Opinion ID: 4076467
Heading Depth: 2
Heading Rank: 1

Heading: Judgment as a Matter of Law on Avaya’s

Text: Common Law Claims We first take up Avaya’s appeal of the District Court’s grant of judgment as a matter of law on its common law claims against TLI for tortious interference with prospective business advantage, unfair competition, fraud, and breach of contract.18 Because all four claims are based on the same allegedly illicit conduct by TLI, we begin by providing a summary of the evidence of that conduct, as developed at trial. We then apply the state law relevant to each of the four causes of action. For each claim, we conclude that judgment as a matter of law was inappropriate. A motion for judgment as a matter of law under Federal Rule of Civil Procedure 50(a) “should be granted only if, viewing the evidence in the light most favorable to the nonmovant and giving it the advantage of every fair and reasonable inference, there is insufficient evidence from which a jury reasonably could find liability.” Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1166 (3d Cir. 1993) (citation omitted). Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge. Thus, although the court 18 Avaya does not appeal the grant of judgment as a matter of law against its claims for civil conspiracy, aiding and abetting a breach of loyalty, and unjust enrichment. 24 should review the record as a whole, it must disregard all evidence favorable to the moving party that the jury is not required to believe. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150-51 (2000) (internal quotation marks and citations omitted). Given that the District Court heard two months of testimony on Avaya’s common law claims, judgment as a matter of law could only have been appropriate in the extraordinary circumstance that none of that evidence could lead a reasonable jury to find that TLI was liable on any one of the common law claims. We exercise plenary review over the order granting the motion for judgment as a matter of law, and we apply the same standard as the District Court should have. Lightning Lube, 4 F.3d at 1166. Though the District Court ably supervised the introduction of volumes of evidence and was attentive in managing this complex case, we cannot help but conclude that its decision to grant TLI’s motion for judgment as a matter of law was irretrievably flawed. Avaya provided ample proof of conduct that could support its common law claims, much of which was uncontroverted and came directly from the testimony of TLI executives themselves. While we have high regard for the fine jurist who was at the helm in the District Court, this case is a reminder that “judgment as a matter of law should be granted sparingly.” Goodman v. Pa. Tpk. Comm’n, 293 F.3d 655, 665 (3d Cir. 2002). 25
Common Law Claims Avaya presented evidence that TLI engaged in conduct that was at best ethically dubious, and quite possibly unlawful. To summarize the conduct at issue, it is undisputed that TLI enlisted former Avaya employees to “hack” and “crack” Avaya systems, that it submitted deceptive requests for login access, and that it used Avaya’s proprietary knowledge – gained while still Avaya’s Business Partner – to compete directly against Avaya. As a result, TLI was able to lure a significant amount of business away from Avaya and its Business Partners. TLI’s surreptitious business dealings and its executives’ own admissions of secrecy belie any claim that it thought its own conduct was fair and proper.

The first method TLI used to hack into its clients’ Avaya systems was hiring former Avaya employee Dave Creswick to crack logins and passwords. Creswick knew that TLI needed the passwords “[t]o do their maintenance” in competition with Avaya. (J.A. 2277.) He would hack into systems and activate MSPs on TLI’s clients’ systems, and he also activated DADMIN login access several times. The evidence introduced at trial of the Creswick hacking scheme was copious, and came mostly from the testimony of TLI executives themselves. Chief Technology Officer Scott Graham acknowledged that TLI paid Creswick to “enable some logins and MSPs” (J.A. 2292) and that it 26 began paying Creswick for this service while TLI was still under contract as an Avaya Business Partner. CEO Douglas Graham acknowledged using Creswick as an “ex-Avaya employee [to] create a new password for the system[s].” (J.A. 2747.) Avaya introduced an email in which Douglas Graham offered Creswick “a flat rate of $300 a password for single situations and $200 a password if you do more [than] one password at a time.” (J.A. 6117.) In another email, Creswick bragged to Douglas Graham that “there has not been [an Avaya PBX] system created that I cannot get into.” (J.A. 6059.) TLI eventually developed additional means to access Avaya PBXs, and by 2008, it had begun to “read [] passwords” for itself, using a method similar to (but simpler than) Creswick’s. (J.A. 2361.) TLI also hacked Avaya systems by hiring another former Avaya employee, Harold Hall, who used software “provided by Avaya” during his time as an Avaya employee to “beat” Avaya’s security systems. (J.A. 2293). Hall had taken the software, called an “ASG key,” with him when he left Avaya’s employment. He acknowledged at trial that he did not receive permission from Avaya to do so. Scott Graham admitted that Hall’s method was necessary to overcome “an additional security method that was implemented by Avaya on certain releases of the ... PBX software.” (J.A. 2365.) He conceded that he knew “Hall had [software] provided to him by Avaya” and that he “believe[d] [Hall] used it through most of his career at Avaya” before using that software “subsequently as a contractor.” (J.A. 2366.) In his own testimony, Hall estimated that he had used the ASG key for TLI “40 [to] 60” times. (J.A. 3057.) 27
Requests The second way that TLI gained access to Avaya’s PBX systems was to cajole Avaya Business Partners into submitting deceptive requests for login access. As Scott Graham characterized it, TLI would “work[] with several Business Partners” to have them “submit[] a DADMIN form at the customer’s request” – but, unbeknownst to Avaya, TLI would be the ultimate user. (J.A. 2293.) Graham acknowledged that, if Avaya had known that TLI was behind the request, it would not have enabled the DADMINs because Avaya was “doing everything [it] could to put [TLI] out of the maintenance business.” (J.A. 2338.) Therefore, as Graham put it, the submissions “did not identify [TLI] on there” and “did not have [TLI’s] name on there to identify to Avaya that [the customer] was also a customer of [TLI’s].” (J.A. 2338.) In response to an interrogatory, TLI identified seven Business Partners who cooperated in the scheme to send access requests “that resulted in the activation of DADMIN logins” that were used by TLI. (J.A. 3041.)
Knowledge Gained As Avaya Business Partner TLI’s third method for surreptitiously gaining access to Avaya systems was to rely on proprietary information learned when it was under contract as an Avaya Business Partner. Scott Graham testified that “108 locations or about 8 percent” of the PBX systems that TLI serviced “were systems for which TLI provided maintenance using a login that it had obtained from Avaya when TLI was a Business Partner.” 28 (J.A. 2423.) An additional “17 percent” of TLI’s maintenance business was for “systems that were ... using a default login or password.” (J.A. 2424.) TLI “did indeed learn of [those default passwords] during the time that [TLI was] a Business Partner.” (J.A. 2332.)
