also about whether a new york law limits and senate can be turned into a windfall under a liquidated damages clause that has nothing to do with the contractual provision the jury found was breached like to focus contract question all the liability in this case every penny of damages that were awarded in this one point three million dollars judgment flow from this particular finding and if the court were to rule in our favor on this it would either be that as i suggested earlier a reverse in re man or russian rendition and we think we've met the standards or recognizing that there is a potential preservation of their problem here we think we've met the standards for virtu under planar which would as the court knows in the back for a new trial or secondly we believe pretty strongly that we've met the standard for legal insufficiency of the evidence of error was preserved resulting in rendition so testimony as to why it was a gross number of contrary evidence may have been introduced isn't this an interpretation of the contract and not an interpretation of balance sheets normal accounting terminology but i think the whole exercise for a trial after the magistrate said this was ambiguous if that's the word he used i'm not sure exactly what we were to use but it could mean it was that could be decided on summary judgment is that we need to put this in front of a fact finder and two is not it maybe it's an accounting term and we got to use precise accounting terminology or maybe it's a slightly different that's what yuri's are supposed to figure out god bless him well it and i'm glad you brought that up  to trial neither party contended that there was any ambiguity in that terminology both sides for whatever reason decided that there are interpretation was correct and that there s actually was no ambiguity so the jury wasn't asked to decide specifically that there was you know which version in terms of the ambiguity decision was correct the jury was asked to apply terminology that our expert testified doesn't exist outside of tax account and particularly under generally accepted accounting principles so that that technical term you know that even the charge recognized the judge southwick that that technical terminology had to be given its technical meaning and there were only very limited circumstances under which the jury in this case as charged could back away from that technical meaning those were surrounding circumstances and you know general  usage of trade i guess would be a good way of describing it so that's exactly the angle that new c s i relies on in its brief is it says well ok assuming that what we say is correct that it's really a technical term and they actually can see that in their brief for those use the word yes to defer taxes for tax assets as a technical term the jury was instructed to consider the context of the instrument or that was purchased from this is just part of the stock purchase agreement they relied on it's mr cooper charles cooper who testified about the negotiations in his reasons for wanting section two point seven to pay based on gross numbers rather than that number and we pointed out to the court as you mentioned just southwick that pro evidence that is pro level as we say is pro evidence of the intent of the parties and  situation is immaterial it's not it cannot be given any way whatsoever even if there is no objection to a trial and that's exactly what our circumstances are here that's the cross moans cases cited in our twenty  it's because it it goes to the parties well it's the basic it's the basic formulation prolife through which is when we got into great writing as we have here there's a merger clause you can't rely on the parties testimony about what they intended or about the negotiations to construe the agreement the agreement has to be construed start first with the four corners  evidence on the meaning of the surtaxes had to do with whether it was a technical accounting term and the application of that term again our expert testified it doesn't exist outside of joy except the accounting principles and the seven forty but in answering just to stop its earlier question you said that the parties each did not they did not continuous ambiguity the court can still think that there's ambiguity and hear evidence on that though the court gets to decide even if there are many cases where the each side says their interpretation wins and then the then they try it on ambiguity with him to give the facts that would come in an ambiguous case well i suppose the court could decide th at in this case the court left it to the jury but i mean they can do that the court can say it's in big us and i'm going to try it on that even if both sides say it's not their cases on that  a question in this perhaps to show my accounting ignorance but i'm going to ask the question anyway how will testify fit to that the gap requires calculating deferred taxes by netting well i think it's a matter of applying the word for that he testified that a tax asset was something that is booked and then at some point later you got the difference  between account book accounting keeping the books and records of the of the corporation versus tax accounting which is what that deductions do you actually get to take a k his testimony was you can only look at the the gross you know let's say we have an expense that we're going to charge off on our twenty sixteen books yes that might be a deduction that we won't know the deduction the extent of which there actually is a deduction until we do our taxes and even then we have to assess this on a more likely than not standard there has to be in order for it to be at actual benefit you have to evaluate whether and over the longer view over both phases  of tax accounting whether there is actually a benefit to the party taking the deduction and that language the benefit language is actually contained in section two point seven of the agreement which the benefit is to