A California district court has dismissed a lawsuit brought by a FedEx contractor against the company for breach of implied contract, wrongful termination and promissory estoppel, finding that oral representations made to the plaintiff cannot change the terms of a written contract.
In Mendes, et.al., v. Fed Ex Ground Transportation Systems, Inc., plaintiffs entered into two contracts with FedEx to provide package delivery services using the name “FedEx Ground” in 1999 and 2009. Both agreements provided for automatic renewal for a term of one year, subject to termination upon notice by either party.
FedEx sent plaintiffs a letter indicating that it was considering not renewing their contract in January 2013, and subsequently notified plaintiffs in writing of FedEx’s intent not to renew the agreements. Plaintiffs contend they had received oral assurances that the lease relationship, critical to their business, would continue as it had before.
In granting the defendant’s motion to dismiss, the court first addressed the dispute of whether the case should be decided under California or Pennsylvania law. A provision in the agreement stated clearly, “This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania.”
In order to uphold that provision, the California court must determine (1) whether the chosen state has a substantial relationship to the parties or the transaction, or (2) whether there is any other reasonable basis for the parties’ choice of law. If the proponent of the choice of law clause demonstrates that either of these tests is met, then the Court must uphold the choice of law provision unless the opposing party carries its burden to show that (1) it is contrary to a fundamental California state policy, and (2) California has a materially greater interest than the chosen state.
Satisfied that none of those California interests were implicated, the Court ordered that because FedEx is a corporation based in Pennsylvania, that fact is sufficient to demonstrate that a choice of law provision bears a “substantial relationship” to the parties and therefore Pennsylvania law should be applied to the dispute.
The Pennsylvania law the California court used to apply to the dispute was Prudential Prop. & Cas. Ins. Co. v. Sartno, 588 Pa. 205, 212, 903 (2006): “Where. . .the language of the contract is clear and unambiguous, a court is required to give effect to that language.”
According to the language of the written contract, FedEx was free to cancel the agreements absent good cause by giving required notice, which they did.
Furthermore, the court noted, “The alleged assurances described by plaintiff do not meet the burden of showing an unequivocal intent to modify the written terms of the contract. A promise not to ‘cancel’ the Operating Agreements absent good cause does not clearly indicate an intent to modify the provision governing renewal.”
This case stands for two propositions. One, the law of the state two parties choose to govern their contract will control a dispute unless allowing it would violate some core or fundamental interest of the state in which the court serves. Second, if the law of that state requires resolving the dispute on the basis of the plain meaning of the contract – and there is no ambiguity – that law can prohibit a party from claiming that the provisions are not valid.
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