FRED H. GILLHAM, SR., as Trustee for the TIMCO Employee Profit Sharing Plan & Trust,… v. Tennessee Valley Authority

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 12a0710n.06
No. 11-5169
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FRED H. GILLHAM, SR., as Trustee for the
TIMCO Employee Profit Sharing Plan & Trust,
FBO Fred H. Gillham, Sr.
Plaintiff-Appellee,
v.
TENNESSEE VALLEY AUTHORITY,
Defendant-Appellant.
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ON APPEAL FROM THE
UNITED STATES DISTRICT
COURT FOR THE WESTERN
DISTRICT OF TENNESSEE
O P I N I O N
BEFORE: BATCHELDER, Chief Judge; MCKEAGUE, Circuit Judge; and QUIST,
Senior District Judge.*
QUIST, District Judge.
Defendant-Appellant Tennessee Valley Authority (TVA) appeals the district court’s order
granting summary judgment to Plaintiff-Appellee Fred H. Gillham Sr., as Trustee for the TIMCO
Employee Profit Sharing Plan & Trust, FBO Fred H. Gillham, Sr. (Gillham or TIMCO), on
TIMCO’s breach of contract claim. The district court held that the TVA breached a commitment
letter with TIMCO for the public auction of real property by allowing a second bidder to bid at the
auction. Because the district court failed to apply the plain language of the commitment letter and
Honorable Gordon J. Quist, Senior United States District Judge for the Western District of*
Michigan, sitting by designation.

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instead improperly read additional terms into the parties’ agreement, we reverse and remand with
instructions to enter summary judgment for the TVA.
I.
The TVA is a “wholly-owned corporate agency and instrumentality of the United States,”
Hill v. United States Dep’t of Labor, 65 F.3d 1331, 1333 (6th Cir. 1995). It is responsible for
managing and developing lands and natural resources in the Tennessee Valley region. See United
States ex rel. TVA v. Welch, 327 U.S. 546, 553, 66 S. Ct. 715, 718 (1946). In 1997, the TVA granted
TIMCO an exclusive easement (the “Easement”) on certain property (the “Property”) located in
Yellow Creek Port Industrial Park in Tishomingo, Mississippi, for a term of forty years. Among
other things, the Easement required TIMCO to invest at least $500,000 to improve the Property and
to use it solely for “constructing, operating, and maintaining facilities to manufacture large water
craft and appurtenances thereto.” TIMCO made the required improvements but was unable to attract
a tenant that met the use restrictions.
In July 2005, TIMCO submitted a land use application to the TVA requesting that the TVA
eliminate the Property’s use restrictions. The TVA denied the request, but eventually suggested that
it sell the Property outright to TIMCO through a public auction. TIMCO agreed to the proposal, and
the TVA’s board of directors approved the proposal. On February 2, 2007, the parties entered into
a commitment letter (First Commitment Letter) containing the terms and conditions for a public
auction of the Property. The First Commitment Letter set a minimum bid of $625,000 and required
TIMCO to attend the auction and bid the minimum amount. The First Commitment letter also
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provided that TIMCO would receive a credit of $425,000 for the improvements to the Property if
TIMCO was the high bidder. The parties set a mutually-acceptable auction date of July 17, 2007.
The TVA, however, cancelled the first auction and attempted to reschedule the auction for August
17, 2007. TIMCO objected to this date, and the sale was not rescheduled.
On November 26, 2007, the parties entered into another commitment letter for an auction sale
of the Property (Second Commitment Letter). The terms of the Second Commitment Letter were
very similar to those of the First Commitment Letter, with the exception that the minimum bid price
was increased to $907,300 and the credit to TIMCO was increased to $653,000. Like the First
Commitment Letter, the Second Commitment Letter contained requirements for TIMCO and other
interested bidders to qualify to participate in the auction. Paragraph 1.D. provides:
D. Financial Ability. TIMCO must qualify to bid at the auction by
submitting evidence, satisfactory to TVA, in its sole discretion, of its
financial ability to close the sale.
Paragraph 4 provides:
4. Auction. The proposed auction shall be held on a mutually acceptable date.
Potential bidders other than TIMCO must qualify at least two (2) days prior
to the date of the auction.
