ITyX Solutions AG v. Kodak Alaris, Inc.

Decision Date27 February 2020
Docket NumberNo. 19-1658,19-1658
Citation952 F.3d 1
Parties ITYX SOLUTIONS AG, Plaintiff, Counter Defendant, Appellee, ITyX Systemwicklung OHG; ITyX Technology GmbH ; Suleyman Arayan; Heiko Groftschik, Counter Defendants, v. KODAK ALARIS, INC., Defendant, Counter Plaintiff, Appellant.
CourtU.S. Court of Appeals — First Circuit

Pieter Van Tol, New York, NY, with whom Garima Malhotra, Philadelphia, PA, Marisa H. Lenok, New York, NY, Hogan Lovells US LLP, Paul R. Mastrocola, Andrea L. Martin, Boston, MA, and Burns & Levinson LLP were on brief, for appellant.

Johnathan K. Levine, with whom Elizabeth K. Levine, Boston, MA, Pritzker Levine LLP, Scott R. Magee, and Morse, Barnes-Brown & Pendleton, PC were on brief, for appellee.

Before Howard, Chief Judge, Lynch and Barron, Circuit Judges.

LYNCH, Circuit Judge.

This appeal primarily concerns attacks on a verdict against Kodak Alaris, Inc. ("Kodak") based on the jury finding that Kodak was in breach of its contractual obligation to ITyX Solutions AG ("ITyX"). Judgment was entered against Kodak in the sum of $9,211,699.20, including prejudgment interest. Kodak also challenges whether ITyX had what Kodak called "standing" to bring a breach of contract claim, the rulings the district court made following the verdict, the district court's calculation of prejudgment interest, and the denial of Kodak's motion for a new trial.

In brief, Kodak contracted with ITyX to sell ITyX's intelligent document recognition ("IDR") software as part of a Kodak-branded software. The contract allowed either party to terminate the agreement following a material breach by the other party and also prohibited Kodak from reentering the IDR business within two years of Kodak's "abandon[ing] the IDR market." The parties' relationship soon soured, and Kodak purported to terminate the contract and purported to exit the IDR business. ITyX brought suit against Kodak for breach of contract and to enjoin Kodak from reentering the IDR business. After ITyX filed this suit, and within two years of Kodak purporting to terminate the agreement, Kodak partnered with a new IDR producer to market and sell a new Kodak-branded IDR product.

The jury verdict awarded $7,466,045 in damages to ITyX. Kodak disputed that the verdict actually found that Kodak had breached the contract. It argued that the jury must have necessarily found that it was ITyX which breached, and that ITyX had breached the covenant of good faith and fair dealing. The district court correctly rejected this argument, as well as Kodak's various "standing" and damages arguments. We reject all challenges and affirm, except as to the calculation of prejudgment interest. As to interest, we alter the date used and remand.


We describe the factual background of the parties' claims, and then turn to the procedural history of the appeal.

A. Factual Background

ITyX, a German software company, produces IDR software, which interprets and extracts text from documents and then organizes such content for a user. ITyX is wholly owned by ITyX Technology, a German limited liability company. A German partnership, ITyX OHG, owns the majority of ITyX Technology. ITyX OHG is composed of partners Süleyman Arayan and Heiko Groftschik, both citizens of Germany. Arayan is also the CEO of ITyX. Kodak Alaris Holdings ("KAH") wholly owns Kodak, an American company.

1. The Master and PS Agreements

In 2011, ITyX began business discussions with Eastman Kodak Company ("EKC") and, on January 18, 2012, entered into a contract called the "Master Agreement." Just a day later, EKC filed for bankruptcy. In September 2013, Kodak assumed all of EKC's rights and obligations under the Master Agreement.

The Master Agreement defines the parties' contractual relationship. Its Preamble states that the parties "decided to enter into a strategic partnership where ITyX [would] license [the IDR software] to Kodak and Kodak [would] rebrand and market [such software]." The Agreement defines the Kodak-branded, IDR product (the "Kodak Product") as "the product, product family, and components of products, ... that Kodak intends to distribute to End Users and will include or incorporate the Licensed Software ... supplied by ITyX and as developed pursuant to this Agreement."

The Master Agreement had an initial term of five years, and the parties believed that it would take about three years to bring the software to market. Unless terminated, the Master Agreement automatically renewed in two-year increments.

The Master Agreement provides that either Kodak or ITyX could terminate the Master Agreement

after a material breach by the other Party upon written notice to the defaulting party ("Default Notice") specifying the default in reasonable detail, unless the defaulting party cures the default within 30 days after receipt of the Default Notice or, if such default cannot be cured within such time, the defaulting Party does not promptly start diligently and continuously in good faith to cure the default.

ITyX warranted that it either owned the copyright of the IDR software or "ha[d] and [would] retain the authority to enter into ... this Agreement and to grant licenses ... to Kodak." The Agreement also created various exclusivity obligations, including that Kodak would be the sole distributor of the Kodak Product and would not "develop a product functionally equivalent to the Kodak Product," i.e., an IDR product that would compete with ITyX's software. Although the Master Agreement authorized Kodak to exit "in its sole good faith business judgment" the IDR business (and so discontinue the marketing and sale of the Kodak Product), Kodak could not sell an IDR product not supplied by ITyX within two years of the exit date.

In the event of a breach, the Master Agreement allows, but does not require, the non-breaching party to seek specific performance from the breaching party.