Wrongful Conduct Avaya also presented evidence that TLI knew that Avaya considered maintenance access to be proprietary and that TLI deliberately acted in secret to gain system access, from which a jury could infer malice or bad faith. Scott Graham admitted in his testimony that TLI “hid [its] activities from Avaya” and that the information about how TLI gained access was “carefully guarded” when dealing with customers – though he denied providing customers with affirmatively false information. (J.A. 2293-94.) TLI actually went to great lengths to conceal its activities from Avaya. Scott Graham acknowledged that if Avaya knew that TLI was behind the vicarious DADMIN login requests, it would not have provided them. Accordingly, TLI would have customers sign blank request forms and would not disclose to them the identity of the Business Partner that would actually submit the form, because “if the Business Partner was identified to the customer, that could get back to Avaya.” (J.A. 2345.) TLI believed (no doubt rightly) that if Avaya learned of that practice, it would have intervened to stop the unauthorized access. As for the hacking schemes, Douglas Graham acknowledged that “it was very important to [TLI] that Avaya 29 didn’t know about Mr. Creswick.” (J.A. 2748.) In an email, Graham wrote that one way TLI got “access to [Avaya] systems” was “having an ex-Avaya employee create a new password for the system,” and he suggested that “[i]f [Avaya] knew of” the manner in which TLI was getting access, it “would probably be raising it” in litigation. (J.A. 6363-64.) TLI executive Bruce Shelby testified that TLI would make customers sign non-disclosure agreements before revealing who its subcontractors were, for fear that Avaya would find out and “put pressure on all the Business Partners that were on our subcontractor list not to work with us.” (J.A. 2986.) He also testified that TLI did not want Avaya “to find out ... how TLI was gaining access to the on-demand maintenance commands.” (J.A. 2997-98.) Testimony also established that TLI acted to obfuscate its practices when dealing with its own customers. For example, when Avaya changed its customer contract language regarding DADMIN access, Scott Graham sent an email to TLI leadership suggesting a tactic to conceal the firm’s methods: In light of Avaya’s recent changes in contract language regarding [DADMIN] specifically, we want to eliminate that word from our vocabulary when talking to customers. When we refer to logins - we want to simply refer to them as “service logins[.”] ... Obviously, some customers will ask pointed enough questions, that we will need to 30 be more descriptive, but as a default we want to change our message. (J.A. 5817.) The obfuscation apparently worked; in fact, two of TLI’s customers testified that they did not know that TLI was not an authorized maintenance provider when they hired the firm. TLI also took preemptive actions to prevent Avaya from interrupting its activities. According to Scott Graham’s testimony, TLI knew that the MSPs were licensed by Avaya to each customer and that the licenses “all implied” that “Avaya could shut [the MSPs] off” at the end of a customer’s contractual relationship with Avaya. (J.A. 2382.) Therefore, as Douglas Graham put it in an email, TLI would “tak[e] over the system” of a customer it had successfully solicited, “before Avaya ha[d] time to turn the [MSPs] off, or change the passwords,” which was “simply done by disconnecting the phone line that links Avaya to the customer’s system.” (J.A. 6363.) Similarly, Harold Hall testified that he would access the Avaya systems using the DADMIN logins he had cracked with the software he had walked away with when he quit Avaya, and then he would change the DADMIN password. He testified that the practice was a “routine thing” that TLI did, and that it ensured that “nobody other than [TLI could] access that [system] using the DADMIN login.” (J.A. 3055.) One TLI employee testified that she was instructed to tell customers who were cancelling a contract with Avaya to “change the line that they had in place” and to “change a password,” all “so that Avaya couldn’t access the system.” (J.A. 2463.) 31
All of the common law claims at issue have as an element that Avaya establish actual damages resulting from TLI’s unlawful activity. At trial, Avaya presented evidence of several avenues through which TLI’s alleged misappropriation of maintenance access caused it financial harm. First, Avaya lost license revenue when TLI provided the misappropriated access to its customers, who would otherwise have had to license access from Avaya. Scott Graham testified that TLI provided customers with logins that went beyond the base customer logins. Douglas Graham testified to a specific instance in which TLI provided a highlevel password to a client so that the client would “not have to pay Avaya for MSPs.” (J.A. 2720.) Shelby testified that TLI would “tell prospective customers that they did not need to pay for MSPs if they were to become a TLI maintenance customer,” “because [TLI] had another method to gain access.” (J.A. 3033.) Second, TLI would itself sell passwords to customers, as was established by Douglas Graham’s testimony. He described how TLI charged “setup fees” for customers who needed a new password. (J.A. 2750.) Also, “[t]here was a time where [TLI] would charge customers if [TLI] had to get a second password.” (J.A. 2750.) That TLI revenue gained by selling Avaya’s proprietary information could be a basis for disgorgement damages. Third, and most importantly, the allegedly misappropriated access enabled TLI to compete directly with 32 Avaya for maintenance customers, costing Avaya profit in its high-margin maintenance business. Scott Graham testified that, from 2001 on, TLI competed with Avaya for maintenance dollars. Douglas Graham acknowledged that, since that time, TLI “marketed ... its own maintenance, to existing Avaya maintenance customers,” and he identified one customer in particular that TLI “took over” from Avaya. (J.A. 2704-05.) Shelby acknowledged that TLI “targeted PBX owners with existing maintenance contracts because they were the ones ... who were most likely to spend money on PBX maintenance.” (J.A. 2983.) He also stated that, of those existing maintenance contracts, “[t]he vast majority were with Avaya.” (J.A. 2983.) Avaya presented evidence that TLI’s ability to compete for that business depended on the maintenance access that Avaya contends was misappropriated. Scott Graham agreed that “unless [TLI] could access the maintenance commands built into the software, [it] couldn’t ... do the maintenance.” (J.A. 2385.) He also stated that “[s]ome of the services” offered by TLI for the PBX maintenance at issue “do require the maintenance commands.” (J.A. 2294.) And he acknowledged that “generally” the commands at issue “can’t be executed by a customer level login with no MSPs,” hence requiring a higher-level login of the type that was gained by the various means just described. (J.A. 2294.)19 19 Avaya presented a specific example through the testimony of one maintenance client who was courted by TLI. That witness testified that his firm had traditionally used Avaya maintenance (either directly or through Business Partners), switched to TLI under the mistaken belief that it 33 The competition for business was especially costly to Avaya because maintenance was a major driver of the profits from its PBX and PDS systems.20 Avaya’s profit margin on the sale of PBX systems was substantially lower than its profit margin on the whole range of maintenance products. was a Business Partner, then terminated that arrangement upon discovering that TLI was not “able to provide [them] with the proper login credentials to support and administer the system” and thereafter “went back to Avaya for support.” (J.A. 2510.) Avaya therefore presented not only generalized evidence that TLI’s maintenance contracts were at Avaya’s expense, but a concrete example of how that substitution worked. 20 Indeed, Douglas Graham noted in an email that Avaya would frequently take losses in order to retain its extant maintenance contracts, another facet of TLI’s competitive strategy: TLI continues to have significant success in taking over existing Avaya maintenance contracts. Even when TLI loses, in most cases Avaya has to take a significant loss to win the deal. For example, TLI just lost International Paper. At the time of TLI’s proposal, International Paper was paying Avaya over $4,000,000 a year. TLI’s proposal was for $2,800,000 a year. I have not gotten all the details, but I am confident that Avaya had to partner with a Business Partner and take a significant loss to keep TLI from winning this deal. (J.A. 6363.) 34 Even if Avaya did not retain the customer as a direct service client, the two other authorized routes for customers to obtain maintenance service – purchasing service from a Business Partner or purchasing licenses for self-maintenance – would also have benefited Avaya financially. As an Avaya executive testified, when a customer signs on with a Business Partner, it becomes a “customer ... that [Avaya] can look to sell additional products to.” (J.A. 2065) In some cases, the Business Partner would in turn sell Avaya maintenance service, providing direct revenue to Avaya. Even if the Business Partner sold its own branded maintenance, any such service was “going to ... include[] ... some Avaya content,” hence yielding business for Avaya. (J.A. 2569.) 21 Moreover, if the jury credited Avaya’s case, it would have been able to apportion damages to different conduct, because it had evidence of TLI’s total maintenance earnings and the proportion of maintenance attributable to each form of allegedly unlawful access. Avaya’s accounting expert testified that, depending on which profit model was believed (the plaintiff’s or the defendant’s), TLI made between $20,260,092 and $31,160,190 from its maintenance of Avaya PBX systems between 2003 and 2010. TLI’s own analysis concluded that its maintenance services were based on logins procured in the following proportions: 8% was “obtained 21 Not incidentally, a maintenance relationship either directly with Avaya or with an authorized Business Partner also allowed Avaya to assert quality control over maintenance, which helped protect the value of Avaya’s brand reputation. When it came to independent providers, Avaya was “concerned about the quality of maintenance service that the customer receives.” (J.A. 2065.) 35 from Avaya when TLI was a Business Partner” (J.A. 2423); 1% was using “a well-known Business Partner password” (id.); 5% was based on deceptive requests from other Business Partners; 24% was “obtained through Mr. Creswick” (J.A. 2424); 28% was “using a login that the customer had provided it access to” (id.); 17% was obtained through a “default login or password” (id.); and 16% was “obtained internally,” including “through use of the known key with Mr. Hall” and TLI’s internally-developed cracking method (id.). If the jury found each of those courses of conduct to be unlawful, the total would account for 99% of the profit that TLI garnered from its Avaya PBX maintenance business. Even limiting the analysis to just the more obviously problematic conduct – deceptive log-in requests, hacking and cracking, and using passwords TLI gained as a Business Partner – it accounts for 53% of TLI’s business. With all the foregoing considerations taken together, we conclude that Avaya presented substantial evidence that, but for TLI’s competition, made possible only by its alleged theft of proprietary information, Avaya would have received a significant portion of the money TLI’s clients spent on maintenance. Further, it would have been feasible for the jury to attribute particular losses to particular conduct.
