CHSPSC, LLC v. The California Credits Group, LLC

A tax group performed tax credit services on a contingency fee basis for a corporation that owned several hospitals in California. Four and half years after the corporation completed a transaction referred to as a “spinoff,” the tax group informed the corporation that the spinoff triggered a reorganization provision of the parties’ contract that entitled the tax group to a fee for unused tax credits related to one of the hospitals involved in the spinoff. The corporation filed suit requesting a declaratory judgment that no fee was owed because the spinoff did not trigger the contract’s reorganization provision. After conducting discovery, the parties filed cross motions for summary judgment. The trial court denied the tax group’s motion and granted summary judgment to the corporation after concluding that the parties’ conduct prior to the dispute showed that they intended the term “reorganization” to have a tax-based meaning that corresponded to the Internal Revenue Code’s definition of the term and that the spinoff did not constitute a reorganization under that definition. Discerning no error, we affirm the trial court’s judgment.