Opinion ID: 199239
Heading Depth: 4
Heading Rank: 4

Heading: Failure to Find AccuSoft in Contempt on the

Text: Basis of Written and Oral Statements Snowbound's final claim of error with respect to the master's contempt rulings is that the master improperly failed to find AccuSoft in contempt for various statements that it made to third parties both orally and in writing. In the proceedings below, Snowbound argued that AccuSoft made numerous statements that violated Paragraph 9 of the settlement agreement, which states, in pertinent part, that: AccuSoft will not hereafter represent explicitly or in substance to anyone that its forthcoming new image software toolkit . . . ”ImageGear,” is based upon or derived from the Image Format Library.” As examples, Snowbound pointed to the fact that AccuSoft's advertising materials referred to ImageGear as “Version 6.0 (the most recent version of the IFL was 5.0) and as the “new version of the AccuSoft Image Format Library.” Similarly, AccuSoft's web page claimed that ImageGear “takes [AccuSoft's] existing Image Format Library product to a new level by adding new features, functions, flexibility and performance.” Snowbound alleged that AccuSoft salespeople had similarly exceeded the limits of Paragraph 9 by, for example, stating in written communications with customers that “we are no longer -44- selling the Image Format Library version 5.0 . . . we are selling the 6.0 version called ImageGear.” While the master agreed that the statements identified by Snowbound suggested a “relationship” between the IFL and ImageGear, he interpreted Paragraph 9 to prohibit a narrower class of statements: those that “convey the . . . suggestion that ImageGear contains the same computer code as the IFL.” The master found that the statements attributed to AccuSoft did not contain that suggestion. The master also considered affidavits from the counsel who negotiated the settlement agreement. These affidavits, he found, showed considerable difference of opinion as to what the parties intended Paragraph 9 to cover. In view of both the narrow construction he applied to the language and the ambiguity he detected in the parties' intent, he found that contempt had not been proven. Snowbound also asserted that AccuSoft had made statements concerning its (and Snowbound's) ability to distribute, maintain and support the Image Format Library that impermissibly deviated from a “script” of approved statements contained in Paragraph 13 of the settlement agreement. Snowbound pointed to an e-mail from AccuSoft, issued days after the settlement agreement was signed, stating that AccuSoft had “full rights to market, sell, distribute, maintain and support -45- the Image Format Library.” Snowbound further noted that AccuSoft continued to refer to the IFL as the “AccuSoft Image Format Library,” even after August 31, 1996, when its right to distribute the software had terminated. Finally, Snowbound asserted that AccuSoft told certain customers who inquired about the IFL after August 31, 1996 that “[n]o one has rights to distribute the IFL,” that “[t]he Image Format Library is no longer available from anywhere,” or even that “Snowbound does not have the right to sell any licensing for the Image Format Library.” Here, again, the master found that the statements complained of had not clearly been demonstrated to violate the requirements of the settlement agreement. The master noted that Paragraph 13, by its terms, only restricted the substance of “statements by either party to the public concerning the ownership of the Software” (emphasis added). It therefore was not clear that Paragraph 13 covered AccuSoft's statements concerning who could sell or distribute the IFL. Furthermore, the master found some merit in AccuSoft's contention that the settlement agreement, although it transferred the IFL software to Palo, did not clearly convey to Palo or Snowbound any rights to the product named the Image Format Library. As such, AccuSoft's statement to its clients that the Image Format -46- Library was “not available from anywhere” was in some sense true -- although less than forthcoming -- after August 31, 1996, given that the only product then available using the IFL code was the one called RasterMaster. The master apparently found AccuSoft's statement that it had “full rights” to the IFL to be the closest case, given his conclusion that the settlement agreement actually placed significant limits on AccuSoft's ability to continue distributing the IFL, including the requirement that such distribution cease entirely after August 31, 1996. Nonetheless, the master found that, from a purchaser's perspective, AccuSoft effectively had the “full rights” claimed at the time the statement was made. Moreover, he found that the statement was not “so much at variance” with the scripted statement -- AccuSoft was permitted to say that “AccuSoft will continue to distribute the AccuSoft Image Format Library” -- as to constitute contempt. On appeal, Snowbound argues that the master's conclusions with respect to these alleged violations must be reversed because the master misinterpreted the requirements of the