Circuitronix, LLC v. Kinwong Elec. (Hong Kong) Co.

• Decision Date: 08 April 2021
• Docket Number: No. 19-12547,19-12547
• Parties: CIRCUITRONIX, LLC, Plaintiff-Appellee-Cross Appellant, v. KINWONG ELECTRONIC (HONG KONG) CO., LTD., Shenzen Kinwong Electronic Co., Ltd., Defendants-Appellants-Cross Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

993 F.3d 1299

CIRCUITRONIX, LLC, Plaintiff-Appellee-Cross Appellant,

v.KINWONG ELECTRONIC (HONG KONG) CO., LTD., Shenzen Kinwong Electronic Co., Ltd., Defendants-Appellants-Cross Appellees.

No. 19-12547

United States Court of Appeals, Eleventh Circuit.

April 8, 2021

Stephen F. Rosenthal, Podhurst Orseck, PA, MIAMI, FL, Natalie J. Carlos, David W.A. Chee, Alan Rosenthal, Carlton Fields, PA, MIAMI, FL, Chauncey D. Cole, IV, Chauncey Cole, PA, MIAMI, FL, Evan Stroman, Kozyak Tropin & Throckmorton, PA, CORAL GABLES, FL, for Plaintiff - Appellee-Cross Appellant.

Elliot H. Scherker, Brigid Finerty Cech Samole, Katherine Marie Clemente, David A. Coulson, James E. Gillenwater, Angela Ashley Korge, Mark A. Salky, Greenberg Traurig, PA, MIAMI, FL, for Defendants - Appellants-Cross Appellees.

Before WILLIAM PRYOR, Chief Judge, JILL PRYOR, Circuit Judge, and SELF,^* District Judge.

WILLIAM PRYOR, Chief Judge:

These appeals raise a preliminary issue of civil procedure and three issues about the merits of a breach-of-contract action between a manufacturer and a distributor. A jury found that the manufacturer breached its duty to sell its products to certain customers exclusively through the distributor. The manufacturer appeals the denial of a directed verdict as to the status of two customers under the contract. The distributor cross-appeals a ruling that invalidated the contract's liquidated-damages clause and a ruling that prevented it from pursuing lost-profit damages. The parties dispute if we may consider the directed-verdict issue or if the manufacturer's post-trial motion was untimely. The motion was due on a day when the clerk's office was closed by court order, but the manufacturer could have filed it electronically. We conclude that, under Federal Rule of Civil Procedure 6, the closure of the clerk's office renders the office inaccessible and tolls the filing deadline, which makes the motion timely. Fed. R. Civ. P. 6(a)(3). We also agree with the rulings of the district court on the merits, so we affirm.

I. BACKGROUND

The Shenzhen Kinwong Electronic Company is a Chinese manufacturer of printed circuit boards. These boards are used in electronic devices to connect electronic components. It uses a Hong Kong-based subsidiary, Kinwong Electronic (Hong Kong) Company, Limited, to sell its products. Around 2005, the two companies—collectively known as Kinwong—sought to expand their sales beyond Asia but had trouble breaking into other markets.

To expand its reach, Kinwong in 2005 entered into a contract with Circuitronix, LLC, a Florida-based distributor that resells printed circuit boards. The contract gave Circuitronix the exclusive right to sell Kinwong's products to customers that Circuitronix recruited. It obligated Kinwong to fulfill orders that Circuitronix generated, and it specified the terms of those sales. It also barred Kinwong from doing business, directly or indirectly, with customers that Kinwong obtained through Circuitronix.

Circuitronix primarily obtained orders from electronic-manufacturing-services companies. Those companies incorporate printed circuit boards into products that they manufacture for other companies. For example, Circuitronix sold Kinwong's boards to the Kimball Electronics Corporation, and Kimball in turn used the boards to make products for its client companies.

In 2010, the parties modified their relationship through a settlement agreement.

The modification became necessary after Circuitronix asserted that Kinwong had violated the exclusivity requirement of the original agreement, such as by selling boards to the end-clients of Kimball. The settlement agreement superseded and replaced the original agreement to the extent the two documents conflicted, but the original agreement otherwise remained in effect.

The settlement agreement contained a "Covenant Not to Circumvent," which codified the exclusivity requirement for companies listed on a Schedule A. Kinwong promised in the covenant that, for entities listed on Schedule A, it would not "directly or indirectly [negotiate or transact with] ... any entity listed on Schedule A, except through Circuitronix" or "circumvent, attempt to circumvent, avoid, or by-pass Circuitronix in any way" "[u]ntil May 24, 2012 or ... for two (2) years from the date of the last purchase order filled by Kinwong from that particular entity, whichever comes later." It also affirmed that, "with respect to Kimball," it would not "circumvent the intents and purposes of this Agreement by selling its products to those of Kimball's customers [for] whom Circuitronix is selling Kinwong's product to Kimball so that Kimball will be able to satisfy its customer's requirements."

