Court Cannot Choose Between Two Reasonable Interpretations on a Motion to Dismiss
In Monier, Inc. v. Boral Lifetile, Inc., (Del. Ch., May 13, 2008), read letter opinion here, the Chancery Court relied on prior precedent to hold that on a Motion to Dismiss under Rule 12(b)(6), it could not choose between two (or more) reasonable interpretations of an Operating Agreement. Thus, even if the plaintiff's interpretation did not ultimately prevail at trial, at the motion to dismiss stage it would be premature to favor one interpretation over the other.
When ambiguity leads to extrinsic evidence, one question is whether the Court then forgets intrinsic evidence (e.g., the four-corners, and read-as-an-integrated-whole rules), and frees itself to make a better contract for the parties. Are the contract terms in the Monier,and the recent Lillis cases, ambiguous, or was it that the actions taken were ambiguous? The Borel parties argued that although management had acted, it did 'not intend' to amend the distribution rate thereby. So, was their action ambiguous, or was that duality inherent in the agreed terms?
In both Monier and Lillis, the Courts' extrinsic looks were at prior conduct and acts of admission, which is evidence that itself admits of ambiguous interpretations - what was done then, why it was done so, and why doing it before defined what now is might be done consistent with the agreed terms.
Unless a textual ambiguity is fatal to an understanding of terms, then a court fairly can assess, as the Lillis decision says, what a reasonable person would think that the terms meant. Lawyers are too skilled at crafting varying interpretations of terms.