include deferred tax assets accrued or benefits obtained by either the purchaser or c s i as it as it existed in the transaction so even the agreement itself section two point seven contemplates there has to be a benefit to the party taking that adduction into it how also testified you may recall and that's a that's a two step process you've got to look at what the bennett what the potential tax assets or and are they going to benefit do they stand a more probable likely than not is more probable than not chance of actually benefiting the company because the idea here is these have to be worth something there has to be actual value to these assets if they're not worth something to the company and they can't really be an asset and you have to consider all those factors and arriving at that conclusion whether there is an asset  well mr howell made clear that in order to do that you've got to you've got to put it all together and you actually not only have to look at net versus versus gross it's a it's a it's a net number of all of deferred tax assets it's not just we can pick and choose which of our assets are we're going to claim and this is actually also contemplated in section two point seven because it does say that the staffing three sixty was supposed to reason we finalize a dollar value of deferred tax assets period not each the first tax asset and they give credit for each deferred tax  asset there has to be a net valuation of the first tax assets that you can reasonably conclude more on a more probable than not basis that's going to benefit the company here a drano three was likely done that pretty extensively that's our other basis for asking the court to reverse some remain and we actually think that it's that that's a much stronger argument and then it would seem at first blush and will rely on a briefing to the to make that point unless i have any time at the end to address it so the penalty issue you know admittedly we have a preservation issue concerning that as well point whatever else would you say did you even argue that no evidence was necessary why is there all the evidence that would be necessary as in the record we have the we didn't don't leave it to the district judge in may that's the right place to decide is disproportionate that we should if we were going to present this defense in the first instance that we should go and get a jury finding on however it's not limited to just proportionality there are other elements of the penalty rule that that based on the record as before the court allow the court to actually rule in our favor on this and if i can be reminded what that is it's oh well it's the damage is the main point i would if the only breach was going to be this breach but the way they just went to whatever new the cause was was written is that and the rate of breaches would have led to this particular penalty that's right and as far as i'm aware there's not a new york case that says how that's ok the jury in this case found one brings the jury rejected other bridges if had the jury found other breaches we probably wouldn't be making this argument but in this case the only breach was section two point seven  payments the liquidated damages clause was designed to secure the urn house and there is no i can't in for size it enough there's no connection whatsoever here between the deferred tax going to sit and earn outs and so without any connection whatsoever we certainly made the point that not only were the damages really ascertainable from that the agreement itself which required that all this be wrapped up within ninety days  of the of the conclusion of the transaction but with that with there being no connection to two point seven the second way of proving that the penalty in this case just celtic is that show that the award is disproportionate actual damages without that including questions of all the of the interpretation of the contract are it's not necessary to follow rules to be a motion to preserve those for the district court no how can a district court correct correct it dearie after the you know fifty allows you to at certain points to put on more evidence or to fix the at you know can fix things and there's no there's no opportunity for the court to have a note that this was going on since it's not pleasant it's not it's just sort of buried in there there's no fact finding in art argues there was no fact finding this is serious this is like statutory damages caps let's look at it as a parallel ok raising issues that are pragmatically sufficient time as long as it's raised before judgment it's just a matter of how big the judgment is it's not a matter of whether there's going to be evidence presented and in our case here to actually combat there's no evidence to could have been presented to combat the the law that's being applied here is already ok thank you please the court i'd like to jump right in on the last issue that that was being discussed and that is the necessity of the penalty issue having been raised earlier through pleading and through a rule fifty motion and it is critical here and and i think it also is important to step back a little bit because the same analysis of why there is  significant preservation a fatal preservation issue the analysis regarding preservation really goes hand in glove with the substantive analysis of whether this is a penalty provision and unenforceable penalty provision under new york law and here's why just tell rob you're absolutely correct should have been raised earlier through pleading through a rule fifty motion because there was something that the parties could fix the parties could fix it the judge could fix it because why because you have to show when when analyzing a question of a penalty provision you have to look to the proportionality the relation between the trigger event which  and the penalty here which here is the acceleration of the urn up what's the relation between the two and could the parties have