Court Opinion

ID: 1013620
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:04:09.763126+00
Date Added: 2024-06-11T09:39:57.304845
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

SER SOLUTIONS, INCORPORATED,           
                Plaintiff-Appellant,
                 v.
                                                No. 03-2161
MASCO CORPORATION, d/b/a Delta
Faucet Company,
              Defendant-Appellee.
                                       
           Appeal from the United States District Court
        for the Eastern District of Virginia, at Alexandria.
             James C. Cacheris, Senior District Judge.
                         (CA-02-1636-A)

                      Argued: May 5, 2004

                      Decided: July 1, 2004

   Before WILKINS, Chief Judge, NIEMEYER, Circuit Judge,
     and Pasco M. BOWMAN, Senior Circuit Judge of the
     United States Court of Appeals for the Eighth Circuit,
                    sitting by designation.

Affirmed by unpublished opinion. Judge Niemeyer wrote the opinion,
in which Chief Judge Wilkins and Senior Judge Bowman joined.

                           COUNSEL

ARGUED: John Charles Thomas, HUNTON & WILLIAMS, Rich-
mond, Virginia, for Appellant. Savalle C. Sims, ARENT, FOX, KIN-
TNER, PLOTKIN & KAHN, P.L.L.C., Washington, D.C., for
2                SER SOLUTIONS, INC. v. MASCO CORP.
Appellee. ON BRIEF: Michael J. Lockerby, M. Christine Klein,
Barry T. Meek, HUNTON & WILLIAMS, Richmond, Virginia, for
Appellant. Anthony V. Lupo, Jennifer Myron, Eric S. Baxter,
ARENT, FOX, KINTNER, PLOTKIN & KAHN, P.L.L.C., Washing-
ton, D.C., for Appellee.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                              OPINION

NIEMEYER, Circuit Judge:

   Following a two-day jury trial on SER Solutions, Inc.’s claims for
breach of contract and copyright infringement and on Delta Faucet
Company’s counterclaim for breach of contract, a jury rendered a ver-
dict in favor of Delta Faucet on both of SER’s claims and Delta Fau-
cet’s counterclaim, awarding Delta Faucet $109,765 in damages. On
Delta Faucet’s post-trial motion, the district court awarded it $82,618
in attorneys fees under § 505 of the Copyright Act.

   On appeal, SER contends that the district court (1) erred in refusing
to enforce a contractual one-year limitation period; (2) erred in admit-
ting into evidence pre-contractual communications and negotiations,
in violation of Virginia’s parol evidence rule; and (3) abused its dis-
cretion in awarding attorneys fees and in determining the amount
awarded. For the reasons that follow, we affirm.

                                   I

  In late 2000, Masco Corporation, d/b/a Delta Faucet Company
("Delta Faucet"), a manufacturer of faucet and showering devices,
decided to change its computer system by switching to the "One
World" software produced by J.D. Edwards & Co. Under "One
World," Delta Faucet was able to generate its invoicing, reporting,
                 SER SOLUTIONS, INC. v. MASCO CORP.                  3
and sales documents. The "One World" system produced documents
in the Portable Document Format ("PDF").

   Several months later, Delta Faucet sought a software package to
manage its documentation and to distribute its documents by e-mail,
Internet, fax, and hard-copy. It discussed its needs with various com-
panies, including SER Solutions, Inc. ("SER"), apprizing them of its
desire to have the software package operate as an integrated system
with the "One World" environment. SER indicated that its Synergy
2000 software would meet these needs. During the course of negotia-
tions, Delta Faucet provided SER with output from the "One World"
system, which was in PDF format, and SER informed Delta Faucet
that, based on its test runs, the Synergy 2000 system "could handle
the output and that [it] would not be a problem." Accordingly, Delta
Faucet and SER entered into a contract dated June 6, 2001, under
which SER agreed to install its Synergy 2000 integrated software
package at Delta Faucet’s office in Indianapolis, Indiana. Under the
contract, Delta Faucet agreed to pay SER $219,530, one-half to be
paid upon placement of the order and the remaining one-half "upon
installation." While the contract did not fix a date by which installa-
tion would be completed, the parties established a schedule under
which the target date for completion of installation would be August
1, 2001. After Delta Faucet paid SER the $109,765 as the down pay-
ment, SER retained the services of NetComm Group, Inc., a third
party, to help install the Synergy 2000 system.

