     13-2012-cv(L)
     My Play City, Inc. v. Conduit Limited

                          UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                     SUMMARY ORDER
     RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
     ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
     PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
     DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
     ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
     SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 1            At a stated term of the United States Court of Appeals
 2       for the Second Circuit, held at the Thurgood Marshall United
 3       States Courthouse, 40 Foley Square, in the City of New York,
 4       on the 8th day of October, two thousand fourteen.
 5
 6       PRESENT: DENNIS JACOBS,
 7                CHRISTOPHER F. DRONEY,
 8                              Circuit Judges,
 9                LEWIS A. KAPLAN,*
10                              District Judge.
11
12       - - - - - - - - - - - - - - - - - - - -X
13       MY PLAY CITY, INC.,
14                Plaintiff-Counter-Defendant-
15                Appellant-Cross-Appellee,
16
17                    -v.-                                        13-2012-cv(L)
18                                                                13-2279-cv(XAP)
19       CONDUIT LIMITED,
20                Defendant-Counter-Claimant-
21                Appellee-Cross-Appellant.
22       - - - - - - - - - - - - - - - - - - - -X
23


                *
              Judge Lewis A. Kaplan, of the United States District
         Court for the Southern District of New York, sitting by
         designation.
                                                  1
 1   FOR APPELLANT:             KEVIN R. GARDEN (with Leo V.
 2                              Goldstein-Gureff on the brief),
 3                              International Legal Counsels PC,
 4                              Alexandria, Virginia.
 5
 6   FOR APPELLEE:              ELI SCHULMAN (with Michael A.
 7                              Charish on the brief), Schulman
 8                              & Charish LLP, New York, New
 9                              York.
10
11        Appeal from a judgment of the United States District
12   Court for the Southern District of New York (McMahon, J.).
13
14        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
15   AND DECREED that the judgment of the district court be
16   VACATED.
17
18        My Play City, Inc. (“MPC”) appeals, and Conduit Limited
19   cross-appeals, from the judgment of the United States
20   District Court for the Southern District of New York
21   (McMahon, J.), awarding $500,001.00 to MPC after a
22   bifurcated jury trial. We assume the parties’ familiarity
23   with the underlying facts, the procedural history, and the
24   issues presented for review.
25
26        The two technology companies contracted to create an
27   online toolbar, provide it to end users, and share revenues
28   from its use. Conduit is in the business of helping
29   “publishers” to create their own toolbars, filled with
30   features related to their businesses. End users install a
31   toolbar, making it constantly visible and accessible on
32   their internet browsers. When the end user performs a
33   Google search on the toolbar and then clicks on a sponsored
34   link, Google pays a portion of its sponsorship revenue to
35   Conduit.
36
37        The 2008 Publisher Revenue-Share Agreement provided
38   that MPC, an online video game company, would use Conduit’s
39   technology to create a toolbar displaying MPC’s trademark
40   and the two would share revenues generated by that toolbar.
41   The toolbar was available for download both on MPC’s website
42   and on Conduit’s website.
43
44        After Conduit terminated the agreement in 2009, the
45   toolbars continued to generate revenue: end users continued
46   to use the toolbars that had been downloaded pre-
47   termination, and new users continued to download the

                                  2
 1   toolbars post-termination. Several months after
 2   termination, Conduit made the MPC toolbars unavailable for
 3   download on the Conduit website and made the already-
 4   downloaded toolbars unusable.
 5
 6        MPC’s complaint alleges (in relevant part) Conduit
 7   underpaid it for pre-termination downloads and infringed
 8   MPC’s trademark post-termination by continued use of the
 9   toolbar. On summary judgment motions, the district court:
10   ruled that a contractual limitation of liability applied to
11   Conduit’s pre-termination conduct; dismissed with prejudice
12   two of MPC’s claims; and granted summary judgment in favor
13   of MPC on four of its claims alleging post-termination
14   trademark infringement. The district court then ordered a
15   bifurcated jury trial, phase-one to determine whether the
16   contractual limitation of liability applied to Conduit’s
17   post-termination conduct, and phase-two to determine
18   damages.
19
20        The jury found that the limitation of liability did not
21   apply to Conduit’s post-termination conduct. It awarded
22   zero compensatory damages, one dollar nominal damages, and
23   $500,000 for unjust enrichment.
24
25        The Court reviews de novo the district court’s grant of
26   summary judgment. See El Sayed v. Hilton Hotels Corp., 627
27   F.3d 931, 933 (2d Cir. 2010). We also review de novo “both
28   the district court’s determination of whether a contract is
29   ambiguous, and, as to an unambiguous contract, the district
30   court’s interpretation of its terms.” Law Debenture Trust
31   Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458, 468 (2d
32   Cir. 2010) (internal citations omitted).
33
34        1. As to damages for trademark infringement, the jury
35   instructions are not challenged on appeal, so we apply them
36   without ruling on their soundness.
37
38        Conduit advances two arguments why the district court
39   should have granted its motions for judgment as a matter of
40   law or, alternatively, for a new trial.
41
42        First, Conduit argues that MPC did not meet its burden
43   because it failed to differentiate among Conduit’s gross
44   receipts, thereby failing to prove to the jury an amount of
45   damages specifically attributable to infringement. Second,
46   Conduit asserts that the jury was required to credit
47   Conduit’s evidence regarding the distribution of downloads

