Opinion
No. 24678–2008.
2012-05-25
MPEG LA, LLC, Plaintiff, v. AUDIOVOX ELECTRONICS CORPORATION and Audiovox Corporation, Defendants.
Sullivan & Cromwell, LLP, Garrard Beeney, Esq., Adam Brebner, Esq ., Andrew Gelfand, Esq., New York, for plaintiff. Winston & Strawn, LLP, Michael Elkin, Esq., Scott Samay, Esq, New York, for defendant/third party plaintiff.
Sullivan & Cromwell, LLP, Garrard Beeney, Esq., Adam Brebner, Esq ., Andrew Gelfand, Esq., New York, for plaintiff. Winston & Strawn, LLP, Michael Elkin, Esq., Scott Samay, Esq, New York, for defendant/third party plaintiff.
EMILY PINES, J.
Plaintiff MPEG LA, L.L.C. (“MPEG”) moves, post-trial, pursuant to CPLR 4403 and 4404 for an order (1) granting MPEG judgment as a matter of law dismissing the affirmative defense of equitable estoppel asserted by Defendant Audiovox or, alternatively, for an order rejecting so much of the verdict of the advisory jury as found that MPEG was equitably estopped from recovering damages from September 2000 to September 2006, and finding for MPEG on that issue; (2) setting aside so much of the jury's verdict as found that Audiovox's suppliers paid $11,571,812.00 to MPEG on behalf of Audiovox for all Audiovox DVD devices sold during the term of the parties' agreement, and entering judgment as a matter of law dismissing the affirmative defense of payment asserted by Audiovox; and (3) entering judgment in favor of MPEG in the amount of $12,744,815 (plus interest) or, in the alternative, ordering a new trial on the limited issue of Audiovox's payment defense.
Audiovox opposes all of the relief sought by MPEG and asserts that (1) the jury's advisory verdict on the equitable estoppel defense was correct and supported by law and the evidence presented at trial; and (2) even if the defense is rejected, there is no need for a new trial on the defense of payment, as Audiovox's expert witness set forth the only credible evidence on such issue. During oral argument, Audiovox's counsel stated that should the Court reject the equitable defenses raised on its behalf, it should apply the number it set forth through its expert at trial for payment by Audiovox's suppliers on its behalf, a figure of $5,815,911. Application of that figure would entitle MPEG to damages in the amount of $8,135,621.50 (plus interest).
The trial of this action took place over a two-week period, during which twelve witnesses testified and hundreds of exhibits were admitted into evidence. Prior to trial, the Court made several substantive determinations, which set forth the Court's findings (1) that the contract between the parties was clear and that Audiovox, as opposed to its suppliers, was responsible for payment of royalty fees to MPEG upon the sale of any MPEG licensed product manufactured for Audiovox by its suppliers; and (2) that Audiovox had raised sufficient issues of fact in its pretrial motion papers to allow it to set forth its equitable defenses of equitable estoppel and waiver, as well as its legal defense of payment. Pursuant to CPLR 4101, the factual issues regarding MPEG's claim against Audiovox for damages for breach of contract, and Audiovox's affirmative defense of payment, were tried before a jury. Pursuant to CPLR 4212, the issues of fact regarding Audiovox's affirmative defenses of equitable estoppel and waiver were submitted to the jury in an advisory capacity.
Following trial of this matter, the jury rendered a verdict finding that (1) Audiovox had failed to pay $13,951,532.50 directly to MPEG under the terms of the parties' license agreement, (2) that Audiovox's suppliers had paid $11,571,812.00 to MPEG on Audiovox's behalf, (3) that during the term of the parties' agreement, MPEG misrepresented to Audiovox the party from which royalties were due upon the sale of Audiovox DVD devices utilizing the MPEG license, (4) that Audiovox relied on such misrepresentation, (5) that Audiovox's reliance was justifiable under all of the circumstances, (6) that as a result of such justifiable reliance, Audiovox suffered to its economic detriment, (7) that the defense of equitable estoppel applied from September 2000 to September 2006, and (8) that MPEG did not knowingly, intentionally, and voluntarily abandon its right under the agreement to be paid by Audiovox for all DVD players sold by Audiovox.
