[00:00:02] Speaker 05: Please be seated. [00:00:05] Speaker 05: Good morning. [00:00:09] Speaker 05: We want to welcome all counsel who are here to argue cases with before us this morning in Hawaii. [00:00:15] Speaker 05: Wayne, we got a little bit of a feedback. [00:00:17] Speaker 05: Maybe Kwame can help us with that. [00:00:22] Speaker 05: Okay. [00:00:23] Speaker 05: We have one matter that was submitted on the briefs, and we'll proceed to the argument calendar. [00:00:28] Speaker 05: The first case is case 23-4314, Howell Link Technologies versus Cypress Technology. [00:00:35] Speaker 05: Mr. Shamigam. [00:00:37] Speaker 02: Thank you, Judge, for asking. [00:00:37] Speaker 02: I'm Shannon Shamigam of Paul Weiss for Appellant Cypress Technologies, and with the court's leave, I'd like to reserve three minutes for a rebuttal. [00:00:45] Speaker 02: May it please the court. [00:00:46] Speaker 02: This case presents a question of contract interpretation on which the district court reached an untenable result. [00:00:52] Speaker 02: The contract between the parties here, known as the EBMA, [00:00:56] Speaker 02: expressly provided that it terminated upon the termination of the ODM contract, which it defined as a contemporaneous terms and conditions agreement between Cyprus and Crestron. [00:01:10] Speaker 02: Once the terms and conditions agreement terminated, the EBMA terminated as well. [00:01:16] Speaker 02: At most, therefore, Cyprus could be liable for two years' worth of damages as a result of its premise [00:01:31] Speaker 05: Give us a second to address that. [00:01:41] Speaker 02: Okay, yet the jury in this case awarded and the district court upheld damages over not a two year period, but instead a seven year period. [00:01:51] Speaker 05: Can I ask, was the determination when it was only, when the contractual arrangement ceased for basically one minute? [00:02:01] Speaker 02: Yes, Judge Bras, the duration of the termination, in our view, is of no moment. [00:02:06] Speaker 02: And that's because of the operation of the clear terms of the EBMA itself. [00:02:11] Speaker 02: The EBMA indicated in section 7.1 that the agreement will continue until the earlier of two things. [00:02:18] Speaker 02: Here, the relevant thing, the termination of the ODM contract. [00:02:23] Speaker 05: There was no condition on that and there's- Was there a requirement to give notice of the termination to OWLINK or do you contend that wasn't a requirement either? [00:02:32] Speaker 02: So no requirement of notice to Allenck. [00:02:35] Speaker 02: The ODM contract itself by its terms permitted Crestron to terminate. [00:02:41] Speaker 02: It required Crestron to provide notice to Cyprus. [00:02:44] Speaker 02: There was also a waiting period which Cyprus waived. [00:02:48] Speaker 02: And so again, if Allenck had wanted to condition termination on something more than the termination of the ODM contract, [00:02:56] Speaker 02: it as a sophisticated party could have negotiated for that. [00:02:59] Speaker 02: And indeed, the testimony of Aulink's president, Mr. Paul Zhang, was precisely to that effect. [00:03:05] Speaker 02: at pages 691 to 692 of the record. [00:03:09] Speaker 05: I guess this didn't get to the jury, they didn't decide this, but is there not a good faith argument on the notice? [00:03:15] Speaker 02: So there was a claim of a breach of the implied duty of good faith and the jury, as you indicate Judge Brass, did not reach that issue. [00:03:25] Speaker 02: So that claim was not resolved by virtue of the resolution of the primary claim on breach of contract. [00:03:31] Speaker 02: But again, I think the disagreement between the parties here really boils down at its core to the operation of section 7.1. [00:03:40] Speaker 02: Our submission to the court is that these provisions work together in a very logical way. [00:03:47] Speaker 02: Essentially, the way that this works is that you do have some protection for Allink in the form of section 2.4. [00:03:55] Speaker 02: That is the provision that [00:03:57] Speaker 02: prohibits Cyprus and Crestron from communicating and that extends for two years after termination. [00:04:04] Speaker 02: So really what was going on here at trial was that there were really two separate theories of breach. [00:04:10] Speaker 02: They were not disaggregated in the verdict. [00:04:12] Speaker 02: The first and more expansive theory was this theory that there was no termination and therefore that the contractual obligation continued for some unspecified period of time. [00:04:22] Speaker 02: If we are correct about the construction of the contract, that theory goes away [00:04:26] Speaker 02: And then you're left with the narrower theory, which is that prior to termination, there was a breach of this no communication provision in 2.4. [00:04:33] Speaker 02: And as I indicated at the outset, that's what provided protection to Aulink. [00:04:39] Speaker 05: Aulink could potentially get... Seems to be made on the other side that... [00:04:43] Speaker 05: When it references the contract, it's referencing sort of future agreements and not just the extant agreement, the extant 2014 T&Cs. [00:04:54] Speaker 05: So how do you address that? [00:04:55] Speaker 02: So that is the alternative argument. [00:04:57] Speaker 02: So just to be clear, as the case now stands before the court, [00:05:01] Speaker 02: of the three theories that were advanced below, Aulink has now effectively abandoned the theory about incorporation. [00:05:08] Speaker 02: So they're really making two arguments. [00:05:10] Speaker 02: The first, that there was no valid termination, which we've been discussing. [00:05:13] Speaker 02: The second, this argument that the term ODM contract refers to any terms and conditions agreement between Cyprus and Crestron. [00:05:22] Speaker 02: Now I'll say that that was Aulink's primary theory below. [00:05:24] Speaker 02: Aulink, I think, is now de-emphasizing that theory, and for good reason. [00:05:29] Speaker 02: I think when you look at [00:05:30] Speaker 02: the language of the ebma. [00:05:32] Speaker 02: It defines ODM contract with a specific and detailed name. [00:05:37] Speaker 02: It repeatedly refers to the agreement between Cyprus and Crestron, not any agreement. [00:05:42] Speaker 02: And it contemplated that a true copy of the ODM contract would be attached. [00:05:46] Speaker 05: What is the distinction between the 2020 TNCs, which you claim are not part of the ODM