct 28, 2009

Citations

No. B209781 (Cal. Ct. App. Oct. 28, 2009)