Supreme Court of Ohio Clerk of Court - Filed May 15, Case No IN THE SUPREME COURT OF OHIO * * * * * * * * * *

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1 Supreme Court of Ohio Clerk of Court - Filed May 15, Case No IN THE SUPREME COURT OF OHIO DELLA WALL, Plaintiff-Appellant, vs. THE KROGER CO., Defendant-Appellee. Appeal No Appeal from the Hamilton County Court of Appeals, First Appellate District Case No. C APPELLEE THE KROGER CO. S MEMORANDUM IN RESPONSE OPPOSING JURISDICTION Gary F. Franke ( ) GARY F. FRANKE CO., L.P.A. 120 East Fourth Street, Suite 1040 Cincinnati, OH Telephone: (513) Facsimile: (513) gff@garyfrankelaw.com Counsel for Plaintiff-Appellant, Della Wall Caroline M. DiMauro ( ) Counsel of Record Matthew R. Byrne ( ) Jamie M. Goetz-Anderson ( ) JACKSON LEWIS P.C. PNC Center, 26 th Floor 201 E. Fifth Street Cincinnati, OH Telephone: (513) Facsimile: (513) caroline.dimauro@jacksonlewis.com matthew.byrne@jacksonlewis.com jamie.goetz-anderson@jacksonlewis.com Counsel for Defendant-Appellee, The Kroger Co.

2 TABLE OF CONTENTS Table of Contents... i Table of Authorities... ii EXPLANATION OF WHY THIS CASE DOES NOT WARRANT FURTHER REVIEW...1 STATEMENT OF FACTS...3 A. Background Facts...3 B. Trial Court Decision...4 C. Appeals Court Decision...5 LEGAL ANALYSIS...5 A. Response to Proposition of Law No. 1: Where a contract is ambiguous in that its meaning is susceptible of two or more reasonable interpretations and there is conflicting extrinsic evidence as to the meaning of the language in issue and intent of the parties, the court must apply blackletter law relative to general rules of contract interpretation....5 B. Response to Proposition of Law #2: Where there is conflicting evidence as to the intent of the parties relative to disputed language in a contract, and absent application of black-letter law relative to general rules of contract interpretation, a party to a contract is entitled to a determination of facts as to the conflicting evidence upon consideration of cross motions for summary judgment CONCLUSION...11 Certificate of Service...12 i

3 TABLE OF AUTHORITIES Cases Beverly v. Parilla, 165 Ohio App. 3d 802, 2006-Ohio-1286, 848 N.E.2d 881, 30 (7th Dist.)...9 Cline v. Rose, 96 Ohio App. 3d 611, 615, 645 N.E.2d 806 (3d Dist. 1994)...8, 10 Klug v. Klug, 2d Dist. Montgomery No , 2003-Ohio Malcuit v. Equity Oil & Gas Funds, Inc., 81 Ohio App. 3d 236, 240, 610 N.E.2d 1044 (9th Dist. 1992)...8, 10 Martin Marietta Magnesia Specialties, L.L.C. v. Public Utilities Com n of Ohio, 129 Ohio St. 3d 485, 2011-Ohio-4189, 954 N.E.2d Nationwide Mutual Fire Ins. Co. v. Guman Bros. Farm, 73 Ohio St. 3d 107, 108, 652 N.E.2d 684 (1995)...7, 11 T.A.P. On Tap, Inc. v. Sardis, 8th Dist. Cuyahoga No , 2000 Ohio App. LEXIS 2740, 8 (June 22, 2000)...9 United States Fid. & Guar. Co. v. St. Elizabeth Med. Ctr., 129 Ohio App. 3d 45, 55, 716 N.E.2d 1201 (2d Dist. 1998)...2 Wall v. Firelands Radiology Inc., 106 Ohio App. 3d 313, 327, 666 N.E.2d 244 (6th Dist. 1995)...10 Westfield Ins. Co. v. Galatis, 100 Ohio St. 3d 216, 2003-Ohio-5849, 797 N.E.2d , 5, 10 Other Authorities Ohio Constitution, Article IV, Section 2(B)(2)(e)...3 ii

