Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-05-04345/USCOURTS-ca8-05-04345-0/pdf.json

Parties Involved:
K2
Appellant
Matrix Group Limited
Appellee
Rawlings Sporting Goods Company
Appellant

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

Nos. 05-4345/06-1033 

___________

Matrix Group Limited, Inc., *

* 

Plaintiff - Appellee/ *

Cross-Appellant, *

*

v. *

*

Rawlings Sporting Goods *

Company; K2, Inc., *

*

Defendants - Appellants/ *

Cross-Appellees. * Appeals from the United States

___________ District Court for the Eastern

District of Missouri.

Matrix Group Limited, Inc., *

a Florida Corporation with *

a principal place of business *

in Safety Harbor, County of *

Pinellas, State of Florida, *

*

Plaintiff - Appellee/ *

Cross-Appellant, *

*

v. *

*

Rawlings Sporting Goods *

Company, Inc., a Delaware *

Corporation with a principal *

place of business in Fenton, *

County of St. Louis, State *

of Missouri, *

*

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The Honorable E. Richard Webber, United States District Judge for the Eastern

District of Missouri.

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Defendant - Appellant/ *

Cross-Appellee. *

___________

Submitted: November 13, 2006

 Filed: February 20, 2007

___________

Before MURPHY, ARNOLD, and BENTON, Circuit Judges.

___________

MURPHY, Circuit Judge.

After Rawlings Sporting Goods Company terminated an agreement granting an

exclusive license to Matrix Group Limited to sell its sports bags, the parties sued each

other for breach of contract. Matrix also asserted claims against Rawlings and K2,

Inc., Rawlings' parent corporation, under a Florida statute on deceptive trade practices

and a tortious interference claim against K2. The district court1

 granted summary

judgment to Matrix on the contract, and a jury returned verdicts in favor of Matrix

against Rawlings and K2. Post trial motions were denied, except for Rawlings' motion

to reduce Matrix's compensatory damage award. Rawlings and K2 appeal the

judgment in favor of Matrix and the denial of post trial motions. Matrix appeals the

reduction of its damage award and the dismissal of its claims under the Florida statute

and for punitive damages. We affirm on all but one issue.

I.

Matrix, which is headquartered and incorporated in Florida, produces and sells

bags for sporting equipment. Rawlings, a Delaware corporation, makes sporting

equipment for use in baseball, softball, basketball and football. On July 31, 1996,

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Rawlings and Matrix executed the contract which is the subject of this litigation.

Under that contract, Matrix had an exclusive license to use Rawlings' trademarks in

producing, marketing, and selling equipment bags, and the license was to continue so

long as certain conditions were satisfied. Matrix agreed to use its "best efforts to

foster and develop the products" and to maximize sales. It further agreed to meet

certain minimum average annual sales levels over a five year period. Rawlings agreed

not to produce or sell bags that competed with those of Matrix or to sell bags over a

certain size. A section entitled "Breach" provided that if either party "breache[d] any

of the provisions" of the contract, written notice of the breach had to be given to the

breaching party. The other party was entitled to terminate the contract if the breaching

party did not cure the breach within thirty days after the written notice. A separate

section entitled "Immediate Termination" stated that Rawlings, upon notice to Matrix,

could immediately terminate the agreement if Matrix became insolvent. The contract

was to be governed by the law of Delaware.

There was testimony at trial that annual sales of Rawlings bags were about

$300,000 at the time Matrix took over its sporting bag business. By 1999 sales had

reached $3 million per year, but in the next several years they declined and were at

about $865,000 in 2003. Nevertheless, Matrix met the contract's minimum sales

requirements at all times during the contract period.

In March 2003 K2 acquired Rawlings as a subsidiary, and then in September

it also acquired Worth, a competitor to Matrix in the sporting equipment bag industry.

K2 made plans to consolidate parts of the sales forces of Rawlings and Worth, and

Louis Orloff, the president of Matrix, wrote to Rawlings that such a consolidation

would violate the noncompete clause of the agreement between Matrix and Rawlings.

For some time Rawlings had been concerned with the decline in its bag sales

and believed that Matrix was uninterested in growing this business and was not using

its best efforts to foster and develop its products. In a meeting with Orloff in

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November 2003, Rawlings management expressed concern that the bag line was

stagnant. Rawlings was dissatisfied with Orloff's response to these concerns, which

it believed showed that Orloff considered Rawlings' bag line relatively unimportant

and that he had no desire to innovate. During that same month K2's consolidation

plans were carried out, and portions of the Rawlings and Worth sales forces were

combined.

After the November 2003 meeting between Orloff and Rawlings management,

Orloff sent a letter to Rawlings referring to the parties' disputes and outlining Matrix's

positions on them. He reiterated his belief that consolidation of the Rawlings and

Worth sales forces would violate the parties' contract. Rawlings felt that this letter did

not satisfactorily respond to its concerns and its president, Robert Parish, discussed

the Matrix letter with Monte Baier, K2's general counsel, and decided to terminate the

license agreement.

On January 30, 2004, Matrix initiated its breach of contract action against

Rawlings in the United States District Court for the District of Maine, alleging breach

of the license agreement's noncompete duties. By letter dated February 2, 2004,

Rawlings informed Matrix that it would terminate the contract effective thirty days

from the date of the letter for Matrix's failure to use best efforts. The letter further

stated that the contract notice provision, requiring a thirty day period for cure of

breach, was inapplicable "because Rawlings has repeatedly requested that Matrix

comply with the terms of the Agreement requiring Matrix to use its best efforts ... and

Matrix has failed and refused to comply." On the same date as that letter, Rawlings

filed its action against Matrix in federal district court in the Eastern District of

Missouri for breach of Matrix's duty to use best efforts. 

Matrix moved for a temporary restraining order and preliminary injunction

against Rawlings in the Maine case while Rawlings sought to transfer that action to

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The First Circuit later affirmed the denial of the temporary injunction. Matrix

Group Ltd. v. Rawlings Sporting Goods Co., 378 F.3d 29 (1st Cir. 2004).

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the Eastern District of Missouri. The district court denied Matrix's motion2

 and

transferred the Maine case to the Eastern District of Missouri where it was

consolidated with the action already filed there.

The cases were realigned, and additional claims were asserted. Matrix alleged

that Rawlings had wrongfully terminated the contract by failing to give it the required

thirty day period in which to cure its breach. Matrix also joined K2 as a party and

alleged that it and Rawlings had violated the Florida Deceptive and Unfair Trade

Practices Act, Fla. Stat. §§ 501.201-.23. In addition Matrix asserted that K2, by

acquiring Worth and consolidating the sales forces of Rawlings and Worth, had

caused Rawlings to breach the license agreement's noncompete clause and tortiously

interfered with that agreement in violation of Florida common law. Matrix sought

compensatory and punitive damages, as well as equitable relief to prevent

consolidation of the Rawlings and Worth sales forces and the selling or promoting of

competing bags.

Rawlings and K2 subsequently moved for dismissal of Matrix's Florida

statutory claim and for summary judgment on Matrix's contract and common law tort

claims. In its motion Rawlings raised an additional theory justifying its termination

of the contract on the ground that Matrix was insolvent and therefore in breach. To

support this theory it produced a balance sheet from 2004 showing that Matrix's

liabilities exceeded its assets. Matrix in turn moved for summary judgment both on

its claim that Rawlings had wrongfully terminated the license agreement and on

Rawlings' breach of contract claim. 

In ruling on these motions, the district court concluded that Matrix's statutory

claim should be dismissed for failure to state a claim. Summary judgment was

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granted to Rawlings on the tortious interference claim against it, but denied to K2.

The district court also granted summary judgment to Matrix for wrongful termination

after concluding that Rawlings' notice had violated the contract's thirty day cure

provision and that there was insufficient evidence that Matrix had been insolvent.

The parties then went to trial on Matrix's claims against Rawlings for breach of

the license agreement's noncompete clause and against K2 for tortious interference.

As part of its compensatory damage claim, Matrix sought lost profits which it would

have gained from the license absent breach. Its expert witness, Donna Beck Smith,

split her calculation of lost profits into two segments: (1) the profits Matrix would

have gained from the license for the first ten years after termination, and (2) the

"terminal value" of the license or its residual value after those ten years. K2 and

Rawlings moved for a directed verdict on the license's terminal value, claiming such

damages were too speculative to be awarded, and K2 moved for judgment as a matter

of law on the tortious interference claim. The motions were denied, and the cases

were submitted to the jury by special verdict with instructions that if the jury found

for Matrix it was to award separate damages for the ten year period after termination

and for the terminal value of the license.

The jury returned a verdict in favor of Matrix and awarded damages against

Rawlings in the amounts of $4,096,312 for the ten year period and $2,053,688 for

terminal value. It also returned a verdict against K2 for $2,500,000. The district court

entered judgment on the jury verdicts. Rawlings and K2 filed post trial motions for

judgment or in the alternative for a new trial. The district court denied the motions

in large part, but it did grant Rawlings' motion in respect to the terminal value award,

and the judgment was amended to eliminate that portion of Matrix's award.

All parties have appealed. Rawlings argues that the district court erred in

granting summary judgment to Matrix on its wrongful termination claim. K2 asserts

that the jury instructions on Matrix's tortious interference claim were faulty and that

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it should have been granted judgment as a matter of law on that claim. Both Rawlings

and K2 argue in the alternative that they are entitled to a new trial because the verdicts

were against the weight of the evidence. On its cross appeal Matrix argues that its

claim under the Florida statute should not have been dismissed, that the jury should

have been allowed to consider whether to award punitive damages against K2, and

that the district court erred in setting aside the jury's award of damages for the

license's terminal value.

II.

A.

In challenging the district court's summary judgment decision, Rawlings argues

that it was excused from complying with the contract's thirty day notice and cure

provision because Matrix had already materially breached the contract by failing to

use its best efforts. According to Rawlings, this prior breach is a complete defense to

Matrix's breach of contract action because a plaintiff must demonstrate substantial

compliance with all contractual provisions before receiving relief. Matrix responds

that the contract must be enforced according to its own terms and that it

unambiguously required notice of breach and provided a thirty day period to cure. We

review a grant of summary judgment de novo, viewing the record in the light most

favorable to the nonmoving party. Hope v. Klabal, 457 F.3d 784, 790 (8th Cir. 2006).

A district court's interpretation of state law is also reviewed de novo. Id.

The contract provided for Delaware law to control, and Rawlings argues that

under that law a party need not give notice of termination if there is a material breach

of the contract by the other party. We have found no decision of the Delaware

Supreme Court on this point of law, and Rawlings cites none. Rawlings does cite

dicta in one chancery case, see A.R. Dervaes Co. v. Houdaille Indus., Inc., 1982 WL

17883 at *2 (Del. Ch. Jan. 14, 1982), and also a trial court decision interpreting a

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statutory notice provision, see Braxton v. Adirondack Group, Inc., 2003 WL

22938542 at *5 (Del. C.P. Aug. 11, 2003). Matrix cites a federal district court case

that directly contradicts Rawlings' position, however. Harper v. Del. Valley Broad.,

Inc., 743 F. Supp. 1076 (D. Del. 1990), aff'd mem., 932 F.2d 959 (3d Cir. 1991). In

Harper, the district court applied Delaware law to hold that one party's alleged failure

to perform adequately under a consulting agreement did not excuse the other party's

failure to follow a fifteen day notice and cure provision. Id. at 1084.

While the case on which Matrix relies is more apposite than those cited by

Rawlings, none is conclusively determinative of Delaware law. See Comm'r v. Estate

of Bosch, 387 U.S. 456, 465 (1967). What should determine the outcome here is the

more fundamental principle that the unambiguous language of a contract must be

given its plain meaning and full effect. Westfield Ins. Group v. J.P.'s Wharf, Ltd., 859

A.2d 74, 76 (Del. 2004). As the Delaware Court of Chancery has explained, "Where

contract language speaks to a particular dispute, the Court gives those privately

negotiated and agreed upon terms their full and plain meaning." Cont'l Ins. Co. v.

Rutledge & Co., 750 A.2d 1219, 1228 (Del. Ch. 2000). 

Here, the license agreement's thirty day notice and cure provision speaks

directly to this dispute. The unambiguous text of that provision applies to "any"

breach (other than those addressed in the immediate termination provision). The thirty

day provision does not exclude "material" breaches from its required notice and cure

period. If only nonmaterial breaches required notice, the word "any" would be

nullified. Rawlings was thus not excused from giving Matrix notice and the period

to cure. 

The principle that unambiguous text governs contractual interpretation also

persuades us that an alleged breach of the contract's best efforts provision is not a

defense to Matrix's breach of contract action. It is precisely when a party is not in

substantial compliance with the contract that the notice and cure provision mandates

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the giving of thirty days' notice. In similar circumstances the Eleventh Circuit has

come to the same conclusion while applying the law of Pennsylvania. See Alliance

Metals, Inc. v. Hinely Indus., Inc., 222 F.3d 895, 903 (11th Cir. 2000) (it would

otherwise "effectively render meaningless contractual 'notice and cure' requirements").

The district court did not err by granting summary judgment to Matrix on these

defenses of Rawlings to the breach of contract action.

Rawlings raises an additional point in addressing the only contractual exception

to the notice and cure provision. It argues that because it presented uncontroverted

evidence that Matrix was insolvent, the license agreement's "Immediate Termination"

provision gave it the right to terminate Matrix immediately upon notice. That

provision states that "Rawlings shall have the immediate right to terminate this

Agreement upon written notice to Matrix in the event that ... Matrix becomes or is

declared insolvent." Matrix disputes Rawlings' reading of the agreement and contends

that it incorrectly interprets the term "insolvent" to mean balance sheet insolvency,

when in actuality the term refers to equitable insolvency. Matrix also argues that

Rawlings waived its insolvency defense by failing to state in its written notice to

Matrix that it was terminating the contract due to insolvency. The district court agreed

with Matrix's interpretation, and we review its construction of the contract de novo.

Oak River Ins. Co. v. Truitt, 390 F.3d 554, 557 (8th Cir. 2004). 

Matrix argues that Rawlings cannot now rely on an insolvency defense because

it failed to mention insolvency in its notice of termination. A party may justify its

termination of an agreement, however, "'by proving that there was, at the time, an

adequate cause, although it did not become known to him until later.'" Brywil, Inc.

v. STP Corp., 1980 WL 77945 at *10 (Del. Ch. July 15, 1980), quoting Coll. Point

Boat Corp. v. United States, 267 U.S. 12, 16 (1925) (Brandeis, J.); see also Barisa v.

Charitable Research Found., Inc., 287 A.2d 679, 682 (Del. Super. Ct.), aff'd, 299 A.2d

430 (Del. 1972). Rawlings is entitled to argue insolvency.

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Insolvency carries two distinct meanings. Balance sheet insolvency, the

interpretation which Rawlings urges for the contract term, occurs when an entity's

liabilities exceed its assets. See Geyer v. Ingersoll Publ'ns Co., 621 A.2d 784, 788

(Del. Ch. 1992). Matrix argues on the other hand that what is intended by the

agreement is equitable or cash flow insolvency. That type of insolvency is understood

under Delaware law to mean (1) "a deficiency of assets below liabilities with no

reasonable prospect that the business can be continued in the face thereof," or (2) "an

inability to meet maturing obligations as they fall due in the ordinary course of

business." Prod. Res. Group, L.L.C. v. NCT Group, Inc., 863 A.2d 772, 782 (Del. Ch.

2004).

Both parties cite cases which discuss the fiduciary duties owed by corporate

directors to creditors. Compare U.S. Bank N.A. v. U.S. Timberlands Klamath Falls,

L.L.C., 864 A.2d 930, 947-48 (Del. Ch. 2004) (using the equitable definition), vacated

on other grounds, 875 A.2d 632 (Del. 2005), with Geyer, 621 A.2d at 788 (using the

balance sheet definition). To support its interpretation of insolvent, Rawlings points

to cases employing the balance sheet definition decided under the Delaware

Fraudulent Conveyances Act. E.g., Harrington v. Hollingsworth, 1994 WL 374313

at *3 (Del. Ch. July 6, 1994). Matrix relies on decisions which use the equitable

definition and deal with the appointment of corporate receivers. E.g., NCT Group,

863 A.2d at 782.

None of these cited cases deals with the interpretation of a contract containing

the term "insolvent." The cases simply show that "insolvent" is reasonably susceptible

of different interpretations and is therefore an ambiguous term. See Rhone-Poulenc

Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992).

Delaware law directs us to look at the meaning of insolvent in the particular context

in which it appears. The question is what reasonable persons in the position of the

parties would have interpreted the ambiguous term to mean. See Kaiser Aluminum

Corp. v. Matheson, 681 A.2d 392, 395 (Del. 1996). To aid our inquiry we look to the

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parties' acts and statements, the business context, any prior dealings, and relevant

customs in the industry. In re Explorer Pipeline Co., 781 A.2d 705, 714 (Del. Ch.

2001).

While this agreement called for Matrix to keep records necessary for the

calculation of royalties payable under it, it did not require Matrix to furnish Rawlings

with general data on its financial condition. This omission indicates that under the

contract, insolvency was intended to mean an inability to continue business in the face

of mounting liabilities or the inability to pay its bills as they became due. Rawlings

would learn about such occurrences without access to Matrix's balance sheets or

income statements. Since Rawlings admits that it was unaware of the Matrix balance

sheet on which its insolvency argument relies until after litigation had begun, it

apparently did not consider it necessary to monitor the company's balance sheets. See

Artesian Water Co. v. State, 330 A.2d 441, 443 (Del. 1974) (parties' own actions "of

great weight" in determining contract's meaning and lead court "to presumptively

correct interpretation"). Moreover, due to costs of replacing Matrix with another

licensee, it is questionable that Rawlings would have only been concerned with a

temporary state of Matrix's balance sheet. In a contract of indefinite duration like this

one, Rawlings would have been more likely concerned with Matrix's long term

financial health and its ability to pay its bills and grow its business. Interpreting the

contract to refer to equitable rather than balance sheet insolvency is the more

reasonable and therefore preferable interpretation. See Holland v. Nat'l Automotive

Fibres, Inc., 194 A. 124, 127 (Del. Ch. 1937). Because it is undisputed that Matrix

was not equitably insolvent, we conclude that summary judgment was correctly

granted to Matrix on this issue.

B.

K2 argues on appeal that Matrix did not establish a submissible case of tortious

interference with a business relationship because it failed to prove an essential element

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The district court applied Florida law to Matrix's tortious interference claim

against K2; neither party challenges that choice.

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of its claim: namely, that K2 had intentionally and unjustifiably interfered with the

license agreement between Matrix and Rawlings. K2 contends that its consolidation

of the Rawlings and Worth sales forces was justified by its interest in its own business

and its competitive position in the sporting goods industry. Furthermore according

to K2, Matrix did not show that its actions were specifically intended to interfere with

the license agreement and the damages awarded against it were duplicative of those

awarded for Rawlings' breach of contract. We review de novo a denial of a motion

for judgment as a matter of law and draw all reasonable inferences in favor of Matrix,

without making credibility assessments or weighing the evidence. Battle v. United

Parcel Serv., Inc., 438 F.3d 856, 861 (8th Cir. 2006).

The elements of a claim for tortious interference with a business relationship

under Florida law are (1) the existence of a business relationship, (2) the defendant's

knowledge of that relationship, (3) the defendant's intentional and unjustified

interference with that relationship, and (4) damage to the plaintiff as a result of the

breach of the relationship. Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So. 2d

812, 814 (Fla. 1994).3

 At trial there was testimony that K2 was aware of the contract

between Rawlings and Matrix and its provisions and that president Parish of Rawlings

had discussed a key letter from Matrix president Orloff with K2's general counsel.

That letter had warned Rawlings that K2's plan to consolidate the Rawlings and Worth

sales forces would breach the contract. Because K2 nonetheless went ahead with

consolidation, the jury was entitled to infer that K2 "intended to procure a breach of

the contract." Chi. Title Ins. Co. v. Alday Donaldson Title Co. of Fla., 832 So. 2d

810, 814 (Fla. Dist. Ct. App. 2002). Purposely causing a breach of contract is an

"improper means" of interference, McCurdy v. Collis, 508 So. 2d 380, 383-84 (Fla.

Dist. Ct. App. 1987), and using improper means to interfere with a business

relationship constitutes unjustifiable interference, Ethyl Corp. v. Balter, 386 So. 2d

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1220, 1225 (Fla. Dist. Ct. App. 1980). The jury was entitled to find from the evidence

that K2 had used improper means of interference and that it had intentionally and

unjustifiably interfered with the license agreement. 

Also unavailing is K2's argument that the damages awarded against it were

duplicative. Damages for breach of contract and tortious interference are not

coextensive, and a jury may award damages under both claims. See Montage Group,

Ltd. v. Athle-Tech Computer Sys., Inc., 889 So. 2d 180, 191-92 (Fla. Dist. Ct. App.

2004). Matrix's expert witness testified that it suffered a total of $12,797,893 in

damages, but the damages which the jury awarded against both Rawlings and K2

totaled only $8,650,000. The jury's aggregate award was thus well within the bounds

of the evidence presented at trial, and a jury may rationally allocate damages "between

the two different causes of action, one for breach of contract, and one for tort." Indu

Craft, Inc. v. Bank of Baroda, 47 F.3d 490, 497 (2d Cir. 1995). 

Because a reviewing court's role under the Seventh Amendment "is to reconcile

and preserve whenever possible" a jury verdict, we must start with a presumption that

the damages awarded were not duplicative. Id. Moreover, the acts committed by

Rawlings and those committed by K2 were different. While Rawlings breached the

contract by improperly terminating Matrix without a period of cure, K2 ordered the

sales forces of Worth and Rawlings to consolidate, thus causing a breach of the license

agreement's noncompete clause. The jury apparently intended to apportion damages

between the defendants for these separate acts. In light of these points and K2's

failure to raise the issue in timely fashion, we conclude that the damages awarded

against K2 should be affirmed and that the district court did not err in denying K2's

motion for judgment as a matter of law. See Jackson v. City of St. Louis, 220 F.3d

894, 898 (8th Cir. 2000).

K2 also argues that the district court's instructions on tortious interference were

an abuse of discretion, but K2 never made a specific objection to the instructions

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K2 also challenges an instruction relating to breach of contract which stated

that if the jury found for Matrix, it had to award "such sum as ... will fairly and justly

compensate plaintiff for any damages [directly resulting from] the breach or breaches

of the parties' contract, mentioned in the evidence." K2 believes that the reference to

"breach or breaches" authorized Matrix to recover under a theory that K2 directed

Rawlings to terminate the contract, but the specific instruction on tortious interference

included no reference to such a theory.

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before submission of the case to the jury. It stated only that "the instruction as

proposed is far broader than the issues as framed by the pleadings and the evidence."

This objection to the district court was too general to preserve the specific objections

that K2 argues on appeal, and the instructions will be reviewed for plain error only.

Dupre v. Fru-Con Eng'g Inc., 112 F.3d 329, 333 (8th Cir. 1997).

K2 claims that the court erred in instructing that one of the elements of a

tortious interference claim was "existing business relationships" without specifying

what those relationships were. No specification was necessary, however, since the

trial focused on Matrix's relationship with Rawlings. The instructions were also

faulty, K2 argues, in failing to define "interference," thus allowing the jury to

understand the term more broadly than does Florida law. K2 overlooks the fact that

the instructions correctly stated Florida law by excluding from "interference" any

action that was justified or that did not employ improper means.4

 There was no plain

error in the jury instructions.

C.

Rawlings and K2 contend that the district court erred by denying their motion

for a new trial. Rawlings asserts that the lost profits award was against the weight of

the evidence because Matrix's expert testimony was unreliable, and K2 claims that the

verdict against it was a miscarriage of justice. The denial of a new trial motion based

on the argument that the jury verdict was against the weight of the evidence "is

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virtually unassailable on appeal," however. Grogg v. Mo. Pac. R.R. Co., 841 F.2d

210, 214 (8th Cir. 1988). Rawlings never made a challenge under Daubert v. Merrell

Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), to the expert testimony whose

calculations it now attacks, and neither Rawlings nor K2 has shown that the verdicts

were against the weight of the evidence or that there was a miscarriage of justice. The

district court did not abuse its discretion in denying the motion for a new trial.

III.

A.

Matrix challenges the district court's post trial elimination of the jury award for

terminal value damage. The district court set aside those damages as speculative, but

Matrix argues that terminal value is a well accepted concept under the law. Even if

its expert's projections were optimistic, Matrix argues, there was nonetheless a

reasonable basis for the award. While the jury valued the license agreement's terminal

value at only about $2 million, the expert testimony set it at $8.7 million. Rawlings

responds that speculation is necessarily involved in estimating terminal value because

revenue lost over an infinite period could be included.

We review a grant of judgment as a matter of law de novo, applying the same

standard as the district court. We view the evidence in the light most favorable to the

nonmovant, give it the benefit of every reasonable inference, and resolve all factual

disputes in its favor. If the evidence viewed according to this standard would permit

reasonable jurors to differ in the conclusions they draw, judgment as a matter of law

cannot be granted. See Smith v. Chase Group, Inc., 354 F.3d 801, 806 (8th Cir. 2004).

Delaware law disapproves of speculative damages, see Scotton v. Wright, 121 A. 180,

185 (Del. Super. Ct. 1923), but damages need only have a reasonable basis, they need

not be absolutely certain. Bomarko, Inc. v. Int'l Telecharge, Inc., 794 A.2d 1161,

1184 (Del. Ch. 1999).

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Matrix called Donna Beck Smith, a certified public accountant and valuation

analyst, as an expert witness to establish the amount of its economic losses. Rawlings

made no Daubert challenge to her testimony. Smith gave her expert opinon about

Matrix's damages after having examined its past and present financial data, as well as

projections about the sporting goods industry's future performance. First, she assessed

damages for the present value of revenue Matrix would have gained from the license

agreement over the first ten years after termination. Next, she assessed the license's

"terminal value" or market value of the license agreement after those ten years, which

she described as "what somebody would be willing to pay for the right to have this

contract." In her valuation Smith used what is called the "constant growth" or

"Gordon growth" model, which assumes constant growth of an asset and then

discounts this value to arrive at the present value of the terminal value.

Calculating the value of an asset at liquidation or disposition is a necessary part

of discounted cash flow analysis, which the Delaware courts have recognized as "the

preeminent valuation methodology" in the financial community. Neal v. Ala. ByProducts Corp., 1990 WL 109243 at *7 (Del. Ch. Aug. 1, 1990), aff'd, 588 A.2d 255

(Del. 1991); see also Kleinwort Benson Ltd. v. Silgan Corp., 1995 WL 376911 at *7

(Del. Ch. June 15, 1995) (discounted cash flow analysis "requires the experts to set

a value for [the asset] at the end of the period, which is labeled a terminal value").

The constant growth model which Smith employed has been specifically recognized

as an accepted way to determine terminal value. See Prescott Group Small Cap, L.P.

v. Coleman Co., 2004 WL 2059515 at *14 (Del. Ch. Sept. 8, 2004). Rawlings argues

that the cases in which recovery for terminal value was allowed are distinguishable

because they involved statutory stock appraisal. The agreement here, however, like

shares in a corporation, was expected to generate income for an indefinite period.

Rawlings gives no reason why the financial principles applied to one revenue

producing asset like stock should not be applied to another like a license agreement.

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Rawlings points to two cases from other jurisdictions which it says reject the concept

of terminal value. The Second Circuit held in a contract case under New York law

that the plaintiff could recover "the market value of an income-producing asset,"

instead of a discounted income stream of lost profits, Schonfeld v. Hilliard, 218 F.3d

164, 177 (2d Cir. 2000), because that accounted for "the chance to earn the speculative

profits." Id. (emphasis omitted). After examining Schonfeld, the Fifth Circuit decided

that lost asset damages from breach of a license agreement were "determined by

considering what a hypothetical buyer would pay for the chance to earn future

profits." Fluorine on Call, Ltd. v. Fluorogas Ltd., 380 F.3d 849, 860 (5th Cir. 2004)

(award reversal). Because the expert had failed to do "any of the calculations that

distinguish a lost asset damage model from a straightforward lost-profits one," the

award was reversed. Id. at 861.

Here in contrast, Smith testified that the purpose of her terminal value

calculation was to ascertain what a buyer would pay for the license agreement ten

years into the future by "determin[ing] the value of an asset and not lost profits year

after year after year into infinity." The constant growth model is entirely different

from calculating damages based on an infinite series of periodic cash flows, for its

formula is meant to estimate the cash available from a disposition of the asset. See

Samuel C. Thompson, Jr., A Lawyer's Guide to Modern Valuation Techniques in

Mergers and Acquisitions, 21 J. Corp. L. 457, 489-92 (1996). We conclude for these

reasons that the district court erred by eliminating the award for terminal value.

B.

Matrix claims that the district court erred by deciding that as a matter of law

Matrix could not ask the jury to award punitive damages against K2 for its tortious

interference. K2 replies that Florida law precludes any award of punitive damages

here.

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A Florida statute governing the award of punitive damages in civil actions

provides that punitive damages are available "only if the trier of fact, based on clear

and convincing evidence, finds that the defendant was personally guilty of intentional

misconduct or gross negligence." Fla. Stat. § 768.72(2). Because punitive damages

are "reserved for particular types of behavior which go beyond mere intentional acts,"

Weinstein Design Group, Inc. v. Fielder, 884 So.2d 990, 1001 (Fla. Dist. Ct. App.

2004), the level of culpability which this statute demands is higher than that which is

demanded by tortious interference. "Proof of the elements of tortious interference

may be established even though the evidence may not justify an award of punitive

damages." Air Ambulance Prof'ls, Inc. v. Thin Air, 809 So. 2d 28, 30 (Fla. Dist. Ct.

App. 2002). In order to recover punitive damages Matrix would have had to prove

more than just the elements of a claim for tortious interference.

Although an award of punitive damages for tortious interference requires "an

illicit scheme to put [the plaintiff] out of business," or fraud or malice, id. at 31,

Matrix points to no evidence from which a reasonable jury could infer that K2 was

guilty of fraud or acted out of a bare desire to harm Matrix. While there is evidence

that K2 acted to harm Matrix's relationship with Rawlings, there is no evidence of

fraud, malice, or desire to destroy Matrix. Cf. IBP, Inc. v. Hady Enters., Inc., 267 F.

Supp. 2d 1148, 1170 (N.D. Fla. 2002) (punitive damages awarded in tortious

interference case where defendant's scheme involved contamination of meat, thereby

"consciously disregard[ing] the health and safety of the ... public"). The district court

did not err in declining to put the issue of punitive damages before the jury.

C.

Matrix contends that the district court erred by dismissing its Florida statutory

claim against Rawlings and K2 on the pleadings. The Florida Deceptive and Unfair

Trade Practices Act prohibits "[u]nfair methods of competition, unconscionable acts

or practices, and unfair or deceptive acts or practices in the conduct of any trade or

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commerce." Fla. Stat. § 501.204(1). Before a 2001 amendment, the statute allowed

only "a consumer" to pursue an action under it. After the amendment, the statute

permits "a person who has suffered a loss as a result of a violation" to bring an action.

Id. § 501.211(2) (emphasis added). Matrix relies on that amendment to bring its

action and claims that Florida courts routinely permit corporations to sue under the

statute. Appellants respond that the consumer protection purpose of the statute is

unchanged and that Matrix therefore lacks standing to pursue its claim. Even if

Matrix did have standing, they add, its complaint asserted no violation of the statute.

Statutory text and case law foreclose the argument that Matrix lacks standing

because it is a corporation. Under Florida law "persons" include "corporations." Id.

§ 1.01(3). Moreover, we are obliged to give effect to the 2001 amendment, for

"[w]hen the Legislature makes a substantial and material change in the language of a

statute, it is presumed to have intended some specific objective or alteration of law."

Mangold v. Rainforest Golf Sports Ctr., 675 So. 2d 639, 642 (Fla. Dist. Ct. App.

1996). Several courts have given effect to that amendment by allowing "a broader

base of complainants," including corporations, to pursue actions under the statute.

Niles Audio Corp. v. OEM Sys. Co., 174 F. Supp. 2d 1315, 1320 (S.D. Fla. 2001);

accord Beacon Prop. Mgmt., Inc. v. PNR, Inc., 890 So. 2d 274 (Fla. Dist. Ct. App.

2004) (on remand from Florida Supreme Court, affirming jury verdict in favor of

plaintiff corporation).

Matrix cannot prevail simply because it has standing, however. See Moore v.

PaineWebber, Inc., 189 F.3d 165, 169 n.3 (2d Cir. 1999) (distinguishing lack of

standing from failure to state a claim on which relief may be granted). Matrix's

complaint alleges that Rawlings violated the statute by intentionally breaching the

contract and that K2 did so by intentionally causing Rawlings to breach the contract.

These allegations are insufficient to state a claim under the statute. The Florida

Supreme Court has cautioned that breaches of contract, without more, are insufficient

to state a claim under the statute. See PNR, Inc. v. Beacon Prop. Mgmt., Inc., 842 So.

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2d 773, 777 n.2 (Fla. 2003). We have found no case in which mere intentional breach

of contract or interference with that contract have been found to constitute a violation

of the deceptive practices statute. 

The cases involving corporate plaintiffs upon which Matrix principally relies

have quite different facts. In one, the defendant was alleged to have continually lied

to the plaintiff about its duties under a property management agreement. Id. at 774.

In another, the plaintiff alleged that the defendant intentionally infringed its trade

dress. Niles Audio Corp., 174 F. Supp. 2d at 1317. And in yet another, the plaintiff

alleged that the defendant had entered into a transaction with bad faith and sought to

drive the plaintiff out of business entirely. Hanson Hams, Inc. v. HBH Franchise Co.,

2003 WL 22768687 (S.D. Fla. Nov. 7, 2003). In those cases the corporate plaintiffs

alleged significant deception or malice. Here in contrast, Matrix alleged only that the

appellants wanted to get Rawlings out of the license agreement and intentionally

caused a breach of that agreement. There were no allegations of bad faith negotiations

or deception during the life of the contract, or allegations that could give rise to an

inference that the appellants wanted to ruin Matrix totally. The district court did not

err by dismissing Matrix's claim under the Florida statute.

IV.

For these reasons we reverse the order of the district court striking Matrix's

damages for the license's terminal value but affirm the judgment in all other respects.

We grant the motion by Matrix to supplement the record on appeal and remand for

entry of judgment consistent with this opinion.

______________________________

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