contract, and the amendments to the 2014 TNCs, which everyone seems to treat as part of the ODM contract? [00:06:00] Speaker 02: Sure. [00:06:01] Speaker 02: Judge Bress, I would start from the point of agreement. [00:06:04] Speaker 02: I think that there is agreement between the parties now that notwithstanding the fact that the original 2014 agreement was not attached, that that constituted a qualifying ODM contract. [00:06:17] Speaker 02: Our view is that nothing in the EBMA precludes the parties from amending the contract. [00:06:24] Speaker 02: As Alan points out, there were somewhere in the neighborhood of 12 amendments. [00:06:28] Speaker 02: during the life of that contract, none of which is material here. [00:06:32] Speaker 02: But I think that the fact remains that there is a difference, Judge Bras, between an amendment on the one hand and termination on the other. [00:06:39] Speaker 02: And there's no doubt that there was termination, that there was a new agreement that came into effect. [00:06:44] Speaker 02: Some of the terms of that new agreement were different from the terms of the 2014 agreement. [00:06:51] Speaker 02: And so I think that that is, by any understanding, a different agreement. [00:06:56] Speaker 02: Which is why Aulink has to make the argument, I think, [00:06:59] Speaker 02: This provision refers to any agreement between the parties. [00:07:03] Speaker 03: Council, I apologize. [00:07:04] Speaker 03: So I had a question for you. [00:07:07] Speaker 03: I wanted to go back to the issue related to 2.4 and section 2.4, which precluded Cyprus from having communications directly with Creston. [00:07:19] Speaker 03: How does that square with the one minute termination not being a termination? [00:07:28] Speaker 02: So I think that the way that all of this should operate is that the right to terminate is absolute in the sense that under section 7.1, there's no condition that the parties have to have complied with the requirements of section 2.4. [00:07:47] Speaker 02: I think what section 2.4 does, Judge D'Alba, is essentially to create an efficient breach provision, which allows the parties the opportunity [00:07:55] Speaker 02: to get out from the contract, but to potentially be liable for two years of damages. [00:08:00] Speaker 02: And we did have defenses to that aspect of the claim, but I think that the critical point is that if you agree with us that there was a termination here, then I think that the case really almost has to go back because you had a verdict in this case that didn't disaggregate those two theories of breach from each other. [00:08:19] Speaker 03: Your breach provision, is that a liquidated damages provision? [00:08:22] Speaker 02: So I think that the way that this would operate, it's not quite like a liquidated damages provision. [00:08:29] Speaker 02: I think by virtue of the operation of 7.5, the theory of damages on which the damages experts largely agreed is that you would operate in a but for world where you would essentially say because there was a breach of 2.4 and because that obligation continued for two years, you would calculate the relevant commissions for that period. [00:08:52] Speaker 02: And there was a meaningful difference between the experts on what that amount should be. [00:08:56] Speaker 02: I think our experts had no more than $4 million. [00:08:58] Speaker 02: Their experts had $10 million. [00:09:00] Speaker 02: That's obviously a lot less than what was awarded here. [00:09:03] Speaker 02: But I want to come back to one sort of broader point that touches on both section 2.4, I think, and section 7.1 and the interplay between these provisions. [00:09:14] Speaker 02: I think the problem with Allynk's interpretation here is that the EBMA would seemingly remain in effect indefinitely. [00:09:22] Speaker 02: As we point out in our reply brief, it's not entirely clear how the parties could ever get out from the obligations of the EBMA. [00:09:32] Speaker 05: They're saying you should just wait two years. [00:09:35] Speaker 02: Well, I think that under their interpretation, but this is a question for my friend, Ms. [00:09:40] Speaker 02: Sherry, I think their view is that if the parties silently terminated the agreement and then proceeded for two years without having any communications, [00:09:51] Speaker 02: then perhaps there would not be a breach, but what happens if the parties communicate during those two years? [00:09:57] Speaker 02: Does that render the termination invalid under their interpretation? [00:10:01] Speaker 02: I frankly think it's a little bit unclear. [00:10:03] Speaker 05: What is the relevance of your clients not telling OwlLink about the termination? [00:10:10] Speaker 05: Because that seems to be part of their beef here, is that they were cut out of this agreement and they found out about it. [00:10:17] Speaker 05: you know, later accidentally and the situation could have persisted seemingly for years without them learning about that. [00:10:24] Speaker 05: What does that do to the legal theories or to the damages? [00:10:28] Speaker 02: Well, I think Allynx president himself testified that the EBMA did not require prior notice of the termination of the ODM contract. [00:10:37] Speaker 02: That's a testimony I adverted to [00:10:39] Speaker 02: at pages 691 to 692 of the record excerpts. [00:10:44] Speaker 02: So I don't think that the failure to provide notice has any significance, but it may very well be. [00:10:51] Speaker 02: that by virtue of the fact that there were these communications, that Cyprus would nevertheless be on the hook for these two years of damages, Judge Brass. [00:11:00] Speaker 02: So I don't think this is a situation in which Allenck would be left without any remedy at all. [00:11:05] Speaker 02: But remember that what Allenck got here was by virtue of their expert's testimony, the expert testimony [00:11:13] Speaker 02: The expert testified that he thought that this agreement would remain in effect for its commercial life of up to seven years. [00:11:21] Speaker 02: The jury awarded somewhat less than that. [00:11:24] Speaker 02: That is the theory that in our view cannot proceed under a construction, a proper construction of the contract. [00:11:32] Speaker 05: What is the relevance at this point of the 2014 TNCs not being attached to the EBMA? [00:11:40] Speaker 02: I think it has no significance. [00:11:43] Speaker 02: And as the court will be aware, our fallback argument here concerns the