In granting judgment as a matter of law to TLI on Avaya’s common law claims, the District Court largely relied on its ruling that Avaya’s contracts with its equipment customers entitled those customers to give TLI access to their systems to perform maintenance. The District Court ruled that, as a matter of law, “Avaya failed to prove the software 36 licensing agreements entered into by TLI’s 470 customers upon purchasing their PBXs prohibited them from allowing TLI[] to access the ODMCs on their systems.” (J.A. 201.) Because that threshold legal determination was so central to the rest of the District Court’s analysis, we turn to considering whether it was correct. There is no dispute that New Jersey law governs this issue, according to the choice of law provision in the customer contracts, and under New Jersey law, “discerning contractual intent is a question of fact unless the provisions of a contract are wholly unambiguous.” Jaasma v. Shell Oil Co., 412 F.3d 501, 507 (3d Cir. 2005) (interpreting New Jersey law) (internal quotation marks and modifications omitted) (quoting In re Barclay Indus., Inc., 736 F.2d 75, 78 n.3 (3d Cir. 1984)). “An ambiguity in a contract exists if the terms of the contract are susceptible to at least two reasonable alternative interpretations.” M.J. Paquet, Inc. v. N.J. Dep’t of Transp., 794 A.2d 141, 152 (N.J. 2002) (quoting Nester v. O’Donnell, 693 A.2d 1214, 1220 (N.J. Super. Ct. App. Div. 1997)). When that is so, it is permissible to look to evidence outside the contract “as an aid to interpretation.” Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 948 A.2d 1285, 1289 (N.J. 2008) (citation omitted). Two sets of license agreements are in dispute, those before and those after 2007. Each is the subject of a distinct question. For the pre-2007 agreements, the question is whether it was ambiguous that they permitted licensees – i.e., Avaya customers – to provide access to ISPs. The post-2007 agreements unambiguously barred giving such access, but it is disputed whether Avaya’s customers actually entered into those agreements. We conclude that, for both sets of 37 agreements, Avaya presented sufficient evidence to at least create disputes of material fact, so that those questions should have been answered by the jury, not the Court. In ruling that PBX license agreements unambiguously gave purchasers a right to use maintenance commands and to provide access to third parties, the District Court relied on language from the “Purchase/Service Agreement.” The Court’s conclusion was based on a provision in “[l]icensing agreements used from 1990 to 2003,” which “granted the purchaser ‘a personal, non-transferable and non-exclusive right to use ... all software and related documentation furnished under this agreement.’” (J.A. 204 (quoting license agreement, an example of which is at J.A. 5856).) In the District Court’s reading, that language gave Avaya PBX customers a “personal ... right” to use MSPs, which the Court viewed as “software ... furnished under this agreement.” In the Court’s view, that right to use MSPs extended to the customer’s maintenance provider, whether an employee or an independent contractor such as TLI.22 22 In 2003, Avaya updated the agreements. It left the quoted language in place but added a new clause stating that the “[c]ustomer will make the Software available only to employees, contractors, or consultants with a need to know, who are obligated to comply with all license restrictions contained in the Agreement and to maintain the secrecy of the Software.” (E.g., J.A. 5241.) The District Court interpreted the language about “contractors[] or consultants” to be “consistent with the ... construction of licensing agreements that allow third-party use for the licensee’s benefit.” (J.A. 205 n.26.) It therefore considered that contract term to be evidence that PBX owners were permitted to use independent 38 Avaya challenges the District Court’s interpretation of those agreements, arguing that the MSPs required to perform maintenance were not in fact “furnished under” the Purchase/Service Agreement, so that customers did not have a “right to use” them. (Opening Br. at 30.) Instead, MSPs were “licensed separately through an MSP Addendum ... or Maintenance Assist agreement.” (Id.) “Avaya delivered new equipment with MSPs turned off, enabled them only if customers signed a separate ... agreement, and disabled them if that agreement expired.” (Id.) Although customers could maintain their PBX systems without MSPs, it was “just not as efficient” to do so without the remote access that MSPs allowed (J.A. 1995) – hence the value of executing an agreement to activate MSPs. We do not need to answer who has the better reading of the contracts because, at a minimum, they are ambiguous, and the District Court erred in ruling that Avaya’s reading is untenable. MSPs may have been embedded in the software given to customers, but customers’ ability to access them required a separate purchase from Avaya. If the District Court’s interpretation were correct, then any time a customer downloaded a piece of software that had components requiring additional payment and permissions, courts would treat the entire software and all its components as having been “furnished” to the customer in the original purchase. That is questionable, and the contrary interpretation is, at the very least, plausible. Moreover, given that Avaya’s business model was dependent on selling base equipment and then licensing and enabling additional features such as MSPs, the contractors for maintenance and to provide them with system access. 39 conclusion that those features were unambiguously meant to be “furnished” in the base purchase is far from clear. As Avaya points out, “[h]undreds of self-maintenance customers paid Avaya for ... access commands,” which would “make no sense if the Purchase/Service Agreements already entitled customers” to them. (Opening Br. at 32.) Avaya, its customers, and even TLI did not read the agreements that way before the lawsuit, and the District Court erred in declaring that the terms were unambiguously contrary to all the parties’ understandings. Avaya also notes that in 1999, the agreements were modified to include a provision that a customer “will not enable or attempt to permit any third party to enable software features or capacity (e.g. additional storage hours, ports, or mailboxes) which Avaya licenses as separate products without Avaya’s prior written consent.” (J.A. 205 n.24.) Based on that language, Avaya argues that customers were barred from allowing an ISP to enable features, such as MSPs, without Avaya’s consent. The District Court, however, did not consider that provision to apply to MSPs. It read the list of enumerated examples – “storage hours, ports ..., and voice mailboxes” – to be “clearly incongruous” with MSPs. (Id.) Accordingly, the Court ruled that MSPs were unambiguously not a “feature[] or capacity” subject to the provision’s restrictions. For much the same reasons that we disagree with the District Court’s construction of the “furnished under” language, we also conclude that it was improper to determine that terms “features or capacit[ies]” were unambiguous and did not apply to MSPs. Storage hours, additional ports, and mailboxes are some examples of the add-ons that Avaya 40 licensed separately, but MSPs and ODMCs that provided remote maintenance access might rationally be viewed by a jury as being just as much “features” that enhance a customer’s use of a PBX system.23 Not only did customers’ behavior provide some corroboration of Avaya’s interpretation of the contract, TLI’s did as well. If the agreements unambiguously permitted customers to give TLI access to MSPs, there would have been little reason for its secretive efforts to gain maintenance access. Indeed, Scott Graham was asked at trial whether he “knew that MSPs were not part of the original sale of the PBX to the customers,” and he responded: “Yes, and that was one of the big problems.” (J.A. 2303.) In light of the imprecision of the words “features” and “capacity” and the extrinsic evidence 23 TLI argues that, in Avaya’s “detailed ‘feature’ manuals,” Avaya “did not once identify MSPs as a ‘feature.’” (Answering Br. at 84 (citing J.A. 2407).) We agree that testimony about those features manuals, and the absence of any mention of MSPs in them, would be relevant for the jury to consider in interpreting the meaning of the 1999 modifications. But, as an Avaya system engineer put it at trial, the PBX software is “able to do a vast number of things,” and customers could pick and choose which “aspects of the