## Facts

- Raymond J. Allen and Sanford E. Takiff formed a holding company, P.N.B. Financial Corporation (PNB), which owned a controlling 84% interest in Park National Bank and Trust of Chicago (the bank).
- Takiff and family trusts he controlled also owned an additional 13% of the bank’s common stock directly; Allen owned only about 0.2% directly, with the remainder held by other shareholders.
- The bank’s board had 14 seats. Under PNB’s bylaws, Allen, as PNB’s president, had authority to cast PNB’s votes in the bank’s director elections.
- After their relationship deteriorated, Takiff sued seeking dissolution of PNB and distribution of PNB’s bank shares to Takiff and Allen.
- The dissolution litigation ended in a settlement that kept PNB intact and required PNB to “nominate and vote all of its shares” in the bank for the election of seven directors nominated by Allen and seven directors nominated by Takiff.
- At a subsequent shareholders’ meeting to elect the bank’s directors, the parties disputed what the settlement required in a cumulative-voting election:
  - Takiff read the settlement to require Allen to distribute PNB’s votes equally among all fourteen agreed nominees, which would allow Takiff—by concentrating his directly owned shares on additional candidates—to elect a majority of the board.
  - Allen read the settlement to require only that PNB vote for the fourteen agreed nominees, while permitting uneven allocations among them; Allen cast PNB’s votes in a way aimed at preserving a 7–7 split.

- The bank adjourned the shareholders’ meeting and later seated a board aligned with Takiff.
- Allen sued the bank (and others) under provisions of the National Bank Act governing national bank elections and meetings. Takiff intervened and counterclaimed, seeking an injunction requiring Allen to vote PNB’s shares in line with Takiff’s interpretation of the settlement.
- After a bench trial, the district court concluded the settlement was unambiguous, adopted Takiff’s interpretation, and ordered Allen to cast PNB’s votes in future elections accordingly. Allen appealed.

## Issues

1. Whether the settlement agreement unambiguously required Allen, when voting PNB’s shares, to allocate an equal number of votes to each of the fourteen agreed director nominees.
2. Whether the district court erred by treating the agreement as unambiguous and granting injunctive relief without resolving factual disputes informed by extrinsic evidence of the parties’ intent.

## Decision

- The Seventh Circuit vacated the district court’s judgment and injunction and remanded for further proceedings.
- The court held the settlement’s voting language was reasonably open to more than one meaning in the context of cumulative voting and the parties’ control dispute.
- Because the agreement was not clearly one-sided in Takiff’s favor, the district court needed to resolve interpretive and factual questions using admissible extrinsic evidence under the governing state contract law (assumed to be Illinois).

## Legal Principles

- A contract is ambiguous when its language, read in context, supports more than one reasonable interpretation; a court may not avoid factfinding by labeling a disputed provision “unambiguous.”
- Where a contract term is ambiguous under the applicable state law, extrinsic evidence bearing on intent and commercial sense may be considered, and the trier of fact must make findings to choose between competing meanings.
- Injunctive relief that compels future performance of a disputed contractual obligation should not rest on an interpretation that depends on unresolved factual questions about meaning and intent.
- A counterclaim arising from the same core dispute may be heard under federal supplemental jurisdiction even when the original complaint rests on a federal statute.

## Conclusion

Allen v. Park National Bank involved a control fight over a national bank following a settlement that required PNB to nominate and vote its shares for seven Allen designees and seven Takiff designees. When the parties later disputed whether the settlement required equal vote allocations among the fourteen nominees, the district court treated the agreement as unambiguous and entered an injunction adopting Takiff’s reading. The Seventh Circuit vacated and remanded, holding that the agreement’s text and the consequences of each reading made the provision susceptible to competing interpretations, requiring consideration of extrinsic evidence and factfinding before injunctive relief could be sustained.


Allen v. Park National Bank, 116 F.3d 284 (1997)