jury. [00:11:48] Speaker 05: What was the significance of this issue in the district court, in the trial? [00:11:53] Speaker 05: And how did it come to seemingly be not significant now, in your view? [00:11:56] Speaker 02: So we argued in the course of the summary judgment briefing that this issue of incorporation should not go to the jury. [00:12:05] Speaker 02: That as a matter of law, it was [00:12:07] Speaker 02: not a valid consideration, the district court disagreed with us. [00:12:11] Speaker 02: And then we proceeded to essentially- What issue shouldn't go to the jury? [00:12:16] Speaker 05: Whether it's the fact that it wasn't attached to the- Correct. [00:12:21] Speaker 02: And more broadly, that the validity of the incorporation was not sort of a relevant factor, which is to say that whether or not the 2014 agreement was properly incorporated by reference into the EBMA. [00:12:37] Speaker 02: Now, we have our fallback argument concerning the instruction here, and I do think with respect that Alynk sought to sow a great deal of confusion on this issue before the jury by suggesting that by virtue of the fact that the 2014 terms and conditions not just were not attached, but were not final as of the time of the EBMA and were not signed as of the time of the EBMA. [00:13:03] Speaker 02: that that somehow supported their position and not ours. [00:13:07] Speaker 05: Did your clients ask for a different instruction? [00:13:09] Speaker 02: We did. [00:13:10] Speaker 02: If you take a look at page 234 of the record excerpts, we asked for an instruction that omitted the language concerning whether or not those terms, quote, existed at the time of incorporation. [00:13:22] Speaker 02: And Al Link's counsel. [00:13:24] Speaker 05: You seem to also be saying there was some additional language from our Pablon case that you would have wanted in the instruction. [00:13:31] Speaker 05: Did your clients ask for that additional language below? [00:13:33] Speaker 02: No, but I think that the language that we proposed achieved the same result, Judge Brass, which was to take off the table any suggestion that by virtue of the fact that the ODM contract had not been signed as of the time of incorporation, that the incorporation was somehow invalid. [00:13:52] Speaker 02: Now again, our broader legal argument here is that incorporation doesn't matter. [00:13:57] Speaker 02: We are resting on the language of Section 7.1, which turns on the termination of the ODM contract, whether or not incorporation has taken place. [00:14:09] Speaker 02: And so I do think that this argument was a red herring, but it was an argument that Allynck pressed throughout the trial. [00:14:15] Speaker 02: and that now Allynk, I think, has clearly in its appellate brief abandoned. [00:14:19] Speaker 02: Does the court has any? [00:14:21] Speaker 03: I do have questions, actually. [00:14:22] Speaker 03: I want to know why it is that Cyprus believes it's entitled to an entire new trial and not just a trial on damages. [00:14:30] Speaker 02: So certainly at a minimum, if the court agrees with us, the jury did not resolve what the appropriate measure of damages would be on the more modest theory of breach. [00:14:39] Speaker 02: Our argument though, Judge D'Alba, is that if the court does agree that there was error here, that we should get a broader new trial because it is unclear how the jury would have resolved the question of liability if the only theory of breach in front of it was this theory of a breach of section 2.4. [00:14:59] Speaker 02: Our primary defense on that claim was that it was Crestron and not Cyprus that was the instigator here, and therefore under California law, this was not a situation in which Cyprus was the substantial factor in causing harm. [00:15:18] Speaker 02: which is necessary in order to have liability. [00:15:21] Speaker 02: And precisely because these two theories of breach were not disaggregated, we don't know what the jury would have thought about that. [00:15:29] Speaker 02: And so we think that it would be appropriate for the court to allow a new trial on that issue, and then if the jury decides to award damages, it can resolve this disagreement between the parties. [00:15:40] Speaker 03: Was Crestron a party to the agreement? [00:15:44] Speaker 02: So Crestron was a party to the ODM contract, obviously. [00:15:50] Speaker 02: It was not a party to the EBMA. [00:15:53] Speaker 02: And I would note, in case this is something that you're wondering, that the ODM contract had a specific provision indicating that there were no third-party beneficiaries of that contract. [00:16:03] Speaker 03: Okay, so Section 2.4 didn't bind Crestron. [00:16:08] Speaker 02: So that is correct. [00:16:09] Speaker 02: It is only an obligation that Cyprus had. [00:16:12] Speaker 02: But if you take a look at the instructions in this case, and in particular I would point you to page 53 of the record excerpts, there was an instruction given that indicated that one of the elements here was that Cyprus's breach was a substantial factor in causing Alanx harm. [00:16:32] Speaker 02: And again, we presented evidence. [00:16:34] Speaker 02: It was disputed between the parties. [00:16:36] Speaker 02: that again, Crestron was the party that triggered these negotiations, and that was the party seeking to have a new ODM contract between Cyprus and Crestron. [00:16:49] Speaker 01: If there is a new trial, as you suggest, on a broader basis, the Covenant of Good Faith and Fair Dealing will also have to be part of that trial, correct? [00:17:01] Speaker 02: I think potentially, yes, that that is right, because the jury obviously did not resolve that issue. [00:17:06] Speaker 02: And this was a relatively brief trial, it was six days, so I don't think that this would impose. [00:17:10] Speaker 05: You say potentially, but is there any circumstance in which it wouldn't be? [00:17:15] Speaker 02: Standing here, I can't think of one, because that would be a claim that presumably ALEC would want to press on remand, and again, it was not resolved by the jury. [00:17:25] Speaker 05: Okay, we've kept you on the run, so we'll put three minutes on the clock for rebuttal, and we'll hear from your opposing counsel. [00:17:37] Speaker 05: Ms. [00:17:37] Speaker 05: Sherry, good morning. [00:17:39] Speaker 04: Good morning, your honors. [00:17:40] Speaker 04: May it please the court, Melissa Arbisheri here on behalf of Cypress Technology. [00:17:44] Speaker 04: Let me