software” to purchase. (J.A. 1886.) That Avaya chose to highlight more glamorous capacities in its features manuals – instead of intermediate commands and functions that allowed remote-access maintenance – does not foreclose a jury determination that such access was indeed a feature of the product. Given that so few customers performed their own maintenance, that lack of emphasis may make perfect sense to a jury. 41 supporting Avaya’s interpretation of the contract, we conclude that the District Court erred in ruling as a matter of law that the 1999 additions to Avaya’s PBX contracts unambiguously did not apply to MSPs. Having resolved that the District Court erred in construing the pre-2007 customer contracts to be unambiguously contrary to Avaya’s interpretation, we turn to the post-2007 agreements.24 The District Court acknowledged that the 2007 version of the licensing agreement clearly “obligated the purchaser to refrain from using a third-party maintenance provider,”25 but it ruled that “Avaya did not introduce any evidence indicating that [TLI’s] 24 The District Court made note of the fact that only “eight out of [TLI’s] 470 customers purchased their PBXs in 2007 or after,” and that the 2007 contract modification “came into existence well after Avaya initiated the instant suit in June of 2006.” (J.A. 206-07 n.27.) Although allegedly unlawful access to post-2007 systems may not have been a large contributor of TLI’s business or the motivation for Avaya’s suit, that goes to the question of damages, not liability. 25 The agreement provided that the “[c]ustomer agrees not to ... allow any service provider or third party, with the exception of Avaya’s authorized channel resellers and their designated employees ... to use or execute any software commands that cause the software to perform functions that facilitate the maintenance or repair of any Product except that a service provider ... may execute those software commands that ... would operate if ... [MSPs] were not enabled or activated.” (J.A. 7283.) 42 customers signed such a licensing agreement, and consequently this iteration of the agreement cannot be used to prove that [TLI’s] customers were prohibited from granting TLI[] access to the ODMCs on their PBXs.” (J.A. 206.) Again, the Court was wrong. Avaya did present sufficient evidence to establish a dispute of material fact, which should have gone to the jury. The form agreement itself was in evidence, and an Avaya employee testified that the standard form agreements as of 2008 included the specific reference restricting use of MSPs. That employee also explained that the forms were crafted by a “forms committee” that ensured that uniform terms and conditions were “incorporated into the templates,” which were then incorporated into “procedures under which [Avaya] used form agreement[s]” for PBX equipment, software, and maintenance sales. (J.A. 2615.) Given the evidence of Avaya’s centralized form-drafting procedure, an example of an actual prototypical form, and examples of earlier generations of forms that were in fact signed by customers, a jury could have reasonably found that the post-2007 form agreements were in fact reflective of PBX purchasers’ license obligations. It was thus improper for the District Court to resolve the question as a matter of law rather than leave it to the jury. 43
Business Advantage We now turn to the specific claims that Avaya asks us to revive. We first consider count three of its Complaint, in which Avaya set forth a claim for tortious interference with prospective economic advantage. As a federal court sitting in diversity, and as is undisputed by the parties, we are obligated to apply New Jersey’s law to the tort claims. See Lorenzo v. Pub. Serv. Coordinated Transp., 283 F.2d 947, 948 (3d Cir. 1960) (per curiam). In Printing Mart-Morristown v. Sharp Electronics Corp., the Supreme Court of New Jersey held that, in a claim of tortious interference with prospective business advantage, “[w]hat is actionable is ‘[t]he luring away, by devious, improper and unrighteous means, of the customer of another.’” 563 A.2d 31, 36 (N.J. 1989) (quoting Louis Kamm, Inc. v. Flink, 175 A. 62, 66 (N.J. 1934)). To prevail on such a claim, Avaya “was required to show [1] that it had a reasonable expectation of economic advantage, [2] which was lost as a direct result of [TLI’C’s] malicious interference, and [3] that it suffered losses thereby.” Ideal Dairy Farms, Inc. v. Farmland Dairy Farms, Inc., 659 A.2d 904, 932 (N.J. Super. Ct. App. Div. 1995) (citation omitted).26 26 We earlier parsed New Jersey law to further subdivide the tort, essentially by breaking out the second part of the Ideal Dairy Farms formulation into three elements. As we put it then, the tort comprised five elements: 1) a plaintiff’s reasonable expectation of economic benefit or advantage, (2) the defendant’s knowledge of that expectancy, (3) 44 In terms of the first element – protectable economic expectations – the Supreme Court of New Jersey has held that “[i]t is not necessary that the prospective relation be expected to be reduced to a formal, binding contract,” and that such prospective relations include “the opportunity of selling or buying land or chattels or services, and any other relations leading to potentially profitable contracts.” Printing Mart, 563 A.2d at 39 (quoting Restatement (Second) of Torts § 766B cmt. c (1979)). Courts have found “a reasonable expectation of economic gain in as slight an interest as prospective public sales.” Id. at 38 (collecting cases). Protectable economic expectations can arise from both existing and potential customers. “Tortious interference developed under common law to protect parties to an existing or prospective contractual relationship from outside interference.” Id. at 38 (emphasis added) (citation omitted). Satisfaction of the first element does not turn on whether the customer is characterized as current or prospective, but rather whether the facts of the case “giv[e] rise to some ‘reasonable the defendant’s wrongful, intentional interference with that expectancy, (4) in the absence of interference, the reasonable probability that the plaintiff would have received the anticipated economic benefit, and (5) damages resulting from the defendant’s interference. Fineman v. Armstrong World Indus., Inc., 980 F.2d 171, 186 (3d Cir. 1992) (citing Printing Mart, 563 A.2d at 37; Restatement (Second) of Torts § 766B)). 45 expectation of economic advantage.’” Id. at 37 (quoting Harris v. Perl, 197 A.2d 359, 363 (N.J. 1964)).27 The second element – malicious interference – requires only “the intentional doing of a wrongful act without justification or excuse.” Id. at 39 (quoting Louis Schlesinger Co. v. Rice, 72 A.2d 197, 203 (N.J. 1950)). Wrongful conduct, always viewed in the specific context of the case presented, is generally defined by reference to custom in the industry. It is conduct that “would not be sanctioned by ‘the rules of the game.’” Id. at 40. “[T]he line must be drawn where one competitor interferes with another’s economic advantage through conduct which is fraudulent, dishonest, or illegal.” Ideal Dairy Farms, 659 A.2d at 936 (citation omitted). A benign, or pro-competitive, motive does not absolve misconduct. “While competition may constitute justification, a defendant-competitor claiming a business27 Printing Mart illustrates how broad a protectable prospective economic advantage may be. The corporate plaintiff had performed printing services for Sharp Electronics for several years. When Printing Mart submitted a bid on the latest Sharp project, there was evidence that Sharp employees rigged the bidding process to enable a Printing Mart competitor to win the contract. Printing Mart sued Sharp, three of its employees, and three competitors for intentional interference with prospective economic relations. The trial court dismissed the complaint on the basis that no contract obligated Sharp to do business with Printing Mart. The Supreme Court of New Jersey reversed, holding that, although a complaint based on tortious interference must allege facts that show a protectable right, the right “need not equate with that found in an enforceable contract.” Printing Mart, 563 A.2d at 37. 