Court Opinion

ID: 1003748
Source: CourtListenerOpinion
Date Created: 2013-07-04 18:30:55.856568+00
Date Added: 2024-06-11T12:37:31.337704
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

TIDEWATER FINANCE COMPANY,             
INCORPORATED,
                Plaintiff-Appellant,
                 v.                               No. 00-1529

FISERV SOLUTIONS, INCORPORATED,
                Defendant-Appellee.
                                       
           Appeal from the United States District Court
          for the Eastern District of Virginia, at Norfolk.
                Raymond A. Jackson, District Judge.
                   (CA-99-696-2, CA-99-697-2)

                      Argued: January 24, 2001

                      Decided: February 27, 2001

        Before MOTZ and TRAXLER, Circuit Judges, and
    Malcolm J. HOWARD, United States District Judge for the
     Eastern District of North Carolina, sitting by designation.

Affirmed by unpublished per curiam opinion. Judge Traxler wrote an
opinion concurring in part and dissenting in part.

                             COUNSEL

ARGUED: Joe Gray Lawrence, Jr., FAGGERT & FRIEDEN, P.C.,
Chesapeake, Virginia, for Appellant. Thomas E. Spahn, MCGUIRE
WOODS, L.L.P., Richmond, Virginia, for Appellee. ON BRIEF:
Thomas B. Kelly, FAGGERT & FRIEDEN, P.C., Chesapeake, Vir-
2          TIDEWATER FINANCE CO. v. FISERV SOLUTIONS, INC.
ginia, for Appellant. Laura R. White, MCGUIRE WOODS, L.L.P.,
Richmond, Virginia; Robert W. McFarland, MCGUIRE WOODS,
L.L.P., Norfolk, Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.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

                              OPINION

PER CURIAM:

   Appellant   Tidewater    Finance    Company,       Incorporated,
("Tidewater") appeals the orders of the district court denying its
motions for summary judgment and various evidentiary issues. We
affirm.

                                   I.

  Incorporated since 1968, FIS (and its successor Fiserv) ("Fiserv")
has been providing data processing ("EDP") and related services to
banks, savings and loans, finance companies, and other institutions.
The main Fiserv EDP system at issue in this litigation is called the
"Dollar System."

   Tidewater is a sub-prime finance company. Tidewater frequently
contracts with vendors and suppliers of equipment and services. Tide-
water also maintains relationships with numerous retailers (car and
furniture dealers, etc.) who loan money to consumers for retail pur-
chases, often using loan forms that Tidewater supplies to the retailers.
Tidewater buys these loan agreements from the retailers and enforces
them against the borrowers.

   In the mid-1990’s Tidewater’s business was expanding, and Tide-
water needed more money to buy consumer loan contracts. The bank
indicated that it would loan the money only if Tidewater arranged for
a more efficient EDP system to assist the processing of loans and its
          TIDEWATER FINANCE CO. v. FISERV SOLUTIONS, INC.            3
other business functions. The bank recommended that Tidewater con-
tact Fiserv.

   Prior to a scheduled meeting on September 5, 1996, in Orlando,
Florida, Tidewater sent Fiserv a list of system capabilities that Tide-
water wanted. Fiserv prepared a response, indicating in most cases
that the Dollar System did not include the capabilities that Tidewater
wanted. Tidewater claims that Fiserv’s representatives made oral
promises at the September 5 meeting that contradict Fiserv’s written
responses which indicated that Fiserv could not, at that time, meet
Tidewater’s demands. However, Tidewater did not confirm these
alleged promises in writing, did not prepare any internal memoranda
describing the promises and did not insist or even request that the
promises be made part of the contract. Therefore, as the district court
held, it is impossible to acknowledge the existence of such promises
without any affirmative proof of their existence.

   Tidewater and Fiserv thoroughly negotiated and entered into four
separate contracts. Three of these contracts involved Fiserv software
licensed to Tidewater. The fourth contract, which is primarily at issue
in this litigation, covered the Fiserv Dollar System and is called the
"Information Processing Agreement" ("Agreement").

   As indicated in the agreement, the services provided for consist of
numerous components and had a five-year term with automatic
renewals under certain conditions. However, the parties could agree,
in writing, to terminate at any time. The agreement contained a
detailed clause specifying how the parties would work together to dis-
engage if either one ended the relationship. If Tidewater wanted to
end the relationship, it was required to provide written notice to
Fiserv. Upon receiving such written notice, the parties would consult
and agree on some termination date, prior to which Tidewater was
obligated to keep paying Fiserv.