anticipated that and second you have to look at what amount of damages was reasonably calcula at the front end and the same analysis goes into the substantive is a penalty as the pleading because that's what we would have proved a trial if they had pled penalty if they had raised it during a timely rule fifty motion what we would have established at trial and mind you this is an evidentiary issue because although the ultimate question of whether a provision is an illegal penalty and unenforceable penalty is a question of law it is substantially dependent on a factual development so it's it's really it's a question of law in that the judge decides it not the jury the jury wouldn't have been given a question is this an unenfor don't believe that's how it works in the new york construct the case is it's hard to wrap your head around them if you look at the main new york court of appeals cases the j m d case the one seventy two van duzer case that are cited in both of the of the parties briefs it's very those cases came up to the court of appeals in the context of review of a summary judgment and in both cases the court reversed a summary judgment and recited whether it's an in for an enforceable penalty is a question of law but we reversed the summary judgment because the parties should have had an opportunity to develop the evidence regarding proportionality were guarding the difficulty of damages so it's there doesn't appear to be a specific query given to a jury but there needs to have been an evidentiary development in order for the judge to make the ultimate decision in that way i think it's a it is more appropriately considered to be a mixed question of fact in law it's resided it's a question of law but there needs to be evidence for the court to determine it and what the evidence would have been here if they told us if they'd a plan it and if they'd of raised it in a timely rule fifty motion what the evidence would have shown is the structure of the acceleration clause jumps up with you recognize it's not acceleration per se the material then we're going to accelerate the earn out it's not a random lump sum award it's an acceleration of the earn out which is a significant part of the consideration for the sale of the business as a whole if everything had gone smoothly then earn out would have been calculated based on the gross profits of the company being sold and another related company paid on a monthly basis a percentage of their gross profit over sixteen quarters four years what the acceleration provision does is recognize that these parties are joined at the hip the buyer and the seller are married to each other for sixteen quarters and the folks who are selling c s i are dependent upon that relationship to get their earn out and the parties sophisticated business parties arm's length transactions made an agreement that if there is one of these acceleration events a material breach of a term and the term material breach of a term breach of the related employment agreements failure of warranties made in the agreement any one of those and we're going to accelerate the earn out and we're not going to make you be dependent on s three sixty which has proved itself i'm reliable by materially breaching other provisions of this contract we're not going to make you have to live with them and be dependent on them to not give is not a windfall at all it is not  exactly your honor and it is discounted the one point four million is two thirds of the maximum out of turn of earn out that they could have have earned over the course of the sixteen quarters if everything had gone smoothly and they had met all of the all of the benchmarks and what this represents is a bargain by the pardons if you x three sixty if you do not live up to the provisions of this contract then we don't have to depend upon you to sixty there is a continuing obligation because the the final provision in that in that long the lengthy paragraph d at the end of it there is a provision that you see they excel rates and you get one  million with a credit for the earn out amount already paid as of the data breach but then it provides that you can continue to the last sentence the regular schedule of pay or not payments shall continue until such time as the four earner obligation has been satisfied and so if the if things had not blown up at that point because of the litigation and whatnot the parties could have continued and tried to earn through the gross profits the delta between the one point four less a credit and the the cap of the two point one so it truly is an acceleration of what would have been earned over four years and that is exactly the evidence that we would have presented at trial if we had had the heads up something that this court in the case that sided explained that a pragmatically sufficient time has meaning and you can not the failure to plead a defense is a fatal waiver if the defense will dictate trial strategy and involve more than a legal issue and those are at exactly a political here the this is not like a statutory cap on punitive damages or something like that where it's just math you take the number you apply just math this does require evidence not just to address the proportion but to to establish that that this is an acceleration clause and not a penalty clause and for that reason the preservation issue is fatal the failure to plead it the failure to raise it in a rule fifty motion either of those by itself is fatal but the two together this court may not reach it but if you do the same analysis establishes that this is not an unforeseeable penalty this is a plain vanilla acceleration provision and if you look at the the the way the new york appellate courts have discussed the analysis of when is something in an illegal penalty clause is very deferential to the agreement of the parties and that the recitals in two point two d make it clear this is a bargain for issues it has recitals saying we know it's going