46 related excuse must justify not only its motive and purpose but also the means used.” Id. at 933 (citation omitted). In Lamorte Burns & Co. v. Walters, the Supreme Court of New Jersey held that the “taking of plaintiff’s confidential and proprietary property and then using it effectively to target plaintiff[’s] clients, is contrary to the notion of free competition that is fair.” 770 A.2d 1158, 1172 (N.J. 2001). In that case, two of Lamorte’s employees collected information on its clients with the purpose of using it to start their own business in direct competition with Lamorte. Id. at 1162. The court held that such conduct was sufficient to make out a claim of tortious interference, so that the targeting of a company’s current clients was sufficient to ground a tortious interference claim. Id. at 1172. For a plaintiff to establish the third element, loss and causation, there must be “proof that if there had been no interference there was a reasonable probability that the victim of the interference would have received the anticipated economic benefits.” Printing Mart, 563 A.2d at 41 (quoting Leslie Blau Co. v. Alfieri, 384 A.2d 859, 865 (N.J. Super. Ct. App. Div. 1978)). As the Appellate Division of the New Jersey Superior Court has explained, “[i]t is sufficient that plaintiff prove facts which, in themselves or by the inferences which may be legitimately drawn therefrom, would support a finding that, except for the tortious interference by the defendant with the plaintiff’s business relationship with [another party], plaintiff would have consummated the sale and made a profit.” McCue v. Deppert, 91 A.2d 503, 505-06 (N.J. Super. Ct. App. Div. 1952). The District Court here decided that TLI’s access was not itself wrongful and that, therefore, Avaya’s tortious 47 interference claim must fail. That conclusion rested on two propositions: first, that Avaya had previously allowed TLI to provide maintenance, and, second, that “customers’ licensing agreements specifically allow[ed] for third-party service providers.” (J.A. 226.) Both those propositions are problematic in ways that undermine the District Court’s decision. As to the first point, the District Court was wrong to conclude that TLI was entitled to access ODMCs merely because it had been allowed to do so while it was an Avaya Business Partner. Of course TLI was permitted access when it was a contractual partner of Avaya’s, but the District Court provided no rationale to explain why that access survived the termination of that relationship. By close analogy, former employees in Lamorte were entitled to use their employer’s proprietary customer information while they were working for that employer, but they were not entitled to use that information when they left to become competitors. 770 A.2d at 1172. Likewise, TLI was entitled to access ODMCs when it was an authorized Avaya Business Partner, but there is no reason it could expect that its access to proprietary software and logins would survive when it struck out on its own to compete directly against Avaya. As to the second point, we have already explained in detail why the District Court erred in concluding that Avaya customers were unambiguously entitled to give TLI remote access to perform maintenance. Even if the District Court were correct, however, that would not immunize TLI from a tortious interference claim when it comes to stealing away customers who had service contracts with Avaya. In WearEver Aluminum, Inc. v. Townecraft Industries, Inc., the 48 Chancery Division of the New Jersey Superior Court emphasized that, even though the plaintiff company’s contracts with its employees were terminable at will, that did not permit a third party to interfere with the employment relationship. 182 A.2d 387, 393 (N.J. Super. Ct. Ch. Div. 1962). Even if the contract in question permits an act eventually taken by a customer, “a stranger to the contract may not exercise his will in substitution for the will of either of the parties to the contract.” Id. Moreover, even if TLI could have lawfully obtained access to MSPs and ODMCs from Avaya’s customers, that did not insulate it from tort liability for the methods it actually used to access the maintenance commands. If a homeowner gives a neighbor permission to borrow tools, the neighbor is not thereby insulated from a trespass suit if he chooses to break into the garage to get them. Having rejected the District Court’s assessment of those two threshold matters, we turn next to its application of a multifactor test for tortious interference from the Restatement (Second) of Torts § 767 (1979).28 Assuming for the moment that the Court was applying the right test – and 28 The District Court cited Printing Mart, 563 A.2d at 752, for the proposition that New Jersey courts have adopted the multi-factor test from the Restatement. In fact, Printing Mart adopted § 766B, but subsequent case law from the Supreme Court of New Jersey suggests that § 767 is also persuasive. See Nostrame v. Santiago, 61 A.3d 893, 901 (N.J. 2013) (“In determining whether the conduct complained of is improper, the Restatement offers general guidance, identifying a variety of relevant considerations.” (citing Restatement (Second) of Torts § 767)). 49 we think looking to the case law may have been more productive – the District Court nonetheless misstepped in its legal ruling. Section 767 lists the following factors for consideration:

actor’s conduct interferes,
actor, (e) the social interests in protecting the freedom of action of the actor and the contractual interests of the other, (f) the proximity or remoteness of the actor’s conduct to the interference and (g) the relations between the parties. The factors in that test are laden with subjective value judgments that will rarely be answerable as a matter of law. Nonetheless, and in the face of the already-recounted unflattering evidence against TLI, the District Court concluded that “[e]very single factor strongly indicates that [TLI’s] conduct d[id] not rise to the level ... the law proscribes.” (J.A. 227.) We disagree. First, the District Court stated that TLI acted with proper competitive motive and interest.29 But, even assuming 29 Although the District Court was not explicit in enumerating which factors of the Restatement’s seven-factor test it was considering, we infer from its argument that it here considered factors (a), (b), and (d) together – respectively, the 50 that were true, a pro-competitive motive or interest does not absolve misconduct that falls afoul of the first factor’s consideration of the nature of the conduct. Again, “[w]hile competition may constitute justification, a defendantcompetitor claiming a business-related excuse must justify not only its motive and purpose but also the means used.” Ideal Dairy Farms, 659 A.2d at 933. Second, the Court considered the nature of the protected interest, and it observed – without further comment or citation to authority – that “the law does not protect as forcefully a firm’s economic interest in possible, future customers as it does interests in contracting parties.” (J.A. 228.) Whether or not that is true, TLI was in fact interfering with Avaya’s relationships with then-existing maintenance customers. There was nothing speculative, or underwhelming, about that economic interest. Third, in considering society’s interest, the District Court found that TLI’s conduct “brought greater competition to the market and challenged widespread and vexatious threats of litigation.” (J.A. 228.) We do not believe the District Court was in a position to weigh the relative social merits of TLI’s conduct with Avaya’s proprietary interests in its software and its legitimate business expectations with its maintenance customers. That is exactly the kind of factual and ethical determination meant for the jury rather than the Court. nature of TLI’s conduct, its motive, and the interests it sought to advance. 