Opinion ID: 2976049
Heading Depth: 3
Heading Rank: 1

Heading: The Limitation of Remedies Clause

Text: The crux of this appeal is whether the limitation of remedies contained in paragraph 7.05 of the 1977 agreement precludes Popovich from recovering damages. The district court decided that the remedy limitation applied only to CBS’s obligations under paragraph 7.05 of the 1977 agreement, and not to any new obligations created by the 1998 settlement agreement because the phrase “this paragraph 7.05” limited the clause to only obligations created by paragraph 7.05. Consequently, the district court allowed Popovich to pursue money damages for Sony’s failure to comply with logo obligations required only by the 1998 settlement agreement. Sony argues that (1) the limitation on remedies applied to obligations arising out of both the 1977 agreement and the settlement agreement, or alternatively (2) no new obligations were created by the 1998 settlement agreement because the settlement agreement merely reconfirmed Sony’s preexisting legal obligation regarding the CIR logo. The parties raised this issue in motions for summary judgment and in motions for judgment as a matter of law. “In cases where an appellant made a Rule 56 motion for summary judgment that was denied, reiterated those same arguments in a Rule 50(a) motion at the close of evidence that was also denied, lost in front of a jury, and then renewed its arguments in a rejected Rule 50(b) motion after the entry of judgment, we will review only the denial of the Rule 50(b) motion.” Barnes v. City of Cincinnati, 401 F.3d 729, 736 (6th Cir.), cert. denied, 126 S. Ct. 624 (2005). We review de novo a denied motion for a Rule 50 judgment as a matter of law. Id. “Judgment as a matter of law may only be granted if, when viewing the evidence in a light most favorable to the non-moving party, giving that party the benefit of all reasonable inferences, there is no genuine issue of material fact for the jury, and reasonable minds could come to but one conclusion in favor of the moving party.” Id. The 1977 agreement and 1998 settlement agreement provide that they are to be interpreted according to the laws of the State of New York. The construction and interpretation of a contract is a question of law for the court. W.W.W. Assocs. v. Giancontieri, 566 N.E.2d 639, 642 (N.Y. 1990). The court must determine if the contract is ambiguous. Id. If no ambiguity exists, the court must interpret the contract. Pedersen v. Stockard S.S. Corp., 51 N.Y.S.2d 675 (App. Div. 1944). If an agreement sets forth the parties’ intent clearly and unambiguously, the court may not consider extrinsic evidence to determine the parties’ contractual obligations. Greenfield v. Philles Records, Inc., 780 N.E.2d 166, 170 (N.Y. 2002). The “reasonable expectation and purpose of the ordinary business[person] when making an ordinary business contract serve as the guideposts to determine intent.” Uribe v. Merchants Bank of N.Y., 693 N.E.2d 740, 743 (N.Y. 1998) (internal quotation marks and citations omitted). Moreover, the contract must be read as a whole, with every part interpreted to give effect to the contract’s general purpose. Westmoreland Coal Co. v. Entech, Inc., 794 N.E.2d 667, 670 (N.Y. 2003). “When a term or clause is ambiguous, ‘the parties may submit extrinsic evidence as an aid in construction, and the resolution of the ambiguity is for the trier of fact.’” Geothermal Energy Nos. 06-3463/3464 Popovich v. Sony Music Entertainment, Inc. Page 14 Corp. v. Caithness Corp., 825 N.Y.S.2d 485, 489 (N.Y. App. Div. 2006) (quoting Pellot v. Pellot, 759 N.Y.S.2d 494, 497 (N.Y. App. Div. 2003)). “Whether multiple writings should be construed as one agreement depends upon the intent of the parties.” Commander Oil Corp. v. Advance Food Serv. Equip., 991 F.2d 49, 52-53 (2d Cir. 1993). The intent of the parties is usually a question of fact reserved for the jury. Rudman v. Cowles Commc’ns, Inc., 30 N.Y.2d 1, 13 (1972). “But if the documents in question reflect no ambiguity as to whether they should be read as a single contract, the question is a matter of law for the court.” TVT Records v. Island Def Jam Music Group, 412 F.3d 82, 89 (2d Cir 2005), cert. denied, 126 S. Ct. 2968 (2006). The settlement agreement specified that “[e]xcept as otherwise provided in [this settlement agreement], the parties expressly ratify and confirm in all respects the January 1977 Agreement and each and every provision thereof.” It is true that the settlement agreement does not use the term “incorporate” to express its relationship with the 1977 