The difference between the amount the jury found that Audiovox had failed to pay MPEG ($13,951,532.50) and the amount the jury found that Audiovox's suppliers had paid to MPEG on Audiovox's behalf ($11,571,812.00) is $2,379,720.50. This amount is equal to the amount that Audiovox's expert, Dr. Rao, determined that MPEG was entitled to for the 2007 through September 2009 period, falling outside the period for which the jury found that equitable estoppel applied. As the Court and counsel agreed that this figure did not take into account the final quarter of 2008, the Court asked counsel to provide it with the proper figure, according to Dr. Rao's calculations, for the final quarter of 2008. Both counsel agreed, without waiving rights to oppose the verdict on other grounds, that the proper figure, for the amount owed to MPEG for the period from October 2007 through September 2009, should the Court agree with the jury's advice on equitable estoppel, amounted to $2,596,058.
At this juncture, MPEG is asking that the Court reject the jury's finding of equitable estoppel and adopt its calculation of amounts due and owing, amounting to $12,744,815. Audiovox asks the Court to confirm the verdict of the advisory jury concerning the defense of equitable estoppel, and adopt the $2,379,720.50 figure as the total damages to which MPEG is entitled.
MPEG'S ARGUMENTS
MPEG asserts that the Court should utilize its authority under CPLR 4403 to reject the jury's advisory verdict on the defense of equitable estoppel on a number of grounds. First, MPEG argues that the parties set down their agreement in a clear and complete document, which should be enforced in accordance with its terms. Such agreement contained a statement that Audiovox did not rely on any representations with regard to the contract's terms made at any time, and that the writing was the entire agreement between the parties. In other words, the agreement, which this Court has already interpreted as to the payment requirement, contains both a merger and an integration clause, as well as a “no reliance” clause, which cannot be altered by the defense of equitable estoppel. Second, MPEG asserts that during his testimony, Plaintiff's CEO, Lavelle, testified that he did not dispute the meaning of such contractual promises, that he had legal advice before he signed and that Audiovox was bound by them (Tr. Lavelle 65, 66, 84)
. Thus, MPEG argues that Audiovox could not reasonably rely on any representations outside of the written agreement to alter its obligation to pay for all licensed products sold by it or on its behalf by its suppliers, whether they were separately licensed or not. Third, MPEG asserts that the only evidence set forth by Audiovox concerning the required showing of misrepresentation consisted of (1) Lavelle's testimony concerning pre-contractual negotiations, which was inconsistent with his deposition testimony, (2) MPEG's pre-contractual licensing information packet which referred to the company that “manufactures” the product—a term consistent with Lavelle's own belief that brand owners such as Audiovox constitute the “manufacturers” within the industry (Tr. Lavelle 17, 18), and (3) a listing by MPEG of licensees in good standing on MPEG's website (which says nothing about which products sold by the listed companies are licensed). MPEG contends that taken together this simply cannot constitute any evidence of misrepresentation, when the so-called comments occurred before the clear contract was entered into, the information packet was both pre-contract and utilized terms understood in the industry to apply to those sellers that sold their own products, such as Audiovox, and the website contained names of entities that likewise each sold their own products to the end users and owed their own royalty payments on such products.
“Tr.” refers to the trial Transcript.
The evidence that Audiovox relied on the purported new misrepresentations, according to MPEG, is belied by the testimony of Lavelle that Audiovox had taken a consistent position long before the contract was signed that it only had to pay for unlicensed suppliers (Tr. Lavelle 21, 23, 26, 27); and by its own failure until called upon by MPEG to pay millions of dollars in royalties over a three year period for the very unlicensed suppliers it admitted it was responsible for (Exhs.79, 207)
. MPEG argues that there is no evidence of justifiable reliance, both in terms of the clear promise by Audiovox that it would not rely on anything outside the agreement, as well as Audiovox's own inequitable actions in under reporting and underpaying even its admittedly owed royalties for three years, as well as the multiple e-mails from Audiovox's suppliers setting forth their agreement to under report the number of sales, followed by no communications regarding those e-mails by Audiovox to MPEG (Exhs.26, 28, 29, 39, 42, 43).