to be difficult to try to figure out how any of the acceleration events might impact the gross profits of the two companies because remember just i think that is the operative standard that's what they're accelerating is the calculation of the twenty the the payment of burnout based on the gross profits of those two companies and the absent absent a fraud or exploitive overreaching or unconscionable conduct those are the sorts of standards that the new york courts look to to determine when there is unenforceable penalty provision they say that only if it's grossly disproportionate one of things that strikes me about what is a primary pragmatic time for this to have been made if in fact this is not a jury issue  very clumsy but it's solely for the judge to be considering you seem to be more workable though not the most efficient way to do it that you could produce this evidence after the determination by the jury on other matters so it's only a matter for the judge that you'd have a hearing just on this after the jury verdict misleading at the pragmatic side which is part of th isn't that at least something that takes it out of the the usual reason for why fifty aces you got to raises for the first time before the matter goes to the jury well your honor i guess i had not thought of that but that's a seriously a square peg in the round hole of a of a trial construct by the time the the first time this was raised you this is so crazy well you know your honor i am i guess i wouldn't put it exactly that way but by the time that issue was raised was weeks after the trial the verdict was done it was on on entry of judgment the witnesses are released there for if there had been an invocation of the rule that was long since past so there was no notice that we're going to have a second face  that you know he did there didn't say well your honor after after the verdict comes in they didn't say we need to set up a hearing next week christer further matters and we want to contest this there was no notice get no notice and no  procedure is going to happen at the back end and i guess i'm trying to envision it now because the earn up payments of based on determinations about other terms in the contract i would imagine that say well at least in a criminal context of the guilt innocence phase punishment phase one you know going in at the front end that there's going to be part too same thing in texas state practice you have p damages the amount of punitive damages as phase two if there are threshold findings in phase one but you know at the front that that's going to happen so so i don't think that the the bifurcation that you think you've suggested is reflected anywhere in the in the new york jurisprudence regarding liquidated damages provisions but even if it were there still needs to be a heads up this is going to happen talk about this situation where we're supposed to just disregard part of the evidence it's not object to because new york doesn't let it says it's substantive and they're forward i don't know how what how we decide which questions we're supposed to disregard and how to jury what do you do with that after you disregard it will you go to the record and say well these questions we can't considers we have to see if there's sufficient evidence based without the that it's just very bizarre to me it is very bizarre your honor and i think there are three straight up reasons why the whole parole evidence argument is in a political here and the court need to waste any time on it first the magistrate judge found asset in this provision in the agreement the question isn't what does deferred tax asset mean on a balance sheet under gap it's what did the parties mean in using that term here in disagreement the magistrate judge said that that the meaning of that term which is not defined in the agreement goes to the heart of the parties dispute and there is an ambiguity regarding what they meant it to mean is that the net or is it the gross is it the asset minus deferred tax liabilities and ambiguity summary judgment denied you need to try this to the jury so where you have a case of ambigu parol evidence rule is wholly in a playable second circumstances surrounding the execution of a contract or always said miscible even where you have an unambiguous contract and i think ironically the two cases that s three sixty cited in their recent rule twenty eight j letter illustrate precisely what is a parole evidence situation where the evidence at issue is no evidence at all and our situation here you look at the two cases one of them the focal some case which is in new york state case was the parties attempted through testimony to add a completely new oral contract a term that didn't exist anywhere in the contract it was out and a dispute regarding a lease and one party testified that the landlord had made an oral promise to me that for the entire term of this lease of an apartment i will provide free bus service to the schools and that didn't appear anywhere in the lease and the court said that's an that's an improper parole evidence that's an oral contract attempting to pretty new provision to the contract that's not appropriate the case out of this court the craft mullens case was an instance where by testimony the parties attempted to contradict an expressed term in a contract that was a case a dispute between a contractor and the united states government regarding building a concrete bridge and there were provisions in and there was a dispute over whether the government was supposed to have supplied the contract the concrete uncertain day it's concrete got held up things got delayed and the contractor sued and said no no no the government is supposed to the government's libel because they didn't provide it on certain dates but there was another provision that said the government shall not be liable for any delay of materials and so you had oral testimony attempting to contradict and express term will dub those two