                                  3
 1   and was further required to infer that the same evidence
 2   decreased MPC’s damages. Neither argument is availing.
 3
 4        Conduit’s first contention is that “MPC bore the burden
 5   of proving gross profits attributable to infringing uses of
 6   its mark” but “instead presented the jury with an
 7   undifferentiated profits figure.” (Appellee’s Br. at 12.)
 8   The premise of that argument--i.e., that it is MPC’s onus to
 9   differentiate those profits attributable to infringement
10   from those profits not attributable to infringement--is
11   untenable in light of the jury instructions. The Court
12   therefore must reject this argument.
13
14        In the alternative, Conduit contends that it proved to
15   the jury that only a small minority of the profits in
16   evidence were attributable to uses that the district court
17   held to have infringed MPC’s mark: the distribution of
18   toolbars on the Conduit website after termination of the
19   contract. Although Conduit did present evidence that only
20   2.9% of post-termination downloads occurred on its website
21   (the vast majority having occurred on the MPC website), the
22   jury was not compelled to accept that testimony in
23   calculating damages for unjust enrichment. These sorts of
24   “[c]redibility determinations, [] weighing of the evidence,
25   and [] drawing of legitimate inferences from the facts are
26   jury functions, not those of a judge.” Anderson v. Liberty
27   Lobby, Inc., 477 U.S. 242, 255 (1986); see, e.g., Raedle v.
28   Credit Agricole Indosuez, 670 F.3d 411, 418 (2d Cir. 2012).
29
30        2. As to the contractual limit of liability, New York
31   law enforces such a clause because it “represents the
32   parties’ Agreement on the allocation of the risk of economic
33   loss in the event that the contemplated transaction is not
34   fully executed, which the courts should honor.” Metro. Life
35   Ins. Co. v. Noble Lowndes Int’l, 643 N.E.2d 504, 507 (N.Y.
36   1994). Such a provision becomes unenforceable “when, in
37   contravention of acceptable notions of morality, the
38   misconduct for which it would grant immunity smacks of
39   intentional wrongdoing.” Kalisch-Jarcho, Inc. v. City of
40   N.Y., 448 N.E.2d 413, 416 (N.Y. 1983).
41
42        When interpreting such a provision, as when
43   interpreting any contractual language, “[w]ords and phrases
44   are given their plain meaning.” PaineWebber Inc. v. Bybyk,
45   81 F.3d 1193, 1199 (2d Cir. 1996) (quotation marks omitted)
46   (alteration in original). “Under New York law, therefore, a
47   court must enforce that plain meaning.” Krumme v. WestPoint