  The agreement provision mainly at issue in this litigation is para-
graph 20. Paragraph 20(a) described the consequences if Tidewater
defaulted in its obligations or breached certain contractual duties.
Paragraph 20(b) defined breach as Tidewater’s "transfer without the
written approval of FIS any of the services provided hereunder to a
competitor or to in house capabilities." If Tidewater breached the
4          TIDEWATER FINANCE CO. v. FISERV SOLUTIONS, INC.
agreement by such a transfer, paragraph 20(c) allowed Fiserv to, (1)
declare a default or (2) at Fiserv’s sole option, declare in writing a
partial breach entitling Fiserv to liquidated damages.

   According to Fiserv, the liquidated damages provision essentially
allowed Fiserv to collect from Tidewater what it would have earned
had Tidewater remained on the system for the entire five-year term
of the contract as Fiserv required this provision to recoup its initial
front loaded investment.

   Tidewater converted to the Fiserv system in March 1997. In
August 1997, after using the Fiserv system for about five months,
Tidewater claims that, due to various problems, Fiserv promised
Tidewater that it could terminate the relationship without paying the
liquidated damages. However, as the jury found, no one at Tidewater
confirmed such a promise in any written communication to Fiserv or
even in an internal memorandum. Instead, Tidewater remained on the
Fiserv system and continued to pay its monthly bills. Six months
later, in February 1998, the Tidewater President wrote Fiserv a letter
and asked to be relieved of its contractual obligations. When Fiserv
declined, Tidewater did not rely on the alleged promise or sue Fiserv
for breach of contract. Instead, Tidewater remained on the system and
continued to pay its bills for another ten months.

   Tidewater continued to send periodic complaints to Fiserv about its
system, yet never sent a written notice of a desire to terminate the
agreement and no longer use the services. In February 1999, Tidewa-
ter became delinquent in paying its bills, and Fiserv sent a default let-
ter, which was cured by a check to Fiserv.

   In a March 2, 1999, telephone conversation, Tidewater expressed
its desire to terminate the agreement. Fiserv, then proceeded to calcu-
late the liquidated damages based on what its argues, and the trial
court held, was a partial breach.

   Tidewater instituted two suits in the circuit court of the City of Vir-
ginia Beach, one for declaratory judgment to adjudicate whether or
not the parties had settled their differences and the other, a motion for
judgment seeking damages for fraud and breach of contract. Fiserv
removed the cases to federal district court and filed a counterclaim for
           TIDEWATER FINANCE CO. v. FISERV SOLUTIONS, INC.             5
breach of contract and conversion seeking liquidated damages and
fees. The district court denied Tidewater’s motion for summary judg-
ment. On February 1, 2000, the jury returned a verdict in favor of
Fiserv in the amount of $536,250.60 for liquidated damages, but
denied its claim for unpaid fees. Tidewater renewed its motion under
Rule 50 and the motion was denied. This appeal is from the district
court’s judgment on Tidewater’s motions for summary judgment and
the jury’s verdict awarding Fiserv liquidated damages.

                                   II.

               TIDEWATER’S RULE 50 MOTIONS

                       A. Standard of Review

   "Rule 50(a) provides that, in actions tried by a jury, the district
court may grant a motion for judgment as a matter of law if a ‘party
has been fully heard . . . and there is no legally sufficient evidentiary
basis for a reasonable jury to find for that party.’" Malone v. Micro-
dyne Corp., 26 F.3d 471, 475 (4th Cir. 1994). This court reviews a
district court’s denial of a Rule 50 motion de novo, yet this court nev-
ertheless reviews the jury’s verdict "in the light most favorable to the
party in whose favor it is found, and such a party is entitled to the
benefit of all inferences which the evidence fairly supports, even
though contrary inferences might be drawn." Jacobs v. College of
William & Mary, 517 F. Supp. 791, 794 (E.D. Va. 1980), aff’d, 661
F.2d 922 (4th Cir. 1981). A "[c]ourt should not attempt to substitute
its judgment for the jury." Id.

               B. Discussion Of Liquidated Damages

         1. Date Of Computation Of Liquidated Damages

   Tidewater argues that the award of liquidated damages must be set
aside because it was calculated as of an incorrect date contending that,
based on the language of the contract, liquidated damages must be
computed for the six full calendar months period immediately preced-
ing the transfer by client of any of the services provided under the
agreement to a Fiserv competitor or in-house capabilities. Tidewater
6           TIDEWATER FINANCE CO. v. FISERV SOLUTIONS, INC.
argues that the date should be the date on which services were termi-
nated by Tidewater, not the date Fiserv ceased providing services.