“Exh” refers to trial exhibit.
With regard to the requirement of economic detriment, MPEG alleges that the trial exhibits demonstrate that Audiovox was not paying the royalty fee in the price it paid to its suppliers, as demonstrated by suppliers' e-mails, once MPEG began to investigate to the extent of stating that they would in the future be required to charge Audiovox an extra $2.50 per unit (Exhs.28, 29). Moreover, Audiovox treated the royalty fees on its books as a landed cost, which it released into its profits, further demonstrating, according to MPEG and Audiovox's own accountant, that Audiovox never really paid the royalty, since the act of accounting for a royalty in the landed factor and again in the product purchase price, would result in accounting for the cost twice (Tr. Pizzo 126, 127).
MPEG also asks the Court to reject Audiovox's affirmative defense of “payment,” and instead direct a verdict in favor of MPEG based upon its differing calculations concerning the amount actually paid for sale of Audiovox's products (subject to the MPEG license) by Audiovox's suppliers on Audiovox's behalf. In this context, MPEG argues that the Court must reject the testimony of Audiovox's expert witness, Dr. Rao. While MPEG asserts (and the Court agrees) that the jury filled out the verdict form incorrectly with regard to this issue, it appears to recognize, as did the Court and Audiovox's counsel, that the jury meant to adopt Dr. Rao's testimony, which set forth that the sum of licensed suppliers' payments on behalf of Audiovox amounted to $5,815,911 rather than MPEG's figure of $1,428.072.50 (MPEG Demonstrative 1026).
According to MPEG, in arriving at his figure of total payments to MPEG, Dr. Rao made, inter alia, the following errors. First, he included a payment by Audiovox's main supplier, Action, in the amount of $480,937.50, which was both acknowledged as a settlement amount in connection with this lawsuit and then returned by MPEG, based upon MPEG's rejection of the conditions placed on acceptance of any such amount (Exh.A81). As this Court limited any evidence of rejected settlement payments in its pre-trial order in limine, MPEG argues that such should be excluded from the calculation. Second, Dr. Rao included in his final figure approximately $1.4 million in supposed payments by Action Asia for Audiovox products, which figure included multiple payments for the same products being sold covering the same time periods (the records duplicated solely since there were multiple document production versions of the same record, (Exh. 135). Third, MPEG asserts that Dr. Rao credited approximately $1.6 million in payments to MPEG by Action Technology and Action Electronics through a “mapping” technique, based on model numbers of products sold by those entities, despite undisputed evidence that Action never remitted sufficient amounts to pay for its own products and that precisely the same model number was utilized by Action for products in the marketplace that admittedly were not those of Audiovox (Exh. A187; Tr. Rao 8, 11, 36, 47; Tr. Westfall 132, 133). Fourth, Dr. Rao based a credit of approximately $590,000 for products sold by Alco, Aplus, Mustek, Orient Power or Shinco and admitted that he had no idea on whose behalf such payments were made (Tr. Rao 57, 58, 59). Fifth, according to MPEG, Dr. Rao utilized excluded evidence to support both a $710,000 payment by Action, based upon a royalty statement containing handwritten notes that could not be verified (Exh. A22), and found an $800,000 credit based almost exclusively on an excluded hearsay declaration from a supplier (Tr. Rao 40, 43, 53).
Based on Dr. Rao's opinion that absent an instruction from a supplier not to credit Audiovox for a product containing an MPEG license, the payment was to be credited to Audiovox, MPEG states that the Court should disregard his testimony in toto.
Finally, and in the alternative, MPEG asks that this Court grant a new trial, solely on the issue of what payments were made by licensed suppliers on Audiovox's behalf, based both on the unreliability of Dr. Rao's testimony and also on the fact that Dr. Rao's testimony was changed on the eve of trial to increase the amount of the credit to be applied.