instances for all evidence is no evidence at all and that is a horse of a different color from what we have here what we have here is them on the balance sheet and with the parties contracted for here is preventing the use that term creating and before my time runs out i want to make two small points one is that the third reason that this that parole evidence rule is controlling here is that even if you take out even if you parse through you say mr cooper sentence regarding this intent or war going in what alan hartley said even if you say slice those out there's still plenty of of other evidence in the record there's joe burnett who was the accountant who testified that what the parties did here was call for a gross call for deferred tax asset you have nancy pac who is the accountant hired by s three sixty to do the calculation you said yeah that's that's what this agreement calls for so that's the those are the three reasons why this court should not be slowed down by the pro level intro and in my last thirty seconds i want to say the the question of the charge the instruction is not a meritorious challenge to this judgement in any way and specifically the harmful error analysis the deference to the court's discretion in telling the jury don't worry about it i'm going to take care of this on the back and sound discretion of the district court and second if you look at the at the record as a whole and the context of the jury's question what they were asking is do we need to calculate the one point four million minus the thing do we need to do that and judge said don't worry about it i'm a take care of it if you look at the record as a whole and the context of the jury's question the standard for finding harmful error on something light like that is in the context of that whole record is there and in erratic kobold doubt that the jury got was confused and made a harmful error because of this instruction and it's not thank you can't objects to district courts response to a jury note is abuse of discretion we're not talking about run of the bill charging the jury type of error we're talking about specific responses to jury notes an abuse of discretion is the standard as this is subject to admittedly homicide error analysis now there's a lot of facts that tie into this issue and i will not necessarily want to occupy time going through a lot of facts but basically however section two point two d the what has been called the acceleration clause and it's really a penalty clause but it was discussed even though it was not summoned to the jury it was discussed repeatedly throughout the trial the district court told the jury panel at the outset panel that the three to calculate and pay under section two point seven was an adjustment event that would extend title new c s c s i r to an accelerated pace during during the c s eyes opening statement their counsel basically said the same thing that the breach of section two point seven that of her tax asset provision would trigger and it was an adjustment event that would make the amounts to be paid out over time doing payable immediately so again mr cooper testified that that adjustment event would result in new c s i be entitled to one point four million dollars less are now payments the c s i s counsel questions accounting expert about the application of section two point two d c s i was counsel questioned staffing three sixty's corporate rep about the liquidated damages provision in the relevant contract language was discussed repeatedly and actually even put up in front of the jury many times journalists three and even in fact journal four as well sure that the jury expected it was going to be asked to apply this proof in the questions that they asked reveal not erected in marriage u s expectation no it's not but but what this does to the graves is that it does help to show the harm if if in fact that there was an abused his discretion and we say that there was because even this court has said be a parent position that that's not correct respectfully but i do understand the argument and what if they're really asking is do we need to make this guy can they should they they are asking that is that what they're asking i think so and it says no you don't need to the judges that's not the consequences of any answer that's a question about whether or not there's something you need me to do you need me to do there's just no let up well but it went beyond that the instructions said do not consider the effect of your answer it what our argument is as far as harm is concerned you know setting aside the basis question we we think we get there but understand the court's decisions on that let's talk about harm for a second that in deciding whether there was a breach of contract in answering the ever important question number one in this case the jury was instructed on the to reality and the jury was told in considering whether there is a breeze it has to be material and one factor in considering that in deciding that is whether there's going to be a fourth  d and there's really no contests it seems to me that the provision of this this excel aeration clause is a forfeiture i mean there my clients being ordered to pay you know upfront and more than a million dollars however when that what the court  tell the jury the effect of it's interest it's not a but as i understand your argument it is that if they had been told that they needed to make a calculation they would have been less likely to find a breach but how do we know they asked the questions do we need to calculate this do we need to calculate this judge able said don't consider the effect of your answers you take that instruction and put it up with the instruction for question number one which says you may consider whether there is a forfeiture in answering the question of whether there is a material breach you can't reconcile those runners or ultimate position and that leads to  thank you very much we have your argument