    Paragraph 20(c) of the agreement states that liquidated damages are

      a sum equivalent to the average monthly gross revenue
      recieved by FIS on account of the Services of FIS trans-
      ferred either to a competitor or to in-house capabilities by
      Client during the six (6) full calendar month period immedi-
      ately preceding such transfer, which average monthly sum
      shall be multiplied by the remaining term of this agreement.

This provision clearly requires liquidated damages to be calculated as
of the end of the month before the date that services are transferred
by Tidewater to a competitor or in-house. Thus, the only question
remaining is was the jury correct in determining that the date was
February 28, 1999 - the last day of the full month before March 2,
1999, the date Tidewater notified Fiserv that it would no longer use
any of Fiserv’s services, or December 10, 1999 - the date Tidewater
actually switched to another service? Thus, Tidewater argues that liq-
uidated damages should be calculated using the date it stopped
accessing the services, while Fiserv maintains that damages should be
calculated from the date Tidewater notified Fiserv to stop providing
services or making them available.

   As the district court noted, this dispute is a classic factual issue for
the jury to decide. Accordingly, because there was a factual dispute
fueled by conflicting evidence combined with the fact that the lan-
guage in the contract on this issue is ambiguous, the court properly
left the question of the date from which liquidated damages should be
computed to the jury.

   The jury determined that the phrase "Services of FIS transferred"
refers to more than the transferring of accounts to another provider,
but requires the knowledge of Fiserv since it must discontinue provid-
ing services which requires its knowledge. This is certainly a reason-
able interpretation.

   Tidewater bears the burden of proving that "reasonable men could
reach no other conclusion than" the transfer of services occurred in
           TIDEWATER FINANCE CO. v. FISERV SOLUTIONS, INC.             7
December. Tidewater does not meet this burden as the jury’s interpre-
tation is a reasonable one.

               2. Availability Of Liquidated Damages

   The closest and most beguiling question in this case is whether liq-
uidated damages were at all available to Fiserv. This issue can actu-
ally be broken down into two separate questions. First, is Tidewater
procedurally barred from making this argument? Second, did a partial
breach, which would trigger liquidated damages, ever occur?

   The Fourth Circuit has held that a party who does not move for
judgment as a matter of law on an issue pursuant to Rule 50(a) waives
its right to move to set aside a verdict for that reason pursuant to Rule
50(b). Smith v. University of North Carolina, 632 F.2d 316, 338-39
(4th Cir. 1980). Further, a party who waives an argument before a dis-
trict court may not appeal the same argument to this court. Id. Conse-
quently, this court does not review the sufficiency of evidence not
challenged on a Rule 50(a) motion. Bristol Steel & Iron Works, Inc.
v. Bethlehem Steel Corp., 41 F.3d 182, 188 (4th Cir. 1994). Fiserv
argues that Tidewater did not raise a challenge to the liquidated dam-
ages clause in its answers or in either of its Rule 50 motions and
therefore may not raise the issue here.

   Tidewater, however, asserts that the district court erred, and that it
did, in fact, raise the issue in its answers. In its answer to Fiserv’s
counterclaim, Tidewater stated, "affirmatively that the wording of the
agreement does not impose any liability upon Tidewater." The district
court found that such language was simply boilerplate and did not
suffice to plead an affirmative defense. This language does not specif-
ically mention the liquidation clause and, therefore, Tidewater should
be procedurally barred from raising this issue.

   Even if Tidewater is not procedurally barred from raising the issue
of partial versus total breach, there is enough evidence in the record
for a reasonable jury to find that Fiserv notified Tidewater of a partial
breach making an award of liquidated damages appropriate under the
contract. For example, as a result of the March 2, 1999, conversation
between the parties - a conversation in which Fiserv first learned that
Tidewater was terminating the services - Fiserv calculated the liqui-
8          TIDEWATER FINANCE CO. v. FISERV SOLUTIONS, INC.
dated damages and sent Tidewater a letter "indicating what the termi-
nation liquidated damages were." This letter indicates Fiserv’s
intention to declare a partial breach as it specifically mentions the
remedy of liquidated damages, a remedy that would only be appropri-
ate under a partial breach of the agreement.

                            SETTLEMENT

   The issue of settlement in this matter, as explained by the trial
judge and as suggested by the statement of the facts in this case, is
a classic "he said, she said." Such an issue of historical facts and cred-
ibility determinations is one for the jury to decide.

            THE COURT’S EVIDENTIARY RULINGS

                       A. Standard of Review

   This court reviews challenges to evidentiary rulings for abuse of
discretion. United States v. Whittington, 26 F.3d 456, 465 (4th Cir.
1994).