AUDIOVOX'S OPPOSITION
Audiovox opposes MPEG's motion and asks this Court to confirm the jury's findings in all respects, whether in the form of an advisory verdict or as a matter of law, on the contractual issues presented. Most significantly, Audiovox asserts that the Court should adopt the jury's finding on the equitable estoppel defense rejecting enforcement of the MPEG–2 Agreement through the end of September 2006.
According to Audiovox, all the required showings to demonstrate equitable estoppel were set forth at trial. It asserts that the jury heard clear evidence of misrepresentation by MPEG regarding which party was responsible for payment of the licensing fee upon sale of a licensed product. Thus, Audiovox contends that the evidence demonstrated first, that MPEG's head of licensing, Mr. Skandalis, had discussions with Audiovox's CEO, Lavelle, in which Skandalis confirmed that it was appropriate for Audiovox to continue to purchase products, as in the past, from suppliers licensed by MPEG, and, in those instances, not pay MPEG (Tr. Lavelle 7, 8). The jury heard testimony that Skandalis referred Audiovox to the list on MPEG's website of licensees in good standing in order to make sure that Audiovox paid MPEG where the supplier was not on the list (Tr. Lavelle 231, 233, 234, 263, 265). Second, Audiovox asserts it received writings and an information packet from MPEG confirming that any company that manufactured MPEG products, without any qualification, needed the license before such manufacturing could take place (Exhs.A17, A26, A27). Third, Audiovox argues that the evidence demonstrated that MPEG accepted money from Audiovox's suppliers on behalf of Audiovox for years before ever seeking payment directly from Audiovox (Tr. Lavelle 18, 30). Finally, Audiovox alleges (Tr. Lavelle 18, 30), that MPEG's royalty specialist, Ms. Huynh, testified that she never was told by anyone in her company that it was collecting only from companies that sold their named products to the end user and that her computer program would not even allow her to obtain such information (Tr. Huynh 91, 101–103).
Audiovox argues further that there was ample evidence of reliance on its part on such misrepresentations. These included, as per Audiovox, Lavelle's credible testimony of reliance on MPEG's misleading words and conduct as set forth both before and after the signing of the agreement. The reliance was reasonable, according to Audiovox, based upon the assertion that the only information provided or available to licensees was on the website, to which MPEG was continously directing its licensees whenever they asked who was responsible for payment of the licensing fee, and the fact that no disclaimer during the period in question was ever placed on the website (Tr. Lavelle 265–268). It was clear, according to Audiovox, that MPEG's own personnel and auditors were confused as to which entity was responsible for payment of MPEG's fees and the jury was justified in determining that such was intended (Tr. Westfall 158–160). Audiovox counters the allegation that its own conduct belies justifiable reliance by setting forth that once it was informed that it owed monies for its unlicensed suppliers, it is uncontested that all such sums were paid prior to the trial of this action (Tr. Leedom 94, 95). With regard to the e-mails from its Chinese suppliers, Audiovox counters that it is unfair to attribute any improper conduct in the marketplace by the suppliers to Audiovox (Tr. Lavelle 35, 36, 213, 214, 215, 263; Tr. Pizzo 161,162).
With regard to the requirement of financial detriment, Audiovox asserts that it demonstrated at trial that it paid millions of dollars included in the fees charged by its licensed suppliers, as testified to by Lavelle (Exh. A136, Tr. Lavelle 22, 23, 25), and that its financial witness explained that the accounting reserves for license fees were merely set up to be compatible with its own computer system and in no way demonstrate that Audiovox believed it had the liability to make such payments.
Based on the above, Audiovox contends that the boilerplate merger and disclaimer clauses in the parties' licensing agreement simply do not act to defeat proof of equitable estoppel and/or waiver, because New York law does not permit general clauses such as those placed in the agreement by MPEG, without any specificity or ability of the other party to alter them, where there is extrinsic evidence of the kind of false statements made in this case.