4 EXPLANATION OF WHY THIS CASE DOES NOT WARRANT FURTHER REVIEW This is a straightforward contract interpretation case. It is a fundamental rule of contract interpretation that a court s role in examining a contract is to determine the intent of the parties, and that if the contract s terms are unambiguous, the court must apply the plain language of the contract. E.g., Westfield Ins. Co. v. Galatis, 100 Ohio St. 3d 216, 2003-Ohio-5849, 797 N.E.2d 1256, 11. To determine if contractual language is ambiguous or unambiguous, a court must examine only the contractual language itself, and may not consider extrinsic evidence of the parties intent. Id. The First District Court of Appeals applied exactly this principle when, relying solely on the language of the severance agreement ( Agreement ) at issue in this case, it held that the relevant language was unambiguous and, based on this unambiguous language, entered summary judgment in favor of Defendant-Appellee The Kroger Co. ( Kroger ). There is nothing noteworthy about the First District s decision or its reasoning, and there is no reason why this Court should accept jurisdiction over Plaintiff-Appellant Della Wall ( Wall ) s appeal. This case raises nothing more than wellsettled principles of Ohio contract law. At the heart of her argument, Wall disagrees with the way the First District Court of Appeals interpreted the Agreement, so she now seeks this Court's review of that language. The appeals court s decision prevents Kroger from having to pay Wall money to which she is not contractually entitled. The decision only concerns a single severance agreement that Kroger entered into with a single person Wall and no other person. Summary judgment in Kroger s favor has zero impact on any person other than Wall. In other words, the outcome in this case is extremely limited in its impact and certainly is not of any public or great general interest. Confronted with this obstacle to jurisdiction, Wall attempts to present the appeals court s decision as somehow ignoring or modifying Ohio contract law. Her characterization is completely incorrect. 1

5 The First District s decision is limited in scope, and hardly remarkable. The decision does not make any new contributions to Ohio contract law, does not modify existing Ohio contract law, and does not misstate or misapply Ohio contract law. Rather, the appeals court simply found that the relevant language in the Agreement was unambiguous, and that this unambiguous language supports Kroger s position in this litigation. That s it. Wall points to the First District s statements that the construction advanced by Kroger is the correct one and [w]e agree with Kroger s interpretation. She asserts that these statements establish that the First District misapplied Ohio contract law by improperly making factual determinations. Wall is incorrect. The First District s references to Kroger s interpretation and construction of the Agreement simply recognize that Kroger s interpretation of the unambiguous contract language at issue in this case was reasonable and correct, while Wall s interpretation was unreasonable and incorrect. This type of conclusion is perfectly acceptable when a court determines that a contract is unambiguous. An ambiguous contract is one that is susceptible to two or more reasonable interpretations and, thus, in contrast, an unambiguous contract is susceptible to only one reasonable interpretation. See United States Fid. & Guar. Co. v. St. Elizabeth Med. Ctr., 129 Ohio App. 3d 45, 55, 716 N.E.2d 1201 (2d Dist. 1998). The First District correctly found that the only reasonable interpretation of the relevant unambiguous contractual language was Kroger s; it did not make any factual determinations. Wall may not like the First District s decision, but her arguments in favor of application of the construe against the drafter rule and the alleged need for review by a trier of fact which radically would change Ohio contract law if accepted by this Court are mere distractions from the simplicity and judicial minimalism of the appeals court s decision. This Court should decline to hear Wall s appeal. This is not a case of public or great general interest. See Ohio Constitution, Article 2

