Bristol-Myers Squibb Company v. Ikon Office Solutions, Inc.

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 01-1774
BRISTOL-M YERS SQUIBB COMPANY ,
Plaintiff-Appellee,
v.
I KON OFFICE SOLUTIONS, I NC.,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Southern District of Indiana, Evansville Division.
No. EV 99-48-C -H/H—David F. Hamilton, Judge.
____________
ARGUED SEPTEMBER 25, 2001—DECIDED JULY 1, 2002
____________
Before ROVNER, DIANE P. W OOD , and EVANS , Circuit
Judges.
ROVNER, Circuit Judge. Bristol-Myers Squibb Company
(“Bristol-Myers”) filed a complaint with the district court
to determine whether it had the right to cancel a con-
tract that it had entered into with Ikon Office Solutions,
Inc. (“Ikon”) for photocopy equipment and services. The dis-
trict court granted summary judgment in favor of the plain-
tiff after determining that Bristol-Myers had the uncon-
ditional right to terminate the contract subject only to the
payment of the agreed upon cancellation fee. Ikon appeals
and we affirm.

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2 No. 01-1774
I.
On December 29, 1995, Bristol-Myers entered into a lease
agreement with Modern Business Systems, which is now
known as Ikon. The lease required Ikon to provide photo-
copy equipment and services to the Bristol-Myers Mead
Johnson Nutritional Facilities in Evansville, Indiana for a
term of five years. After approximately one month of ne-
gotiations, and several draft agreements, the parties signed
a contract consisting of a preprinted form and a typed ad-
dendum. The preprinted portion of the contract states, “This
lease is noncancelable,” but provides a space for “Other Op-
tions and Conditions.” Within that space, Ikon typed, “See
Addendum #1 for terms and conditions.” The relevant lan-
guage in Addendum #1 is as follows:
Throughout the length of the 5 year contract, Modern
Business Systems will consider renegotiation of the cost
per copy pricing to match competitor bids to Bristol-
Myers Squibb Corporate Office. Cancellation Penalty
is 25% of the remaining equipment portion of the con-
tract:
1 year into contract $142,560
2 years into contract $106,920
3 years into contract $ 71,280
4 years into contract $ 35,640
Approximately $32,000 penalty to cancel Xerox rentals
can be rolled into the cost per copy at any time during
the contract. The cost per copy increase will be deter-
mined by how many months remain in the contract. If
the contract is canceled for any reason, Bristol-Myers
Squibb will be responsible for the remaining portion of
the money sent to Xerox, to be added to the cancellation
penalty.
Two years after signing the contract, in late 1996, Bristol-
Myers’ corporate office began soliciting bids for the pro-

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No. 01-1774 3
vision of photocopying equipment for all of its facilities na-
tionwide, including the Mead Johnson Nutritional Facili-
ties. After finding a suitable bidder, Bristol-Myers sent
a letter notifying Ikon that it was terminating the con-
tract pursuant to the cancellation terms. Ikon responded
that Bristol-Myers could not cancel the lease before first
giving Ikon the opportunity to match any competitive bid.
Ikon gave Bristol-Myers the option of buying out the re-
maining months on the lease for an amount substantially
greater than the cancellation fee.
Bristol-Myers then brought a declaratory relief action
seeking a determination that it had complied with the
terms of the contract and owed nothing further to Ikon.
Bristol-Myers in turn moved for partial summary judgment
seeking a determination that the contract (1) allowed
for early termination, and (2) did not give Ikon a right of
first refusal. The district court granted the motion for
summary judgment, declaring that Bristol-Myers had the
unconditional right to terminate the lease, subject only
to the payment of the appropriate cancellation fee, and
that the contract did not give Ikon a right of first refusal.
Because the parties disagreed on the proper amount of the
cancellation fee, the district court withheld entry of a fi-
nal judgment and set a trial date to determine the proper
amount of the fee. Shortly thereafter, the parties were able
to reach agreement on the appropriate amount of the can-
cellation fee, and the district court entered final judgment on
February 28, 2001. Ikon appeals.
II.
Summary judgment is appropriate where there is no
genuine issue of material fact and the moving party is en-
titled to judgment as a matter of law. Gawley v. Indiana
Univ., 276 F.3d 301, 308 (7th Cir. 2001). We review the dis-
trict court’s ruling on summary judgment de novo, constru-

