Once parties decide to litigate, it’s not so easy to extricate – as Judge Engelmayer’s opinion in First American Intern. Bank v. The Community’s Bank amply demonstrates.
Community’s Bank entered into an agreement with FAIB to share any Award of local development funds it received from the federal government. Sure enough, Community’s Bank was awarded a $432,000 grant, but the Award’s terms prohibited Community from transferring the Award except to an affiliate – which did not include FAIB. Community’s Bank claimed that it was barred from transferring any proceeds of the Award to FAIB and therefore entitled to keep the full Award, whereas FAIB claimed that so long as Community’s Bank received the Award proceeds from the government in the first instance, it could thereafter share them.
However, both banks did agree that one of their competing claims had to be right. And they both asked Judge Engelmayer to decide the case on summary judgment – and spare them the cost of more litigation. Judge Engelmayer recognized that “given the [small] stakes at issue, a resolution of the decisive question of contract interpretation at this stage would be far more efficient for the parties than deferring that question for trial.” But he didn’t bite: “although such a ruling would have doubtless been more efficient for the parties,” ‘no reasonable person’ could interpret the ‘not pellucid’ contract language only one way. And off the parties were sent to a jury trial that likely will cost more than the amount at stake. In other words, once you enter the courthouse door it may not be so easy to exit “efficiently.”
The opinion is also useful as it discusses in detail the court’s role in interpreting contract language – in Judge Engelmayer’s view, a court should tread carefully unless the contract’s language is “wholly unambiguous.”