TVA and TIMCO set a mutually-acceptable date of December 21, 2007, for the auction, and
TVA issued a Notice of Public Auction for that date at 8:30 a.m. CST at the Tishomingo County
Courthouse. The Notice provided that “[i]n order to qualify to bid, TVA must receive, no later than
12:00 Noon CST on December 19, 2007, a letter of intent to bid and credentials, satisfactory to TVA,
in its sole discretion, evidencing the financial ability to close the sale.” Gillham, on behalf of
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TIMCO, sent a letter of intent to bid and letter of credit to the TVA on December 12, 2007. On
December 13, 2007, Will Wasdin (“Wasdin”), the TVA Realty Services paralegal assigned to handle
the auction, sent Gillham an email notifying him that TIMCO had qualified to bid. On December
19, 2007, two days prior to the scheduled auction, Wasdin sent Gillham an email stating that TIMCO
was the only qualified bidder, along with a copy of a Special Warranty Deed that the TVA would
deliver upon the close of the auction on December 21, 2007.
On December 20, 2007, at approximately 10:00 a.m., as Wasdin was preparing to leave his
office to travel to Tishomingo County, Mississippi, for the auction, he retrieved from the TVA mail
cart a package from Dynasteel Corporation. Wasdin opened the package and saw that it contained
bid documents for the auction. The package was postmarked December 12, 2007. Although Wasdin
did not receive the package until December 20, 2007, it had been received at least a day earlier in
the TVA’s Chattanooga Mail Services Office. Delivery had been delayed, however, because the
address did not contain a mail-stop number, i.e., an internal TVA address. Wasdin immediately
called Rebecca Tolene, an attorney in TVA’s Office of the General Counsel, who in turn notified
Gillham’s attorney of the situation. After investigating the matter, Tolene determined that the
package was timely submitted and that Dynasteel should be permitted to bid at the auction. Through
counsel, Gillham protested the TVA’s decision to allow Dynasteel to bid.
The auction went forward as scheduled on December 21, 2007. Gillham attended the action
and made the winning bid on behalf of TIMCO in the amount of $1.5 million.
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Following the sale, TIMCO sued the TVA, alleging that it breached the Second Commitment
Letter by allowing Dynasteel to bid at the December 21, 2007, auction. Following discovery, the1
parties filed cross motions for summary judgment. The district court granted TIMCO’s motion and
denied the TVA’s motion, concluding that the TVA improperly allowed Dynasteel to bid at the
auction because Dynasteel failed to qualify before the deadline expired.2
II.
“Questions of contract interpretation, including those that form the basis for the grant of
summary judgment, are subject to de novo review.” Royal Ins. Co. of Am. v. Orient Overseas
Container Line Ltd., 525 F.3d 409, 421 (6th Cir. 2008) (citation omitted). Summary judgment is
proper “if the movant shows that there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
TIMCO’s breach of contract claim alleged that the TVA breached the First and Second1
Commitment Letters. TIMCO also alleged that Wasdin’s December 19, 2007, email was a separate
contract that the TVA breached. In addition to breach of contract, TIMCO alleged claims for unjust
enrichment and violation the Freedom of Information Act. TIMCO subsequently withdrew its
Freedom of Information Act claim.
Because TIMCO failed to address the First Commitment Letter in its summary judgment2
papers, the district court deemed that aspect of its claim abandoned. In light of its ruling on
TIMCO’s claim for breach of the Second Commitment Letter, the district court declined to address
TIMCO’s breach of contract claim based on Wasdin’s email. Finally, the district court dismissed
the unjust enrichment claim because the Second Commitment Letter was a valid contract covering
the subject of the unjust enrichment claim. The only claim at issue on appeal, therefore, is TIMCO’s
claim for breach of the Second Commitment Letter.
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III.
A.
Because the contract at issue involves the United States and was entered into pursuant to a
federal statute, federal common law applies. United States v. Seckinger, 397 U.S. 203, 209-10, 90
S. Ct. 880, 884 (1970); King v. United States, 301 F.3d 1270, 1275-77 (10th Cir. 2002). The general
rules of contract law require that courts interpret contracts according to their “‘plain meaning, in an
ordinary and popular sense.’” Univ. Hosps. of Cleveland v. S. Lorain Merchants Ass’n Health &
Welfare Benefit Plan & Trust, 441 F.3d 430, 437 (6th Cir. 2006) (quoting Perez v. Aetna Life Ins.
Co., 150 F.3d 550, 556 (6th Cir. 1998)). “When clear contract language itself reveals the intent of
the parties, it is unnecessary to turn to rules of construction.” TVA v. Exxon Nuclear Co., 753 F.2d
493, 496 (6th Cir. 1985); see also Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542,
1549 (9th Cir. 1989) (noting that the parties’ intent must be ascertained from the contract itself when
its terms are clear). Furthermore, the contract must be construed to give meaning to every word or
phrase. United States v. Brye, 146 F.3d 1207, 1211 (10th Cir. 1998).