Agreement and does not mention paragraph 7.05 specifically. Nevertheless, the terms “ratify” and “confirm,” together with the broad language immediately following (“each and every provision”), leave no doubt in my mind that the parties intended for the settlement agreement and the 1977 agreement to be interpreted in conjunction with each other. I read the 1977 agreement as unchanged by the settlement agreement except where the settlement agreement expressly amends or modifies the 1977 agreement. The conclusion that paragraph 5 of the settlement agreement must be read together with the 1977 agreement does not resolve the more difficult issue of whether paragraph 5 of the settlement agreement replaced, modified, expanded, or left untouched paragraph 7.05 of the 1977 agreement. The district court decided that the settlement agreement was ambiguous as to whether it added new logo obligations, such as placing the logo on CDs and on compilation albums.1 To the extent that the settlement agreement did create new obligations, the district court decided that the limitation of remedy clause did not apply to those new obligations. Sony argues that the settlement agreement did not create new obligations, and even if it did, the limitation on remedies clause applies to the new obligations as well as the old. I turn to the second argument first, because if Sony is correct, there is no need to decide the first issue. The district court reasoned: The court notes, however, that the remedy limitation unambiguously applies only to CBS’ obligations under paragraph 7.05 of the 1977 Agreement, and not to obligations under other paragraphs of the 1977 Agreement or to new obligations under any future agreements. The text specifically covers failure to comply with “obligations pursuant to this paragraph 7.05.” (1977 Agreement, ¶ 7.05.) (emphasis added). The presence of the word “this” emphasizes that the remedy limitation applies only to one specific paragraph of one specific agreement. The district court also determined that it was required to conduct “an independent reading of the 1977 and 1998 Agreements to determine whether they are ambiguous as to remedy” and “the 1998 Logo Requirement does not contain any remedy-limiting language, nor does it reference the 1977 Agreement by name.” The district court did not interpret the two agreements together, as it should have done, when deciding whether the limitation of remedies clause applied to any new obligations created by the settlement agreement. The limitation of remedies clause is not mentioned in the settlement 1 A compilation album is an album comprised of master recordings from more than one artist. Nos. 06-3463/3464 Popovich v. Sony Music Entertainment, Inc. Page 15 agreement, a strong indication that the parties intended for it to remain in effect. I read paragraph 5 of the settlement agreement as modifying paragraph 7.05 of the 1977 agreement, either by clarifying Sony’s existing obligations or by creating new obligations as to the type of product to which the logo obligation attached, but not replacing 7.05 in its entirety and not displacing the remedy limitation clause. In reaching the opposite conclusion, the district court placed undo emphasis on the phrase “this paragraph.” Since paragraph 5 of the settlement agreement, at most, modified paragraph 7.05, paragraph 5's modifications could reasonably be viewed as having become a part of paragraph 7.05, and therefore “this paragraph” includes the obligations created in paragraph 7.05 as modified by paragraph 5 of the settlement agreement. Moreover, paragraph 7.05 was the only paragraph in the agreement to address logo issues, so limiting damages for violations of “this paragraph” is most reasonably interpreted as distinguishing the limited remedy available for breaches of logo-related obligations from breaches arising from other subject matters in the contract. The settlement agreement demonstrates that Popovich knew how to utilize the opportunity created by the settlement agreement to change unfavorable terms of the 1977 agreement by doing so expressly. Under the 1977 agreement, the agreement could not be changed or terminated “except by an instrument signed by an officer of CBS.” The settlement agreement expressly modified that provision by replacing the quoted language with “except by an instrument signed by both parties.” The absence of any express language modifying the remedy limitation clause unambiguously indicates that the parties did not intend to create new remedies if Sony failed to correctly place the CIR logo on Meat Loaf products.