6 IV, Section 2(B)(2)(e). A. Background Facts STATEMENT OF FACTS Wall was previously Kroger s Group Vice President of Human Resources. T.d. 26 at 17. She was Kroger s highest ranking human resources employee and was responsible for all aspects of human resources for Kroger. T.d. 26 at Wall delivered a letter to Kroger s CEO in June 2010 in which she stated her intent to resign and demand for severance. T.d. 25 at 57; T.d. 26 at 35, 41. She further detailed her severance demands, which totaled at least $1,614,375, to Paul Heldman, Kroger s Executive Vice President, Secretary, and General Counsel. T.d. 25 at 57; T.d. 26 at 6. Heldman denied her initial severance demand and they discussed options regarding terms that might be included in a separation agreement. T.d. 26 at 48. Heldman then prepared the Agreement, and he and Wall exchanged multiple s regarding the Agreement s terms. T.d. 25 at 58, 59, 63-66; T.d. 26 at 48. Among other things, Wall informed Heldman that she had 47 weeks of unused, banked vacation. T.d. 25 at 59, 63. Wall consulted with her attorney regarding the Agreement. T.d. 25 at 64, 78. She then signed the Agreement. T.d. 25 at 59; T.d. 26 at 78. The relevant language at issue in this case states: 2. From August 7, 2010, through June 30, 2013, you will remain on the active management payroll.... You will receive cash compensation as follows: a) For the first 47 weeks of that period you will receive monthly payments based on your final annual salary of $273,000. b) You will receive payments under Kroger s 2010 and 2011 annual bonus plans, if a bonus is earned for other corporate executives, based on your bonus potential of $255,000. Your bonus, payable in March 2011, will be pro-rated based on service through September 4, 2010; your 2011 bonus, payable in March 2012, will be pro-rated based on six weeks of service in c) For the 24 months from June 30, 2011 through June 30, 2013, you will receive additional monthly pay of $35,875, an amount derived from adding one-twelfth of your annual salary and one-twelfth of your bonus potential at 70%. 3

7 (T.d. 25 at 67) Prior to signing the Agreement, Wall asked her longtime colleague, Vicky Weyer, Kroger s Manager of Corporate Benefits, to calculate Wall s estimated retirement benefits using projected severance numbers that assumed that the $22,750 payments described in Paragraph 2(a) would end after 47 weeks. T.d. 25 at 71-74; T.d. 26 at Kroger paid Wall $22,750 per month for 47 weeks as required by Paragraph 2(a) of the Agreement. T.d. 25 at After the 47 weeks ended, Paragraph 2(c) required Kroger to begin making 24 monthly payments of $35,875 from June 30, 2011 through June 30, T.d. 25 at 67. Instead of paying Wall $22,570 in June and then $35,875 each in July and August, however, a payroll clerk mistakenly caused Kroger to pay Wall $58,625 in each of the three months. T.d. 25 at 60. These $58,625 payments represented the combined total of the monthly Paragraph 2(a) $22,570 payments and the monthly Paragraph 2(c) $35,875 payments. T.d. 26 at 60. When Kroger informed Wall of the mistaken overpayments, she asked, How on earth did this happen? and suggested that Kroger simply reverse what was done and take the difference out of my account. T.d. 25 at 78. Later, she announced that she did not believe she was overpaid. T.d. 25 at 80. She then developed a novel interpretation of the Agreement under which the $22,750 monthly payments described in Paragraph 2(a) as terminating after 47 weeks would continue past the 47 week period into and throughout the subsequent two year period described in Paragraph 2(c). This interpretation would result in her receiving at least $1,657,250 from Kroger that is, more than the amount she initially demanded (at last $1,614,375) and that was rejected by Kroger. B. Trial Court Decision After the close of discovery, the parties filed cross motions for summary judgment. T.d. 19; T.d. 23. Kroger also filed a motion to strike Wall s motion for summary judgment and its exhibits. T.d. 25. Based on its review of extrinsic evidence, the trial court determined that the disputed language was ambiguous. T.d. 37 at 2-3. The trial court then proceeded to apply a version of the 4

