C. Breach of Contract
To succeed on the motion for summary judgment on its breach of
contract claim, NUS must prove that it had a valid and binding
contractual relationship with Chesapeake and WTM, that it
complied with and performed its obligations under the contract,
that Chesapeake and WTM breached the contract, and NUS suffered
damages as a consequence. See, e.g., 5 Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure § 1235 at
269-271 (1990). Neither party disputes that the July, 1988
agreement is a valid and binding contract. NUS maintains that it
fulfilled its obligations under the contract through its
submission of recommendations to Chesapeake about utilities cost
savings at Chesapeake's various facilities. Although Chesapeake
argues that NUS's "critique" recommendations for WTM were outside
the scope of the agreement, it does not contend that NUS breached
the contract with these recommendations. At issue is whether
Chesapeake and WTM acted upon and implemented NUS's
recommendations, saved costs on their utilities thereby, and
refused to pay NUS its share of these savings in violation of the
1. WTM Facility
a. Paragraph 11 of the Agreement
It is undisputed that defendants undertook a power factor
correction project at WTM from which they received utilities cost
savings. The parties dispute whether the agreement allowed NUS to
make "critique" recommendations for WTM about its power factor,
and if so, what obligations each had to such recommendations.
Whether WTM acted upon these recommendations is disputed by the
Plaintiff contends that defendants initiated the power factor
correction project after and because of its recommendation that
they improve the power factor at WTM Plant No. 1. Plaintiff
maintains that the July, 1988 contract authorized it to make
"critique" recommendations for WTM and obliged Chesapeake and WTM
to pay it fifty percent of any savings received if they acted
upon and implemented those recommendations. Plaintiff asserts
that the November 7, 1989 letter was a mere clarification of the
contract, and as such, provides the definitive interpretation of
paragraph 11 from the moment the contract was executed in July,
Defendants declare that under the plain language of paragraph
11 of the contract, NUS could provide only audits, not "critique"
recommendations for WTM. Defendants insist that the November 7,
1989 letter was not a clarification but an actual change of the
contract which was effective prospectively, but not
retrospectively. To support their position, defendants aver that
some terms of the November 7, 1989 "clarification" are clearly
inconsistent with paragraph 11 of the original agreement: For
example, if NUS provided Chesapeake with audits for WTM, under
paragraph 11 Chesapeake was "under no obligation to provide
information or respond to such requests or recommendations."
(Compl. Ex. A ¶ 11.) However, the November, 1989 letter required
Chesapeake to "review the recommendations and advise [NUS] of
reasons why in certain cases they may not be viable." (Compl.Ex.
B.) Defendants maintain that inconsistencies such as this lead to
the conclusion that the November, 1989 letter modified, not
clarified, the terms of the July, 1988 agreement.
To resolve the parties' dispute over the WTM recommendations,
the Court must first determine whether the contract is ambiguous
with regard to WTM. Sumitomo Machinery Corp. of America v.
AlliedSignal, Inc., 81 F.3d 328, 332 (3d Cir. 1996) (citing
Teamsters Indus. Emp. Welfare Fund v. Rolls-Royce,
989 F.2d 132, 135 (3d Cir. 1993)). A contract is ambiguous if it "is
susceptible of more than one meaning." Sumitomo, 81 F.3d at 332
(quoting Briggs v. United Shoe Machinery Corp., 92 N.J. Eq. 277,
287, 114 A.
538, 542 (Err. & App.), cert. denied, 254 U.S. 653, 41 S.Ct.
149, 65 L.Ed. 459 (1920)). As stated, although a contract may be
unambiguous on its face, it may be susceptible to more than one
meaning "when understood from the `linguistic reference point of
the parties.'" Sumitomo, 81 F.3d at 332 (quoting Mellon Bank,
619 F.2d at 1011).
The Court finds that paragraph 11 of the original agreement is
susceptible to more than one meaning and is ambiguous. In
particular, the last two sentences of the paragraph are open to a
variety of interpretations. "It is our preference that [WTM and
the Kraft Products facility] be audited rather than critiqued"
may express a preference for audits but not a prohibition of
critiques. On the other hand, it may be, as defendants argue, a
polite or euphemistic prohibition of critiques and an invitation
for audits. Although evidence that Chesapeake would not have
signed the contract had critique recommendations for WTM not been
banned is indicative of Chesapeake's intent, it does not
demonstrate that NUS agreed to such a ban. Similarly, NUS's
admission that paragraph 11 limited its efforts with regard to
WTM does not belie NUS's argument that the contract did not
prohibit critique recommendations. The November 7, 1989
"clarification" muddies the meaning of the contract further.
Chesapeake's obligations in the "clarification" are inconsistent
with its original ones in paragraph 11. Such a reading supports
Chesapeake's position that the clarification modified, not
clarified, paragraph 11, but does not betray the parties'
original understanding of paragraph 11. Because the meaning of
paragraph 11 is ambiguous, it is similarly unclear to what extent
the "clarification" modified, rather than clarified, that
paragraph. The November "clarification's" assertion that
paragraph 11 "is in no way intended to preclude [NUS] from
submitting recommendations" with regard to WTM is a plausible
interpretation of paragraph 11. Issues of material fact preclude
a determination of whether the November, 1989 letter was a
clarification, a modification, or a hybrid of the two, and
whether the letter applied retrospectively or prospectively.
b. Whether Defendants Acted upon or Implemented a NUS
Recommendation at WTM
Under the contract, Chesapeake was not obliged to pay NUS for
its services unless it acted upon and implemented a NUS
recommendation. (Compl. Ex. A ¶ 3.) Chesapeake argues that even
if the contract permitted NUS to make critique recommendations
about WTM, it still did not breach the contract because it did
not "act upon" or "implement" any NUS recommendation. Chesapeake
contends that WTM's decision-makers were unaware of NUS's
recommendation, and that WTM already knew of the potential cost
savings of a power factor improvement and had begun the
improvement incrementally before the contract was executed.
Finally, Chesapeake states that the impetus for WTM's power
factor project was a warning that its electric utility might not
have been able to provide reliable power without improvement to
the power factor.