   By October 2001, installation of only a few of the software mod-
ules had been completed, providing "limited functionality of the sys-
tem." SER and NetComm continued their effort, however. When
installation was still not complete by March 2002 and when the mod-
ules that had been installed began dropping data from the documents
generated by the One World system, SER recommended that Delta
Faucet purchase alternative software at an additional cost of $194,000
to $312,000. Unwilling to pay additional amounts for a system that
was not properly converting documents in the PDF format and was
otherwise not working, Delta Faucet decided to terminate the contract
with SER and seek an alternative vendor, which it did. On May 14,
2002, it sent a formal letter of termination to SER, offering to return
to SER its software and materials. Several months later, in August
2002, SER formally revoked Delta Faucet’s license for using the Syn-
4                SER SOLUTIONS, INC. v. MASCO CORP.
ergy 2000 system and warned Delta Faucet that further use of the
software would violate its copyright. SER also demanded that Delta
Faucet remit within ten days an outstanding balance of nearly
$152,000.

   When Delta Faucet refused SER’s demand for payment, SER com-
menced this action for breach of contract and copyright infringement.
Delta Faucet filed a counterclaim for breach of contract. After a two-
day trial, the jury returned a verdict in favor of Delta Faucet on its
counterclaim, awarding damages of $109,765, the down payment that
Delta Faucet had paid to SER. The jury also ruled against SER on its
breach of contract and copyright infringement claims. Following trial,
the district court awarded Delta Faucet $82,618 in attorneys fees, pur-
suant to § 505 of the Copyright Act, 17 U.S.C. § 505. From the judg-
ment entered, SER filed this appeal.

                                   II

   SER first contends that the district court erred in refusing to
enforce the one-year contractual limitations period to bar Delta Fau-
cet’s counterclaim. Section 7(b) of the contract between SER and
Delta Faucet provides that "[n]o action, regardless of form, arising out
of any of the transactions under this Agreement may be brought by
Licensee more than one year after such action [accrued]."1 SER
argues that, under the parties’ informal schedule for installation of the
Synergy 2000 system, SER was to complete installation by August 1,
2001. When SER had not completed installation by then, according
to SER, Delta Faucet’s cause of action accrued. Thus, Delta Faucet’s
counterclaim, filed on December 4, 2002, was more than one year
after the cause of action accrued and would therefore be barred.

   Delta Faucet argues that SER did not breach its contract to install
Synergy 2000 until the spring of 2002, when it became apparent that
SER’s software modules were defective and when SER told Delta
Faucet that it would cost an additional $194,000 to $312,000 to cor-
rect the problem. In response to these events, Delta Faucet sent SER
    1
   The contract actually provides "more than one year after such action
occurred." The parties agree, however, that "occurred" is a typographical
error and that the word should be "accrued."
                 SER SOLUTIONS, INC. v. MASCO CORP.                    5
a letter dated May 14, 2002, terminating the contract. With respect to
the installation schedule established by the parties for installing the
software, Delta argues that the schedule was an informal one that was
not mandated by any language in the contract and that any such
schedule, in any event, was waived by the parties, as SER and its sub-
contractor were diligently working to complete installation well
beyond the August 2001 date and Delta Faucet implicitly approved
the slippage in the schedule.

   We agree with Delta Faucet. There is no evidence in the record of
any breach of contract in August 2001. Nor is there any evidence that
at that time the parties believed that SER was breaching the contract.
The first indication of serious problems with SER’s product appeared
in the spring of 2002. Even upon discovery of these serious problems,
SER would have had to be given a reasonable opportunity to correct
them. Rather than requesting that opportunity, SER demanded addi-
tional monies to complete the installation, prompting Delta Faucet to
terminate the contract. It was at this point that Delta Faucet first pos-
sessed a claim against SER for breach of contract. Since Delta Fau-
cet’s counterclaim in December 2002 was filed well within one year
of the breaches on which it relied for its claim, we affirm the district
court’s conclusion that the counterclaim was not barred by § 7(b) of
the contract.

                                   III

  SER next contends that the district court erred in admitting evi-
dence during trial in violation of Virginia’s parol evidence rule. As
SER argues:

    Delta Faucet was permitted to introduce evidence of com-
    munications and negotiations that preceded the written con-
    tract. This allowed Delta Faucet to argue that SER Solutions
    did not fulfill contractual obligations that were never set
    forth in the contract itself. The improper introduction of this
    evidence substantially prejudiced SER Solutions and a new
    trial is required.