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4 No. 01-1774
ing the record in the light most favorable to the nonmovant,
Ikon. Id. Ikon contends that the district court erred by (1)
rejecting the substantial extrinsic evidence offered by Ikon
of the contracting parties’ intent, (2) finding and declar-
ing that the contract between the parties was unambiguous,
(3) providing Bristol-Myers with an unconditional and uni-
lateral right to terminate the contract at any time, sub-
ject only to the payment of an appropriate cancellation fee,
and (4) finding that the contract did not give Ikon a right of
first refusal.
The contract provides, and the parties agree, that the
lease shall be governed by Missouri law. Under Missouri
law, the cardinal rule of contract interpretation is to ascer-
tain the intention of the parties and to give effect to that in-
tention. Sonoma Mgmt. Co. v. Boessen, 70 S.W.3d 475, 479
(Mo. App. 2002) (citing J.E. Hathman, Inc. v. Sigma Al-
pha Epsilon Club, 491 S.W.2d 261, 264 (Mo. 1973)). Un-
less the contract is ambiguous, the intent of the parties
must be based on the contract alone, and not on extrinsic
evidence. Id. The issue of whether a contract is ambiguous
is a question of law. Lupo v. Shelter Mut. Ins. Co., 70 S.W.3d
16, 19 (Mo. App. 2002). A contract is ambiguous only if
its terms, when given their natural and ordinary mean-
ing, are reasonably open to more than one meaning, or
the meaning of the language used is uncertain. Sonoma
Mgmt. Co., 70 S.W.3d at 479. A contract is not ambiguous
merely because the parties disagree over its meaning. Id. A
court may not create an ambiguity by using extrinsic or
parol evidence. Lupo, 70 S.W.3d at 20. Nor may it create
ambiguities by distorting contractual language that may
otherwise reasonably be interpreted. Sonoma Mgmt, 70
S.W.3d at 479.
As both parties agree, there is a plain and irreconcilable
conflict between the preprinted form that states that the
contract is “noncancelable” and the typewritten addendum
that lays out the terms for cancellation on the assumption

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No. 01-1774 5
that the contract may be “canceled for any reason.” Ikon
asserts that once an ambiguity is found in a contract, the
ambiguity must be resolved by submission to a jury. Under
Missouri law, however, the “mere fact of ambiguity does not
automatically require intervention of a jury.” Busch & Latta
Painting Corp. v. State Highway Comm’n of Mo., 597 S.W.2d
189, 198 (Mo. App. 1980). Even if a court finds that a con-
tract is ambiguous, “the court must still declare the mean-
ing of the contract unless the surrounding circumstances
or other extrinsic evidence admitted on the ambiguity ques-
tion raise issues of fact for the jury to resolve.” Id. (inter-
nal citations omitted); see also Auto Owners Mut. Ins. Co.
v. Wieners, 791 S.W.2d 751, 758 (Mo. App. 1990) (same);
Girardeau Contractors, Inc. v. Missouri Highway and
Transp. Comm’n, 644 S.W.2d 360, 363 (Mo. App. 1982)
(“Even if the contract could be considered ambiguous, that
does not necessarily mean that there is a jury question. The
court itself must still declare the meaning of the contract
unless the evidence admitted raised a real issue of fact to
be resolved by the jury.”); Commerce Trust Co. v. Howard,
429 S.W.2d 702, 705-06 (Mo. 1968) (declaring that, “where
there is no real conflict of evidence upon any of the essential
facts properly to be considered is [sic] construing the con-
tract, and the true meaning of the words used is made clear
by such evidence, it becomes the duty of the Court, and not
the jury, to construe it”) (quoting National Corp. v. Allan,
280 S.W.2d 428, 432 (Mo. App. 1955)). Before submit-
ting the matter to a jury, a court first must attempt to
construe the contract “based on all the circumstances, evi-
dence, and rules of construction.” Vandever v. Junior Coll.
Dist. of Metro. Kansas City, 708 S.W.2d 711, 717 (Mo. App.
1986).
In this case, there are no essential facts that must be
considered in construing the conflicting portions of the con-
tract. The contradictory language in the contract refers
solely to whether the contract may be cancelled or not, and