8 construe against the drafter principle of construction that was completely unsupported by law; specifically, the trial court stated that where there is doubt or ambiguity in the language of a contract it will be construed strictly against the party who prepared it. T.d. 37 at 3-4. The trial court granted Wall s motion for summary judgment and denied Kroger s motion. T.d. 37; T.d. 42. Kroger appealed. T.d. 44. C. Appeals Court Decision The First District found that the relevant contractual language was unambiguous. 1 (Memo Supp. Jurisd. Appx. 6-7, 9, 14) In reaching this conclusion, it examined only the text of the Agreement, not extrinsic evidence. (Id., 9-14) The First District found that the unambiguous language of the Agreement supported Kroger s position. (Id., 12, 14) The court therefore reversed the judgment of the trial court and entered summary judgment in favor of Kroger. (Id. at 8, 16) Wall has now filed this appeal. LEGAL ANALYSIS A. Response to Proposition of Law No. 1: Where a contract is ambiguous in that its meaning is susceptible of two or more reasonable interpretations and there is conflicting extrinsic evidence as to the meaning of the language in issue and intent of the parties, the court must apply black-letter law relative to general rules of contract interpretation. When a court analyzes disputed contract language, it must first determine if the language is ambiguous or unambiguous. To do so, the court must rely exclusively on the contract language itself, and may not consider extrinsic evidence of the parties intent. See, e.g., Westfield Ins. Co. v. Galatis, 100 Ohio St. 3d 216, 2003-Ohio-5849, 797 N.E.2d 1256, 11 (courts may look no further than the contract to find the intent of the parties when language is clear, and courts may only 1 The record has not yet been filed with this Court, and the docket record number of the court of appeals opinion is not yet known. Kroger therefore refers to the copy of the appeals court opinion that is filed as an appendix to Wall s Memorandum in Support of Jurisdiction with citation to Memo Supp. Jurisd. Appx., followed by a number referring to the handwritten page numbers provided by Wall. 5

9 consider extrinsic evidence to ascertain intent when language is ambiguous); Martin Marietta Magnesia Specialties, L.L.C. v. Public Utilities Com n of Ohio, 129 Ohio St. 3d 485, 2011-Ohio- 4189, 954 N.E.2d 104, 22 (if contract is clear and ambiguous on its face, parol evidence may not be considered). The trial court explicitly ignored this well-settled principle of contract interpretation. The trial court stated that At the very best and giving credence to evidence submitted by both parties, the language of the Agreement means one thing to defendant and another to plaintiff. T.d. 37 at 2 (emphasis added). The trial court then described the conflicting Affidavits of Della Wall, Phillip Combs 2, Paul Heldman, and Vicky Weyer filed by the parties, and referenced Kroger s mistaken overpayments to Wall. T.d. 37 at 2-3. The court then again explicitly stated that it considered extrinsic evidence in order to determine that the relevant contractual language was ambiguous: Clearly, based on review of the contract language in issue and the opposing evidence presented by the parties relative to the meaning of said language, the contract is reasonably susceptible to two different meanings and the intent of the parties cannot be determined from the written terms alone. Thus, the contract language in issue is ambiguous. T.d. 37 at 3 (emphasis added). The trial court could have done little more to make its error more noticeable. The First District corrected this error. In considering whether the relevant language was ambiguous or unambiguous, the appeals court examined only the language of the Agreement, and did not consider any extrinsic evidence. (Memo Supp. Jurisd. Appx. 6-7, ( A careful reading of the employment agreement here convinces us that there is no ambiguity )) The First District correctly explained that the 47 week period described in Paragraph 2(a) established a first 2 Combs affidavit consists almost entirely of out-of-court statements offered to prove the truth of the matter asserted. T.d. 19. Because of this inadmissible hearsay, Combs affidavit may not be considered and should have been stricken. 6

10 temporal period, during which Wall was to be paid $22,750 per month, and that Paragraph 2(c) established a second, subsequent temporal period during which she was to be paid $38,875 per month. (Memo Supp. Jurisd. Appx. 6-7, 11-14) The appeals court also explained that, given the overall language of the Agreement, the only sensible reading of the Agreement established that the phrase additional monthly pay in Paragraph 2(c) did not extend the Paragraph 2(a) payments beyond Paragraph 2(a) s finite 47 week period into the Paragraph 2(c) period, but rather indicated that the $38,875 payments during the Paragraph 2(c) temporal period were in addition to the previously-received $22,750 payments during the finite Paragraph 2(a) 47 week period. (Memo Supp. Jurisd. Appx. 7, 11-13) The appeals court also explicitly stated that the trial court should not have considered parol evidence because the language of the Agreement was unambiguous. (Memo Supp. Jurisd. Appx. 7, 14) The First District s reading of the Agreement was correct. Instead of directly criticizing the appeals court s analysis regarding the Agreement s lack of ambiguity, Wall s First Proposition of Law simply ignores that the appeals court found the relevant language to be unambiguous. Wall also incorrectly assumes that the relevant language in the Agreement is ambiguous. Her assumption is based on the trial and appellate courts reaching different findings. (Memo Supp. Jurisd. 7) But simply because the trial and appellate courts reached different conclusions certainly does not in itself establish that the relevant contractual language is ambiguous. Appellate courts conduct de novo review of whether contractual language is ambiguous. See, e.g., Nationwide Mutual Fire Ins. Co. v. Guman Bros. Farm, 73 Ohio St. 3d 107, 108, 652 N.E.2d 684 (1995) ("If a contract is clear and unambiguous, then its interpretation is a matter of law and there is no issue of fact to be determined.... Unlike determinations of fact which are given great deference, questions of law are reviewed by a court de novo. ) (internal quotation marks and citations omitted). De novo review, by definition, means that the reviewing court is free 7

