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UNIVERSAL COMPUTERS LTD. v. DATAMEDIA CORP.

January 15, 1987

Universal Computers (Systems) Ltd., Nicholas A. Drescher, Christopher Holman and Alan B. Wilson, Plaintiffs and Defendants-in-Counterclaim
v.
Datamedia Corporation, Defendant and Plaintiff-in-Counterclaim v. Universal Computers (Holdings), Ltd., Universal Computers (Services, Ltd., and Universal Computers, Ltd., Additional Defendants-in-Counterclaim



The opinion of the court was delivered by: COHEN

 This breach of contract and fraud action is presently before the Court on several post-trial motions. Defendant, Datamedia Corporation ("Datamedia") moves for a new trial, or a judgment notwithstanding the verdict ("j.n.o.v.") or a remittitur. Plaintiffs, Universal Computers (Systems) Ltd. ("UCSL"), Nicholas A. Drescher, Christopher Holman and Alan B. Wilson move to amend the jury trial verdict to include prejudgment interest and attorneys' fees.

 BACKGROUND

 UCSL is a corporation organized under the laws of the United Kingdom with its main offices located in London, England. It was established by its parent company, Universal Computers, Ltd. ("UCL") *fn1" to purchase and resell certain computer hardware and software. *fn2" The individual plaintiffs helped capitalize UCSL and had substantial responsibilities in its management. Defendant, Datamedia, is a Delaware corporation with its principal place of business located in Pennsauken, New Jersey. It is in the business of designing, manufacturing and marketing various computer products, including hardware and software.

 UCSL entered into a contract with Datamedia in April, 1983, wherein UCSL was given the right to act as the exclusive "Authorized Datamedia Dealer" for a territory made up of the United Kingdom, the Republic of Ireland, the Isle of Mann and the Channel Islands. Datamedia agreed to sell and UCSL agreed to buy a computer system manufactured by Datamedia, the 932 PICK system. *fn3" The contract (hereinafter referred to as "Dealer Agreement") required that UCSL make timely payment of all invoices, meet a specified quota for the number of systems purchased from Datamedia *fn4" and provide Datamedia with sub-license agreements *fn5" executed by the ultimate purchaser, or "end-user" of each system sold by UCSL. Further, as provided in Section 4 of the Agreement, the failure of UCSL to comply with these requirements gave Datamedia the right to terminate it.

 Sometime in the latter half of 1983, while UCSL was preparing for the first quota period, Datamedia entered into negotiations with International Computers, Ltd. ("ICL"), another United Kingdom Company, regarding a possible agreement for the sale to ICL of the Datamedia 932 PICK or a substantially similar system. ICL is the largest computer company in Western Europe, and was described by a witness in this case as "the IBM of Europe." It has an extensive, world-wide sales and dealer network and is much larger than either UCSL or Datamedia.

 In December of 1983, eight months after the execution of its Dealer Agreement with UCSL and at the beginning of the first quota period, Datamedia and ICL executed a document called the "Heads of Agreement," which recorded the bases of a proposed contract between them. Their negotiations continued, *fn6" and culminated in an agreement signed on or about February 24, 1984 and termed a Volume Purchase, or Original Equipment Manufacturer ("OEM") Agreement. This agreement granted ICL the exclusive right to sell computer systems which included the Datamedia 932 family of computers, the very same family covered by the UCSL Dealer Agreement. ICL was granted world-wide marketing rights, with "exclusive" marketing rights in certain areas including the territory covered by the UCSL Dealer Agreement.

 In March and April of 1984, a series of meetings was held by representatives of UCSL, ICL and Datamedia to see if an agreement could be reached whereby UCSL would become the exclusive United Kingdom dealer for the PICK Systems as packaged by ICL. On April 16, 1984, UCSL rejected the terms proposed by ICL. One could infer that Datamedia realized it might be faced with a lawsuit by UCSL and hoped an agreement between UCSL and ICL would obviate the necessity for any such action.