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6 No. 01-1774
neither party disputes that the contract could be terminated.
The parties only disagree as to the terms by which the
contract may be cancelled. Furthermore, the meaning of
the arguably ambiguous portion of the contract easily is
construed by applying a well-known rule of construction as
required by Vandever, and therefore the question is not one
for submission to a jury. 708 S.W.2d at 717.
Under Missouri law, when a conflict arises between a
preprinted portion and a typewritten portion of a contract,
the typewritten language will prevail. Silver Dollar City,
Inc. v. Kitsmiller Constr., Co., 931 S.W.2d 909, 914 (Mo.
App. 1996); House of Lloyd, Inc. v. Director of Revenue, 824
S.W.2d 914, 923 (Mo. 1992) (overruled on other grounds
by Spico, Inc. v. Director Revenue, 875 S.W.2d 539 (Mo.
1994)). Missouri courts have turned to this rule and other
such rules of construction, in the context of a motion for
summary judgment, to resolve ambiguous language with-
out submission to a jury. See, e.g., Hayward v. Taylor, 807
S.W.2d 171 (Mo. App. 1991). Likewise, we may resolve
any ambiguity over conflicting language of the contract—
in this case whether the contract could be cancelled or
not—by well-established principles of Missouri law for con-
struing contracts. The addendum controls, and thus, Bristol-
Myers has the right to cancel the contract.
The parties also dispute the terms under which the
contract can be cancelled. Ikon claims that the following
language gave it a right of first refusal: “Throughout the
length of the 5 year contract, Modern Business Systems
will consider renegotiation of the cost per copy pricing to
match competitor bids to Bristol-Myers Squibb Corporate
Office.” Bristol-Myers contends that this language does
not give rise to a right of first refusal, but rather merely
reflects Ikon’s willingness to renegotiate pricing. We find
that the terms regarding the conditions of cancellation are
not ambiguous in any material respect and did not give
Ikon a right of first refusal.

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No. 01-1774 7
Under Missouri law, a right of first refusal requires an
owner, when and if that owner decides to sell, to offer the
property first to the person who has the right of first refusal.
Schroff v. Smart, 73 S.W.3d 28, 29, n.1 (Mo. App. 2002)
(citing Beets v. Tyler, 290 S.W.2d 76, 81 (Mo. 1956)). The
party with the right of first refusal may, but does not have
to, elect to purchase the offered property. Id. If the party
with the right of first refusal elects not to purchase the
property, the owner may then sell to anyone it chooses. Id.
An owner must make an offer to a holder of the right of
first refusal before accepting an offer from a third party.
Unlimited Equip. Lines, Inc. v. The Graphic Arts Ctr.,
Inc., 889 S.W.2d 926, 935 (Mo. App. 1994). A right of first
refusal is often given in connection with the sale or lease
of real estate, but can be a part of any contract. Id. at 932.
Nothing in the disputed contract clause establishes any
duty or obligation on the part of Bristol-Myers to give
Ikon the right of first refusal. It does not require Bristol-
Myers to notify Ikon of its intention to solicit competing
bids, nor does it require Bristol-Myers to consider compet-
ing bids from Ikon. It merely does what the plain language
says it does—it allows Ikon to consider renegotiating the
cost per copy pricing to match competitive bids that Bristol-
Myers might receive. This Court must give effect to the
intent expressed by the plain language of the contract. Wild-
flower Comty. Ass’n v. Rinderknecht, 25 S.W.3d 530, 534
(Mo. App. 2000). It may not give effect to a party’s secret
surmise or undisclosed assumption. Peet v. Randolph, 33
S.W.3d 614, 618 (Mo. App. 2000).
Missouri courts liberally find right of first refusal clauses
to be specific enough to be enforced, even when they are
missing some important terms. See, e.g., Peet, 33 S.W.3d at
618 (lacking price and duration); Unlimited Equip. Lines,
Inc., 889 S.W.2d at 933-34 (lacking price terms, scope of
right, and the type of transactions to which the right ap-
plied); Barling v. Horn, 296 S.W.2d 94, 95 (Mo. 1956)