SER argues that because the contract was an integrated contract that
"supersede[d] all prior and contemporaneous agreements, understand-
6                SER SOLUTIONS, INC. v. MASCO CORP.
ings, negotiations, and discussions, whether oral or written," evidence
of prior agreements or understandings were irrelevant under Virgin-
ia’s parol evidence rule and therefore prejudicial under Federal Rule
of Evidence 403.2 The parol evidence rule provides that an integrated
agreement "may not be contradicted by evidence of any prior agree-
ment or of a contemporaneous oral agreement." Va. Code Ann. § 8.2-
202; see also Cave Hill Corp. v. Hiers, 570 S.E.2d 790, 794 (Va.
2002) ("Parol evidence of prior or contemporaneous oral negotiations
are generally inadmissible to alter, contradict, or explain the terms of
a written instrument provided the document is complete, unambigu-
ous, and unconditional" (internal quotation marks and citation omit-
ted)). SER asserts that the prior discussions between it and Delta
Faucet conflicted with the written terms of the integrated contract,
which set forth essentially only specifications for the Synergy 2000
software and never warranted that the Synergy 2000 system would
function with Delta Faucet’s preexisting "One World" system.

   We disagree with SER’s characterization of the contract between
SER and Delta Faucet. That contract is much broader than SER
acknowledges. It promises, in albeit ambiguous language, that the
Synergy 2000 system would function "correctly" with Delta Faucet’s
system. The contract provides that for $219,530, SER will provide
Delta Faucet with "Document Implementation, Internet Banking Inte-
gration . . . Distribution Module, System Preparation, Installation . . .
Training (Onsite/Offsite), Consulting Services" and, for the first 90
days, "Maintenance and Support Services." Section 1.2.2.3 provides
that SER will "create report parameters based on the data and classifi-
cation requirement Customer supplies." Section 2.2 requires that
Delta Faucet provide "sample data representative of data that will be
processed by the system once in production mode," and §§ 2.2.1 and
    2
    SER filed a motion in limine "to exclude from the trial of this matter
evidence of communications and/or negotiations predating the parties’
written and fully integrated License Agreement dated June 6, 2001."
Delta Faucet argued in response, "[h]ere, admission of the pre-contract
discussions and correspondence is necessary to explain the parties’ inten-
tions as to the functionality of the software to add meaning to the term
‘correctly’ and SER’s obligation to ‘correctly’ provide certain function-
ality." The district court agreed with Delta Faucet and denied SER’s
motion in limine.
                SER SOLUTIONS, INC. v. MASCO CORP.                  7
2.2.2 provide that Delta Faucet will provide SER with samples of
reports and documents, along with its desired requirements for them.
Section 1.2.2.5 provides that SER "will discuss with the customer ver-
sions of web browsers and adobe reader necessary to successfully run
Web Module on client machines." In response to the samples and dis-
cussion, the contract provides that SER will install its modules to
work "correctly" with Delta Faucet’s systems: Section 1.2.3.1 pro-
vides that SER "will setup all equipment purchased . . . [which] will
include connecting servers to Customer’s network and working with
Customer to establish required data transfer connections with Cus-
tomer systems"; Section 1.2.3.2 provides that SER "will configure the
system and insure that input data is being downloaded from Custom-
er’s data provider or mainframe and processed correctly through
Reports module"; Section 1.2.3.3 provides that SER "will configure
the scanning station(s) and verify that data can be scanned, indexed
and filed to Document Module"; and § 1.2.3.4 provides that SER "will
configure the system and ensure that Web Module is operating cor-
rectly. This includes verifying installed client components (web
browser, Adobe Reader) and successful client access of SER Solu-
tions, Inc. data via Web Module."

   Thus, SER explicitly undertook not only to integrate its Synergy
2000 system with Delta Faucet’s existing "One World" system, but
also assured that SER’s products would operate "correctly" as so inte-
grated. What "correctly" means, however, is indefinite and ambigu-
ous, and Delta Faucet was allowed to introduce evidence of what that
term meant. For example, it offered an e-mail document sent by SER
a week before Delta Faucet signed the contract, providing "[a]nswers
to [Delta Faucet’s] questions." The e-mail explained that

    (1) SER’s e-Distribution module will fax, print & e-mail
        reports to an individual or multiple individuals.

    (2) There is no loss of quality or clarity when converting
        PDF to PCL.

    (3) Conversion from PDF to PCL is instantaneous; so no
        delay is incurred.
8                SER SOLUTIONS, INC. v. MASCO CORP.
    (4) Overlay Development Tools: You can use tools such
        as Java, the Acrobat Tool Kit or PCF! Form. They will
        create a bmp file to store for overlay on your reports.

    (5) References for the e-Distribution module. Still work-
        ing on this for you.