With regard to the issue of payment, Audiovox argues that there is no basis to discredit Dr. Rao's testimony, obviously relied upon by the jury, in making the calculations concerning the damages portion of this trial, over which the jury was the trier of fact. With regard to the credits Dr. Rao calculated, Audiovox makes the following arguments. First, Audiovox asserts that the credit for products Audiovox acquired from Thomson was based on bank verifications and confirmation from such supplier, including products delivered by other connected entities including Vtrek, Chicony, Hamsang and Tonic (Exh. A127, Tr. Rao 21–27). With regard to Philips, the expert was justified in his figures crediting their payments based on that company's offer sheets confirming payments (Exh. A234). With respect to the Action entities, Audiovox contends that the jury saw documents wherein Action confirmed payment for Audiovox products (Exhs.A103, A143, A187, A229); yet Audiovox's expert limited his payment credits to those products reported by Action which could be specifically correlated to Audiovox by model number (Tr. Rao 8, 9, 47). This mapping process was, according to Audiovox's expert, a proper manner of estimating credits, and was also utilized, although on a smaller scale, by MPEG itself (Tr. Westfall 166). The $800,000 credit for payments for Audiovox products by ForYou was clearly, according to Audiovox, properly based upon invoices, e-mails and wire transfer records, rather than any excluded evidence (Exhs.A97, A143). Audiovox also defends the expert's approximate $500,000 credit for amounts paid by Action (Exh .A257; Tr. Lavelle 43; Tr. Rao 67–73), setting forth that MPEG's allegation that such amount was returned was left to the jury to decide. With regard to Dr. Rao's practice concerning those suppliers where there was evidence of payment but no specific record of the entity on whose behalf they were made, the process of crediting only a portion of such payments in reaching his figure was, according to Audiovox, consistent with the level of payment by other suppliers in general and an appropriate method of calculating proper credits (Tr. Rao 8, 9, 66). In reaching his conclusion, based upon what he claimed was appropriate methodology, Dr. Rao had no need, according to Audiovox, to rely on any excluded evidence. In response to the allegation that Dr. Rao double counted in his credits, such is belied, according to Audiovox, by Dr. Rao's sworn testimony that he corrected any double counting in developing his final figures for trial (Tr. Rao 74). Moreover, Audiovox claims that MPEG's major arguments concerning the calculation of credits is only relevant if the Court rejects the equitable estoppel defense and simply is not an issue for the period after the estoppel was found by the jury no longer to apply.
Finally, Audiovox claims that the original damage figure of $2,379,720, based upon Dr. Rao's calculation of license fees unpaid to MPEG for the period between 2007 and 2009, should not be altered by the Court to the amount of $2,596,058, which counsel for both parties agreed was the amount of damages utilizing the September 30, 2006, date set by the jury for the end of the equitable estoppel period. Audiovox asserts that the Court should adhere to the lower number based upon Dr. Rao's testimony that a party needs a reasonable period to adjust its conduct when an estoppel or waiver period ends (Tr. Rao 64, 68). The three months between October 2006 and January 2007 is certainly a reasonable one, according to Audiovox.
MPEG'S REPLY
In reply, MPEG argues that Audiovox must be held to its clear contractual representations as it never asserted a fraud theory either before or during the trial of this matter; and no evidence of intentional deception was set forth. Even if such were the case, according to MPEG, a specific promise such as the one contained in section 4.7 of the parties' agreement, which prohibits reliance on any “representations with respect to this agreement” is addressed precisely to what Audiovox argues it relied upon in this case. In response to the claim of waiver, MPEG asserts that it made clear in its acceptance of payment by licensed suppliers on Audiovox's behalf that such did not alter the ultimate obligation of the end seller (such as Audiovox) to pay royalties in accordance with the signed Agreement.