11 to reach the opposite conclusion of that reached by the trial court. If Wall were correct, any time a trial court found contract language to be ambiguous, a reviewing appellate court could never reach the opposite conclusion and find the language to be unambiguous, as doing so would automatically make the language ambiguous. In other words, a trial court s finding that the language was ambiguous could never be reversed on appellate review. Wall can cite no authority supporting such a modification of existing contract law. Wall s first proposition of law further states that if a contract is ambiguous, the court must apply black-letter law relative to general rules of contract interpretation. (Memo Supp. Jurisd. 7) It is unclear what Wall means by black-letter law relative to general rules of contract interpretation, but the phrase appears to be a reference to her repeated reliance on the construe against the drafter principle of contract interpretation. Wall states in her Memorandum Supporting Jurisdiction that the general rule of contract interpretation is that if the language in a contract is ambiguous in that it is susceptible to two or more reasonable interpretations and there is conflicting extrinsic evidence, the court should construe the language against the drafting party. (Memo Supp. Jurisd. 4) In Wall s view, the construe against the drafter rule must automatically be applied if there is conflicting extrinsic evidence regarding the meaning of ambiguous contract language. (Memo Supp. Jurisd. 4) This misstates the construe against the drafter rule and is not the law. In fact, the construe against the drafter rule is a secondary rule of construction that may only be applied when the primary rules of construction are applied and the contract s meaning remains ambiguous. Malcuit v. Equity Oil & Gas Funds, Inc., 81 Ohio App. 3d 236, 240, 610 N.E.2d 1044 (9th Dist. 1992). This means that the construe against the drafter rule may only be used if parol evidence is inadequate to determine the meaning of the contract. See, e.g., Cline v. Rose, 96 Ohio App. 3d 611, 615, 645 N.E.2d 806 (3d Dist. 1994) ( When interpreting ambiguous 8

12 contracts, courts must make a legitimate attempt, after hearing the relevant parole evidence, to determine the intent of the contracting parties.where application of this rule makes the meaning of the language clear, the secondary rule of construction of strict construction [sic] against the drafter is not applicable. ) (bracketed text in original) (internal citation and quotation marks omitted); see also Klug v. Klug, 2d Dist. Montgomery No , 2003-Ohio-3042, 13 ( If the language of the contract is ambiguous a court should consider extrinsic evidence to determine the parties intent.a court should only resort to construing an ambiguous contract against the drafter when the court is unable to determine the intent of the parties. ) (internal citations omitted); T.A.P. On Tap, Inc. v. Sardis, 8th Dist. Cuyahoga No , 2000 Ohio App. LEXIS 2740, 8 (June 22, 2000) ( If an ambiguity is found, a judge will first attempt to ascertain the parties intent from the available parol evidence and if the term s meaning is still in doubt, it will be construed against the party who drafted it. ); Beverly v. Parilla, 165 Ohio App. 3d 802, 2006-Ohio-1286, 848 N.E.2d 881, 30 (7th Dist.) ( Rather, this rule of construction is merely a guiding principle the court uses in determining the parties intent after viewing the extrinsic evidence presented by the parties. Otherwise, extrinsic evidence would be irrelevant. ). If Wall s and the trial court s view of the construe against the drafter rule were the law, it would result in non-drafting parties winning virtually all contract disputes automatically, as any shred of extrinsic evidence in support of the non-drafting party s interpretation would allow that party to prevail, even if the balance of extrinsic evidence supported the drafting party s position. This would turn the law of contract interpretation on its head, discourage parties from drafting contracts, and eliminate the need for a trier of fact in virtually all contract disputes. 3 3 Even if the Agreement were ambiguous and the extrinsic evidence did not favor either party s interpretation of the Agreement, the construe against the drafter rule could not be applied in this case as Wall was a sophisticated negotiator who was head of Kroger s human resources 9