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8 No. 01-1774
(lacking price or method for determining price). Neverthe-
less, the agreements in each of these cited cases contained
very explicit language granting a right of first refusal. Peet,
33 S.W.3d at 616 (“Buyers to have first right of refusal
to any offer on the above mentioned 20 A tract if said tract
is ever sold, wholly or in part, written first right of refusal
to be executed at the time of closing of this contract”);
Unlimited Equip. Lines, Inc., 889 S.W.2d at 933 (“[GAC]
agrees to give first right of refusal to [UEL] on all equipment
that is to be released for the next twelve months”); Barling,
296 S.W.2d at 95 (if Lessors have “notified the Lessees in
writing of their desire to sell the building and the premises
prior to the expiration of this term . . . Lessees shall have
the first opportunity to purchase the premises”). The con-
tract in this case lacks any such explicit language granting
a right of first refusal.
Corbin on Contracts discusses myriad terms that have
been used to create a right of first refusal including, “first
option to buy,” “first privilege of buying,” “preemptive op-
tion,” “preemptive right,” “preemptive right to purchase,”
“right of preemption,” “first right of purchase,” “first refusal-
to-purchase option,” “preferential right to purchase,” “first
option to buy,” “preference as purchaser,” and “independent
privilege.” 3 Eric Mills Holmes, Corbin on Contracts, §§ 11.3,
n. 1, 11.4 (revised ed. 1993). None comes close to the vague
statement contained in the contract in this matter that Ikon
is “willing to consider renegotiation.”
Unable to point to any specific language within the con-
tract granting a right of first refusal, Ikon urges this Court
to look to external evidence to establish the parties’ inten-
tion to include such a right. Ikon argues that the Court may
do so because the contract is ambiguous. Ikon’s argument,
however, requires this Court to declare all parts of the
contract related to cancellation ambiguous merely because
of the easily resolved conflict discussed above between the
printed form that states that the contract is “noncancelable”

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No. 01-1774 9
and the typewritten addendum that lays out the terms
for cancellation on the assumption that the contract may
be “canceled for any reason.” But such an argument defies
logic. It would require this Court to construe that which is
clear and unambiguous on its face. There simply is noth-
ing ambiguous in the phrase “[Ikon] will consider rene-
gotiations of the cost per copy pricing to match competitor
bids.” A court may not create ambiguities by distorting con-
tractual language that may otherwise reasonably be inter-
preted. Sonoma Mgmt., 70 S.W.3d at 479.
“The parol evidence rule prohibits evidence of prior or
contemporaneous agreements that vary or contradict the
terms of an unambiguous and complete contract absent
fraud, common mistake, accident or erroneous admission.”
Kassebaum v. Kassebaum, 42 S.W.3d 685, 693 (Mo. App.
2001). The contract term regarding Ikon’s “willing[ness]
to consider renegotiation of the cost per copy pricing to
match competitor bids” was not ambiguous. Ikon does not
allege fraud, common mistake, accident, or erroneous ad-
mission. The parties in this case spent a month negotiating
the terms of the agreement and intended for it to be the
complete and final agreement between the parties. See
Poelker v. Jamison, 4 S.W.3d 611, 613 (Mo. App. 1999) (not-
ing that if a document “appears to be a complete agreement
on its face, it is conclusively presumed to be a final as well
as a complete agreement between the parties”). Extrinsic
evidence, therefore, is not admissible to create a right of
first refusal that does not exist on the face of the contract.
We agree with the district court that the terms of the
contract did not require Bristol-Myers to give Ikon a right
of first refusal prior to cancelling the contract. Bristol-
Myers had the right to terminate the contract subject only
to the payment of the appropriate cancellation fee.

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10 No. 01-1774
III.
For the reasons stated above, we affirm the district court’s
grant of summary judgment in favor of Bristol-Myers.
AFFIRMED .
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-97-C-006—7-1-02

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