With regard to the evidence actually presented at trial, MPEG repeats that the so called misleading website spelled out that a supplier could pay any applicable royalties to MPEG on the end seller's behalf but that the end seller (i.e. Audiovox in this case) is still responsible for assuring that the royalties are paid (Exh. 144, p. 2). With regard to Audiovox's claim of reliance, MPEG reasserts that such cannot be used where Audiovox simply did not pay for its unlicenced suppliers' sales of its products until after MPEG's March 2006 investigation. Where, as here, the agreement, the information packet and MPEG's website all made clear in writing that the end seller was responsible for payment of royalties, there can be, according to MPEG, no justifiable reliance. Finally, MPEG reiterates that Audiovox's own improper conduct, including not communicating Action's clear writings seeking to fraudulently conceal sales, prohibits the assertion of any equitable defense by Audiovox. With regard to the requirement of economic detriment caused by justifiable reliance on misrepresentations, Audiovox's own communications with its suppliers, again demonstrated that it never paid the so called $2.50 per unit to its licensed suppliers.
On the legal issue presented to the jury (the payment defense), MPEG reiterates its contentions that such was based on double counting, model numbers used by suppliers for multiple entities, flawed theories without one iota of documentary support, and evidence excluded by the Court.
DISCUSSION
The role of the jury and the judge, where both legal and equitable claims are raised by the parties to a litigation, is discussed in some detail by the Court of Appeals in Mercantile & General Reinsurance Co, PLC v. Colonial Assurance Co, 82 N.Y.2d 248, 604 N.Y.S.2d 492, 624 NE 2d 629 (1993). In Mercantile, supra, the plaintiff sought rescission of a reinsurance agreement based upon claims similar to that made by Audiovox in this case, i.e., material misrepresentations, upon which it relied, in entering into a contract. The defendant asserted a counterclaim, like MPEG's claim in this case, for a breach of the contract. Id. At trial in Mercantile, the Supreme Court treated the plaintiff's claim of material misrepresentation as an equitable defense and counterclaim to defendant's breach of contract claim and ruled that the jury's verdict on the equitable issues would be advisory. Id. The jury found that the defendant was entitled to recover on the contract, that it made no material misrepresentations warranting rescission, and awarded the defendant damages. The Supreme Court, treating the verdict on the issue of misrepresentation as advisory, found that misrepresentations had, in fact, been made, thereby entitling the Plaintiff to rescission. Id. The Court of Appeals, following reversal by the Appellate Division, was called upon to rule on the effect of the jury's determination on the misrepresentation claim. Id. In reversing the Appellate Division, the Court of Appeals held that, as the case was presented, the action for rescission really constituted an equitable defense to the breach of contract claim. Id at 252, 493, 630. The Court found that under the plain terms of CPLR 4101, where a legal claim is countered by an equitable defense, issues of fact connected to the claim at law are to be tried by the jury, whereas, equitable defenses are to be tried by the Court. The question, therefore, remained as to whether the factual issues to be determined by the jury on the question of law, i.e., whether a contract existed and what damages, if any, were suffered, was found to be separate and apart from all other issues, whether fact or law, pertaining to the equitable defense in that case. Id. If the facts on which the equitable claims in that case were found to be identical to those forming the basis for the legal claims, the jury's verdict was to be considered more than merely advisory. Id. The Court found that the very essence of what the insurer was seeking was to set aside a contract that was otherwise legal and binding based upon the collateral issue of whether misrepresentations had occurred. Id at 253, 494, 631. As such facts were considered totally separate and apart from those needed to determine whether a breach of contract had occurred, the trial court was free, as the jury's verdict on the issue of misrepresentation was merely advisory, to determine the recision claim de novo. In this vein, the Court of Appeals held that:
“Because the jury verdict on misrepresentation was merely advisory, the trial court was not bound by it. It could disregard the advisory verdict, even if there was evidence to support it.” Id.
The Mercantile decision presented the precise issue of the Court's role in this case; demonstrating that the issue of equitable estoppel is one for this Court to determine.