13 There is no persuasive reason why this Court should unsettle the law of contract interpretation in Ohio in this way. The appeals court s decision effectively mooted the trial court s mistaken reliance on a modified version of the construe against the drafter rule. By declining jurisdiction, this Court will allow the law of contract interpretation to remain unchanged. B. Response to Proposition of Law #2: Where there is conflicting evidence as to the intent of the parties relative to disputed language in a contract, and absent application of black-letter law relative to general rules of contract interpretation, a party to a contract is entitled to a determination of facts as to the conflicting evidence upon consideration of cross motions for summary judgment. Wall s second proposition of law is truly innovative. Wall appears to argue that when a contract is ambiguous, a court should apply the construe against the drafter rule of contract interpretation, but if the court does not apply this rule, it should allow the trier of fact to examine the conflicting evidence in order to interpret the contract. This approach simply is not the law. Indeed, Wall gets the order exactly backwards. As previously explained, it is wellestablished that the construe against the drafter rule should only be applied when the contract s meaning cannot be determined based on the primary rules of contract interpretation, including review of the available parol evidence. See, e.g., Malcuit, 81 Ohio App. 3d at 240;Cline, 96 Ohio App. 3d at 615. Wall, on the other hand, seems to argue that the need for a trier of fact to review extrinsic evidence of intent is a fallback procedure when a court for some reason declines to apply the construe against the drafter rule. This is less an argument in support of jurisdiction than a department and consulted counsel regarding the terms of the Agreement. See Westfield, 100 Ohio St. 3d 216, 2003-Ohio-5849, 797 N.E.2d 1256, at 13 ( construe against the drafter principle applies when contracts are standardized and between parties of unequal bargaining power); Wall v. Firelands Radiology Inc., 106 Ohio App. 3d 313, 327, 666 N.E.2d 244 (6th Dist. 1995) ( construe against the drafter principle does not apply where all parties to contract are knowledgeable). 10

14 demonstration that Wall wholly misunderstands basic principles of contract interpretation. 4 In any event, the First District s determination that the relevant language in the Agreement is unambiguous (a determination that precludes the need for a few of the extrinsic evidence) is a legal question within the court s authority, and there are no remaining questions to be decided by a trier of fact. See Nationwide Mutual Fire Ins. Co., 73 Ohio St. 3d at 108, 652 N.E.2d 684. CONCLUSION Wall s appeal presents no questions of public or great general interest. The appeals court unlike the trial court applied the rules of contract interpretation properly, and, based on its review of the Agreement, determined that the relevant contractual language was unambiguous and required summary judgment in Kroger s favor. The appeals court s decision was limited in scope and presents no new issues for review by this Court. Further review of this case is not warranted. Respectfully submitted, /s/caroline M. DiMauro Caroline M. DiMauro ( ) Matthew R. Byrne ( ) Jamie M. Goetz-Anderson ( ) JACKSON LEWIS P.C. PNC Center, 26 th Floor 201 E. Fifth Street Cincinnati, OH Telephone: (513) Facsimile: (513) caroline.dimauro@jacksonlewis.com matthew.byrne@jacksonlewis.com jamie.goetz-anderson@jacksonlewis.com Counsel for Defendant-Appellee, The Kroger Co. 4 This conclusion is emphasized by the fact that Wall describes the failure to submit the extrinsic evidence in her case to a trier of fact as a denial of due process, but also argues that the court should simply apply the construe against the drafter rule. These two positions are contradictory. 11

15 CERTIFICATE OF SERVICE I certify that a true and correct copy of Appellee The Kroger Co. s Memorandum In Response Opposing Jurisdiction has been served on Gary F. Franke, Gary F. Franke Co., L.P.A., 120 East Fourth Street, Suite 1040, Cincinnati, OH 45202, Attorney for Plaintiff-Appellee Della Wall, via ordinary U.S. mail and by to gff@garyfrankelaw.com this 15 th day of May, /s/caroline M. DiMauro Caroline M. DiMauro , v. 2 12