 Then, on April 17, 1984, the day after UCSL rejected the proposed arrangement with ICL, Datamedia notified UCSL that their agreement was immediately terminated, claiming that UCSL was seriously behind in its payments to Datamedia and that it had failed to provide the required sub-license agreements. This left the larger and more prestigious ICL as the sole United Kingdom seller of the Datamedia PICK Systems.

 Plaintiffs instituted the instant action on or about June 28, 1984, alleging that defendant breached the Dealer Agreement, breached a covenant of good faith and fair dealing, and acted fraudulently in connection with this Agreement. Defendant filed a counterclaim against the plaintiffs, and additional defendants in the counterclaim UCL, Universal Computers (Holdings), Ltd., and Universal Computers (Services), *fn7" for monies owed by UCSL for systems purchased from Datamedia.

 The three week jury trial of this action commenced on September 8, 1986. On September 25, 1986, the case was given to the jurors for their deliberations. Because of the complexity of this case, they were instructed to respond to a form of Special Interrogatories prepared by the Court with the aid and consent of both counsel.

 On September 26, 1986, the jury returned their responses to the Special Interrogatories, a copy of which is attached to this opinion as Exhibit A. In Section A- Breach of Contract by Datamedia, they indicated that Datamedia did materially breach the Dealer Agreement, that UCSL substantially performed its obligations under the Dealer Agreement, and that UCSL proved it suffered damages which were directly caused by Datamedia's breach. On the line marked "Amount," the jury wrote "Two Million Dollars ". In Section B- Breach of duty of Good Faith and Fair Dealing by Datamedia, the jury found that Datamedia did breach the duty of good faith and fair dealing, that UCSL substantially performed its obligations under the Dealer Agreement, and that UCSL proved that it suffered damages which were directly caused by this breach. However, the jury did not write anything in the space for the "Amount" of these damages. In Section C- Fraudulent Misrepresentations as to UCSL, the jury indicated that Datamedia did make a false statement to UCSL in connection with the Dealer Agreement, and that UCSL reasonably relied on that statement. However, even though the question specifically directed the jury to state the amount of damages from this misrepresentation, they again did not fill in an amount. Thus, the jury responses to the liability questions are consistently clear even if their responses to the damage questions are not. In Sections D, E, and F- Fraudulent Misrepresentation as to Individual Plaintiffs, the jury found that Datamedia had made a false statement but that none of the three plaintiffs reasonably relied on that statement to his personal injury. In Section G- Punitive Damages, the jury found that Datamedia's actions were done with actual malice or spite, or in wanton, willful and reckless disregard of the rights of plaintiffs. The jury filled in $10,000 as the single amount of punitive damages that would punish Datamedia for its conduct. In Section H Breach of Contract by UCSL for Failure to Pay, the jury found that UCSL failed to make payments to Datamedia for products it accepted, and that the amount of money UCSL owes as a result of this failure is $45,000. In Section I- Liability of the Universal Companies, the jury found that UCL and the other affiliated companies should be responsible for UCSL's debts. The judgment was entered on September 30, 1986.

 I. Defendant's Motion for Judgment Notwithstanding the Verdict or, in the Alternative, for a New Trial

 Defendant moves for j.n.o.v. on three issues: the jury's verdict that plaintiff should prevail in the breach of contract claim; the award of damages for lost profits; and the award of punitive damages. We will address each of these issues in turn.

 We begin by noting that an order granting a j.n.o.v. is governed by Fed. R. Civ. P. 50(b) and is an extraordinary remedy. It should be granted only when the evidence, exposed to the light most favorable to the non-moving party, supports only one conclusion, namely in favor of the movant. See Hild v. Bruner, 496 F. Supp. 93, 97 (D.N.J. 1980). The standard for granting a motion for j.n.o.v. is the same as for a directed verdict. Skill v. Martinez, 91 F.R.D. 498, 503 (D.N.J. 1981), aff'd 677 F.2d 368 (3d Cir 1982).