settlement agreement and the import of AccuSoft's statements. Although we acknowledge that the interpretations proposed by Snowbound, at least in certain instances, are -47- plausible, we do not believe Snowbound has met the heavy burden of demonstrating that the master abused his discretion by concluding otherwise. With respect to the violations of Paragraph 9, we concede that the use of “Version 6.0 to describe ImageGear, taken in isolation, implies a relationship between it and Version 5.0 of the IFL that could include reliance on the same or similar underlying code. However, other statements in the advertisements and AccuSoft’s web page quite clearly undercut that suggestion. For example, the first sentence of the advertisement text states: “AccuSoft Corporation announces a totally new product, ImageGear, the next generation in imaging technology” (emphasis added). Similarly, the web site states: “It's not a new version of an old product . . . it's new from the ground up, designed to the most current coding, quality and performance standards” (emphasis added). Given this, we see no reason to disturb the master's conclusion that these statements, taken as a whole, did not improperly suggest that ImageGear was “based on or derived from” the code contained in the IFL. The written communications with customers, which include no such clarifying language, present a perceptibly closer case and, were we deciding this issue in the first instance, we are not certain that our conclusion with respect to -48- these statements would be the same as the master’s. However, we do not find the master’s conclusions so clearly wrong as to require us to find an abuse of discretion. The question of what AccuSoft’s statements implied, in the context in which they were made, strikes us as one which the master was plainly in a superior position to answer. So too, we note that the master’s inquiry into the negotiating history of the parties on the relevant language of Paragraph 9 led him to believe that the question of what was prohibited was not entirely understood by the parties. Under the circumstances, we are not convinced that the master’s conclusion constitutes reversible error. We are similarly unpersuaded that reversal of the master’s conclusions regarding alleged violations of Paragraph 13 is justified. We agree with the master that the settlement agreement’s scripts, which, by their terms, extend only to statements concerning the “ownership” of the software, are not unambiguously applicable to the statements AccuSoft made concerning rights to market and distribute the software. It also seems to us to stretch the scripts too far to assume that they would prohibit AccuSoft from making potentially accurate negative statements concerning Snowbound's distribution of the IFL when such statements did not conflict with those that the settlement agreement permitted. -49- Turning finally to AccuSoft's statement that it had “full rights to market, sell, distribute, maintain and support the Image Format Library,” we again conclude that the master's conclusion should be affirmed, although, in this case, we rely on a different ground than did the master. See Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 217 F.3d 8, 10-11 (1st Cir. 2000) (holding that the appellate court is “not bound by the trial court's rationale, but may affirm [the trial court's] judgment for any valid reason that finds support in the record”). In our view, there is no doubt that AccuSoft's statement ultimately implies a claim regarding “ownership” of the IFL, and therefore is governed by Paragraph 13 of the settlement agreement. Equally clear, as the master found (and the scripts and the settlement agreement confirm) is that AccuSoft had, and could properly claim, only more limited rights in the software. The “full” rights to which AccuSoft sought to lay claim were transferred to Snowbound, and, in fact, Snowbound was specifically allowed to claim such full rights in the code underlying the IFL (and RasterMaster) by section b of Paragraph 13 of the settlement agreement. Given this, to the extent that the master's opinion rests on a finding that AccuSoft's statement did not conflict with the settlement agreement, we must disagree. -50- At the same time, we think that this comparatively minor departure from the settlement agreement's requirements does not, by itself, require a finding of civil contempt. As we have noted, “letter perfect compliance” with a court's order is not required -- only substantial compliance. Langton, 928 F.2d at 1222. While AccuSoft doubtless tried to portray its position following execution of the settlement agreement in a favorable light, most of its statements -- particularly those disseminated to the public generally -- were adequately qualified to avoid conflict with the settlement agreement's terms. We do not consider this single improper statement, contained in an e-mail between AccuSoft and one of its resellers, so significant as to require a finding that AccuSoft was not in substantial compliance with the relevant provisions of the settlement agreement. We therefore affirm the master's conclusion. -51-