just start with the incorporation by reference issue, because I wanted to set the record straight. [00:17:49] Speaker 04: We did not press that during the trial at all. [00:17:52] Speaker 04: You could look at the entire trial transcript. [00:17:54] Speaker 04: And in fact, at page 1064, the excerpts of record, our counsel said to the court, I'm not really sure why we're talking about incorporation. [00:18:01] Speaker 04: By reference anymore, it's not how the evidence came in. [00:18:05] Speaker 04: Same statement at about 1089 to 1090 of the excerpts of record. [00:18:10] Speaker 04: They proposed a jury instruction on incorporation by reference. [00:18:13] Speaker 04: It's the one they pointed to. [00:18:15] Speaker 04: In fact, the instruction given mirrored their instruction with the exception of the one part in subpart three that we're talking about. [00:18:22] Speaker 04: And their JMAW, renewed JMAW, focused on incorporation by reference. [00:18:28] Speaker 04: If you look at the jury instructions as a whole, there were six jury instructions on contract interpretation starting with [00:18:34] Speaker 04: number 31, this is the experts records 55 to 60. [00:18:38] Speaker 04: And so what the jury had in front of it was just California law and contract interpretation, disputed words, looking at the contract as a whole, looking at the conduct of the parties. [00:18:49] Speaker 04: And so this was not our issue at trial by any means. [00:18:51] Speaker 04: And in fact, if you look at our opposition to the JMA, what we said were there are two evidentiary bases to uphold the jury's verdict on validity of termination. [00:19:01] Speaker 04: One was this ODM contract issue, and the other one was whether or not this is really a termination. [00:19:06] Speaker 04: So let me get to those two key points. [00:19:10] Speaker 04: First, on the ODM contract, we are not running away from that at all. [00:19:14] Speaker 04: Their argument is very formalistic. [00:19:17] Speaker 04: They say look at it, it's capital letters, it has the definite article, it says exhibit A. The problem is their argument falls apart on this formalistic interpretation because if you look at the words in 7.1, it is referring in capital letters to a contract that has a different name. [00:19:34] Speaker 04: It says standard not modified. [00:19:37] Speaker 04: Exhibit A was never attached. [00:19:39] Speaker 04: What does that mean? [00:19:40] Speaker 04: It opens the door to look and see what the parties intended. [00:19:44] Speaker 04: They said the parties Crestron and Cypress will enter into an ODM contract. [00:19:50] Speaker 04: Why? [00:19:50] Speaker 04: For this purpose. [00:19:52] Speaker 04: So this is the whereas clause in the beginning of the EBMA, page 1211. [00:19:56] Speaker 04: For this purpose. [00:19:57] Speaker 04: What purpose? [00:19:58] Speaker 04: The purpose is for Cypress to design, manufacture, and sell to Crestron certain HDMI products. [00:20:05] Speaker 04: It didn't just incorporate [00:20:07] Speaker 04: The 2014 terms and conditions, as acknowledged by my friend on the other side, it incorporated every single one of the 12 amendments over the course of six years. [00:20:17] Speaker 05: Whatever it means, why would it mean something that was entered into after a termination? [00:20:24] Speaker 04: Well, this gets to the 62nd issue. [00:20:27] Speaker 04: I guess it gets to two things. [00:20:29] Speaker 04: What is ODM contract mean? [00:20:31] Speaker 04: In our position throughout, and I think this is well supported by the EBMA, is that it is any terms and conditions that governs the relationship between the parties when it comes to these HDMI products. [00:20:42] Speaker 04: And the 2020 terms and conditions, same parties, same exact title. [00:20:48] Speaker 04: If you look at 1219 and 1250 next to each other, they're both called the modified terms and conditions. [00:20:53] Speaker 04: Same products, very same purpose. [00:20:55] Speaker 05: I guess the question I would have is, [00:20:58] Speaker 05: would we draw different significance from the 2020 TNCs when it occurred, when they are, when they followed a formal event in the contract, which was a termination? [00:21:10] Speaker 04: I don't think by at all, because termination of course means an end, right? [00:21:14] Speaker 04: It means an end to something and nothing ended. [00:21:16] Speaker 04: In fact, intentionally nothing ended because Crestron said, we will only do this if there are no gaps. [00:21:23] Speaker 04: And so this was uninterrupted continued from one minute literally to the next. [00:21:28] Speaker 04: the same relationship, the same products, the same parties. [00:21:31] Speaker 04: And I think maybe it goes in part to what termination means. [00:21:34] Speaker 04: And my friend on the other side will say, well, it says termination, so that means anything that happens. [00:21:41] Speaker 04: The 60 second pause counts. [00:21:43] Speaker 04: But termination means an end to something. [00:21:45] Speaker 04: Nothing ended. [00:21:45] Speaker 04: And there are a number of cases cited throughout the briefs [00:21:49] Speaker 04: that show that you can't just look at termination in the abstract in a contractual circumstance. [00:21:53] Speaker 04: You have to look at the contract as a whole. [00:21:55] Speaker 05: So how long did it have to be terminated for? [00:21:57] Speaker 05: So here it was terminated for a minute. [00:21:59] Speaker 05: What if it was like a month? [00:22:01] Speaker 04: So it needs to be, our view, it needs to be a clean break. [00:22:03] Speaker 04: And I know my friend on the other side said it's unclear what our position is on this. [00:22:06] Speaker 04: It has to be a clean break. [00:22:07] Speaker 04: The parties have to be walking away from each other, walking away from engaging in this contractual relationship. [00:22:13] Speaker 04: And so the longer the period of time is, and if there's not evidence that they said, you know, wink, wink, [00:22:18] Speaker 04: we're gonna get back together in a week and keep this going, then it starts to look like a clean break. [00:22:23] Speaker 04: And then you're talking about 7.5. [00:22:26] Speaker 04: And I just wanna spend a minute on 7.5 as well. [00:22:30] Speaker 04: And you're on your question, is it a liquidated damages provision? [00:22:33] Speaker 04: That is how they are treating it. [00:22:35] Speaker 04: They talked about efficient breach. [00:22:36] Speaker 