Staffing Specifix, Inc. v. Tempworks Mgmt. Servs., Inc.
913 N.W.2d 687
Minn.2018Background
- Staffing Specifix (Staffing) and TempWorks Management Services (TMS) entered a services agreement (drafted by TMS) making TMS employer of record and specifying management fees calculated from "actual total cost of payroll," an undefined term; TMS also agreed to maintain workers' compensation insurance.
- The services agreement had an initial 18-month term with renewal and a buyout provision allowing Staffing to terminate after a year by paying twice the prior year's management fees less actual payroll costs.
- Disputes arose over whether management fees included workers' compensation and whether a buyout fee was owing; parties negotiated compromises (including a $65,000 withholding) and later executed a Tricom Agreement to terminate the relationship, which used the phrase "fees earned by TMS."
- The district court ruled the services agreement ambiguous (admitted parol evidence) and later found the Tricom Agreement ambiguous; at trial it instructed the jury to (1) determine whether contracts were ambiguous, (2) determine the parties' intent if ambiguous, and (3) construe ambiguous terms against the drafter.
- TMS objected that the instruction wrongly told the jury both to ascertain intent and apply contra proferentem; the court of appeals held the instruction misstated law and remanded for new trial; the Minnesota Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a jury may determine if a contract is ambiguous | District court may let jury decide ambiguity | Court (TMS) argued determination of ambiguity is for judge | Judge decides ambiguity; instructing jury to decide ambiguity was error |
| Whether jury may both determine parties' intent and construe ambiguities against drafter without order | Staffing: jury can find intent and, if ambiguous, apply contra proferentem | TMS: jury must first attempt to determine mutual intent using extrinsic evidence; only if intent not shown may contra proferentem apply | Court held jury must first resolve intent (fact question after parol evidence); only if intent not proved by preponderance may ambiguities be construed against drafter |
| Whether contra proferentem is a default rule regardless of evidence | Staffing: contra proferentem can be applied when terms "reasonably susceptible" to >1 meaning | TMS: contra proferentem is last-resort rule after considering extrinsic evidence and intent | Court: contra proferentem is supporting rule; apply only after evidence fails to prove intent |
| Whether erroneous instruction prejudiced defendant requiring new trial | Staffing: evidence favored Staffing; no prejudice | TMS: erroneous instruction likely affected outcome; merits new trial | Court could not say error was harmless; gave benefit of doubt to objector and affirmed remand for new trial |
Key Cases Cited
- Motorsports Racing Plus, Inc. v. Arctic Cat Sales, Inc., 666 N.W.2d 320 (Minn. 2003) (primary goal of contract interpretation is to ascertain parties' intent)
- Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339 (Minn. 2003) (determination of ambiguity is a question of law for the court)
- Turner v. Alpha Phi Sorority House, 276 N.W.2d 63 (Minn. 1979) (where ambiguous terms and no extrinsic evidence of intent, construing ambiguities against drafter is appropriate)
- ICC Leasing Corp. v. Midwestern Machinery Co., 257 N.W.2d 551 (Minn. 1977) (after extrinsic evidence, if intent not proved by preponderance, resolve ambiguities against drafter)
- Wick v. Murphy, 54 N.W.2d 805 (Minn. 1952) (when contract admits two interpretations, adopt one favorable to non-drafter absent clear contrary intent)