The courts seem to be throwing curve balls lately on the interpretation of some rather common words. In my previous post I discussed the interpretation of "if" by the Idaho Supreme Court. TonightI am writing about the Iowa Court of Appeals ignoring the word "shall" in ruling that Wild Rose Entertainment, L.L.C. did not breach a contract with John Pavone and Signature Management Group, L.L.C. (Pavone v. Kirke, No. 9-412/08-0180, Ia. Ct. Apls., Nov. 25, 2009).
Wild Rose and SMG entered into an agreement regarding the operation of a casino in Ottumwa (the "October Agreement"). This agreement contained a provision stating that if the Ottumwa project was completed "Wild Rose shallenter into an exclusive management agreement with [Pavone]...This Management Agreement shall provide for an annual management fee equal to four percent (4%)...The terms of the Management Agreement shallbe similar to...the gaming development agreement between Wild Rose and the City of Ottumwa, Iowa."
The court's opinion notes that the parties orally agreed that this agreement would also apply to a possible casino in Emmetsburg. Presumably then with respect to Emmetsburg the references to Ottumwa should be changed toEmmetsburg. The Ottumwa casino was rejected by gaming authorities, but the Emmetsburg casino was approved.
The jury found for Pavone and awarded him $10 million. The district court refusedto issue a JNOV. the court of appeals reversed the trial court and held that this section of the agreement was nothing more than an agreement to agree and was therefore unenforceable.
First, the court held that the October Agreement was a consulting agreement, not a management agreement. It is not clear why the characterization of this contract is relevant. Whether the October Agreement is a management agreement or a consulting agreement is not the point. Pavone was contending that Wild Rose was required to enter into a management agreement because the Emmetsburg casino was approved.
Next, the court found that the October Agreement failed to contain many key terms regarding the management agreement including the hiring and firing of key personnel, the term of the agreement and the scope of services. However, as the district court pointed out in its ruling, the referenced agreement with Ottumwa contained all of these terms and it was reasonable to assume that management included the hiring and firing of key personnel.
The fact that the district court and the court of appeals could come to different conclusions should have been enough to find that a jury could too, but I find it very interesting that the use of the word "shall" was never discussed. Lawyers choose their words carefully. What did they mean when both sides agreed to the use of the word "shall"?
Dictionary.com says it means "must or is obliged to." Merriam-Webster's says it is used to express what is mandatory. That is how I use the word. Apparently, the Iowa Court of Appeals thinks otherwise. So what are lawyers now supposed to think it means?