04: That's not how it reads. [00:22:37] Speaker 04: So 7.5, if you look at it, it's a basic survival provision. [00:22:42] Speaker 04: And it's not just about 2.4. [00:22:44] Speaker 04: It covers section one, section four, section five, section six, section seven, and section eight. [00:22:50] Speaker 04: Basically, most of the provisions in the contract are included in this survival provision. [00:22:55] Speaker 04: And it says they've survived for two years after termination. [00:22:59] Speaker 04: And again, this is any termination. [00:23:00] Speaker 04: It's not just 7.1. [00:23:01] Speaker 04: It's termination for convenience under 7.3. [00:23:04] Speaker 04: It's termination for cause under 7.2. [00:23:07] Speaker 04: So there is a ton of work for the survival provision to do that have nothing to do [00:23:12] Speaker 04: would 2.4 have nothing to do with these facts. [00:23:15] Speaker 04: Now as far as 2.4 goes, what does it do? [00:23:17] Speaker 04: It doesn't say we're gonna cut damages off at two years. [00:23:20] Speaker 04: That would look very different if that's what they had written into the agreement. [00:23:24] Speaker 04: Instead, and Mr. Zhang testified at trial to this, what it says is if their relationship breaks down, Crushedron gets upset with Cyprus, doesn't wanna deal with them anymore, and they do have this clean break, it gives Outlink two years to get them to start talking to each other again. [00:23:41] Speaker 04: to get them to work together again, to fix the relationship, to possibly reengage. [00:23:45] Speaker 05: They decide, as they did, that your client is not necessary in this relationship. [00:23:49] Speaker 05: What were they supposed to do to accomplish that? [00:23:52] Speaker 04: So they were supposed to come talk to us, not do this whole behind the back thing. [00:23:57] Speaker 05: Is that a contractual obligation, or is that a good faith argument? [00:24:01] Speaker 04: They are bound by this contract. [00:24:03] Speaker 04: They didn't write a contractual out for themselves. [00:24:06] Speaker 04: They didn't write in, we can terminate at will. [00:24:08] Speaker 04: We did. [00:24:09] Speaker 04: They didn't. [00:24:10] Speaker 04: They didn't write in, you know what, let's just do this for five years. [00:24:13] Speaker 04: We'll revisit in five years, see how the relationship's going. [00:24:16] Speaker 04: They didn't do that, and they didn't do that for a reason, and it's because of the nature of this kind of contract. [00:24:21] Speaker 04: There are tons of upfront costs that my client put in here. [00:24:24] Speaker 04: Effort to get them together to have this relationship work, and they were, right? [00:24:29] Speaker 04: My client was a middleman. [00:24:30] Speaker 04: What happens in those circumstances? [00:24:32] Speaker 04: You worry, right? [00:24:33] Speaker 04: You worry the two sides. [00:24:34] Speaker 04: After a number of years, all of the hard work are gonna say, [00:24:37] Speaker 04: You know what, we don't need you anymore. [00:24:38] Speaker 04: We're gonna save money and do it ourselves. [00:24:40] Speaker 04: And my client was worried about that. [00:24:42] Speaker 04: And that wasn't some secret. [00:24:44] Speaker 04: He told them, he said, I need 2.4 in the agreement when Cypress tried to take it out. [00:24:50] Speaker 04: Said, I need it in there because I'm worried you're gonna try to cut me out. [00:24:53] Speaker 04: And what did they say? [00:24:54] Speaker 04: They said, Paul, don't worry about that. [00:24:56] Speaker 04: We're not gonna do that to you. [00:24:57] Speaker 04: That's at 479 of the excerpts of record. [00:25:00] Speaker 05: Their position would seem to be, your client is protected, but up to two years worth of the value. [00:25:05] Speaker 04: Yeah, and I think that just goes back to reading 7.5 to be something that it's not. [00:25:10] Speaker 04: The concern about cutting him out, you know, two years doesn't remotely make up for the damage that was caused by the six-year relationship. [00:25:19] Speaker 04: The idea of damages in general, right, is you get whatever you're entitled to but for the breach. [00:25:26] Speaker 04: They never would have been able to enter into even this fake termination. [00:25:30] Speaker 04: but for the breach of 2.4. [00:25:32] Speaker 04: It took six months of clandestine conversations and negotiations to even enter into that piece of paper. [00:25:38] Speaker 04: And Crestron was clear as day, we are not gonna do that if there's a single gap in our relationship. [00:25:44] Speaker 04: We need the products, we need everything to keep moving as it is. [00:25:47] Speaker 04: And so the 2.4 breach is what allowed them to even sign that piece of paper. [00:25:52] Speaker 04: And nothing in the contract suggests that the parties agreed on day one. [00:25:57] Speaker 04: You know what? [00:25:57] Speaker 04: I don't want you to talk to each other, but if you do it, no big deal. [00:26:01] Speaker 04: Just pay us for two years and we'll go our separate ways. [00:26:03] Speaker 04: They didn't negotiate for that. [00:26:04] Speaker 04: It's not what the contract. [00:26:06] Speaker 04: says, and, you know, yes. [00:26:08] Speaker 05: If they did decide that, you know, we don't want Howell Link in the middle of this, were they supposed to cease their interactions for two years and then pick that up, or was there a price to pay to do that? [00:26:19] Speaker 04: Right, they had two options. [00:26:20] Speaker 04: I mean, the obvious one is when you have a contract you're no longer happy with and you don't have a way out because you haven't negotiated one, is you go talk to them and say, we're unhappy, can we either A, renegotiate, or B, let me buy you out of the contract? [00:26:32] Speaker 04: I mean, it would be like, you know, my daughter [00:26:35] Speaker 04: saying, I know you said I couldn't do something, but I really, really wanted to do it, and I knew if I just asked you, you would say no. [00:26:42] Speaker 04: I mean, that is the essence of their argument. [00:26:44] Speaker 04: They didn't come talk to us, my client said, come talk to us, it's business, we can renegotiate. [00:26:49] Speaker 04: They didn't provide any protections in the contract for themselves to get out when they wanted to get out, and now they're trying to read 7.1 to be way more than it was intended to be. [00:26:59] Speaker 04: The point of 7.1, I mean, its entitled term, [00:27:02] Speaker 