The dispositive issue in this appeal is what must occur for interested bidders, other than
TIMCO, to qualify to bid. Two provisions of the Second Commitment Letter are relevant. First,
under paragraph 4., potential bidders “must qualify at least two (2) days prior to the date of the
auction.” Second, paragraph 1.D. specifies that a potential bidder qualifies “by submitting evidence,
satisfactory to TVA, in its sole discretion, of its financial ability to close the sale.” Giving these
provisions their plain meaning, an interested party qualifies to bid by submitting to the TVA, two
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days prior to the date of the auction, satisfactory evidence of its ability to close the sale. Applying
this plain language, Dynasteel qualified to bid when it submitted, and the TVA received, its
documents two days before the auction, by 12:00 Noon on December 19, 2007.
The district court held that the TVA’s receipt of Dynasteel’s documents, alone, was
insufficient for Dynasteel to qualify because the TVA must, at a minimum, “open[] the envelope and
glanc[e] at its contents to determine whether it includes documents in proper form.” It reasoned that
because the bidder’s evidence must be “satisfactory to TVA,” a TVA representative must review the
evidence of financial ability to confirm that the bidder qualifies. In reaching this conclusion,
however, the district court ignored the plain language of the agreement and instead read additional
language into paragraph 1.D. conditioning qualification upon the TVA’s review of the bidder’s
evidence. The qualification requirements, however, speak not in terms of what the TVA must do
or determine, but instead address what the bidder must do–submit the satisfactory evidence two days
prior to the sale. Moreover, the requirement that the evidence be “satisfactory to TVA” defines the
quality of the interested bidder’s evidence; it does not require that the TVA review the documents
prior to the deadline. The district court’s interpretation appears to have been influenced by its
consideration of extrinsic evidence concerning the TVA’s auction process. Because the language
is unambiguous, however, the district court erred in considering extrinsic evidence to glean the
parties’ intent. “[A] court should not use extrinsic evidence to attempt to discern the intent of the
parties, but rather should determine their intent from the plain language of the contract.” Royal Ins.
Co. of Am., 525 F.3d at 421 (internal quotation marks omitted).
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The district court also found that limiting paragraph 1.D. to the bidder’s submission and the
TVA’s receipt would render the phrase “satisfactory to TVA, in its sole discretion” superfluous. We
disagree. The character of the bidder’s evidence does not change between the time of receipt and
review. If Dynasteel’s evidence was satisfactory to Wasdin when he opened the package and
reviewed it–even after the deadline for submissions had expired–it was satisfactory at the time it was
received in the TVA’s mail room. For example, suppose that in order to qualify the TVA had
required interested bidders to submit their bid documents on paper in a color satisfactory to the TVA.
If the TVA determined that it would accept bid documents only on blue or red paper, a bidder who
timely submitted bid documents on yellow paper would never qualify, but a bidder who submitted
bid documents on a blue piece of paper would qualify upon the TVA’s receipt of the bid package,
regardless of when it was reviewed, because the color of the paper would be satisfactory to the TVA.
Thus, the TVA’s receipt of Dynasteel’s package qualified Dynasteel to bid.
B.
TIMCO argues that a dispute of fact remains as to whether the TVA received Dynasteel’s bid
package before the qualifying deadline, thus precluding summary judgment for the TVA. We
disagree.
According to the TVA’s evidence, the mail arrives in the TVA’s mailroom one time each day
at 7:00 a.m. (Fichera Decl. ¶ 9.b.) Mail that contains a mail-stop number, or an internal delivery
address, is sorted into pigeonholes and delivered at approximately 10:00 a.m. the same morning. (Id.
¶¶ 9c. and e.) Mail that lacks a mail-stop designation is placed into a bin to be looked up later in the
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day, usually after lunch. (¶¶ 9.d. and g.; Stinson Dep. at 2.) Most of the lookup mail is delivered
on the 10:00 a.m. mail run the day after it is received. (Fichera Decl. ¶ 9.g.) It is undisputed that
Dynasteel’s package did not contain a mail-stop number. The handwritten mail-stop number “SP3L”
on the Dynasteel package indicates that the package was put in the lookup bin and that a mailroom
employee wrote the mail-stop number on the envelope. (Id. ¶ 15.a.) The facts that the Dynasteel
package contained a hand-written mail-stop number and was delivered to Wasdin between 10:00
a.m. and 11:00 a.m. on December 20 indicate that the package was received in the TVA’s mailroom
no later than approximately 7:00 a.m. the previous morning, when the mail was delivered.