51 Fourth, in considering the proximity of TLI’s conduct to the interference, the District Court emphasized that TLI’s “interference was far removed from their allegedly improper conduct” because it only accessed the ODMCs after the customer in question had left Avaya. (J.A. 229.) But the customers never would have left Avaya if TLI had not been able to promise ODMC access. The allegedly tortious conduct that enabled that access was therefore the sine qua non of TLI’s business. Finally, in considering the relations of the parties, the District Court determined that that factor “counsels for a finding of lawful conduct, as a mere four months after it signed the modified Avaya One agreement, and not long after originally encouraging TLI to invest in its maintenance business, Avaya cancelled the contract, thereby jeopardizing [TLI’s] monetary investment and business model.” (J.A. 22930.) That TLI chose to compete against Avaya rather than accept the standard Business Partner arrangement – and therefore prompted Avaya to terminate their relationship – cannot insulate TLI’s allegedly tortious conduct. Avaya’s supposed bad acts and predatory conduct may end up supporting TLI’s antitrust counterclaims, but the District Court provided no authority to suggest that those acts permitted TLI to engage in hacking or fraud in retaliation for its termination as a Business Partner. A straightforward application of New Jersey’s test for tortious interference with prospective economic advantage leads, we believe, to the conclusion that Avaya presented sufficient evidence from which a reasonable jury could conclude that TLI tortiously interfered with Avaya’s prospective business advantage. Avaya had a reasonable 52 expectation of ongoing business with its own customers, who are the targets of TLI’s sales efforts. As to the “malicious interference” element, we hold that a jury could reasonably have concluded that TLI’s methods – including, as examples, its hacking, dishonest login requests, and use of proprietary information learned while an Avaya Business Partner – were fraudulent, dishonest, or otherwise contrary to the ethical standards of the industry. TLI presented no evidence that its actions were consistent with industry norms, and we would be loath to hold that there was no jury question here, even if it had. That leaves only the loss and causation element. The evidence could support a conclusion that TLI’s interference resulted in Avaya losing direct maintenance contracts with customers. Moreover, even if customers independently terminated their direct service contracts with Avaya, if they had turned to other authorized maintenance methods instead of using TLI – whether using a Business Partner or selfmaintaining – Avaya would still have profited because, as earlier noted, those methods also produced revenue for Avaya. Avaya thus presented sufficient evidence from which a jury could conclude that Avaya suffered damages, given that any money earned by TLI must have come from Avaya’s pockets to at least some extent. In sum, the District Court improperly made inferences in favor of the moving party, TLI, as to both contract interpretation and tortious interference with prospective economic advantage, and it failed to recognize the sufficiency of the evidence Avaya had adduced. If the jury had been allowed to draw its own inferences from the evidence, it may have agreed with the District Court that TLI’s conduct was somehow permitted by Avaya’s customer contracts. But the jury may very well have determined that TLI’s actions were 53 not shielded by the customer contracts and were instead unethical, against the public interest, and ultimately tortious. We express no opinion on the correct answer in this dispute, holding only that the matter was for the jury to decide.
Next, we consider Avaya’s unfair competition claim. New Jersey law is not precise about what constitutes unfair competition. But while “[t]he amorphous nature of unfair competition makes for an unevenly developed and difficult area of jurisprudence,” at heart it “seeks to espouse some baseline level of business fairness.” Coast Cities Truck Sales, Inc. v. Navistar Int’l Transp. Co., 912 F. Supp. 747, 786 (D.N.J. 1995) (interpreting New Jersey law) (citations omitted).30 New Jersey courts have deliberately kept the standard of liability somewhat adaptable, so that it may fit changing circumstances: “the purpose of the law regarding unfair competition is to promote higher ethical standards in the business world. Accordingly, the concept is deemed as flexible and elastic as the evolving standards of commercial morality demand.” Ryan v. Carmona Bolen Home for Funerals, 775 A.2d 92, 95 (N.J. Super. Ct. App. Div. 2001) (internal quotation marks and citations omitted) (quoting N.J. 30 Other business torts – including tortious interference – can themselves support an unfair competition claim. Coast Cities, 912 F. Supp. at 786. Our conclusion that the tortious interference claim should have proceeded to the jury is itself sufficient to overturn the judgment as a matter of law on the unfair competition claim. Our analysis here focuses on those aspects of unfair competition that are distinct from tortious interference. 54 Optometric Ass’n v. Hillman-Kohan, 365 A.2d 956 (N.J. Super. Ct. Ch. Div. 1976)). In New Jersey, unfair competition is commonly invoked for claims similar to misappropriation of trade secrets or commercial identity. An unfair competition claim, however, protects more information than a traditional trade secret claim. See Torsiello v. Strobeck, 955 F. Supp. 2d 300, 314 (D.N.J. 2013) (“Under New Jersey law, to be judicially protected, misappropriated information need not rise to the level of the usual trade secret, and indeed, may otherwise be publicly available.” (quoting Platinum Mgmt., Inc. v. Dahms, 666 A.2d 1028, 1038 (N.J. Sup. Ct. Law Div. 1995))). For example, in the Lamorte case, the Supreme Court of New Jersey reinstated summary judgment against the plaintiff’s exemployees who took their former employer’s “client names, addresses, phone and fax numbers, file numbers, claim incident dates, claim contact information, and names of the injured persons.” 770 A.2d at 1162. The court endorsed the statement “that an agent must not take ‘unfair advantage of his position in the use of information or things acquired by him because of his position as agent or because of the opportunities which his position affords.’” Id. at 1167 (quoting Restatement (Second) of Agency § 387 cmt. b (1958)). The court emphasized that “the [client-specific] information was available to defendants for their use in servicing clients on behalf of Lamorte only,” and that “defendants also knew that Lamorte had an interest in protecting that information.” Id. at 1167. Collectively, those facts established that the “information taken by defendants was confidential and proprietary information belonging to plaintiff.” Id. at 1168. 55 What constitutes misappropriation is somewhat vague. “It is not possible to formulate a comprehensive list of the conduct that constitutes ‘improper’ means of acquiring a trade secret.” Restatement (Third) of Unfair Competition § 43 cmt c. (1995). Generally, however, “‘[i]mproper’ means ... include theft, fraud, unauthorized interception of communications, inducement of or knowing participation in a breach of confidence, and other means either wrongful in themselves or wrongful under the circumstances of the case.” Id. § 43. Even a legitimate business purpose will not excuse otherwise tortious conduct if the means used are improper. See Lamorte, 770 A.2d at 1171. As another court has put it, [t]he key to determining the misuse of the information is the relationship of the parties at the time of disclosure, and its intended use. This tort tends to arise where an ex-employee uses confidential information to assist a competitor. A court may look to whether the information is public, whether it was provided in the course of employment for the sole purpose of servicing clients, how detailed the information is, and whether the party using the information is aware of the information holder’s interest in protecting the information ... . Torsiello, 955 F. Supp. 2d at 314 (internal quotation marks and citations omitted). For a plaintiff to establish damages, New Jersey law allows recovery under a disgorgement theory in cases of unfair competition. See Castrol, Inc. v. Pennzoil Quaker State Co., 169 F. Supp. 2d 332, 345-46 (D.N.J. 2001) (ruling 56 that the plaintiff in that case was “entitled to disgorgement of [the defendant’s] profits” for its “claims under the New Jersey Common Law of Unfair Competition ... .”).31 Therefore, in place of proving specific damages, Avaya could properly seek disgorgement of TLI’s profits from any conduct the jury found tortious. We hold that Avaya presented sufficient evidence that a reasonable jury could have concluded that there was unfair competition under a misappropriation theory. The District Court’s grant of judgment as a matter of law was thus erroneous. TLI gained access to proprietary information – namely ODMC login passwords – using hacking, the solicitation of disloyal former Avaya employees, and information learned during TLI’s own time as an Avaya Business Partner. A jury could have determined that TLI’s methods of gaining Avaya’s proprietary information constituted misappropriation. Likewise, Avaya could show damages under either a lost profit theory or a disgorgement theory. Given that such a large proportion of TLI’s wellaccounted profits resulted from conduct that Avaya alleges was rooted in the misappropriation or proprietary information, the disgorgement theory may have been simple for the jury to apply to determine damages.