04: It says this is when the contract begins, this is when the contract ends. [00:27:06] Speaker 04: And when it's talking about termination of the ODM contract, the idea is when you two are no longer working together for this purpose, then the EBMA is over, because it really serves no purpose at all at that point. [00:27:18] Speaker 04: And that did not happen. [00:27:20] Speaker 04: The opposite happened. [00:27:21] Speaker 04: We're talking about a 60-second, dead of night pause in the relationship. [00:27:25] Speaker 04: Again, same title, same parties, same purpose. [00:27:29] Speaker 04: same products that we had spent years developing. [00:27:32] Speaker 04: And the jury, importantly, we haven't talked about the jury. [00:27:35] Speaker 04: The jury heard all of this evidence under California contract law. [00:27:39] Speaker 04: All of that is important. [00:27:40] Speaker 04: And the only question is whether or not the language is reasonably susceptible to the reading we're giving it. [00:27:47] Speaker 04: And it's more than that. [00:27:49] Speaker 04: Again, termination is not a defined term. [00:27:51] Speaker 04: ODM contract is, but it's not the one that they say it is. [00:27:56] Speaker 04: Nothing was attached. [00:27:57] Speaker 04: This essentially, [00:27:58] Speaker 04: At the end, it's a 13th Amendment. [00:28:00] Speaker 04: That's all it was. [00:28:02] Speaker 04: It's a 13th Amendment. [00:28:03] Speaker 04: They called it something else because they wanted to fit within the language of 7.1, but it's nothing more than the 13th Amendment. [00:28:11] Speaker 05: So the other side says, if this is right, there's this sort of indefiniteness problem in terms of when does the contract actually end and how would they go about undoing it? [00:28:24] Speaker 05: Do you think that's an issue? [00:28:25] Speaker 04: I don't think, I mean, they haven't identified why that's a legal problem. [00:28:29] Speaker 04: They had an argument below about, you know, restraint of trade and the like, but the court dismissed it and they don't re-raise that on appeal and they didn't have any evidence on that point. [00:28:38] Speaker 04: And I don't think it's surprising, again, that it's an indefinite agreement. [00:28:42] Speaker 04: They could have, of course, tried to say, you know what, this is a great idea, but at some point we might not need you anymore, so why don't we do it for five years and revisit. [00:28:50] Speaker 04: They could have again tried to negotiate for something where I'm not sure my client would have agreed or certainly wouldn't have agreed on these terms because of all the upfront costs and efforts going into it. [00:29:00] Speaker 04: And so it's really no answer for them to say we really wanted to get out. [00:29:04] Speaker 04: We didn't have any way out. [00:29:05] Speaker 04: So we decided to do this kind of dead of night. [00:29:09] Speaker 04: quote unquote termination that didn't end anything at all. [00:29:12] Speaker 05: But I mean, you know, the EBMA doesn't say, doesn't provide any other conditions on termination. [00:29:19] Speaker 05: It just says you can terminate. [00:29:21] Speaker 05: So even though it was only a minute, why isn't it a formal act of termination that that wouldn't trigger the provision? [00:29:28] Speaker 04: Because it needs to be an end to the contractual relationship between the two. [00:29:31] Speaker 04: And it's not that. [00:29:32] Speaker 04: And also because termination has to have [00:29:35] Speaker 04: some real meaning, and so if I can give the court an example. [00:29:39] Speaker 04: So let's say there's an employment contract and an employee's benefits vest after a year, and they vest so long as you haven't been terminated within a year. [00:29:48] Speaker 04: If the employer fired and terminated, quote unquote, the employee on day 364 at 11.59 p.m. [00:29:56] Speaker 04: and one minute later rehired that employee, I don't think any court would read that to say, oh, well, that's a termination, I guess, your benefits. [00:30:03] Speaker 04: don't invest, it has meaning, and really when we're talking about California contract law, the crux of all of this is what did the parties intend? [00:30:12] Speaker 04: And so for all of the formalistic arguments, taking a step back, what did the parties intend in 2014 when they entered into this arrangement? [00:30:22] Speaker 04: When they talked about termination of the ODM contract, something they hadn't even entered into and finalized yet, what were they saying? [00:30:29] Speaker 04: When you guys stopped working together, [00:30:31] Speaker 04: under a contract when you stop selling these HDMI products that we're gonna help you develop. [00:30:36] Speaker 04: At that point, there's no point in having an eBMA anymore. [00:30:40] Speaker 04: It serves no purpose. [00:30:42] Speaker 04: I guess one point on the new trial, I hope the court doesn't get there, but if the court is starting to think about a new trial, the idea that they should be able to take back their conceded breach really makes no sense at all. [00:30:57] Speaker 04: I mean, this isn't just liability that the jury found. [00:31:00] Speaker 04: This was a conceded breach in the opening statement. [00:31:03] Speaker 04: In the closing statement before the court, they said, well, yeah, there's a technical breach. [00:31:07] Speaker 04: And the court said there's nothing technical about it. [00:31:09] Speaker 04: So the 2.4 breach is clear as day and there's no reason they should go back to be able to relitigate that. [00:31:16] Speaker 04: The good faith and fair dealing, absolutely that would be on the table. [00:31:20] Speaker 04: But I think that just goes to underscore why this shouldn't go back in the first place. [00:31:24] Speaker 04: The jury heard all of this evidence. [00:31:26] Speaker 04: the jury considered all the evidence, had the instructions. [00:31:30] Speaker 05: Is the lack of notice to your client and the not telling your client about the alleged termination, is that a good faith and fair dealing argument or is that something else? [00:31:42] Speaker 04: No, I think it is a good faith and fair dealing argument. [00:31:45] Speaker 04: I also think maybe it goes to the point I was making earlier, which is they wouldn't have been able to carry off this, what they're calling a termination. [00:31:53] Speaker 04: without having engaged in these six months of behind the scenes dealing with Crestron. [00:31:59] Speaker 