MONTAGE GROUP v. Athle-Tech Computer Sys.
| Decision Date | 15 December 2004 |
| Docket Number | No. 2D03-2026.,2D03-2026. |
| Citation | 889 So.2d 180 |
| Parties | MONTAGE GROUP, LTD., and Digital Editing Services, Inc., Appellants/Cross-Appellees, v. ATHLE-TECH COMPUTER SYSTEMS, INC., Appellee/Cross-Appellant. |
| Court | Florida District Court of Appeals |
Arthur J. England, Jr., Charles M. Auslander, and Lisa L. Jama of Greenberg Traurig, P.A., Miami; Steven L. Brannock of Holland & Knight LLP, Tampa; and James W. Stoll of Brown Rudnick Berlack Israels LLP, Boston, MA, for Appellants/Cross-Appellees.
F. Wallace Pope, Frank R. Jakes, and Joseph J. Weissman of Johnson, Pope, Bokor, Ruppel & Burns, P.A., Tampa; and Stuart C. Markman, James E. Felman, Katherine Earle Yanes, and Robert W. Ritsch, of Counsel, of Kynes, Markman & Felman, P.A., Tampa, for Appellee/Cross-Appellant.
On this court's own motion, the opinion dated October 13, 2004, is withdrawn and the following revised opinion is substituted therefor. The revisions consist of a correction of the name of one of the parties in section II.A., "The Parties' Claims," (2) an expansion of footnote 15, and (3) a change — in conformity with Athle-Tech's request for relief in the trial court — of the date from which prejudgment interest on the unjust enrichment award shall run. Otherwise the opinion is unchanged.
No further motions for rehearing will be entertained.
In this case we are called upon to address the aftermath of a business deal that began at a point where sports, technology, and commerce intersect. Montage Group, Ltd. (Montage) and Digital Editing Services, Inc. (DES),1 appeal a final judgment awarding Athle-Tech Computer Systems, Inc. (Athle-Tech) over $14.1 million in damages and prejudgment interest on Athle-Tech's claims for breach of contract, tortious interference, and unjust enrichment. As a sanction for their multiple discovery violations, the trial court struck the Defendants' answers and affirmative defenses on the day the trial was scheduled to begin, and the case was tried before a jury on the issue of damages only. Montage and DES contend that the trial court erred in imposing the sanctions and that the jury's verdict is deficient in several respects. On its cross-appeal, Athle-Tech contends that the trial court erred in failing to grant its motion for prejudgment interest on the amount of the unjust enrichment award. We affirm the sanctions order. We agree with the Defendants that the jury's verdict is flawed. We affirm the final judgment in part, reverse it in part, and remand for the entry of an order of remittitur with respect to the award of damages against DES for unjust enrichment. On the cross-appeal, we direct that the amended final judgment to be entered on remand and after a new trial on damages for unjust enrichment, if necessary, shall include an award of prejudgment interest on the amount of the unjust enrichment award.
The dispute among the parties in this case stems from an alleged breach of a contract between Athle-Tech and Montage for the joint development, ownership, and licensing of a digital software computer program. In the 1990s, both companies were acknowledged leaders in their respective industries — Athle-Tech in the sports film editing business and Montage in the creation of digital film editing software. A brief profile of each company will be helpful to an understanding of the pertinent facts.
Athle-Tech was founded by Dr. Samuel G. Covault in 1986. Covault had been a football coach at Miami University (Ohio), Ohio University, Ohio State University, and the University of Connecticut. In the 1980s, Covault had developed a game analysis and video-editing computer system used by football coaches to review and analyze game films. The system included a game analysis software program, videocassette recorders, and computer equipment. Athle-Tech marketed these systems primarily to Division I college football teams and enjoyed substantial success in its market. Although Athle-Tech was a one-man business operated by Covault from his home in Pinellas County, it won recognition by a trade publication as one of the "Top 100 Value Added Resellers" engaged in reconfiguring and reselling microcomputer systems to end users.