31 See also Restatement (Third) of Unfair Competition § 45 (1995) (“One who is liable to another for an appropriation of the other’s trade secret ... is liable for the pecuniary loss to the other caused by the appropriation or for the actor’s own pecuniary gain resulting from the appropriation, whichever is greater ... .”). 57 We next consider Avaya’s common law fraud claim. Under New Jersey law, proof of common law fraud requires the satisfaction of five elements: [1] a material misrepresentation by the defendant of a presently existing fact or past fact; [2] knowledge or belief by the defendant of its falsity; [3] an intent that the plaintiff rely on the statement; [4] reasonable reliance by the plaintiff; [5] and resulting damages to the plaintiff. Liberty Mut. Ins. Co. v. Land, 892 A.2d 1240, 1247 (N.J. 2006). A jury must find fraud by clear and convincing evidence, a standard which demands “evidence so clear, direct and weighty and convincing as to enable the factfinder to come to a clear conviction, without hesitancy, of the precise facts in issue.” N.J. Div. of Youth & Family Servs. v. I.S., 996 A.2d 986, 1000 (N.J. 2010) (quoting In re Seaman, 627 A.2d 106, 100 (N.J. 1993)).Proof of damages can be supported by a jury inference that a defendant’s actions “reduced the plaintiff’s profits, although by an uncertain amount.” Nappe v. Anschelewitz, Barr, Ansell & Bonello, 477 A.2d 1224, 1233 (N.J. 1984). Based on the trial record, there was ample evidence from which a reasonable jury could have found for Avaya on the fraud claim. The evidence for the first element – fraudulent conduct – is straightforward. TLI had its customers fill out forms requesting login permissions but instructed those customers to leave the “Business Partner” 58 component of the form blank, to be filled in later by TLI. TLI would then insert the name of an authorized Business Partner so that Avaya would provide the requested login information. TLI therefore willfully misrepresented who was making the request for the login credentials and acknowledged the materiality of that misrepresentation by confirming that it did not want Avaya to find out what they were doing, because Avaya would otherwise not provide the logins. The evidence also satisfies the second element, knowledge, in that it supports a conclusion that TLI knew it was operating under false pretenses. The form at issue, by its very language, is a request from a customer to Avaya for delivery of information to a specifically named Business Partner. The form provided that the login Avaya furnished would allow “the Business Partner listed above ... to perform additions, changes, moves and/or upgrades.” (J.A. 5313.) Yet TLI submitted the form knowing full well that the “Business Partner listed above” would not be performing those tasks, because TLI would be. As to the third element, the reasonableness of relying on the representation, TLI filled out the form with the name and information of an existing, authorized Business Partner. A jury could find that Avaya acted reasonably by providing access information when it believed such access was being delivered to a provider with whom it had an existing contract. The final element, damages, is what most concerned the District Court. As established above, however, Avaya presented strong evidence – sufficient for the clear and convincing standard – that every dollar made by TLI in its maintenance of Avaya products was necessarily to some 59 degree at Avaya’s expense. A jury could have reasonably concluded that each time TLI used a fraudulently obtained login to win or keep a maintenance contract, that cost Avaya profit. As the Supreme Court of New Jersey confirmed in Nappe, such an inference is enough to sustain a finding of damages, even where the exact amount may be uncertain. 477 A.2d at 1233. Avaya thus presented sufficient evidence to send the fraud claim to the jury, based on TLI’s deceptive login requests. 60
Finally, we turn to Avaya’s breach of contract claims against TLI. As developed at trial, Avaya contended that TLI breached two contracts: the 1998 dealer agreement between Lucent and TLI, and the 2003 Avaya One agreement that was effective until TLI’s participation as a Business Partner was terminated.32 In both cases, the District Court did not contest the existence of the contract or damages, but instead granted judgment as a matter of law on the ground that “Avaya ha[d] failed to introduce evidence from which a reasonable jury could find that TLI breached either of the contracts.” (J.A. 210.) Once again, there is not a sound basis for that holding.