The settlement agreement also added a liquidated-damages clause. This clause applied to breaches of specified provisions of the agreement, including the covenant. The parties agreed that it would be "extremely difficult" to determine actual damages if Kinwong were to breach the covenant and that the relationships between Circuitronix and the Schedule A companies were worth millions of dollars to Circuitronix. They decided that Kinwong would need to pay $2 million in liquidated damages for each breach that it caused.

The covenant and the liquidated-damages clause became important when Circuitronix sued Kinwong in 2017. Circuitronix invoked the jurisdiction of the district court based on diversity of citizenship. 28 U.S.C. § 1332. It alleged that Kinwong "repeatedly and systematically" breached the covenant. It pleaded claims of breach of contract and unjust enrichment. The district court dismissed the claims of unjust enrichment but permitted the breach-of-contract claims to proceed to trial.

Before trial, the district court placed limits on the kinds of damages that Circuitronix could seek. Circuitronix had planned to seek liquidated damages or, in the alternative, lost-profit damages. But the district court granted Kinwong partial summary judgment as to the unenforceability of the liquidated-damages clause. And it granted Kinwong's motion in limine to bar Circuitronix from seeking lost-profit damages. The district court explained that it was required to bar lost-profit damages because Circuitronix had failed to disclose its computation of those damages, and the failure was neither substantially justified nor harmless. It twice revisited the issue of lost-profit damages, and it twice reaffirmed its ruling.

The district court held a nine-day jury trial in 2019. During trial, Kinwong moved under Federal Rule of Civil Procedure 50(a) for a directed verdict as to the status of two of its customers. Fed. R. Civ. P. 50. The operative Schedule A identified the Lear Corporation as a client that Circuitronix recruited for Kinwong, and it specified that Lear purchased Kinwong's products on behalf of General Motors and Nissan. Circuitronix argued that Kinwong breached the covenant not to circumvent when it sold products to General Motors and Nissan directly. Kinwong sought a directed verdict that, as a matter of contract interpretation, General Motors and Nissan fell outside the ambit of the covenant.

The district court reserved its ruling during trial.

The jury found for Circuitronix. It awarded Circuitronix just over $1 million in compensatory damages. These damages reflect the out-of-pocket losses that Circuitronix sustained because of Kinwong's breaches.

After the trial concluded, the district court denied Kinwong's motion for a directed verdict. It concluded that Kinwong's proposed reading of the covenant was incorrect. So it entered judgment for Circuitronix on June 6.

Under Rule 50(b), Kinwong had 28 days after the entry of judgment to renew its motion. Id. R. 50(b). Because this clock ran to Thursday, July 4, a legal holiday, Kinwong's deadline automatically tolled to July 5. See id. R. 6(a)(1), (6). But Kinwong did not file its renewed motion until Monday, July 8.

Circuitronix argued that this motion was untimely. Kinwong responded that, because the clerk's office was closed on Friday, July 5, its deadline tolled to July 8 and made its filing timely. See id. R. 6(a)(3) (ordinarily extending the deadline for filing "if the clerk's office is inaccessible ... on the last day for filing under Rule 6(a)(1)").

The district court denied Kinwong's renewed motion. It did not address the issue of timeliness. Instead, it reiterated that Kinwong's motion failed as a matter of contract interpretation.

II. STANDARDS OF REVIEW

We review de novo the interpretation of the Federal Rules of Civil Procedure, Mega Life & Health Ins. Co. v. Pieniozek , 585 F.3d 1399, 1403 (11th Cir. 2009), and of contracts, Tims v. LGE Cmty. Credit Union , 935 F.3d 1228, 1237 (11th Cir. 2019). We also review de novo the denial of a motion for a directed verdict. State Farm Mut. Auto. Ins. Co. v. Williams , 824 F.3d 1311, 1315 (11th Cir. 2014). And we review de novo a summary judgment. Strickland v. Norfolk S. Ry. Co. , 692 F.3d 1151, 1154 (11th Cir. 2012). When a district court imposes discovery sanctions, our review is "sharply limited" to an abuse-of-discretion standard and "a determination that the findings of the trial court are fully supported by the record." Mee Indus. v. Dow Chem. Co. , 608 F.3d 1202, 1211 (11th Cir. 2010) (internal quotation marks omitted).

III. DISCUSSION

We divide our discussion in three parts. We first review the denial of Kinwong's motions for a directed verdict. We then consider the enforceability of liquidated damages. We last address the exclusion of lost-profit damages.

A. The District Court Did Not Err by Denying Kinwong's Rule 50 Motions.

Circuitronix contests both the timeliness of Kinwong's Rule 50(b) motion and the merits of its argument. Because Circuitronix preserved its objection about timeliness, we would not be able to consider Kinwong's challenge on the merits if its Rule 50(b) motion were untimely. Rosenberg v. DVI Receivables XIV, LLC , 818 F.3d 1283, 1292 (11th Cir. 2016) ; see also Escribano v. Travis...