In two recent cases, the Georgia Court of Appeals illustrated how the careful parsing of words in a document can affect the outcome of a lawsuit.
In Thompson v. LaFarge Building Materials, Inc., Case No. A13A0740 (decided July 16, 2013), the Georgia Court of Appeals carefully examined the language of a guaranty agreement and refused to enforce it against the purported guarantor. Page one of the relevant document was an application for credit by a limited liability company. The second page of the document contained a section labeled “Continuing Guaranty.” In that section, the signer agreed to unconditionally guarantee the payment of the credit extended to “the Applicant identified on page 1.” Although the application for credit was clearly made by the limited liability company, the document nowhere defined the limited liability company as “Applicant.” Consequently, the Court found that the guaranty was unenforceable because it omitted the name of the principal debtor, a requirement for an enforceable guaranty.
In Primary Investments, LLC v. Wee Tender Care III, Inc., Case A13A0412 (decided July 16, 2013), the Georgia Court of Appeals refused to enforce a noncompete agreement against certain individuals. Those individuals had been managers and members of a limited liability company that ran a childcare facility. Another business had purchased the assets of that limited liability company. As a part of that agreement, the purchasers obtained from the “Seller” a commitment not to open a competing childcare facility for a certain amount of time in a defined area surrounding the facility being sold. Sometime after the sale, the individual members and managers of the selling LLC formed a new business that competed against the purchaser. The purchaser sought to invoke the noncompetition covenant against the individuals and the new entity. However, the Court concluded that the “Seller” under the asset purchase agreement was the limited liability company, not its members. Therefore, the individual members were free to form a new business that competed with the purchaser.
In both of these cases, the parties asserting the claims had reasonable arguments that what the parties “meant to say” was something other than the meaning that the Court gave to the relevant agreements. However, the Court made clear that what matters is the actual language used by the parties. The Court will enforce an agreement as it is written, not how the parties intended it to read.