53 Cal.App.5th 807
Cal. Ct. App.2020Background
- Parties executed a License Agreement (1996) governing the Warriors’ use of Oracle Arena; section 6.4 required the licensee to pay remaining renovation debt if the license "terminates" prior to June 30, 2027.
- A contemporaneous Memorandum of Understanding (MOU) had provided a 20‑year term with four 5‑year renewal options and a specific debt‑payment regime if the Warriors did not exercise the first two renewal options.
- Drafting records show the MOU language was altered: MOU required payment if the Warriors “do not exercise” renewals; the License Agreement uses broader language stating payment is due if the licensee “terminates this License Agreement for any reason.”
- Authority negotiator memos and a Consent and Agreement with the bond purchaser (CIBC) indicate the team understood limited circumstances permitted departure without immediate full payment and that other departures would leave the team liable for debt service through 2027.
- GSW declined to exercise renewal options and allowed the initial term to expire (extended later to 2019); arbitrator found "terminates" includes nonrenewal and awarded the Authority debt‑service relief; the trial court confirmed the award and this appeal followed.
Issues
| Issue | Authority's Argument | Warriors' Argument | Held |
|---|---|---|---|
| Whether the term "terminates" in §6.4 includes a termination by nonrenewal (failure to exercise renewal option) | §6.4 is reasonably read to include termination by nonrenewal; extrinsic evidence (MOU, memos, CIBC consent) shows parties intended continuation of debt obligations after nonrenewal | "Terminates" requires an affirmative act to end the contract during its term; allowing a contract to expire is not a "termination" | The word is ambiguous; extrinsic evidence supports the Authority; arbitrator’s factual interpretation (that nonrenewal is a termination) is binding and affirmed |
Key Cases Cited
- Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal.2d 33 (1968) (parol/extrinsic evidence admissible to resolve ambiguous contract language)
- Cable Connection, Inc. v. DIRECTV, Inc., 44 Cal.4th 1334 (2008) (parties may contractually permit judicial review of arbitral legal errors)
- City of Hope Nat. Med. Ctr. v. Genentech, Inc., 43 Cal.4th 375 (2008) (distinguishes when contract interpretation is question of law vs. fact)
- Winet v. Price, 4 Cal.App.4th 1159 (1992) (threshold ambiguity is a question of law)
- Parsons v. Bristol Dev. Co., 62 Cal.2d 861 (1965) (court may independently determine contract meaning where extrinsic evidence uncontroverted)
- Continental Baking Co. v. Katz, 68 Cal.2d 512 (1968) (extrinsic evidence may explain, not vary, integrated agreements)
- Universal Sales Corp. v. California Press Mfg. Co., 20 Cal.2d 751 (1942) (parties’ post‑execution conduct informs ambiguous contract construction)