The New York Appellate Division Finds Ambiguity Where There Is None

Thanks to a tip from @NY_Contracts, here’s yet another story of a court failing at textual interpretation.

The opinion in question is Dan’s Hauling & Demo, Inc. v. GMMM Hickling, LLC, No. 1068, 2021 WL 1711512 (N.Y. App. Div. 30 Apr. 2021) (PDF here). It’s from the Fourth Department of the Appellate Division, New York State’s intermediate appellate court.

The plaintiff agreed to remove hazardous materials from the defendants’ power plant, perform demolition work, and pay a specified amount to the defendants, and in exchange the plaintiff could remove salvaged metal and sell it to others. Here’s the language at issue:

First Installment: Due and payable on the earlier of (i) 30 calendar days after completion of the Abatement or commencement of the Demolition portion of the Work, whichever occurs first; and (ii) the Removal … of 3,500 tons of Salvaged Metals … from the Property.

The defendants terminated the contract because more than 30 days had passed after the start of demolition work and the plaintiff had failed to pay the first installment. On appeal, it was accepted that the abatement work had not been completed and that the plaintiff hadn’t removed 3,500 tons of salvaged metals from the property.

Here’s how the court describe the alternative interpretations:

According to plaintiff’s interpretation of the payment clause, its obligation to make the first installment payment required two triggering events: (1) 30 days passing from either the completion of the abatement or the commencement of demolition, whichever occurred first; and (2) the removal of 3,500 tons of salvaged metals from the project.

… According to defendants’ interpretation of the payment clause, plaintiff’s obligation to make the first installment payment required one triggering event, which could be either: (1) 30 days passing from the completion of abatement; (2) 30 days passing from the commencement of demolition; or (3) removal of 3,500 tons of salvaged metals. In other words, defendants applied the phrase “on the earlier of” in the payment clause to mean the earlier of romanette “i” or romanette “ii,” whereas plaintiff applied “on the earlier of” to apply only to the two events described within romanette “i,” rendering both romanette “i” and “ii” necessary prerequisites to its first installment obligation.

The plaintiff’s interpretation is flat-out wrong, for reasons the court explains; that’s not what interests me. Instead, let’s consider what the court says next:

On the other hand, according to defendants’ interpretation of the payment clause, plaintiff’s obligation to make the first payment required the occurrence of one triggering event. That interpretation applies the phrase “on the earlier of” to mean “on the earlier of” the events described in romanette “i” or romanette “ii.” Although that interpretation solves the inconsistencies created by plaintiff’s interpretation, it creates two new ones. First, the use of the term “and” between the two romanettes suggests that there are two conditions, and that both of those conditions must be satisfied. Although defendants contend that “and” should be read as the equivalent of “or,” the payment clause distinctly uses the word “or” within romanette “i,” thereby suggesting that the drafters intended a difference between the disjunctive “or” and conjunctive “and.”

The court is mistaken in this. Here’s what A Manual of Style for Contract Drafting ¶ 13.810 says regarding what conjunction to use when providing for selection of the earlier or later, or greater or lesser, of two alternatives:

Many drafters would use or, presumably because when you select one item from a group, or is usually the appropriate conjunction to use, as in You may select A, B, or C. But the logical choice is and, in that one is selecting one item from a group of two or more. Using or would require that one select, say, the greater of each item considered individually, which wouldn’t make sense.

Yes, or has its proponents. In particular, MSCD points out the five weaknesses in Bryan Garner’s arguments in favor of or. But the court doesn’t have to take sides in this to find the and in question a legitimate choice—even Garner acknowledges that and is the logical choice.

The court goes on to suggest a second problem with the interpretation offered by the defendants:

Second, treating “and” as the equivalent of “or” contravenes the use of only two romanettes in the clause’s overall organization. If, as defendants contend, the payment clause is read to mean that the payment obligation is triggered upon the earlier of either (i) 30 days passing from the completion of abatement or commencement of demolition; or (ii) removal of 3,500 tons, then logically the clause would have been drafted with three romanettes instead of two, i.e., (i) 30 days from completion of abatement; or (ii) 30 days from commencement of demolition; or (iii) removal of 3,500 tons.

I have no idea what the court thinks it’s doing here. The language in question nests one earlier-of choice within another. It might have been simpler to instead structure the choice as the earliest to occur of three alternatives, but that doesn’t cast doubt on the meaning of the language in question.

So the court held that the language in question was ambiguous. As such, it failed to administer justice.

Too many courts are failing at textual interpretation; see this August 2020 blog post about that. Textual interpretation isn’t a license to improvise, to make stuff up—it’s a discipline grounded in linguistics, and it’s not for dilettantes. We can’t expect judges to acquire the necessary expertise on their own; I’ll continue to look for ways to offer online training to court personnel.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.