Court Opinion

ID: 4174156
Source: CourtListenerOpinion
Date Created: 2017-06-02 20:04:05.134705+00
Date Added: 2024-06-11T14:24:55.091485
License: Public Domain

FILED
                                      NOT FOR PUBLICATION
                                                                            JUN 02 2017

                           UNITED STATES COURT OF APPEALS                MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS

                                  FOR THE NINTH CIRCUIT

 PATSYSTEMS (NA) LLC, an Illinois                     No. 15-15877
 limited liability company,
                                                      D.C. No. 2:13-CV-00175-MEA
              Plaintiff - Appellee,

     v.                                               MEMORANDUM *

 THE TREND EXCHANGE, INC., a
 Delaware corporation,

              Defendant - Appellant

                          Appeal from the United States District Court
                                   for the District of Arizona
                          Magistrate Judge Mark E. Aspey, Presiding

                             Argued and Submitted March 17, 2017
                                  San Francisco, California

Before: WARDLAW and GOULD, Circuit Judges, and SHEA, District Judge.**

          The Trend Exchange, Inc. (Trend) appeals from the trial court’s entry of

          *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
      The Honorable Edward F. Shea, Senior United States District Judge for the
Eastern District of Washington, sitting by designation.

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judgment in favor of Plaintiff-Appellee Patsystems (NA) LLC, (Patsystems). We

have jurisdiction pursuant to 28 U.S.C. § 1291. Because the parties are familiar with

the facts and history of this case, we need not recount them here. We affirm in part,

reverse in part, and remand for proceedings consistent with this decision.

                               I. Parol Evidence Rule

      Generally, we review rulings on motions in limine for an abuse of discretion.

United States v. Alvirez, 831 F.3d 1115, 1120 (9th Cir. 2016). However, we review

the application of the parol evidence rule de novo. See Day v. Am. Seafoods Co., 557
F.3d 1056, 1057 (9th Cir. 2009). Here, in granting Patsystems’ motion in limine, the

trial court properly applied the parol evidence rule to exclude specific proposed

testimony related to an oral understanding allegedly reached prior to execution of the

fully integrated contract and directly contradicting the contract’s payment terms.1 See

Cleary v. News Corp., 30 F.3d 1255, 1263 (9th Cir. 1994). We affirm the trial court’s

ruling in this regard.

                   II. Evidence Regarding Cessation of Services

      We apply an abuse of discretion standard when reviewing a trial court’s

enforcement of pretrial orders. See Miller v. Safeco Title Ins. Co., 758 F.2d 364, 369

(9th Cir. 1985). “A pretrial order, however, should be liberally construed to permit

      1
        The trial court’s application of the parol evidence rule was raised in the
parties’ briefs, but neither party addressed the issue during oral argument.

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any issues at trial that are ‘embraced within its language.’” Id. at 368 (quoting United

States v. First Nat’l Bank of Circle, 652 F.2d 882, 886–87 (9th Cir.1981)). Properly

utilized, a pretrial order is a procedural tool that is meant to facilitate trial on the

merits, not to defeat a party on a technicality. See Trujillo v. Uniroyal Corp., 608 F.2d
815, 818 (10th Cir. 1979).

      The trial court prohibited Trend from presenting evidence that Patsystems had

never restored services after admittedly cutting them off. It based its ruling upon a

finding that Trend had not properly raised that particular theory of defense. However,

in the proposed pretrial order — under the section entitled “Contested Issues of Fact

and Law” — Trend denied Patsystems’ performance under the contract:

      2. The defendant denies the plaintiff’s allegation that the plaintiff
      provided the defendant with a non-exclusive, perpetual license to the
      plaintiff’s Broker Systems software, in addition to other software
      licenses and services under the Software License, Hosting and Support
      Agreement.
      3. The defendant denies the plaintiff’s allegation that the Unpaid
      Invoices identified in the Complaint were properly raised and issued
      under the Software License, Hosting and Support Agreement.

      Liberally construed, these denials embrace the issue of whether Patsystems had

ceased performance and nevertheless kept issuing invoices. We therefore hold that

the trial court abused its discretion by precluding Trend from presenting evidence that

Patsystems had cut off services and did not reinstate them.

                        III. Limitation-of-Damages Clause

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      We review de novo whether a particular defense must be raised as an

affirmative defense. See Taylor v. United States, 821 F.2d 1428, 1430, 1432–33 (9th

Cir. 1987). “In responding to a pleading, a party must affirmatively state any

avoidance or affirmative defense . . . .” Fed. R. Civ. P. 8(c). This requirement is

designed to avoid surprise and prejudice to a plaintiff. See Simmons v. Navajo Cty.,

609 F.3d 1011, 1023 (9th Cir. 2010).

      The trial court precluded Trend from invoking the contract’s limitation-of-

damages clause (Clause 11.2) based on its finding that Trend had not properly raised

Clause 11.2 as an affirmative defense. Rule 8(c) contains a nonexclusive list of

enumerated affirmative defenses, none of which resemble a contractual limitation on

liability such as is provided by Clause 11.2. See Fed. R. Civ. P. 8(c). Further,

applying the reasoning in Taylor v. United States, 821 F.2d at 1432–33, persuades us

that the trial court erred in ruling Clause 11.2 was an affirmative defense.

      In Taylor, we rejected the plaintiff’s argument that the government had waived

the protection of California Civil Code § 3333.2, as incorporated by the Federal Tort

Claims Act, by failing to raise the issue before judgment. Taylor, 821 F.2d at 1430.

We said, “Section 3333.2 is a limitation of liability, not an affirmative defense.” Id.

at 1433. We concluded that the government’s delay in raising the defense did not

prejudice the plaintiff because application of § 3333.2 was strictly a legal issue and

                                           4
held that the government had raised § 3333.2 “at a pragmatically sufficient time” so

as not to waive its protection. Id. (quoting Lucas v. United States, 807 F.2d 414, 418

(5th Cir. 1986)).

      Here, Patsystems was the party that drafted the relatively short contract —

Exhibit 1 at trial — which contained Clause 11.2 in bold, capital letters. There could

not have been any surprise or prejudice to Patsystems. Clause 11.2 was part of the

very contract that Patsystems placed squarely before the trial court as its basis for

relief, particularly given that a fundamental goal of contract interpretation is to give

effect to the parties’ mutual intent as it existed at the time of contracting. See, e.g.,

U.S. Cellular Inv. Co. v. GTE Mobilnet, Inc., 281 F.3d 929, 934 (9th Cir. 2002). We

therefore hold both that Clause 11.2 is not an affirmative defense and that Trend raised

the issue “at a pragmatically sufficient time” so as not to waive any protection Clause

11.2 might offer. See Taylor, 821 F.2d at 1432–33.

                                    IV. Conclusion

      We affirm the trial court’s grant of Patsystems’ motion in limine, but reverse

the trial court’s rulings precluding the two defenses that Trend attempted to raise at

trial, and remand for a new trial.2 On remand, the trial court is directed to allow Trend

to present any otherwise-admissible evidence that tends to show Patsystems did not

      2
       Although we hold that the trial court must allow Trend to assert these two
defenses, we express no opinion as to the merit of these two defenses.

                                           5
fully perform under the contract, including evidence that services were cut off and

never restored. The trial court is also directed to allow Trend to raise Clause 11.2 as

a defense, and determine what effect, if any, that clause has on Trend’s liability or

damages. Each party shall bear its own costs.

      AFFIRMED in part, REVERSED in part, and REMANDED.

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