04: Because had this been above board, had they come to our client, had we been aware of it, it is very unclear and perhaps not particularly likely that they would have successfully done the 60 second lapse. [00:32:13] Speaker 04: in the dead of night. [00:32:15] Speaker 04: So I think it's relevant to tell the story and to explain why the two are intertwined. [00:32:19] Speaker 04: But I guess that gets me to one other point. [00:32:22] Speaker 04: My friend is wrong when he says that valid termination is part of any breach claim. [00:32:27] Speaker 04: It was not part of any breach claim at all. [00:32:29] Speaker 04: The breach claim that the jury found was based on 2.4. [00:32:32] Speaker 04: Valid termination came in only as their argument to mitigate damages. [00:32:38] Speaker 04: Our experts said seven years, we think the agreement would have stayed intact for seven years, [00:32:42] Speaker 04: And they came back and said, no, no, no, see, there was a termination. [00:32:46] Speaker 04: So we think they'd only get two years of damages. [00:32:49] Speaker 04: That's at page 10, excuse me, 1060 of the excerpts of record and 1061. [00:32:56] Speaker 04: where they argued this is a way to cut off damages. [00:32:59] Speaker 04: It was never about breach. [00:33:01] Speaker 05: They want to continue their relationship, but they want you out of it. [00:33:07] Speaker 05: And they don't necessarily want to negotiate with your client further and then just want to be done. [00:33:13] Speaker 05: Is your position then that they would need to cease working together for two years before they start working together again? [00:33:21] Speaker 05: Yes. [00:33:22] Speaker 05: And where do you get that from the contract? [00:33:24] Speaker 04: Because the contract says that you can't have direct conversations. [00:33:28] Speaker 04: That's 2.4. [00:33:28] Speaker 04: It doesn't provide them termination. [00:33:31] Speaker 04: for convenience, termination of right, it's not a basis for cause, because they don't want to do it anymore. [00:33:36] Speaker 04: So they have no termination right that they negotiated for. [00:33:40] Speaker 04: And then all that's left is the two-year survival period. [00:33:47] Speaker 04: So if they really did terminate, right? [00:33:50] Speaker 04: So if they said, we want out, we are terminating, we're getting out of the ODM contract entirely, and there's a clean break for two years, [00:33:59] Speaker 04: and two years later they get back together, then I guess we're just out of luck. [00:34:03] Speaker 04: But the reality is that was never going to happen because Crestron needed these products. [00:34:08] Speaker 04: These are not off the shelf products that they had spent years developing. [00:34:12] Speaker 04: And so a two year clean break was not in the cards for any of the parties, which is why the answer was if they wanted, you know, we don't need you anymore. [00:34:21] Speaker 04: Thanks for all of your help. [00:34:23] Speaker 04: We'd like to go our separate ways and make more money. [00:34:25] Speaker 04: Their option was to come talk to us and try to renegotiate. [00:34:28] Speaker 04: That's what happens. [00:34:29] Speaker 04: when years later you look at a contract and wish you had negotiated for different rights. [00:34:33] Speaker 05: I know we're taking you over your time, but can you address this jury instruction? [00:34:36] Speaker 04: Yes. [00:34:37] Speaker 04: So the jury instruction, two points on that. [00:34:39] Speaker 04: One is how the objections developed and what the objections actually were. [00:34:43] Speaker 04: The objections at trial, again, they proposed that instruction minus the few words we're talking about today. [00:34:49] Speaker 04: And their arguments essentially came down to that tells the jury that this needed to be signed and finalized. [00:34:58] Speaker 04: But it doesn't say that, right? [00:35:00] Speaker 04: It says must exist. [00:35:01] Speaker 04: It comes directly out of this court's poblan decision. [00:35:04] Speaker 04: It says nothing about signing. [00:35:06] Speaker 04: And in fact, an earlier version did talk about signing and the court said, no, no, no, that's not the law. [00:35:11] Speaker 04: I'm not gonna give that instruction. [00:35:13] Speaker 04: And so I think at the best, what their argument is one about formulation, and maybe the jury might have incorrectly thought that signing was required, but it doesn't say that. [00:35:23] Speaker 04: And if we're just talking about formulation, it's an abuse of discretion standard. [00:35:27] Speaker 04: And the Gracie v. Gracie case that's cited in their opening brief and reply deals with the use of trademarks and says, okay, maybe you could read it either way. [00:35:36] Speaker 04: But if we're just saying you could read it either way, that's not enough to reverse. [00:35:40] Speaker 04: I think the language is exactly right. [00:35:42] Speaker 04: The idea is when you're talking about incorporation by reference, the parties need to know about what you're incorporating or it needs to be easily available. [00:35:50] Speaker 04: And so, in a sense, it does have to exist. [00:35:53] Speaker 05: Maybe this is a question for them, but why was this instruction on the table at all, if everybody's agreeing that incorporation by reference? [00:35:59] Speaker 04: I think that is a fair question. [00:36:01] Speaker 04: It was an issue at summary judgment, to be totally clear. [00:36:04] Speaker 04: It was an issue at summary judgment. [00:36:05] Speaker 04: It just had gone away by the time of trial and the way the evidence came out at trial. [00:36:10] Speaker 04: I think there was some confusion between two different issues. [00:36:14] Speaker 04: Incorporation by reference, meaning, is the 2014 TNCs incorporated at all? [00:36:20] Speaker 04: verse, is it only the 2014 TNCs? [00:36:22] Speaker 04: Our position at trial was it's not only the 2014 TNCs, and that's the argument we made for the jury, excuse me, and that's the argument, the language they quote from the closing argument was going directly to that issue. [00:36:36] Speaker 04: The point was, because it was not finalized, because it was not signed, because it was not attached as Exhibit A, [00:36:43] Speaker 04: they weren't just talking about the 2014 TNCs. [00:36:47] Speaker 04: What they were talking about is whatever terms and conditions relationship you're going to enter into that's gonna control these HDMI products, that