It is well settled that a jury verdict (on a legal claim) may be set aside as against the weight of the evidence only where the evidence weighs so greatly in the movant's favor that the jury could not have reached its conclusion on any fair interpretation of the evidence. Avendano v. Stravakos, 32 AD3d 449, 819 N.Y.S.2d 474 (2d Dep't 2006). A court's power to set aside a verdict, under this standard, derives from the judicial system's obligation to protect the integrity of our legal system against the taint of a clearly erroneous verdict. Annunziata v. Colasanti, 126 A.D.2d 75, 512 N.Y.S.2d 381 (1st Dep't 1987); Nicastro v. Park, 113 A.D.2d 129, 495 N.Y.S.2d 184 (2d Dep't 1985). Under CPLR 4404(a), the trial court has discretion to set aside a verdict which is clearly the product of substantial confusion among the jurors. Provenzano v. Peters, 242 A.D.2d 266, 661 N.Y.S.2d 41 (2d Dep't 1997). It has often been held that should the court determine that a verdict is against the weight of the evidence, the proper disposition is to set aside the verdict and order a new trial. Gayle v. Neyman, 91 A.D.2d 75, 457 N.Y.S.2d 499 (1st Dep't 1983).
The above demonstrates the different standards to be applied by the trial court in reviewing an advisory verdict and one based on a question of law.
In order to state a viable defense of equitable estoppel, the proponent has the burden of demonstrating (1) clear misrepresentation; (2) reliance on such; (3) that the reliance is justifiable and (4) that such reliance was to the detriment of the party relying on the misrepresentations. Fundamental Portfolio Advisors, Inc. v. Tocqueville Asset Management L.P., 7 NY3d 96, 817 N.Y.S.2d 606, 850 N.E.2d 754(20);see, New York City Health and Hospitals Corp. v. St. Barnabas Hospital, 10 AD3d 489, 782 N.Y.S.2d 12 (1st Dep't 2004). As stated in this Court's prior determination on the parties' summary judgment motions, the doctrine is the legal tool utilized in the interest of fairness to prevent the enforcement of rights which would otherwise work injustice upon the entity against which enforcement is sought, and which, in reliance on the opposing party's words or conduct, has been misled into believing that such enforcement would not been sought. Fundamental Portfolio Advisors, Inc, supra.
A waiver of a contractual provision can be proved only by a knowing, voluntary and intentional abandonment of a known right. Id. Such should not be lightly presumed and must be based on a clear manifestation of intent to relinquish a contractual right. Id. However, where the sole evidence of the clear misrepresentations set forth consists of oral statements and ambiguous writings, all occurring before a clear agreement between sophisticated parties containing no reliance, disclaimer and integration clauses, and again followed by writings that are at best ambiguous, there can be no equitable estoppel nor waiver. Id.
The Court of Appeals in, Danaan Realty Corp v. Harris (5 N.Y.2d 317, 184 N.Y.S.2d 599, 157 NE 2d 597 [1959] ), a case discussed in the memoranda of law submitted by both parties herein, describes the effect of integration and disclaimer as well as “no reliance” clauses in contracts. It sets forth that while a boilerplate integration cause may be ignored in cases where reliance on fraudulent promises occurs,” (a) specific disclaimer destroys any allegation by the other party that a contract was executed in reliance on contrary oral representations”. The disclaimer in Danaan stated that “ (t)he Seller has not made and does not make any representations as to the physical conditions, rents, leases, expenses, operation or any other matter or thing affecting or related to the aforesaid premise, except as herein specifically set forth, ...” ( Id at 320,601,598).
Applying the test set forth by the Court of Appeals in Mercantile, supra, this Court is charged with the determination of whether the facts presented are sufficient, either as a matter of law or based on the evidence presented at trial, to demonstrate either of the equitable defenses set forth by Audiovox. Although the Court finds the Danaan case persuasive in its holding that certain “no reliance” clauses constitute the kind of specific statement utilized by the courts to counter claims of reliance on misrepresentations, the case at bar did not have quite the specificity with regard to the actual subject matter of the contract as that contained in Danaan. While Audiovox disclaimed reliance on the meaning of the contractual provisions, the parties' contract did not set forth the kind of representation in its “no reliance” sentence with regard, for example, to the issue of the party responsible for payment of the licensing fee as between a licensed supplier and a licensed entity that transfers the product to the end user. Had that occurred, this case would not have gone to trial.