Delta Faucet was also allowed to introduce testimony to describe its
needs and the discussions between its representatives and SER’s rep-
resentatives to explain what the "correctly" operating system would
do and how it failed. None of this evidence contradicted any terms of
the contract; it only explained what operating "correctly" meant and
what a breach of the contract involved.

   In these circumstances, we conclude that the evidence was properly
admitted. "[T]he rule excluding parol evidence has no application
where the writing on its face is ambiguous, vague, or indefinite. In
such a case, the proper construction of the contract is an issue for the
trier of fact, and the court should receive extrinsic evidence to ascer-
tain the intention of the parties and to establish the real contract
between them." Cascades N. Venture Ltd. P’ship v. PRC, Inc., 457
S.E.2d 370, 373 (Va. 1995). The contract between SER and Delta
Faucet provided that "input data . . . downloaded from Customer’s
data provider or mainframe" will be "processed correctly." The
ambiguous and indefinite term "correctly," as used in the contract, is
meaningful to the contracting parties only when it is considered in its
larger context. Pre-contractual communications between Delta Faucet
and SER made clear that a "correct" installation of Synergy 2000, as
required by the contract, contemplated full functionality with the pre-
existing J.D. Edwards’ "One World" software that Delta Faucet had
installed.

   In sum, we conclude that the evidence admitted by the district court
properly related to the ambiguous term "correctly" as well as to
breach of the promise that the installation perform correctly and there-
fore did not violate the parol evidence rule. Accordingly, the district
court did not abuse its discretion in admitting the testimony.

                                  IV

  Finally, SER contends that the district court abused its discretion
when it awarded Delta Faucet attorneys fees under the fee-shifting
                SER SOLUTIONS, INC. v. MASCO CORP.                    9
provision of § 505 of the Copyright Act, 17 U.S.C. § 505. In addition,
SER argues that the court abused its discretion in awarding the spe-
cific sum of $82,618.

  Attorneys fees are not awarded "as a matter of course" under § 505.
Diamond Star Bldg. Corp. v. Freed, 30 F.3d 503, 507 (4th Cir. 1994).
In determining whether to award such fees, district courts must
engage in a four-pronged inquiry:

    First, the district court should evaluate the motivation of the
    parties. While a finding of willful infringement or bad faith
    on the part of the opposing party properly may be consid-
    ered by the district court, the presence or absence of such
    motivation is not necessarily dispositive. Second, the district
    court should weigh the objective reasonableness of the legal
    and factual positions advanced. The court may consider, for
    example, whether the positions advanced by the parties were
    frivolous, on the one hand, or well-grounded in law and fact,
    on the other. Third, the court should consider "the need in
    particular circumstances to advance considerations of com-
    pensation and deterrence." In evaluating this factor, the
    court may find relevant, among other circumstances, the
    ability of the non-prevailing party to fund an award. Finally,
    these enumerated factors are not intended as an exhaustive
    list; the district court may also weigh any other relevant fac-
    tor presented.

Rosciszewski v. Arete Assocs., Inc., 1 F.3d 225, 234 (4th Cir. 1993)
(citations omitted and emphases added). If a court determines to
award attorneys fees under § 505, it must then determine the reason-
ableness of amounts requested by considering the following factors:

    (1) the time and labor expended; (2) the novelty and diffi-
    culty of the questions raised; (3) the skill required to prop-
    erly perform the legal services rendered; (4) the attorney’s
    opportunity costs in pressing the instant litigation; (5) the
    customary fee for like work; (6) the attorney’s expectations
    at the outset of the litigation; (7) the time limitations
    imposed by the client or circumstances; (8) the amount in
    controversy and the results obtained; (9) the experience, rep-
10                 SER SOLUTIONS, INC. v. MASCO CORP.
       utation and ability of the attorney; (10) the undesirability of
       the case within the legal community in which the suit arose;
       (11) the nature and length of the professional relationship
       between attorney and client; and (12) attorneys’ fees awards
       in similar cases.

Barber v. Kimbrell’s, Inc., 577 F.2d 216, 226 n.28 (4th Cir. 1978).

   After having carefully reviewed the record and considered the
arguments of counsel made in their briefs and at oral argument, we
conclude that the district court did not abuse its discretion either in
applying Rosciszewski to the question of whether to award attorneys
fees or in applying Barber to the question of their amount. Accord-
ingly, we affirm the district court’s award of attorneys fees to Delta
Faucet in the amount of $82,618.

     The judgment of the district court is

                                                             AFFIRMED.