Facts
- Cartan Tours, Inc., a tour company, contracted with ESA Services, Inc., a hotel operator, for 372 hotel rooms in Salt Lake City for the 2002 Winter Olympic Games.
- Cartan prepaid the full contract price (about $2.4 million).
- The contract included a force-majeure clause providing a full refund if specified events (including terrorism) occurred “affecting the ability of the Olympic Games to be held.”
- After the September 11, 2001 terrorist attacks and ensuing military action, Cartan asserted the events materially impacted the Olympics and substantially interfered with Cartan’s ability to market and sell Olympic tour packages.
- Cartan sought declaratory relief and return of its prepaid funds under the force-majeure clause; ESA maintained the Olympics would proceed as scheduled and the clause was not triggered.
Issues
- Whether judgment on the pleadings was proper where the nonmoving party alleged facts that, if true, could bring the dispute within a force-majeure clause and where contractual ambiguity was asserted.
- Whether the court could determine at the pleadings stage that the force-majeure language (“affecting the ability of the Olympic Games to be held”) could not, as a matter of law, be satisfied by the post-9/11 events alleged.
Decision
- The appellate court reversed the judgment on the pleadings and remanded for further proceedings.
- Accepting Cartan’s allegations as true and drawing reasonable inferences in Cartan’s favor, the pleadings did not establish ESA’s entitlement to judgment as a matter of law.
- The court did not decide whether the force-majeure clause was actually triggered; it held only that the issue could not be resolved on the pleadings alone.
Legal Principles
- Judgment on the pleadings is appropriate only when the movant is entitled to judgment as a matter of law and the pleadings show no material issues of fact.
- On a motion for judgment on the pleadings, the court must accept the nonmovant’s well-pleaded allegations as true and draw all reasonable inferences in the nonmovant’s favor.
- Unambiguous contract language may be construed as a matter of law, but reasonably susceptible language may require extrinsic evidence to determine the parties’ intent.
- Where the operation of a force-majeure clause depends on disputed facts (including the effect of events on contemplated performance) and a plausible competing construction exists, disposition at the pleadings stage is generally improper.
Conclusion
The court held that Cartan’s allegations and the force-majeure language presented fact-dependent and potentially ambiguous questions that could not be decided on the pleadings, requiring reversal and remand for evidentiary development and further contract interpretation.