However, based on a careful review of the evidence, the Court finds that neither equitable defense was proved. While the Court is prepared to believe that CEO Lavelle was misled in a verbal conversation prior to the agreement, the contract itself was clear and obligated Audiovox to be the entity responsible for payment of MPEG's license fee upon the sale of its products, whether manufactured by a licensed supplier or an unlicensed supplier. The so-called misleading information packet and the website are, at best, ambiguous and quite specifically require the entity that sells to the end user assumes the burden of payment to MPEG. Audiovox has not demonstrated economic harm in view of the correspondence from its suppliers that once MPEG became aware of non-payment it would, in the future, require Audiovox to pay the $2.50 to those suppliers. The evidence belied any assertion that such reliance was justifiable, based upon the e-mails from Audiovox's main supplier, Action, and never communicated by Audiovox to MPEG stating clearly (whether in broken English or not) that it and Audiovox would under report sales of MPEG licensed products once MPEG started to investigate. For the same reasons, there is no evidence of voluntary abandonment of a known right. As set forth, the evidence presented at trial will not permit either equitable defense to be sustained.
With regard to the legal issues, the Court accepts the jury's finding that the dollar figure of license fees unpaid by Audiovox amounts to $13,951,532.50. This does not appear to be contested. However, despite the high burden required to overturn a jury verdict on a question of law, there can be no doubt that the jury erred when it determined that the amount paid by Audiovox's licensed suppliers on its behalf equaled $11,571,812. There was no testimony presented at trial to support such a finding. It appears, as the Court set forth on the record at trial, that the jury conflated the legal and equitable defenses, contrary to the Court's instructions, and placed a number on the verdict sheet that represented the amount which, if subtracted from the first figure, equaled the amount owed, as per Dr. Rao, for the period outside the equitable estoppel advisory finding (2007 through the end of the subject period, i.e. September 30, 2009). In this vein, there were only two figures set forth at trial, subject to both parties' extensive direct and cross examination, which could be utilized to determine the answer to verdict sheet Question No. 2, seeking the total amount paid by Audiovox's suppliers for the sale on Audiovox's behalf of MPEG licensed products. These constituted Dr. Rao's figure of $5,815,911 and Mr. Westfall's figure of $1,428,072.50. While the jury would have been free to alter such figures by increasing Westfall's figure or decreasing Dr. Rao's figure, those two numbers were the apogee and perigee of their alternatives.
Under the circumstances, the Court believes it is required to set aside the verdict of the jury as to the sole issue of payment by Audiovox's licensed suppliers of MPEG products for the dates in question (September, 2000–September, 2009) as against the weight of the evidence. Neither party, in the Court's view, demonstrated that its view of the payment figure proffered was correct as a matter of law. The Court, in addition, does not accept MPEG's argument that Dr. Rao's testimony should be disregarded and/or stricken as legally unsupportable. Due to the jury's clear error in selecting a payment number that was entirely dependant on the equitable estoppel defense, the parties are entitled to have this issue tried by a jury. However, in view of the considerable time and expense incurred in connection with the trial of this case, the Court will stay enforcement of its order for the purpose of granting the parties the opportunity to choose an alternative option, without prejudice to either party's rights on appeal with regard to the many other issues raised in this litigation. These alternatives constitute the following: (1) the parties may meet and confer and reach an agreement on the number to be applied for payment; or (2) the parties will permit the Court, as the trier of fact, to determine this issue based upon the trial testimony and exhibits already submitted without need for a new trial. Counsel are directed to inform the Court of their preferred course within sixty days.
Accordingly, the Court makes the following findings:
1. Audiovox has failed to demonstrate, at trial, based on the evidence presented, entitlement to judgment on either of its equitable defenses and they are dismissed;
2. The jury erred, as a matter of law, on the numerical figure it set forth representing the total payments made to MPEG by licensed suppliers of Audiovox products on Audiovox's behalf for the period from September 2000 through September 2006;
3. In view of the jury's clear error, the parties are entitled to a new trial on the sole issue of the payment defense raised by Audiovox;
4. The Court hereby stays enforcement of its Order for a period of sixty (60) days for the purposes set forth above.
This constitutes the DECISION and ORDER of the Court.