The systems marketed by Athle-Tech were based on linear (analog) technology. In the early 1990s, Covault realized that the newer digital film editing systems already in use in the film and television industry would soon make obsolete his linear-based sports film editing system. Digital film editing systems offer significant advantages over analog systems in the speed at which editing can be performed. In response to this challenge to his existing business, Covault outlined the elements of a new digitally based system.2 He also began to seek a business relationship with a company that had the ability to make his concept for a digitally based sports film editing system a reality.
After several unsuccessful approaches to other companies, Athle-Tech ultimately entered into such a business relationship with Montage, which was located in Keene, New Hampshire. Montage had previously developed digital film editing software known as "MServer" for use in the film and television industry. Montage's business was similar to Athle-Tech's in that it involved the reconfiguring and resale of microcomputer systems. Montage had also been very successful in its market. The MServer software had won Oscar and Emmy awards for technical achievement. Covault met with officers of Montage initially in 1994, and the two companies began to negotiate a business deal for the development, ownership, and licensing of the digital software program necessary to the production of the digital sports film editing system envisioned by Covault.
Although Athle-Tech and Montage negotiated and reviewed numerous documents proposed to memorialize their business relationship, the only document on which Athle-Tech would subsequently base its claims was a letter agreement dated January 1995 for the development of the game film editing software, a necessary component of the proposed system.3 The letter agreement provided that Montage would undertake the development of a GUI (General User Interface) for football coaches, as defined in a design document provided by Covault entitled "Coach's GUI for Athle-Tech/Montage Non-Linear Video Editing."4 Pursuant to the letter agreement, each party was to own a one-half interest in the software once it was completed, each was obligated to pay one-half of the development costs, and each was obligated to pay the other fifty percent of the proceeds of all sales of licenses of the Coach's GUI software. Montage was also to deliver to Athle-Tech a complete copy of the source code for the software.5 The letter agreement provided further that neither party would sell, loan, disclose, or otherwise distribute to any party the source code for the program or any derivative versions of it.
The letter agreement left unresolved two issues critical to the business relationship between Athle-Tech and Montage. First, the letter agreement provided that the parties would share equally in the sale of the proceeds from the sale of licenses for the Coach's GUI software. However, neither Athle-Tech nor Montage was in the computer software business. Both companies were in the business of the reconfiguring and resale of microcomputer systems. Coach's GUI and its derivatives were never intended to be sold as separate software products. On the contrary, Coach's GUI and its derivatives would be sold only as one component of larger systems that included computer hardware, other software, peripherals and related installation, and training and support services. In the letter agreement, the parties estimated the retail price of a license for Coach's GUI at $5,000. The sales price of a complete system could be hundreds of thousands of dollars. Although Montage contended that the letter agreement was not binding, the parties would subsequently dispute whether Athle-Tech's right to one-half of the proceeds was to be calculated based on the portion of the system price properly allocable to the value of the Coach's GUI software or the price of an entire system. It is not surprising that Montage subsequently argued in favor of the former basis for the calculation while Athle-Tech contended for the latter.
Second, the letter agreement did not settle the nature of the business relationship between the parties. It would become apparent from later litigation that Athle-Tech viewed the digital game film editing project as a joint venture in which it was a full partner with Montage. Montage envisioned Athle-Tech's role as merely an independent distributor of the digital sports film editing system that it had under development. The unresolved issues in the documentation of the parties' business relationship set the stage for the dispute that followed.
After the letter agreement was signed in January 1995, Montage began the development of the Coach's GUI software. The development project proved to be far more expensive and time-consuming than either of the parties had anticipated. In the letter agreement, Montage had estimated the cost of developing the software at approximately $45,000 and expressed its expectation "to complete a version 1.0 release of this product around April 1, 1995." In fact, the development of Coach's GUI was not completed until sometime in 1998. The former president of Montage claimed at trial that its development and marketing costs for the project exceeded $2 million. Athle-Tech paid a total of $23,000 toward the cost of developing the Coach's GUI software.
The delays in the development of the software contributed to tension in the relationship between Covault and personnel at Montage. This tension was exacerbated by Montage's...
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