The Master Agreement provided that ITyX would "act as an independent contractor" of Kodak. The Master Agreement also incorporates any "Statement[s] of Work" creating additional "specifications and conditions" into which Kodak and ITyX would enter subsequently. New York substantive law governs the Agreement.

On June 25, 2015, Kodak and ITyX entered into another contract, the Professional Services Transfer Pricing Agreement ("PS Agreement"). The parties then amended the PS Agreement on August 20, 2015 (the "PS Amendment"). Together, these "PS Agreements" specified that Kodak would be solely responsible for sales and marketing, and ITyX would provide the technology necessary to deliver and support the software.

2. The Investment Framework Agreement Among Related Entities

More than two years after Kodak and ITyX entered into the Master Agreement, a group of related entities, KAH, ITyX OHG, ITyX Technology, and Arayan entered into a June 2014 Investment Framework Agreement ("IFA"). Under the IFA, KAH would acquire 25.1% of ITyX Technology. ITyX Technology, in turn, was to acquire ITyX and another company and KAH would invest €12.6 million into ITyX Technology via a series of payments over a sixteen-month period. The IFA also authorized ITyX Technology, once per quarter, to request up to two million euros in additional investment funds from KAH to "support ... acquisitions or similar strategic investments."

The IFA provides that if KAH failed to make a required payment for more than thirty days, then ITyX OHG or ITyX Technology could exercise a "call option." The call option, if exercised, would allow ITyX OHG or ITyX Technology to purchase all ITyX Technology shares held by KAH in return for a payment of one euro and a waiver of KAH's outstanding IFA obligations.

3. KAH Purports to Terminate the IFA and Kodak Purports to Terminate the Master Agreement

In June 2015, KAH did not make one of its required payments at the required time. In response, on November 23 or 24, 2015, ITyX OHG gave notice to KAH that it was exercising the call option. The notice stated that this decision was based on both the missed payment and on an earlier refusal by KAH to invest another two million euros into ITyX Technology pursuant the IFA.1

On December 18, 2015, KAH sent to ITyX OHG and ITyX Technology a letter stating that it would not comply with the call option, and that it was terminating the IFA for cause and was withdrawing as a shareholder of ITyX Technology. Also on December 18, 2015, Kodak sent a letter to ITyX asserting that the exercise of the call option effected a material breach of the Master Agreement, and announced Kodak was terminating the Agreement. The letter also stated that, if the termination was ineffective, Kodak was abandoning the IDR business for a two-year period following the exit date. A jury would later find that, by selling its Actionable Intelligence Management ("AIM") platform, an IDR software, Kodak reentered the IDR business in violation of that two-year period.

B. Procedural History

On February 15, 2016, ITyX filed suit against Kodak for damages for breach of contract and for declaratory and injunctive relief to the effect that the Master Agreement was still in effect and Kodak could not develop or sell products that competed with the Kodak Product. ITyX moved for a preliminary injunction against Kodak to prevent it from selling various IDR products. The district court, finding no risk of irreparable harm, denied the motion.

On April 15, 2016, Kodak moved to dismiss the action or stay the proceedings until two related lawsuits in Germany were resolved.2 The district court denied the motion, noting that it was not certain that parties and/or contracts in the German proceedings were "sufficiently aligned," or that the legal issue were sufficiently alike.

On February 21, 2018, Kodak moved for summary judgment on all claims, arguing primarily that ITyX lacked standing to bring the suit.3 Kodak also argued that, in terminating the Master Agreement on December 18, 2015, it had validly terminated the PS Agreements. It argued in the alternative that the purported...

To continue reading

Request your trial
5 cases
  • Lestage v. Coloplast Corp.
    • United States
    • U.S. Court of Appeals — First Circuit
    • 9 December 2020
    ...for judgment as a matter of law, we examine all evidence in the light most favorable to the jury verdict. See ITYX Sols. AG v. Kodak Alaris, Inc., 952 F.3d 1, 9 (1st Cir. 2020).Coloplast is a medical device company that develops ostomy, continence, wound, and skin care products. Coloplast h......
  • Plazzi v. FedEx Ground Package Sys., Inc.
    • United States
    • U.S. Court of Appeals — First Circuit
    • 20 October 2022
    ...appeal.II. We review de novo the district court's determination that Plaintiffs lacked Article III standing. ITyX Sols. AG v. Kodak Alaris, Inc., 952 F.3d 1, 9 (1st Cir. 2020). Our review of the grant of a motion to dismiss for failure to state a claim is also de novo. Legal Sea Foods, 36 F......
  • Dantzler, Inc. v. Empresas Berríos Inventory & Operations, Inc.
    • United States
    • U.S. Court of Appeals — First Circuit
    • 1 May 2020
    ...People's All. & Nat. Res. Def. Council v. Mallinckrodt, Inc., 471 F.3d 277, 283 (1st Cir. 2006) ; see also ITyX Solutions AG v. Kodak Alaris, Inc., 952 F.3d 1, 9 (1st Cir. 2020). PRPA, Rapiscan, and S2's challenge of Dantzler's standing arises in the pleading stage, so this Court takes all ......
  • Thompson v. Gold Medal Bakery, Inc.
    • United States
    • U.S. Court of Appeals — First Circuit
    • 2 March 2021
    ...estoppel on his disability discrimination claims, he lacks Article III standing to bring this FMLA claim. See ITyX Sols. AG v. Kodak Alaris, Inc., 952 F.3d 1, 9-10 (1st Cir. 2020) ; Carson v. Makin, 979 F.3d 21, 30 (1st Cir. 2020) (reviewing standing de novo).8 Thompson makes no argument to......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT