* This order and judgment is not binding precedent, except under the

doctrines of law of the case, res judicata, and col lateral estoppel. This court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3. 

## F I L E D United States Court of Appeals Tenth Circuit 

### AUG 6 1998 

### PATRICK FISHER Clerk UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

AUDIOTEXT COMMUNICATIONS NETWORK, INC.; CONNECTIONS U.S.A., INC.,Plaintiffs-Counter-DefendantsAppellants/Cross-Appellees, v. U.S. TELECOM, INC., doing business as Sprint Telemedia, Inc., formerly known as Sprint Gateways,Defendant-Counter-ClaimantAppellee/Cross-Appellant. Nos. 97-3050, 97-3053 (D.C. Civ. No. 94-2395-GTV)

(D. Kan.)

ORDER AND JUDGMENT *

Before TACHA , McWILLIAMS , and KELLY , Circuit Judges.

Plaintiffs-Appellants Audiotext Communications Netw ork, Inc. (Audiotext) and Connections U.S.A., Inc. (Connections) appeal a fter a jury verdict in their favor, alleging several errors in both the judgmentand in the court’s award of attorney’s fees. Defendant-Appellant U.S. Telecom, Inc. (Sprint) cross-appeals from the judgment against it. Our jurisdiction ari ses under 28 U.S.C. § 1291, and- 2 -

we affirm as to everything but attorney’s fees. Audiotext and Connections are known, in telecommuni cations argot, as information providers (IPs). They offer interactiv e messages and live operators, on a pay-per-call basis, via long distance 900 numb ers. Audiotext and Connections offered sports information and psychic, astrological, dating, and pornographic programs. The consumer placing calls is known as the end user. Audiotext and Connections each entered into two con secutive information provider contracts (IP contracts) with Sprint for l ong-distance pay-per-call service. Sprint, an interexchange carrier (IXC), w as obliged under the contracts to carry Plaintiffs’ 900 calls over its long distan ce network, bill and collect charges from the end users, and remit the monies to Plaintiffs. In return, Plaintiffs paid Sprint transport and billing and co llection fees. Over the duration of the contracts, Plaintiffs paid Sprint more than $3,000,000 in service fees. Evidence presented at trial indicated Sprint induce d Plaintiffs to enter into the contracts by representing that it could supply 900-number coverage for the whole country, except for insignificant rural pocke ts where Plaintiffs were not advertising anyway. It became apparent during the course of the contracts, however, that Sprint was not remitting payment to the IPs for a significant volume of calls the IPs serviced. Further evidence showedlarge areas of unequal access—areas in which AT&T had the ability to bill and collect for 900 calls but- 3 -

other carriers did not. In these areas Sprint need ed to enter into a contract with the local telephone company (LEC) and regional Bell operating company (RBOC) in order to bill to and collect from the end user. When Sprint began offering 900 service in 1989, it had no billing agreements with any LEC or RBOC. During 1990 Sprint entered into billing contracts with onl y six of the 1200 to 1400 LECs and RBOCs in the United States. Sprint created int ernal reports and maps of unequal access areas, showing where it did and did not have the ability to bill and collect for 900 calls. Although it could have open ed up 900 access to its long distance network only in areas in which it could bi ll for calls directly or had contracted with a LEC and RBOC for billing services , Sprint deliberately opened 900 access to calls from the entire country. Connections entered into its first IP contract withSprint in 1989, and Audiotext followed in 1990. Although its inabilityto collect and bill for unequal access calls was well-known to Sprint, it failed to inform the IPs of the problem. When Audiotext and Connections became aware of the substantial disparity between the number of calls they serviced and the n umber Sprint paid them for, they brought the problem to Sprint’s attention. Sp rint responded with surprise and assured Audiotext and Connections that the prob lem was not caused by any deficiency on its part. When the problem persisted and Plaintiffs pursued their complaints, Sprint gave a variety of excuses, trans ferred Plaintiffs’ accounts to- 4 -

other Sprint representatives, and released misleadi ng reports about the non-equal access issue. In July 1991, Audiotext installed equipment which a llowed it to recognize whether incoming 900 number calls were accompanied by complete billing information, or ANI, which included the end user’s name and address. It became immediately apparent Sprint was transporting a sign ificant number of calls unaccompanied by ANI. For each of these calls Spri nt collected from Audiotext its transport and billing fees but could not bill t he end user, and so could not remit to Audiotext its charge for the call. Audiot ext set up its equipment to block calls without complete ANI, and confronted Sprint w ith the problem. Sprint admitted it was unable to bill in most non-equal ac cess areas. Connections independently discovered the non-equal access probl em in September 1991. Sprint withdrew from the 900 number business withinthe next month. A jury found Sprint had fraudulently induced and br eached its IP contracts with both Audiotext and Connections. The jury awar ded compensatory damages on all claims except Connections’ fraud claim. Aft er a separate inquiry the jury awarded Audiotext $15,000,000 in punitive damages, but the district court reduced the amount to $2,222,368.20 pursuant to Fla . Stat. Ann. § 768.73 (West 1996). The court refused the jury’s request for pe rmission to change its verdict to award Connections compensatory fraud damages, and a lso denied Plaintiffs’- 5 -

request for prejudgment interest. The court later granted in part the Plaintiffs’ motion for attorney’s fees, but awarded only $401,2 80.00 of the requested $1,618,294.49. Plaintiffs contend the district court erred in (1) refusing to allow the jury to amend its verdict, (2) reducing the award of puniti ve damages, (3) denying prejudgment interest under Kansas law, and (4) redu cing the award of attorney’s fees. In its cross-appeal, Sprint first raises sev eral reasons why the district court erred in denying its motion for judgment as a matte r of law on Audiotext’s fraud claim. Second, Sprint argues the court erred in fa iling to limit contract damages as required under the terms of the IP contracts, an d, third, erred in failing to enforce an IP contract provision regarding chargeba cks. Finally Sprint argues for a new trial on the ground that the inappropriately admitted fraud evidence tainted the contract verdict. The parties agree that in th is diversity case Florida law governs the tort claims and Kansas law controls the contract claims. Because Sprint’s issues, if they have merit, would be dispo sitive, we address them first. We review de novo the denial of judgment as a matte r of law. See Taylor v. Cooper Tire and Rubber Co. , 130 F.3d 1395, 1399 (10th Cir. 1997). Judgment as a matter of law is appropriate “[i]f during a tr ial by jury a party has been fully heard on an issue and there is no legally sufficien t evidentiary basis for a reasonable jury to find for that party on that issu e.” Fed. R. Civ. P. 50(a)(1). In- 6 -

support of its contention that judgment as a matterof law should have been granted against Audiotext’s fraud claim, Sprint arg ues first that the plain language of the IP contracts precludes reliance on its preco ntractual misrepresentations. Relying on the general rule that representations pr eceding or accompanying a written contract are merged into the final written contract, Sprint argues its precontract misrepresentations as to coverage could no t be relied upon in light of this contract language: Sprint “will use its best effort s to maximize coverage for billing and collection by entering into billing and collection agreements with as many LECs as possible.” XV Aplt. Exh. App. at 3802 ; XIX Aplt. Exh. App. at 4591. This clause, according to Sprint, clearly in formed Audiotext that Sprint did not have full billing and collection capability, be cause otherwise there would be no need for Sprint to make further efforts to maxim ize billing coverage. A claim of fraud based on oral misrepresentations i s barred if a later contract adequately deals with the alleged misrepre sentation. See Englezios v. Batmasian , 593 So. 2d 1077, 1078 (Fla. Dist. Ct. App. 1992). Sprint’s misrepresentations had to do with “coverage,” an am biguous term that was never clarified in the oral representations or defined in the parties’ contract. The misrepresentations obscured Sprint’s extensive area s of non-equal access, which were never addressed in the contract. Sprint’s contractual promise was to “maximize coverage” by contracting with LECs. Beca use the contract neither- 7 -

defined coverage nor addressed non-equal access, itdid not adequately deal with the oral misrepresentations, and consequently did n ot bar the fraud claim based on them. Sprint also points to the merger and integration cl auses in the IP contracts, which provide that the written contracts supersede all prior representations and constitute the parties’ whole agreement. It is wel l settled in Florida that such clauses will not bar evidence of fraud in the induc ement of the contract. See Nobles v. Citizens Mortgage Corp. , 479 So. 2d 822 (Fla. Dist. Ct. App. 1985). Sprint’s next contention is that there was no evide nce Audiotext’s first IP contract was fraudulently induced, and that particu lar claim should not have been submitted to the jury. Although the substantive fr aud issues are governed by Florida law, federal law determines whether the evi dence is sufficient to submit the case to a jury. See Taylor , 130 F.3d at 1399. Judgment as a matter of law is proper only when the evidence and all inferences from it, viewed in the light most favora ble to the nonmoving party, is ‘so patently in favor of the mo ving party that a jury verdict in favor of the opposing party would b e improper and would have to be set aside by the trial judge.’ Id. (quoting Peterson v. Hager , 724 F.2d 851, 853-54 (10th Cir.1984)). Sprint argues that Mr. Gifford, Audiotext’s president at the time of its first IP contract and the officer who executed the contract, did not testify at trial, and consequently no evidence exists that Sprint misrepr esented anything to him or- 8 -

omitted to tell him anything. Sprint’s argument tu rns on its further allegation that Mr. Gifford was the only Audiotext representative i nvolved in the first IP agreement. But here it is mistaken. Sprint’s own employee, Diane Thomas Bland, testified it was she who began Sprint’s busi ness relationship with Audiotext, and she dealt with Michael Pardes at Aud iotext before the first IP agreement. See XI Aplt. App. at 2546-48. She testified she made representations about coverage to Mr. Pardes at that time. See id. The court did not err in submitting this claim to the jury. Sprint’s next argument against Audiotext’s fraud cl aim is that the alleged misrepresentations concern the heart of the parties ’ agreement in the IP contracts, and consequently Florida’s economic loss rule limit s Audiotext to its rights under the contracts. The Florida Supreme Court has held that a claim for fraud in the inducement of a contract is an independent tort whi ch is not barred by the economic loss rule, and which may proceed alongside a claim for breach of the
contract. See HTP, Ltd. v. Lineas Aeras Costarricenses, S.A. , 685 So. 2d 1238, 1240 (Fla. 1996). Fraud in the inducement presents a special situatio n where parties to a contract appear to negotiate freely—which normall y would constitute grounds for invoking the economic loss d octrine—but where in fact the ability of one party to negotiate fair terms and make an informed decision is undermined by the other party’s fraudulent behavior. . . . Id. (quoting Huron Tool & Engineering Co. v. PrecisionConsulting Servs., Inc. ,- 9 -

532 N.W.2d 541, 545 (Mich. Ct. App. 1995). Sprint makes a further distinction: if the substance of the alleged fraudulent misrepre sentations is inseparable from what is promised in the contract, an action for fra ud is barred and the plaintiff must rely on the promises for which he bargained. See Hotels of Key Largo, Inc. v. RHI Hotels, Inc. , 694 So. 2d 74, 78 (Fla. Dist. Ct. App.), review d enied , 700 So. 2d 685 (Fla. 1997). Conversely, if the misrepr esentations are distinct from the promises in the contract, the fraud claim is no t barred by the economic loss rule. See HTP , 685 So. 2d at 1239. In our view this is merely a nother avenue to arrive at our earlier conclusion: Sprint’s fraudule nt misrepresentations were not adequately addressed in the contract. Because the fraud is distinct from the substance of the IP contracts, the claim was not barred by the economic loss doctrine. See id. at 1239-40. Sprint argues Audiotext failed to prove fraud damag es that are separate and distinct from its contract damages. We review the district court’s decision on whether the damage award was duplicative for clear error, because of the factual nature of the inquiry. See Mason v. Oklahoma Turnpike Auth. , 115 F.3d 1442, 1459 (10th Cir. 1997), appeal decided byMason v. Oklahoma Turnpike Auth. , 124 F.3d 217 (10th Cir. 1997). “[I]t is firmly est ablished that damages for fraud may not be recovered when they merely duplicate tho se sustained as a result of a concomitant breach of contract.” National AircraftServs., Inc. v. Aeroserv Int’l,- 10 -

Inc. , 544 So. 2d 1063, 1065 (Fla. Dist. Ct. App. 1989). Audiotext’s contract damages compensated it for service fees paid to Spr int in return for which Sprint did not perform its obligations. Among these failu res was the thirteen percent deviation between the number of billable calls thatreached Audiotext’s 900 programs and the number of calls Sprint actually bi lled. Although no unbilled calls reached Audiotext after it began blocking cal ls without ANI, Audiotext continued to receive a smaller volume of business than it would have had Sprint not misrepresented its billing capacity. Audiotext ’s fraud damages compensated it for revenue lost because of this smaller volume of calls after blocking. The district court made this distinction and ordered re mittitur of fraud damages that duplicated the contract recovery. The remaining fr aud damages were properly recovered. See Williams v. Peak Resorts Int’l Inc. , 676 So. 2d 513, 516 (Fla. Dist. Ct. App. 1996). Sprint next complains that the district court impro perly held it had a duty to disclose to Audiotext any material fact which Audio text did not have an equal opportunity to discover. It argues the proper stan dard is that it need only have disclosed what Audiotext could not have learned thr ough diligent inquiry. Sprint also complains the court did not properly distingui sh between active misrepresentation and nondisclosure. That distinct ion has been severely criticized by the Florida Supreme Court. See Johnson v. Davis , 480 So. 2d 625, 628 (Fla.- 11 -

1985) (“[W]here failure to disclose a material factis calculated to induce a false belief, the distinction between concealment and aff irmative representations is tenuous. Both proceed from the same motives and ar e attended with the same consequences; both are violative of the principles of fair dealing and good faith; both are calculated to produce the same result; and , in fact, both essentially have the same effect.”). The standard of diligent inqui ry Sprint attempts to impose on Audiotext was rejected by the Florida Supreme Courteighteen years ago. See
Besett v. Basnett , 389 So. 2d 995, 998 (Fla. 1980) (“We hold that a recipient may rely on the truth of a representation, even though its falsity could have been ascertained had he made an investigation, unless he knows the representation to be false or its falsity is obvious to him.”). In J ohnson , the court stated Florida law held “that where the parties are dealing at arm ’s length and facts lie equally open to both parties, with equal opportunity of examination , mere nondisclosure does not constitute a fraudulent concealment.” Joh nson , 480 So. 2d at 628 (emphasis added). Although the court criticized th is rule as not in conformity “with current notions of justice, equity and fair d ealing,” and in the context of residential real estate transactions imposed a high er duty of disclosure, see id. at 628-29, it follows even from the narrower rule thatwhere the parties do not have equal opportunity to examine, nondisclosure may be fraudulent. Sprint also quotes Watkins v. NCNB Nat’l Bank , 622 So. 2d 1063, 1065-66- 12 -

(Fla. Dist. Ct. App. 1993), review denied , 634 So. 2d 629 (Fla. 1994) in support of its nondisclosure standard. However Watkins states, immediately following the passage Sprint quotes, that the plaintiff in that c ase failed to plead any facts supporting an unequal opportunity to discover. The district court did not err in formulating Florida law. Sprint next argues several infirmities in the awardof contract damages. First, it argues the court failed to limit damages in accord with contractual limitation clauses. Second, it argues that the cou rt improperly reversed itself after trial by holding that certain language in the limit ation clauses was ambiguous. Third, it argues the court improperly held that the jury had decided the ambiguous question when the jury had not been instructed to d o so. We review contractual language and the determinatio n of ambiguity de
novo. See Mid-West Conveyor Co. v. Jervis B. Webb Co. , 92 F.3d 992, 995 (10th Cir. 1996). The IP agreements provided: “IN NO EVENT SHALL [SPRINT] BE LIABLE FOR: (1) ANY INCIDENTAL, INDIRECT, SPECIAL O R CONSEQUENTIAL DAMAGES INCLUDING, BUT NOT LIMITED TO , ANY
DAMAGES RESULTING FROM THE INTERRUPTION OR DISCONTINUANCE OF THE SERVICES FURNISHED BY [SPRINT ] . . . OR ANY LOST REVENUES OR PROFITS OF IP. . . .” II Aplt . Exh. App. at 323; XV Aplt. Exh. App. at 3639, 3802; XIX Aplt. Exh. Ap p. at 4592. Sprint argues- 13 -

Plaintiffs’ contract damages were for lost profits or revenues, in violation of its contractual exemption from “consequential damages.” Id. We agree with the district court that Plaintiffs’ contract damages do not arise from lost profits or revenues. Although Audiotext’s fraud damages compe nsated it for lost revenue, the contract damages for both Plaintiffs arose fromservice fees Sprint charged them and which, under the contract, were subject to recovery in the event of Sprint’s breach. The contract also provided as follows: “[Sprint’s] entire liability resulting from [its] failure to perform any of its obligation s under this Agreement shall be IP’s actual, direct damages as might be provable ina court of law, but not to exceed the amount paid to [Sprint] for monthly serv ices pursuant to this Agreement.” II Aplt. Exh. App. at 323; XV Aplt. Ex h. App. at 3639, 3802; XIX Aplt. Exh. App. at 4592. The district court first held the monthly services limitation was an unambiguous contract provision wh ich it would apply as a matter of law. In response to a motion for reconsi deration, the court reversed itself and acknowledged there was more than one rea sonable interpretation of what amounts were properly included within “monthlyservices.” Because ambiguous contract provisions are questions of factfor the jury, the court held that all parties had had the opportunity to presenttheir interpretations to the jury, and the jury had obviously found Plaintiffs’ eviden ce convincing.- 14 -

The district court was correct in concluding “month ly services” was ambiguous. See City of Wichita v. Southwestern Bell Tel. Co. , 24 F.3d 1282, 1287 (10th Cir. 1994) (applying Kansas law and hold ing the contract term “gross receipts from noncompetitive services” ambiguous). The two competing reasonable interpretations were that the term inclu ded either all monthly charges paid to Sprint, or only flat fees recurring each mo nth. Sprint argues the latter view is the unambiguous plain meaning of the clause because Plaintiffs’ interpretation—that the amount includes the total m onthly fees paid to Sprint—would render the word “monthly” superfluous. We disagree. Under Plaintiffs’ interpretation monthly services are sti ll distinguished from one-time flat fees paid to Sprint to begin service. See II Aplt. Exh. App. at 328. Sprint argues the court erred in determining after trial that the issue had been decided by the jury even though no instructionwas given on the matter. Sprint did not timely object to the court’s failure to give an instruction, however, and has thus waived its claim. See Fed. R. Civ. P. 51. Although Sprint suggests it was prejudiced by the court’s initial determinat ion that the provision was unambiguous, depriving it of the opportunity to pre sent evidence on the matter, we note that Sprint called an expert in billing cha rges to testify as to the meaning of the monthly services limitation. We find no pla in error. See Unit Drilling Co. v. Enron Oil & Gas Co. , 108 F.3d 1186, 1190-91 (10th Cir. 1997).- 15 -

Sprint’s next major argument is that the district c ourt failed to enforce a provision of the IP contracts relating to chargebac ks, and thus improperly allowed Plaintiffs damages under this rubric. Chargebacks refer to 900 fees billed to and disputed by the end user, which, as a result of that dispute, are deemed uncollectible. A multitude of reasons could support the determination that a 900 fee was uncollectible; the end user might deny all knowledge of the call, for example, or claim a minor had made the call, or he might simply refuse to pay. The first IP agreements provide that if any single phone number’s monthly chargebacks exceeded $20.00, the IP would bear the loss, and where the chargebacks per phone number per month were less, S print would bear them. The second IP contracts lowered the threshold to $10.00 . Sprint argues the Plaintiffs calculated their damages to include chargebacks that were properly assessed to them under these contract provisions. Some disagreement, however, existed as to the defin ition of “chargeback.” Plaintiffs point to a Factoring Agreement between S print and Audiotext which defines chargeback as “the amount of any IP Accountfor any Billing Period which is disputed by an end-user and which is determined by [Sprint] to be uncollectible .” XIX Aplt. Exh. App. at 4574 (emphasis added). Plaintiffs maintain their chargeback damages were based on tho se instances in which Sprint failed to “determine” the charges to be “uncollecti ble.” Plaintiffs proved this at- 16 -

trial through Sprint’s witnesses and by offering inevidence the reason code Sprint listed next to each chargeback, along with the reas on code tables. The reasons for the chargebacks indicate many of them—although disp uted by the end user—were not determined by Sprint to be uncollectible. Plai ntiffs’ evidence also indicated that callers repeatedly took advantage of their pro grams, denied all knowledge or refused to pay, and requested an adjustment. See I Aplt. Supp. App. at 72–163, III Aplt. Supp. App. at 675–822. Although Sprint c ontends that adjustments were granted by LECs, and Sprint was bound by their deci sions on billing matters, Sprint’s private arrangements with LECs did not bin d the Plaintiffs. Plaintiffs’ billing agreements were with Sprint, and they were entitled to hold Sprint to its word. Sprint presented its view of chargebacks to the jury, and the jury apparently believed that much of what Sprint failed to collect from end users were not “chargebacks” under the IP agreements, and thus not subject to the chargeback threshold. Sprint’s final argument is that the improper submis sion of fraud claims tainted the jury’s consideration of the contract cl aims. This argument fails in the wake of our holding that the fraud claims were prop erly submitted to the jury. We turn now to the issues raised by Plaintiffs in the main appeal. We review for abuse of discretion Connections’ claim that the court erred in refusing to resubmit to the jury the verdict on its compensatory fraud damages. See Unit- 17 -

Drilling , 108 F.3d at 1192. Although the jury found that S print fraudulently induced Connections to enter the IP contracts, it e ntered zero in the space for Connections’ compensatory fraud damages. On the sp ecial verdict form immediately following these findings, an interrogat ory stated that if the jury had found Sprint defrauded Connections, and if it award ed Connections compensatory fraud damages, then it should decide whether Connec tions was entitled to punitive damages. Although it had not satisfied both parts of the question’s predicate, the jury answered that Connections was entitled to puni tive damages. See V Aplt. App. at 957-58. When the jury realized that its fi nding of no compensatory fraud damages prevented it from awarding punitive damages to Connections, it wrote the court a note: it was notour intention to absolve Sprint from punitive dama ges with regard to Connections’ fraud claim against them—we simply could not decipher the fraud amount asked for. The verdi ct forms for Connections asked for 7 figures—we were able to der ive 6 figures from Art Levinson’s testimony and Exhibit number 19 80. Missing was the figure for damages due to fraud. We all ag reed to award the entire amounts asked for plus punitive damages . . . . We were not aware that by leaving the fraud amount at zero Spri nt would not have to pay punitive damages to Connections. XII Aplt. App. at 3049. Connections argues the special verdict was inconsis tent and the court was required to resubmit it to the jury for clarificati on. See Unit Drilling , 108 F.3d at 1191. In reviewing this claim we must accept any r easonable view of the case- 18 -

that will conform to the verdict. See Patton v. TIC United Corp. , 77 F.3d 1235, 1241 (10th Cir.), cert. denied , 518 U.S. 1005 (1996). We think it clear the jury simply failed to follow the court’s instructions inthe special interrogatory. According to those instructions the jury’s factual finding of zero compensatory fraud damages precludes its determination that puni tive damages were appropriate. See Stoddard v. School Dist. No. 1 , 590 F.2d 829, 835 (10th Cir. 1979). Where predicate factual findings have been rendered in special interrogatories, an erroneous legal conclusion by the jury may be disregarded.
See Ratigan v. New York Central R.R. , 291 F.2d 548, 555 (2d Cir.), cert. denied , 368 U.S. 891 (1961). The jury’s misperception of the legal effect of its compensatory damages finding provides no basis on w hich to allow it to alter that factual finding. From the jury’s note it is appare nt that Connections failed in its burden of persuasion on this issue, and the court w as well within its discretion in refusing to send the issue back to the jury. Altho ugh Connections argues in its reply brief that under Florida law punitive damages for fraud may be awarded in the absence of compensatory fraud damages, see Ault v. Lohr , 538 So. 2d 454, 456 (Fla. 1989), it did not raise this point in the district court. Because Connections has not complied with Tenth Cir. R. 28. 2(b) by demonstrating where in the 13,000-page record it was raised and ruled o n, we deem the point waived.
See Harolds Stores, Inc. v. Dillard Dep’t Stores, Inc. , 82 F.3d 1533, 1540 n.3- 19 -

(10th Cir.), cert. denied , 117 S. Ct. 297 (1996). We review de novo Audiotext’s claim that the distri ct court misinterpreted Fla. Stat. Ann. § 768.73 by applying it to Audiotext’s award of punitive damages.
See City of Wichita v. United States Gypsum Co. , 72 F.3d 1491, 1495 (10th Cir. 1996). The statute provides:

(1) (a) In any civil action based on negligence, s trict liability, products liability, misconduct in commercial transa ctions, professional liability, or breach of warranty, and involving willful, wanton, or gross misconduct, the judgment for the t otal amount of punitive damages awarded to a claimant may not exce ed three times the amount of compensatory damages awarded to each person entitled thereto by the trier of fact, except as pr ovided in paragraph (b). (b) If any award for punitive damages exceeds the limitation specified in paragraph (a), the award is presumed t o be excessive and the defendant is entitled to remittitur of the amou nt in excess of the limitation unless the claimant demonstrates to the court by clear and convincing evidence that the award is not excessive in light of the facts and circumstances which were presented to the trier of fact. Fla. Stat. Ann. § 768.73(1)(b) (West 1996). Audiot ext raises four arguments on this claim. First, it argues its fraudulent induce ment claim does not constitute “misconduct in commercial transactions,” id. , and thus the statute does not apply to its punitive damage award. Second, it argues th at even if the statute does apply, the district court erred in trebling only Au diotext’s compensatory fraud damages instead of its total compensatory damages i n arriving at the statutory cap. Third, it argues the district court erred in finding it had not rebutted by clear and convincing evidence the presumption of excessiv eness under § 768.73(1)(b).1 Although Audiotext asserts Mancusi’s holding on this point is dictum

because the court ultimately held the statute did n ot apply retroactively to Mancusi’s cause of action, we believe it still prov ides an authoritative indication - 20 - Fourth, it contends that even if the court did not commit a legal error in applying the statute, it abused its discretion in denying Au diotext’s motion to alter or amend the judgment by removing the punitive damages cap. The statute does not define “misconduct in commerci al transactions” and Florida courts have not addressed the issue present ed to us, but we think the statute’s plain meaning covers Sprint’s fraud in it s commercial relationship with Audiotext. The Florida Supreme Court has held thata legitimate objective of § 768.73 is to “discourage punitive damage claims.” Gordon v. State , 608 So. 2d 800, 802 (Fla. 1992), cert. denied , 507 U.S. 1005 (1993). It has also held that “misconduct in commercial transactions” covers inte ntional torts, in particular the tort of malicious prosecution. See Alamo Rent-A-Car, Inc. v. Mancusi , 632 So. 2d 1352, 1357-58 (Fla. 1994). In Mancusi , the plaintiff thought he had rented a car from Alamo for one month; however the rental co ntract indicated a rental period of one week. Sometime after the week had el apsed, Alamo had Mancusi arrested and prosecuted. Mancusi sued Alamo for ma licious prosecution, won compensatory and punitive damage awards, and the Fl orida Supreme Court held that “misconduct in commercial transactions” covere d the punitive award. See id.
at 1354-58. 1 We believe this indicates a flexible and common-s ense reading ofof how Florida courts would interpret the statute. - 21 - the misconduct phrase. Audiotext argues that becau se the phrase says “misconduct ina commercial transaction,” it does not apply to it s misconduct before the IP agreements. While this textual argument ha s appeal, we do not think the Florida courts would read the statute in such a technical fashion. The entire relationship between Sprint and Audiotext wa s commercial, and we believe their pre-contract negotiations fall within the ord inary meaning of “commercial transaction.” In Mancusi , the Court held that an intentional tort which occ urred after the expiration of the one-week rental contrac t was “during the course of the commercial transaction” and was “the direct result of that commercial transaction.” Id. at 1357. Similar logic brings commercial contractnegotiations within the scope of the statutory phrase. But Audi otext’s technical argument is perhaps better met with another: an element of frau dulent inducement is damages,

see Baker v. United Servs. Auto. Ass’n , 661 So. 2d 128, 131 (Fla. Dist. Ct. App. 1995), review denied , 669 So. 2d 252 (Fla. 1996) and damages did not be gin to accrue until the IP contracts were executed. There fore part of Sprint’s misconduct occurred “in” the commercial transaction s. Audiotext also relies on Scheidt v. Klein , 956 F.2d 963, 970 (10th Cir. 1992), in which we i ncluded the dictum “common law fraud does not appear to fall wi thin the explicitly delimited scope of section 768.73(1) . . . .” Id. Scheidtwas decided prior to Mancusi , and- 22 -

the quoted statement was not necessary to our decis ion because we held the argument to which it applied had been waived. See id. Audiotext argues next that the district court erredin trebling only its compensatory fraud damages and excluding contract d amages when calculating the punitive damage cap. Audiotext relies on the l anguage of the statute and Christenson & Assocs. v. Palumbo-Tucker , 656 So. 2d 266 (Fla. Dist. Ct. App. 1995) for its contention that the total compensatory damage award for all claims should have been trebled to calculate the cap. The relevant statutory language states: “the total amount of punitive damages award ed to a claimant may not exceed three times the amount of compensatory damag es awarded to each person . . . .” Fla. Stat. Ann. § 768.73(1)(a). Christenso nheld that prejudgment interest should be included in the compensatory damage awardbefore trebling. See Christenson , 656 So. 2d at 266 (“Certainly, there is nothing i n section 768.73 authorizing judges to separate the various elements composing the bundle of compensatory damages and discard from the punitive damages formula those elements that the judge personally deems unwise.”). Although Christenson’s language is broad, it does not support Audiotext’s reading. Section 768.73 appears under the statutory chapter “Torts,” and we believe it must be read in that context. Under Audiotext’s interpretation, unrelat ed claims compensated in one lawsuit would all be trebled so long as punitive damages were awarded on one of2 In its effort to convince us the punitive damage award was not excessive,

Audiotext cites more than once to Continental Trend Resources, Inc. v. OXY USA Inc. , 44 F.3d 1465 (10th Cir. 1995). That decision was vacated and remanded by the Supreme Court. See OXY USA Inc. v. Continental Trend Resources, Inc. , 517 U.S. 1216 (1996), on remand , Continental Trend Resources, Inc. v. OXY USA Inc. , 101 F.3d 634 (10th Cir. 1996) (reducing punitive damages from $30,000,000 to $6,000,000), cert. denied , 117 S. Ct. 1846 (1997). - 23 - the claims. Further, Audiotext’s interpretation wo uld violate Florida’s rule that punitive damages may not be recovered for breach of contract. See Lewis v. Guthartz , 428 So. 2d 222, 223 (Fla. 1982). Punitive damage s are recoverable for the independent tort of fraud, and it is to that cl aim the statute refers. Audiotext next complains that the district court er red in finding it had not met its statutory burden of demonstrating to the co urt by clear and convincing evidence that the punitive damage award was not exc essive. We review the court’s finding for clear error. See FDIC v. Hamilton , 122 F.3d 854, 860 (10th Cir. 1997). Further, we owe deference to the distr ict court’s opportunity to judge the credibility and weight of evidence, see Salve Regina College v. Russell , 499 U.S. 225, 233 (1991), and we may not substitute ourjudgment for that of the trial court, see Anderson v. City of Bessemer City , 470 U.S. 564, 574 (1985). We have reviewed the record and cannot say the court c learly erred in finding Audiotext did not meet its high burden. 2 Moreover, having reviewed de novo the district court’s interpretation of Fla. Stat. Ann. § 768.73, we see no reason to traverse the same ground using the more deferential abuse of discretion standard- 24 -

under which Audiotext complains about the denial of its motion to alter or amend the judgment. Both Audiotext and Connections contend the districtcourt erred in denying them prejudgment interest on their contract damages under Kansas law. We review the denial of prejudgment interest for abuse of discretion, see Frymire v. Ampex Corp. , 61 F.3d 757, 772 (10th Cir. 1995), cert. dismisse d , 519 U.S. 1182 (1996), but consider the underlying question of statutory interpretation de novo,

see Driver Music Cos. v. Commercial Union Ins. Co. , 94 F.3d 1428, 1433 (10th Cir. 1996). Kan. Stat. Ann. § 16-201 (West 1996) p rovides: Creditors shall be allowed to receive interest . . . for any money after it becomes due; for money lent or money due on settlem ent of account, from the day of liquidating the account and ascertaining the balance; . . . for money due and withheld by an unreasonable and vexat ious delay of payment or settlement of accounts . . . . Id. Plaintiffs argue they are entitled to prejudgmentinterest on both statutory grounds: first, that the contract damages due them were liquidated; second, that Sprint unreasonably and vexatiously withheld payments which were due and owing to Plaintiffs. “A claim becomes liquidated when both the amount du e and the date on which it is due are fixed and certain, or when the same become definitely ascertainable by mathematical computation.” Plains Resources, Inc. v. Gable , 682 P.2d 653, 657 (Kan. 1984). Disputes as to underlyi ng liability are irrelevant- 25 -

provided the amount of damages is certain. See Royal College Shop, Inc. v. Northern Ins. Co. , 895 F.2d 670, 674 (10th Cir. 1990). The amount o f damages was the subject of extensive trial testimony and in volved complex statistical procedures and aggregations, some of which were hot ly disputed. Audiotext’s own representative testified as to how he had arriv ed at the 73% damage figure for excessive chargebacks: “Yeah. What I felt was reasonable is what came out to about 73—.” I Aplee. App. at 133. We think it obv ious the damages were not liquidated. The trial court has discretionary power to award interest as an element of damages even if the primary damages are not liquidated. See Lightcap v. Mobil Oil Corp. , 562 P.2d 1, 16 (Kan.), cert. denied , 439 U.S. 876 (1977). Guided by considerations of fairness and equity, such an awar d is intended to fully compensate a party injured through vexatious withho lding of monies owed. See id. at 16. The award is dependent, of course, on the trial court’s discretion, to which we defer because it had the opportunity to sc rutinize the evidence, assess credibility and probativeness, and balance the equi ties. See Royal College Shop , 895 F.2d at 675–76. We find no abuse of that discr etion. Plaintiffs finally argue the district court abused its discretion in awarding them a substantially reduced amount of attorney’s f ees. The IP agreements provided that “[i]n the event of legal action by ei ther of the parties hereto,” the- 26 -

party in whose favor final judgment is entered is e ntitled to attorney fees, costs, and expenses from the losing party. See, e.g. , XIX Aplt. Exh. App. at 4596. Plaintiffs’ counsel requested compensation for 7,16 0 hours at an average rate of $236.75, for a total of $1,618,294.49, plus $332,86 5.55 in expenses. The district court awarded $350,000 in fees and $51,280 in expen ses. Plaintiffs protest the court’s decision to award fees only for claims on w hich they succeeded, its failure to fully explain its reductions to the fee award, i ts failure to consider the degree of success they achieved, and its decision to “simp ly make a general reduction” instead of cutting particularized hours based on sp ecific findings. VIII Aplt. App.
at 2031. When a court awards attorney fees pursuant to a contract, as opposed to a statute, we have recognized that its duty is to ens ure the nonbreaching party is made whole and receives the benefit of its bargain. See United States ex rel. C.J.C., Inc. v. Western States Mechanical Contracto rs, Inc. , 834 F.2d 1533, 1547- 48 (10th Cir. 1987). Because these purposes are f undamentally different from those underlying statutory fee awards, we have heldthat the close scrutiny applied to statutory fee awards should not be applied to co ntractual awards, see id. ; Public Serv. Co. of Colo. v. Continental Cas. Co. , 26 F.3d 1508, 1520 & n.11 (10th Cir. 1994), which should be routinely awarded. See Public Serv. Co. of Colo. , 26 F.3d at 1520-21. The trial court’s task is not to fix areasonable fee, as it is in- 27 -

statutory awards, but only to determine whether the requested fee is “inequitable or unreasonable,” in which case it may reduce the f ee accordingly. See C.J.C.,
Inc. , 834 F.2d at 1549. Kansas law governs the contrac tual award of fees. See Public Serv. Co. of Colo. , 26 F.3d at 1520. The district court properly stated Kansas standards for determining the reasonableness of the fee, and we cannot find that it abused its discretion in fixing a rate or in separating reasonable from unre asonable categories of fees. Nor did the court abuse its discretion in declining to give great weight to the plaintiffs’ degree of success. See C.J.C., Inc. , 834 F.2d at 1547-50 (holding court is not bound to consider federal statutory fee fact ors). However the court refused to subtract the categories of unreasonable billings from the total in order to arrive at a reasonable fee. Instead it simply picked a fi gure it thought reasonable. We consider such a general reduction an abuse of discr etion. The court must articulate some rational method by which it arrives at a reasonable fee. See C.J.C., Inc. , 834 F.2d at 1550 (holding that in contractual fee award “it remains important for the district court to provide a ‘conc ise but clear explanation’ of its reasons for any adjustments to the fee award.”) (qu oting Mares v. Credit Bureau of Raton , 801 F.2d 1197, 1201 (10th Cir.1986) (quoting Hens ley v. Eckerhart , 461 U.S. 424, 437 (1983))). Although the court stated that Plaintiffs had not t otaled their billings for- 28 -

each separate claim, and refused to “scour through nearly 500 pages of unindexed billing statements,” VIII Aplt. App. at 2030, we kn ow of nothing requiring Plaintiffs to index or segregate their charges for various claims. We have held that contractual fee claimants need not meticulousl y describe each task billed.
See Public Serv. Co. of Colo. , 26 F.3d at 1520 (“While the absence of specific task descriptions may preclude an award of fees in cases arising under a federal fee-shifting statute . . . the same degree of speci ficity is not required in the context of contractual fee awards.”). Cf. id. at 1521 (holding court need not comb voluminous billing records to ferret out certain ho urs which opposing party complained about but failed to draw to the court’s attention). If the court wishes to cut time spent on claims which were not ultimate ly successful, it should do so and recalculate the fee to arrive at a reasonable f igure. See id. (affirming trial court’s use of lodestar approach and specific deduc tion of unreasonable billings). AFFIRMED in part, REVERSED in part, and REMANDED. Entered for the Court Paul J. Kelly, Jr. Circuit Judge