                            B. Discussion

                        1. The Default Letter

   Based on the standard of review applicable to evidentiary rulings,
this court finds that the trial court did not abuse its discretion by
allowing testimony about the default letter under the "Best Evidence
Rule."

             2. Prevention of Performance Instruction

   Tidewater claims that the district court abused its discretion by
instructing the jury about the doctrine of prevention of performance
which states that a party is excused from performing its contractual
obligations if the other party prevents performance. One of Fiserv’s
defenses to the breach of contract claim against it was that if the jury
found it breached (which the jury found it did not, so this point is
essentially moot), then it could use the defense of prevention of per-
           TIDEWATER FINANCE CO. v. FISERV SOLUTIONS, INC.               9
formance. Therefore, the trial court did not abuse its discretion by
allowing such an instruction.

                    3. The "Shevel’s" Instruction?

   Tidewater did not object when the district court rejected its pro-
posed instruction which explained that despite the written agreements,
the jury should consider all of the representations ever made to Tide-
water before and after the contracts were signed. Based on the stan-
dard of review applicable to evidentiary matters, this court would
have to find that the lower court abused its discretion when it found
that there was not sufficient evidence of the disputed representations.
Clearly, the trial court found that there was not enough evidence to
give such an instruction. Simply put, Tidewater did not object when
the district court rejected its proposed instruction and the district court
did not abuse its discretion in doing so.

                 4. Instruction On Actual Damages

   The trial judge followed Florida law precisely in instructing the
jury on how to calculate damages.

                     5. Tidewater’s Fraud Claim

   It is clear from the testimony of both parties that this matter is a
contract dispute about the terms and conditions of the contract. Fraud
simply did not play a part in this matter and the district court was cor-
rect in granting summary judgment for Fiserv on this issue.

                                                             AFFIRMED

TRAXLER, Circuit Judge, concurring in part and dissenting in part:

   This dispute completely ended the contractual relationship between
the two parties. They had no further business dealings with each other
thereafter. Regardless of who was at fault, the breach was total and
absolute. Yet somehow Fiserv managed to have the breach considered
"partial." Because this breach was in no way partial and hence no
basis existed for liquidated damages, I respectfully dissent.
10         TIDEWATER FINANCE CO. v. FISERV SOLUTIONS, INC.
   First, Fiserv argues that Tidewater did not raise this issue as an
affirmative defense in its answer and therefore has waived any chal-
lenge relating to the liquidated damages provision. To the extent
Tidewater challenges the liquidated damages clause as unreasonable
or unenforceable, Fiserv is correct. See Public Health Trust v. Romart
Constr., Inc., 577 So. 2d 636, 638 (Fla. Dist. Ct. App. 1991). How-
ever, the issue of whether there was a partial or a total breach has
nothing to do with the reasonableness of the liquidated damages
clause. This separate question is simply whether the clause applies,
not whether the clause is an impermissible penalty. Hence, Tidewater
was not required to raise the nature of the breach as an affirmative
defense.

   Second, Fiserv argues that Tidewater did not preserve the issue of
partial versus total breach in its Rule 50 motions. To the contrary,
before the case was submitted to the jury Tidewater moved for judg-
ment as a matter of law, arguing that there was a total breach rather
than a partial breach. See J.A. 1105-09. The district court denied the
motion. See J.A. 1118. In its post-trial motions, Tidewater renewed
its motion for judgment as a matter of law on the grounds that no par-
tial breach occurred and the district court again denied the motion.
See J.A. 1229-30. Accordingly, the issue was properly preserved.

   Finally, Fiserv points out that it provided Tidewater with notice of
a partial breach as required by the contract. However, the fact that
Fiserv provided notice of a breach which it chose to call "partial" has
no bearing on whether, as a matter of law, a partial breach actually
occurred. The question of notice is a separate and distinct inquiry.

   In my view, the district court erred in denying Tidewater’s Rule 50
motions on the issue of total versus partial breach. A total breach of
contract strikes at the whole of the contract or the whole of the con-
sideration. See Hyman v. Cohen, 73 So. 2d 393, 397 (Fla. 1954) (en
banc); Restatement (Second) of Contracts § 241 (1979). Because
Tidewater refused to accept any of the services for which it con-
tracted, this breach was material and went to the heart of the contract.
Thus, as a matter of law, the liquidated damages provision was not
applicable to Tidewater’s breach.

  I would reverse the district court’s denial of Tidewater’s Rule 50(b)
motion and remand for further proceedings. As to the remainder of
          TIDEWATER FINANCE CO. v. FISERV SOLUTIONS, INC.         11
the panel’s rulings, I concur in those parts not inconsistent with my
dissent.