 Motions for a new trial are governed by Fed. R. Civ. P. 59(a), and may be granted to prevent an injustice or to correct a verdict that is clearly against the weight of the evidence. American Bearing Co., Inc. v. Litton Industries, 729 F.2d 943, 948 (3d Cir.), cert. denied, 469 U.S. 854, 83 L. Ed. 2d 112, 105 S. Ct. 178 (1984). A court must be careful not to usurp the jury's function and should not substitute its judgment for that of the jury. See Borbely v. Nationwide Mutual Ins. Co., 547 F. Supp. 959, 980 (D.N.J. 1981). Here, there was sufficient evidence to support the jury's verdict and we therefore deny defendant's motion.

 A. UCSL's Breach of Contract Claim

 Plaintiffs allege that defendant breached several provisions of the Dealer Agreement, specifically, the provisions granting UCSL exclusive sales rights, prohibiting interference with a contractual relationship with another party, and governing the termination of the contract. The jury found that defendant materially breached the Dealer Agreement. However, in the Special Interrogatories, prepared, as heretofore indicated, with the aid and consent of both counsel, the jury was not requested to specify which part(s) of the contract were breached. In urging a j.n.o.v., or new trial on the breach of contract issue, defendant contends that it did not breach any of the three provisions.

 1. Submission of the Contract to the Jury for Interpretation

 Defendant's first argument, in support of its motion for j.n.o.v. or new trial on the breach of contract claim, is that the Court should have instructed the jury that the language of the contract was unambiguous and should have ruled, as a matter of law, as to the language's meaning.

 One of defendant's positions, at trial, was that its contract with ICL was not a breach of the Dealer Agreement with UCSL because the Dealer Agreement only gave UCSL the right to be the exclusive dealer of the computers, and ICL was to be an Original Equipment Manufacturer and not a dealer. In addition, defendant maintained that the computers covered by the UCSL Dealer Agreement were not the same as those involved in the transaction with ICL. Thus, a critical issue was the exact scope of the Dealer Agreement. The relevant language contained therein is from Sections 1.1 and 1.3 of the agreement.

 Under Section 1.1, UCSL received the rights "to sell and license the Electronic Data Processing Systems and Software Product listed in Schedule 1 . . ., as it may from time to time be amended pursuant to Paragraph 5 of this Agreement. . ." (emphasis added.) *fn8" Section 1.3 of the UCSL Agreement states that: "Notwithstanding any other provisions as set forth herein, the SELLER and DEALER acknowledge that DEALER's rights to serve as SELLER'S AUTHORIZED DATAMEDIA DEALER are exclusive within DEALER's geographical territory as described in Schedule 2. . . ." (emphasis added.)

 Defendant submits that this language is susceptible of just one meaning, that only the appointment of another Authorized Dealer would violate the exclusivity provision, and that the jury should have been so instructed. *fn9" In support of its position, defendant cites the case of Lee v. Flintkote Co., 193 U.S. App. D.C. 121, 593 F.2d 1275 (D.C. Cir. 1979) in which the court interpreted a franchise agreement clause giving the franchisee the exclusive right to sell the franchisor's products in a certain territory. The relevant contract clause stated that the franchisor "shall not approve another licensed location within a radius of two and one-half (2-1/2) miles" of an approved franchise location. Id. at 1283-84. The court there found that this language did not prevent any sales of the relevant products by any other entity, but only prohibited the establishment of another retail franchise store. Id. at 1284. The Court there ruled that this clause was not reasonably susceptible to other interpretations. Defendant in the present case believes we should make a similar finding here.

 The language in the UCSL Dealer Agreement is not as unambiguous as that in Lee. It is unclear what is meant by UCSL's right to be the "Exclusive " - "Authorized Datamedia Dealer," and what acts by defendant would violate that right. The contract in the present case is reasonably susceptible to more than one interpretation, and its language is not as specific as that in Lee, which spelled out what the franchisor could do. We therefore hold that the ...


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