                                  4
 1   Stevens Inc., 238 F.3d 133, 139 (2d Cir. 2000) (citing Am.
 2   Express Bank Ltd. v. Uniroyal, 562 N.Y.S.2d 613, 614 (App.
 3   Div. 1990)).
 4
 5        The Publisher Revenue-Share Agreement incorporated the
 6   terms of a separate Publisher Agreement, which includes the
 7   following limitation of liability:
 8
 9       IN NO EVENT SHALL CONDUIT’S . . . LIABILITY FOR
10       ANY CLAIM ARISING OUT OF OR RELATED TO THIS
11       AGREEMENT, THE USE OF OR INABILITY TO USE THE
12       TOOLBAR AND/OR ENVIRONMENT, TO THE FULLEST EXTENT
13       POSSIBLE UNDER APPLICABLE LAW, EXCEED $5,000.
14
15   (Publisher Agreement ¶ X.)
16
17        The district court ruled that the clause applied to
18   MPC’s pre-termination claims but was ambiguous as to whether
19   it applied to Conduit’s post-termination infringement. The
20   district court therefore submitted that question to the
21   jury. On appeal, MPC challenges the limitation’s
22   applicability to the pre-termination claims and Conduit
23   challenges the district court’s decision to submit the post-
24   termination applicability to a jury.
25
26        The limitation of liability extends to “any claims
27   arising out of or related to this agreement.” It therefore
28   applies unambiguously to both the pre-termination and post-
29   termination conduct that formed the basis for MPC’s lawsuit.
30
31        MPC’s pre-termination claims allege breach of contract,
32   which manifestly arises out of and relates to the contract.
33   MPC urges that the limitation is unenforceable as a
34   consequence of Conduit’s alleged manipulation of MPC’s
35   revenue share throughout its performance on the contract: in
36   particular, a complex sequence of increases and decreases in
37   MPC’s revenue share and the conduct of a “screening”
38   protocol that involved adjusting reports of searches from
39   the toolbar. These allegations are exceedingly obscure and
40   may even have led Conduit to pay more (not less) money to
41   MPC. They therefore do not support a finding of “misconduct
42   . . . smack[ing] of intentional wrongdoing.” See Kalisch-
43   Jarcho, Inc., 448 N.E.2d at 416.
44
45        MPC’s post-termination claims likewise relate to the
46   agreement. As the district court explained,


                                  5
 1   “the gravamen of the infringing conduct was the
 2   defendant’s continued use as though it were a licensee
 3   under this agreement following the termination of the
 4   agreement of the plaintiff’s trademark.” (Trial Tr.
 5   393.) MPC’s Second Amended Complaint, naturally
 6   enough, describes its trademark infringement claims by
 7   reference to the agreements. The infringing conduct
 8   was a continuation of the very conduct that Conduit
 9   undertook in performing the contract. Claims based on
10   that conduct therefore relate to the agreements.1
11
12        Based on our de novo review of the limitation-of-
13   liability clause, we conclude that it applies to the
14   entirety of MPC’s claims in this litigation. Conduit is
15   liable for no more than $5,000 here.
16
17        3. Conduit argues that MPC’s damages improperly
18   encompass “extraterritorial infringement” of the trademark,
19   because only 1.74% of post-termination toolbar use occurred
20   inside the United States. Even if Conduit were to prevail
21   on this argument, the resulting U.S.-only damages would
22   exceed the $5,000 limitation of liability. We therefore
23   need not reach this argument.
24
25        4. As to punitive damages, MPC sought to introduce
26   evidence of Conduit’s pre-termination breach of contract in
27   order to demonstrate the egregious nature of its post-
28   termination behavior. The district court, after an in
29   camera review, excluded the evidence and declined to charge
30   the jury with respect to punitive damages. The district
31   court’s sound ruling relied on State Farm Mut. Auto. Ins.
32   Co. v. Campbell, 538 U.S. 408 (2003), which required that
33   evidence of punitive damages bear a nexus to the harm
34   suffered by the plaintiff. See id. at 420-23. For the
35   reasons articulated by the district court, evidence of


         1
          Although Conduit failed to conscientiously avoid
     infringement post-termination, the infringing conduct did
     not rise to the level of the egregious. To defeat the
     otherwise appropriate enforcement of the limitation-of-
     liability clause, the misconduct must be “in contravention
     of acceptable notions of morality,” and “smack[] of
     intentional wrongdoing.” Kalisch-Jarcho, Inc., 448 N.E.2d
     at 416. That is a tough standard, and Conduit’s delay in
     taking down the toolbar (a delay that arguably benefited
     MPC’s brand and website) did not rise to that level.
                                  6
 1   punitive damages was properly excluded and a jury charge
 2   concerning punitive damages was properly omitted.
 3
 4        For the foregoing reasons, we hereby VACATE the
 5   judgment and REMAND for entry of a judgment consistent with
 6   this order.
 7
 8                              FOR THE COURT:
 9                              CATHERINE O’HAGAN WOLFE, CLERK
10




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