The 1998 contract’s choice of law provision provides that it is governed by Delaware law. In Delaware, the elements of a breach of contract claim are: “[1] the existence of the contract, whether express or implied; [2] the breach of an obligation imposed by that contract; and [3] the resultant damage to the plaintiff.” VLIW Tech., LLC v. HewlettPackard Co., 840 A.2d 606, 612 (Del. 2003). 32 Whereas the customer contracts referenced above in Part II.A.2 were for PBX systems, the dealer agreements between Avaya and TLI are worded broadly enough to reach both the PBX and PDS markets. Insofar as Avaya’s breach of contract allegations rely primarily on improper access to ODMCs and MSPs, however, the breach of contract claim is principally focused on the larger PBX market. 61 The signature page of the 1998 agreement evidences a contract between Lucent (Avaya’s predecessor) and TLI (referred to in the contract as the “Dealer”), satisfying the first element of the cause of action. Section 2.8 of the 1998 agreement provides, in part, as follows: Dealer may not market or sell Lucent Products to any Lucent BCS Global Account, or … the United States Government, and will use its best efforts to ensure that Dealer does not market to present direct customers of Lucent who are under warranty or with existing maintenance contracts for Lucent products or to any entity that is considering a proposal from Lucent for products or maintenance services, except that Dealer may respond to a request for competitive bids, proposals, or quotations even if Lucent is also responding. (J.A. 5905 (emphases added).) Avaya claims that TLI breached that “best efforts” clause by marketing and selling maintenance services to existing Lucent/Avaya customers. At trial, Douglas Graham admitted that TLI “marketed … to existing Avaya maintenance customers” in 2001, while the firm “was operating under the terms of the 1998 Lucent dealer agreement.” (J.A. 2704.) He also acknowledged a particular client to whom TLI had “marketed ... maintenance to replace existing Avaya maintenance.” (J.A. 2705.) In spite of what is arguably a clear violation of § 2.8 of the agreement, the District Court concluded that TLI’s 62 conduct “does not constitute a breach” because the Court interpreted § 2.8 to prohibit only the marketing of “Lucent Products,” a defined term that did not include maintenance. (J.A. 212.) That, however, is an overly cramped interpretation of the provision. Although a jury could perhaps import the “Lucent Products” language into the “best efforts” clause, that clause could just as easily support an interpretation that generally bars the marketing of maintenance to Lucent/Avaya customers. Indeed, the best efforts clause specifically prohibits marketing to Lucent/Avaya customers “with existing maintenance contracts ... or to any entity that is considering a proposal from Lucent for … maintenance services,” which strongly suggests that maintenance was part of the prohibition. (J.A. 5905.) The District Court therefore erred in assuming that “no reasonable jury” could have found a breach of § 2.8. (J.A. 213.) As to the final element, damages, we conclude that the same analysis for the earlier causes of action would have supported a jury finding that any profit that TLI gained by its breach of contract must have come, at least in part, at Avaya’s expense. Therefore, we conclude that a jury could reasonably have found all three elements of a breach of contract, and judgment as a matter of law was not proper.
The choice of law clause in the Avaya One agreement, § 18.1, provides that New York law governs. Under New York law, the elements of a breach of contract claim are similar to Delaware’s: “[1] the existence of a contract, [2] the plaintiff’s performance pursuant to the contract, [3] the 63 defendant’s breach of his or her contractual obligations, and [4] damages resulting from the breach.” Neckles Builders, Inc. v. Turner, 986 N.Y.S. 2d 494, 496 (N.Y. App. Div. 2014). The signature page of the Avaya One agreement evidences a contract between Avaya and TLI, satisfying the first element. Section 7.3 of the Avaya One agreement provides, in part, as follows: [TLI] agrees not to reverse engineer, decompile or disassemble software furnished to it in object code form or permit any third party to do so. For any software included as part of the Licensed Materials which inherently includes the capability of being remotely enabled, [TLI] expressly agrees that it shall not enable, or permit or assist any third party to enable, such features or capabilities without Avaya’s express written permission.33 (J.A. 6953.) That obligation was clearly intended to survive the termination of the Avaya One agreement.34 Both an 33 As an Avaya executive testified at trial, the purpose of that provision was “to protect [Avaya’s] software assets going forward if there is information that a Business Partner gets, [and] also to make sure that nothing gets turned on subsequent[ to] termination.” (J.A. 2116.) 34 Section 17.6 of the agreement provided that “the termination of the Agreement shall not prejudice or otherwise affect ... any ... obligations of the parties, such as those arising 64 Avaya executive and a systems engineer testified that MSPs and the DADMIN logins were capable of being remotely enabled. The agreement also included, at § 4.1, a general morality clause that bound TLI for the duration of the agreement: [TLI] shall: (a) conduct its business in a manner that reflects favorably on the Products and on the good name, goodwill and reputation of Avaya; (b) avoid deception, misleading or unethical practices; and (c) use best efforts to promote, market, and further the interest of Avaya, its name and Products. (J.A. 6951 (emphases added).) Although Avaya’s performance – the second element of a breach of contract claim – was not part of the District Court’s analysis, the record provides sufficient evidence for a jury to conclude that Avaya did perform. TLI was operating as a Business Partner under the Avaya One agreement from its execution until the business relationship between the parties was terminated. Douglas Graham acknowledged that the relationship was “mutually beneficial” and that, “[a]s an Avaya Business Partner ... TLI was authorized by Avaya to resell certain Avaya products and services.” (J.A. 2699.) under [Section 7], which by their nature continue beyond termination of the Agreement and which shall survive such termination.” (J.A. 6959.) 65 Indeed, Avaya equipment was “by far [the] leading manufacturer product that [TLI] sold.” (J.A. 2700.) The District Court’s analysis focused on the third element – the actual breach of a contractual obligation. Avaya’s claim for breach of § 7.3 is straightforward. Insofar as MSPs and DADMINs were “licensed Materials which inherently include[d] the capability of being remotely enabled,” a jury could find that TLI breached its contractual obligations when it “enable[d] ... or assist[ed] any third party to enable, such features or capabilities without Avaya’s express written permission.” (J.A. 6953.) Even though the District Court acknowledged that the meaning of those terms was “less than perfectly clear,” it nonetheless concluded that the term “features and capabilities” unambiguously excluded MSPs and DADMIN logins. (J.A. 218-19.) Yet the activation of MSPs and use of DADMIN logins allowed customers to perform remote maintenance, for which customers were willing to pay additional licensing fees, suggesting that the customers considered them to be features or capabilities. Even if a reasonable jury could have agreed with the District Court’s reading of the contract, there was at least sufficient ambiguity in the Avaya One agreement that the jury could have seen it the other way and agreed with Avaya that MSPs and DADMIN logins are “features and capabilities,” the unauthorized activation of which by TLI amounted to a breach of contractual obligations. As to the morality clause in § 4.1, Avaya contended that TLI breached its obligations when it began its allegedly unethical business practices during the term of the contract, in preparation for soliciting maintenance customers away from Avaya. Those activities included hacking logins and enlisting 66 Business Partners to obtain ODMC access. As early as May 2003, while still bound by the Avaya One agreement, TLI solicited Creswick to “pull ... password[s].” (J.A. 2281.) In September, during the contract term, TLI began to seek a “discreet Avaya Business Partner ... [to] submit DADMIN request forms on our behalf.” (J.A. 5813.) A reasonable jury could have concluded that, by engaging Creswick and recruiting Business Partners to submit deceptive DADMIN login request forms, TLI was violating its contractual obligations to “avoid deception [and] misleading or unethical practices” and to “use best efforts to promote, market, and further the interest of Avaya.” (J.A. 6951.) Analysis of damages – the final element of the cause of action – was not central to the District Court’s grant of judgment as a matter of law. However, the analysis for damages is as straightforward as for the tort claims, because PBX and PDS maintenance business gained by TLI as a result of its breach must have come, to some extent, at Avaya’s expense.
Based on the foregoing analysis, we conclude that the District Court’s grant of judgment as a matter of law was erroneous for the four affirmative common law claims that Avaya addresses in this appeal.35 We will therefore vacate 35 Although our dissenting colleague’s “assessment of Avaya’s case-in-chief is the same as the District Court’s” (Dissenting Op. at 3-4), he has sufficient “doubt about the propriety of the District Court’s decision” that he focuses his opinion on other issues (id. at 4). We therefore let our 67 the District Court’s judgment and remand for further proceedings on those four claims. That does not, however, end our inquiry. Given the District Court’s instruction to the jury that all of TLI’s conduct was lawful, we must also consider whether the several errors associated with the District Court’s handling of the common law claims also infected the remainder of the trial.