AKRON, Ohio (LN) — The Ninth District Court of Appeals found the Summit County trial court erred by focusing exclusively on the language of a termination clause without considering whether the memorandum of understanding as a whole unambiguously expressed the parties' intention not to be bound, and without examining the parties' conduct to determine their intent.
The appellate panel said it would not weigh in on whether the termination clause or the broader memorandum of understanding was enforceable, but said the trial court must conduct that analysis on remand.
"To the extent that the trial court failed to undertake this analysis and, if appropriate, to consider evidence outside the record to determine the parties' intentions, this Court agrees with Testa's assignment of error," Judge Jennifer Hensal wrote for the panel.
The memorandum of understanding was signed January 3, 2017, by the Hudson city manager and a Testa representative after the city council authorized a letter of intent in September 2016 for Phase II of the city's downtown retail area. The termination clause stated that if feasibility studies revealed the project was not feasible before a final development agreement was executed, the parties would in good faith negotiate a commercially reasonable termination of the memorandum.
Testa alleged Hudson breached the memorandum of understanding by negotiating in bad faith and unilaterally terminating without negotiating a commercially reasonable termination. Testa also sought declaratory judgments that the memorandum of understanding was a binding contract and that it did not require endorsement from the city solicitor or a certification of available funds under Revised Code Section 5705.41(D)(1).
Hudson moved for summary judgment, arguing the memorandum of understanding was an unenforceable preliminary step toward a final agreement. The trial court granted the motion.
Presiding Judge Carr concurred in the judgment only but said she would have gone further. "I would conclude that the trial court erred in granting summary judgment to Hudson, as the termination clause was a binding agreement to negotiate," Carr wrote. She also said the trial court should reconsider issues about city solicitor endorsement and finance director certification that it had found moot.
The case was remanded to Summit County Common Pleas Court.