(¶¶ 15.c.- e.)
TIMCO cites two bases for an issue of fact. First, it contends that the Dynasteel package
lacked a special TVA sticker that should have been attached pursuant to a recently-adopted junk-
mail-reduction policy. The policy applied to mail that did not include a mail-stop number and
required mailroom employees to place a sticker on the parcel instructing the recipient to advise the
sender of the proper mail-stop number. TIMCO contends that the lack of such a sticker on the
Dynasteel package creates a genuine issue of fact as to whether the sorting and delivering of the
Dynasteel package was consistent with the TVA’s other mailroom policies and procedures that
would have delayed the delivery of the Dynasteel package to Wasdin. TIMCO also notes that TVA
mail courier Charles Stinson testified that depending on his mailroom workload, he might lookup
mail-stop numbers for lookup mail prior to the 10:00 a.m. mail run and include those pieces of mail
in that morning’s mail run. (Stinson Dep. at 22-23.) Thus, TIMCO argues, a trier of fact could
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conclude that the TVA received the Dynasteel package on December 20 and delivered it to Wasdin
the same day.
TIMCO’s evidence fails to create an issue of fact. To survive summary judgment, a party
must present more than a “mere . . . scintilla” of evidence. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 252, 106 S. Ct. 2505, 2512 (1986). A party may not rest on speculation or a “mere possibility”
of a factual dispute. Mitchell v. Toledo Hosp., 964 F.2d 577, 582 (6th Cir. 1992). That the
Dynasteel package lacked a special sticker says nothing about whether it was handled in the usual
manner for mail items lacking a mail-stop number. The sticker may have been omitted for a number
of reasons, none of which has anything to do with the processing of lookup mail. As for the
possibility that the Dynasteel package was processed the same morning it was received, this is no
more than speculation. Based on decades of experience in the TVA’s mailroom, Frank Fichera, the
Manager of TVA Mail Services, stated that most lookup mail is done after lunch, and it “would be
highly unusual for a piece of lookup mail to be looked up and be distributed on the 10:00 a.m. mail
run on the day that it was received.” (Fichera Decl. ¶ 9.g.) Indeed, Fichera confirmed that the
mailroom received more mail in December–when the Dynasteel package was received–than at other
times of the year because of the holidays, (id. ¶ 5), making it improbable that mailroom employees
would have time to handle the lookup mail received that morning in time to include it in the morning
mail run. Consequently, TIMCO can offer no more than speculation.
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IV.
For the foregoing reasons, the judgment of the district court is REVERSED and
REMANDED with instructions to enter summary judgment in favor of the TVA.
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ALICE M. BATCHELDER, Chief Judge, dissenting. I dissent not because I find the
majority’s interpretation of the contract language wrong—to the contrary, I find it both persuasive
and elegant, indeed, considerably more elegant than the contract itself. Rather, I dissent because I
believe it is possible to reasonably disagree with that interpretation, in no small part due to the
contract’s noted inelegance. Thus, I would find this contract ambiguous and in need of trial to
determine what the parties intended it to mean.
As the majority recognizes, the dispute in this case turns on two key sentences in the contract.
The first is in ¶ 1.D., which defines what it means for TIMCO to “qualify.” The second is in ¶ 4,
which places a two-day, pre-auction deadline on when other bidders can qualify. Though no
language directly defines what “qualify” means for other bidders, the parties agree that the ¶1.D.
definition provided for TIMCO applies to other bidders as well. See, e.g., TVA Br. at 22 n.13.
Thus, the contract requires the following for other bidders to bid at the auction:
[Other bidders] must qualify to bid at the auction by submitting evidence, satisfactory
to TVA, in its sole discretion, of [their] financial ability to close the sale. [Other
bidders] must qualify at least two (2) days prior to the date of the auction.
