“Lying within the lake” is a simple phrase, and we know what it means. Yet it was central to a contract dispute involving $20 million.
The case addressed the rights of a rock-quarry company’s owner (Mr. Elmore) to excavate material from a human-made lake on land that Mr. Elmore had owned but sold to a utility company (FP&L). Florida Power & Light Co. v. Hayes, 122 So. 3d 408, 409-11 (Fla. Dist. Ct. App. 2013). The case involved contracts from 1955, 1958, and 1984. The alleged breach occurred in 2004.
Two lakes were created pursuant to the 1955 contract. Six, 50-foot strips of land were left intact to facilitate the quarrying operations. Each strip protruded partly across a lake from the border. Four strips had been removed over the years.
Fast forward to 2004: Mr. Elmore decided to remove material from the two remaining strips. Based on the contracts, he believed that he had retained title to–
[the] rock, stabilizer and sand lying within the lake presently established on the Property, and will continue to have the right to remove said rock, stabilizer and sand.
Id. at 410.
FP&L refused to allow Mr. Elmore to remove material from the strips, interpreting “lying within the lake” to mean material under water (not material within the strips, which were partly above the waterline).
FP&L did not focus on the strips’ importance until 1992. In 2004, Mr. Elmer obtained a permit to remove material from them.
FP&L managed to get the permit rescinded and repudiated Mr. Elmore’s rights under the contract. Mr. Elmore sued in 2004.
In 2010, the trial court entered summary judgment for Mr. Elmore and awarded damages of $20,463,910, finding the 1984 contract language unambiguous based partly on language from the 1955 contract, which was incorporated into the 1984 contract.
The trial court vacated part of its order and granted a new trial as to the amount of damages only.
In 2013, the appellate court affirmed in part, reversed in part, and remanded. I don’t know whether the parties have settled or are still battling. Mr. Elmer died before the appeal was filed, so his estate’s personal representative (Hayes) was a party to the appeal.
Below are five”take-aways” that I’ll share with my students:
(1) Seemingly simple phrases can inspire different interpretations depending on the context.
(2) Thus, even if the parties’ minds seem to have met, drafters should scrutinize contract terms for potential ambiguity.
(3) Parties may view their relationship and duties one way at the contract-forming stage but very differently down the road.
(4) Contract drafters should spend significant time trying to anticipate possible, future changes in the parties’ views and interests (i.e., anticipate how things might go wrong).
(5) Drafters should precisely draft provisions that address such potential changes.
Around the Blogosphere