is the ODM contract we're referring to. [00:36:58] Speaker 04: Whether it's the initial one, whether it's the 12 amendments, whether it's updated later, or whether what's functionally the equivalent, which is a 13th amendment, that they just called something else. [00:37:10] Speaker 05: Okay, thank you very much, Ms. [00:37:12] Speaker 05: Sherry. [00:37:22] Speaker 02: May it please the court, I'd like to address four issues in three minutes. [00:37:26] Speaker 02: First, the core interpretation question, second, section 7.5, third, what the jury found, and then fourth, the instructional issue. [00:37:33] Speaker 02: On the interpretation question, the way that I understand Ms. [00:37:37] Speaker 02: Sherry's argument this morning, what she means by a clean break is really that the parties had to cease for two years and then and only then could enter into a new agreement. [00:37:51] Speaker 02: Now, leaving aside the fact that Allynk's threshold argument would seem to suggest that even that agreement would constitute an ODM contract under the agreement because they take the position that any agreement would so qualify, that does, I would respectfully submit, create something of a Hotel California situation where Cyprus would really be disempowered [00:38:12] Speaker 02: from entering into any sort of agreement with Crestron that did not involve Allalink. [00:38:17] Speaker 02: And when you get right down to it, what Allalink is attempting to do is to read a new limitation into section 7.1 to condition a valid termination on the absence of a violation of section 2.4. [00:38:33] Speaker 02: That cannot be correct. [00:38:34] Speaker 02: Section 2.4 itself by its terms [00:38:38] Speaker 02: does not have a dependency relationship with termination, indeed, Section 7.5 ensures that that obligation exists even after termination, and yet it is Allync that is trying to mash those two things together. [00:38:52] Speaker 02: Now second, with regard to section 7.5, I just want to make the point that with regard to this question of what the remedy would be for a breach of section 2.4, Allynk's own damages expert read section 7.5 the same way that we're reading it. [00:39:08] Speaker 02: Allynk's own damages expert suggested that the damages would be for a two-year period after the termination of the contract for a breach of section 2.4. [00:39:18] Speaker 02: With regard to what the jury found here, [00:39:22] Speaker 02: I want to point the court to page ER 15, which is the jury's verdict form on the claim for breach of contract. [00:39:30] Speaker 02: As we point out in our reply brief, in contrary to Aulink's representations, that instruction merely described Aulink's claim and set out both of the theories of breach. [00:39:42] Speaker 02: It did not disaggregate them. [00:39:44] Speaker 02: And so again, I don't think that we can have any confidence that the jury would have found a breach of section 2.4 on which to award damages if that had been the sole issue in front of the jury. [00:39:57] Speaker 02: And finally, with regard to the instructional issue, I just want to clarify what actually took place here. [00:40:03] Speaker 02: It is true that in the colloquy on the jury instruction, after the district court said, [00:40:09] Speaker 02: that this question of incorporation by reference was a matter for the jury, that Aulink's own counsel, Mr. Leon, said, and this is actually, I believe, not page 1064, but page 1046, he said, I'm frankly not even sure that incorporation by reference has much to do with this case anymore. [00:40:27] Speaker 05: Was this an instruction your client requested ultimately? [00:40:29] Speaker 02: Well, we proposed language because the court had said that this was a matter for the jury. [00:40:35] Speaker 02: and the district court gave a different instruction containing the language about the agreement having to exist. [00:40:42] Speaker 05: And I wanna close by pointing out- Why did your client ask for the language in the first place? [00:40:46] Speaker 02: Well, I think that my client certainly had taken the position at summary judgment that this was not a matter for the jury. [00:40:52] Speaker 02: But once the district court had made that determination, it was trying to propose language that was legally correct and faithful to this court's decision in Poupon. [00:41:01] Speaker 02: But Judge Brass, I would point you and the court to page 1133 and the closing. [00:41:07] Speaker 02: And at this point in the closing, Alling's counsel, Ms. [00:41:10] Speaker 02: Johnson, went to town on this issue. [00:41:14] Speaker 02: She pointed out the fact that [00:41:16] Speaker 02: the ODM agreement was not attached. [00:41:18] Speaker 02: She pointed out that the title was different. [00:41:20] Speaker 02: And then she said, and I'm quoting, other problem, it didn't exist. [00:41:25] Speaker 02: It was signed later between, you know, three weeks from the effective date, nine days from one of the signatures, six days from the other signature. [00:41:32] Speaker 02: It didn't exist and it's fine. [00:41:32] Speaker 05: Isn't this kind of part of a broader argument that what this, what ODM contract means is a sort of more floating concept that can refer to a broader relationship? [00:41:42] Speaker 02: Well, I think, contrary to that, Judge Bras, I do think with respect, this was an effort to sow confusion. [00:41:49] Speaker 02: Remember at the beginning of the case, that one of the arguments that Aulink made was that the ODM contract didn't exist and that they were entitled to prevail on that ground. [00:42:00] Speaker 02: Now I think Aulink wisely concedes that the lack of attachment [00:42:05] Speaker 02: and the arguments concerning incorporation by reference are of no moment. [00:42:09] Speaker 02: I would submit that that confusion alone would be grounds for reversal, but I think now that we're all in agreement that the original 2014 terms and conditions qualified, that just merely squarely tees up the discrete question [00:42:24] Speaker 02: of whether or not ODM contract means any contract, including contracts after these sophisticated parties engaged in the act of termination. [00:42:33] Speaker 05: We'll let you go a little over your time. [00:42:34] Speaker 05: Let me see if my colleagues have any further questions. [00:42:37] Speaker 05: Mr. Chamigam, thank you. [00:42:38] Speaker 05: Ms. [00:42:38] Speaker 05: Sherry, thank you. [00:42:39] Speaker 05: This matter is submitted.