The parties’ dispute over this language essentially boils down to a matter of timing: when
must TVA review the submitted evidence to determine if it is satisfactory? Both parties agree that
a bidder must submit its evidence before the two-day deadline. Further, and crucially, both parties
agree that a bidder does not ultimately qualify to bid at the auction until TVA determines that the
bidder’s submitted evidence is satisfactory. See, e.g., TVA Br. at 38 (“If TVA determines, in its sole
discretion, that the [bidder’s] evidence is not satisfactory, then the bidder . . . cannot bid at the
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auction.”) and 33 (“TVA had up to the start of the auction to determine whether a potential bidder
had qualified . . . .” (emphasis added)). Where they part ways is that TIMCO argues that TVA must
make the determination by the two-day, pre-auction deadline, while TVA argues that it can make that
determination any time before the auction itself. TIMCO Br. at 21; TVA Br. at 33. While I agree
with the majority that TVA has the better argument, I do not see TIMCO’s approach as unreasonable.
Viewed in isolation, ¶ 1.D. favors TVA’s timeline, establishing only that TVA must find a
bidder’s submitted evidence satisfactory in order for the bidder to qualify to bid at the auction; it
does not require the pre-auction deadline for TVA’s review. The only apparent time limit is that a
bidder must qualify before the auction takes place (“to bid at the auction,” a bidder “must qualify”),
which is consistent with TVA’s position on appeal regarding when it must make the qualification
determination.
But TIMCO argues that ¶ 4 does create a deadline for qualification. It requires that bidders
“must qualify at least two days” before the auction. This could reasonably be interpreted to mean
that all the necessary elements of “qualify” must be completed by that time. Because a necessary
element of qualification is TVA’s determination that the submitted evidence is satisfactory, such an
alternative interpretation would require TVA to determine that the evidence is satisfactory before
the deadline.
TIMCO’s approach is strengthened by the fact that TVA’s argument requires interpreting
“qualify” to mean something different in ¶ 1.D. than it does in ¶ 4. As TVA sees it, to “qualify”
under ¶ 1.D. a bidder must have submitted evidence and TVA must have determined that the
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evidence is satisfactory, but to “qualify” under ¶ 4 a bidder need only submit its evidence before the
two-day deadline. Thus, under TVA’s interpretation, a bidder who has “qualified” under ¶ 4 by
submitting his materials before the two-day deadline can then be “disqualified” under ¶ 1.D.’s post-
deadline (but pre-auction) review. Defining the same key term in the same contractual provision to
mean two different things is questionable and supports recognizing the contract language as
ambiguous.
The majority’s approach offers a route around this ambiguity problem. In its analysis,
qualification occurs simply because the bidder submits satisfactory evidence. Thus, a bidder who
(1) submits evidence before the two-day, pre-auction deadline that (2) TVA finds satisfactory
sometime after the deadline (3) “qualified” at the moment it submitted its satisfactory evidence. So
how is it, as the district court asked below, that the evidence could be satisfactory to TVA without
review? The majority answers, “The character of the bidder’s evidence does not change between
the time of receipt and review. If [the other bidder’s] evidence was satisfactory to Wasdin when he
opened the package and reviewed it—even after the deadline for submissions had expired—it was
satisfactory” when it was submitted before the deadline, too. Maj. Op. at 8.
Though I find this persuasive, I do not think it solves the ambiguity problem. By reserving
the satisfaction determination to its “sole discretion” and eschewing any explicit limitations on that
discretion, TVA has arguably made its review an indispensable element of what it means to
“qualify.” Thus, it seems reasonable to read the contract as making TVA’s exercise of judgment a
necessary part of the qualification process—until TVA renders judgment, a bidder is not qualified.
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Notably, that is precisely TVA’s position on appeal: it will not allow a bidder to participate at the
auction until it has determined that the bidder is, in fact, qualified. TVA Reply Br. at 21 (noting that
the “sole discretion” language means that TVA “reserve[s] the right to consider a potential bidder’s
financial wherewithal before allowing it to bid”).
Where contract language is susceptible to more than one reasonable interpretation, it is
ambiguous. Sec’y of U.S. Air Force v. Commemorative Air Force, 585 F.3d 895, 900 (6th Cir.
2009). The proper interpretation of ambiguous language turns on the intent of the parties and is an
issue of fact, Parrett v. Am. Ship Bldg. Co., 990 F.2d 854, 858 (6th Cir. 1993), meaning that it
ordinarily must be resolved at trial. Summary judgment is appropriate to resolve ambiguity only
“where extrinsic evidence leaves no genuine issue of material fact and permits interpretation of the
agreement as a matter of law.” Reardon v. Kelly Servs., Inc., 210 F. App’x 456, 458 (6th Cir. 2006).
The state of the extrinsic evidence in this case does not permit such a conclusion, and neither the
district court nor the majority found otherwise. I would remand this case for trial.
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