Sas Inst., Inc. v. World Programming Ltd.
| Decision Date | 17 June 2016 |
| Docket Number | No. 5:10-25-FL,5:10-25-FL |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | SAS INSTITUTE, INC., Plaintiff, v. WORLD PROGRAMMING LIMITED, Defendant. |
Pending before the court is defendant's motion for judgment as a matter of law or, in the alternative, motion for a new trial. (Doc. No. 542). For those reasons stated herein, the motion is DENIED.
Plaintiff is a North Carolina-based company that primarily produces and sells computer software. Over the course of the company's thirty-year history, it has become the world's largest privately-held software company. Plaintiff's most widely recognized product is known as the "SAS System," software that allows users to perform a variety of tasks, primarily relating to data access, management, analysis, and presentation.
In addition to the SAS System, plaintiff also developed secondary software called "SAS Learning Edition." This software was packaged and promoted as an educational tool to help individuals learn to use the SAS System. Plaintiff marketed this software to students and priced licenses for the SAS Learning Edition between $125 and $150.
In 2010, plaintiff filed suit against defendant, a competing software company based in the United Kingdom. Plaintiff alleged that defendant used the SAS Learning Edition to create a knock-off version of the SAS System (known as "WPS") and targeted SAS customers to switch their software provider/servicer from plaintiff to defendant. Specifically, plaintiff claimed that defendant's employees intentionally misrepresented the company's intent in order to obtain licenses to SAS Learning Edition, knowing that plaintiff would not license the Learning Edition software to a company that wished to create a competing version of the SAS System. Plaintiff also alleged that defendant violated the terms of the Learning Edition license agreement by using the software for "production purposes," a non-educational use. After using Learning Edition to create software that was almost identical to the SAS System, plaintiff alleged that defendant then marketed the software to plaintiff's customers as a drop-in replacement for the SAS System at a considerably lower price.
On September 22, 2015, the case went to trial on three claims asserted by plaintiff: (1) damages for defendant'sbreach of the SAS Learning Edition license agreement,1 (2) fraudulent inducement by WPL to obtain the SAS Learning Edition license, and (3) unfair and deceptive trade practices as prohibited by North Carolina General Statute § 75-1.1, pursuant to plaintiff's fraudulent inducement claim. After a two-and-a-half week trial, the jury rendered its verdict, finding that: (1) defendant's breach of the SAS Learning Edition License Agreement damaged plaintiff in the amount of $26,376,635; (2) defendant fraudulently induced plaintiff to enter into the license agreement and this fraudulent inducement damaged plaintiff in the same amount; and (3) defendant's fraudulent inducement occurred in or affected commerce and constituted the proximate cause of plaintiff's injury, again resulting in damages in the same amount. (Doc. No. 517). The jury further awarded plaintiff $3,000,000 in punitive damages on its fraudulent inducement claim. Id.
Defendant moves the court for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(b). In support of its motion, defendant argues four specific points: (1) plaintiff presented no evidence that defendant intended to breach the Learning Edition license agreement at any time;(2) the relevant provisions of the Learning Edition license agreement amount to misuse of copyright and, as a result, are unenforceable; (3) plaintiff is not entitled to any damages because it has not proven proximate causation; and (4) the jury's damages award was unsupported by the evidence and contrary to North Carolina law. (Doc. No. 543). Finally, if the court finds that defendant is not entitled to judgment as a matter of law, defendant moves the court for a new trial pursuant to Rule 59. Id. Plaintiff opposes defendant's motion, arguing that ample evidence supported the jury's verdict and damage awards in every respect and, consequently, defendant is not entitled to judgment as a matter of law or a new trial.
Once a jury has returned its verdict, there are limited circumstances that allow the court to overturn it. The same standard applicable to a motion for summary judgment controls the analysis of a Rule 50(b) motion. Dennis v. Columbia Colleton Med. Ctr., Inc. et al., 290 F.3d 639, 644 (4th Cir. 2002).
[W]hen a jury has returned a verdict, the district court may grant a Rule 50(b) motion for judgment as a matter of law only if, viewing the evidence in a light most favorable to the non-moving party (and in support of the jury's verdict) and drawing every legitimate inference in that party's favor, the only conclusion a reasonable jury could have reached is one in favor of the moving party.
Pitrolo v. Cnty. of Buncombe, N.C., et al., 407 F. App'x 657, at *1 (4th Cir. 2011) (quoting It'l Ground Transp. Inc. v. Mayor & City Council of Ocean City, Md. et al., 475 F.3d 214, 218-19 (4th Cir. 2007)) (unpublished). Essentially, if a reasonable jury could only rule in favor of defendant, the court should grant its motion, but if reasonable minds could differ, the court must affirm the jury's verdict. Dennis, 290 F.3d at 645 (citing Sales v. Grant, 158 F.3d 768, 775 (4th Cir. 1998)). In analyzing defendant's motion, the court must draw all reasonable inferences in plaintiff's favor but may not weight the evidence or assess the credibility of the witnesses. Id. (citing Baynard v. Malone, 268 F.3d 228, 234 (4th Cir. 2001)).
A similar set of strictures apply to the court's consideration of a motion under Rule 59. The court should grant defendant's motion for a new trial only if: 1) the verdict is against the clear weight of the evidence; 2) is based upon evidence that is false; or 3) will result in a miscarriage of justice, even though substantial evidence might prevent the direction of a verdict. Cline v. Wal-Mart Stores, Inc., 144 F.3d 294, 301 (4th Cir. 1998) (quoting Atlas Food Sys. & Servs., Inc. v. Crane Nat'l Vendors, Inc., 99 F.3d 587, 594 (4th Cir. 1996)). Unlike a motion for judgment as a matter of law, however, the court is permitted to weigh the evidence and assess the credibility of witnesses when determining whether to grantdefendant's motion for new trial. Id. The grant or denial of a motion for new trial rests within the court's sound discretion. Id.
At trial, plaintiff made two separate assertions related to fraud: (1) that defendant fraudulently induced plaintiff to enter into the Learning Edition license agreement; and (2) this fraud constituted the predicate for an Unfair and Deceptive Trade Practices Act ("UDTPA") violation, which plaintiff argued occurred in or affected commerce and constituted the proximate cause of plaintiff's injury. The jury found in favor of plaintiff on both of these claims. In its motion, defendant argues that plaintiff did not present sufficient evidence that WPL intended to breach the terms of the license agreement, undermining the jury's verdict on both claims.
Issues of timing are extremely important to differentiate plaintiff's claim for breach of contract, on which the court previously entered summary judgment, from its claim of fraudulent inducement. To substantiate a claim of fraudulent inducement, plaintiff needed to prove that: (1) defendant made a false representation or concealed a material fact, (2) reasonably calculated to deceive, (3) made with intent todeceive, (4) which in fact did deceive, and (5) this resulted in damage to plaintiff. Myers & Chapman, Inc. v. Thomas G. Evans, Inc., 374 S.E.2d 385, 391 (N.C. 1988) (citing Ragsdale v. Kennedy et al., 209 S.E.2d 494, 500 (N.C. 1974)). These elements shift the fact-finder's perspective. The mere failure to carry out a promise cannot support an action for fraudulent inducement. Strum v. Exxon Co., U.S.A., 15 F.3d 327, 329-30 (4th Cir. 1994). Instead, a party has to demonstrate the promisor "had a specific intent not to perform a[t] the time the promise was made." Wilson v. McAleer, 368 F. Supp. 2d 472, 477 (M.D.N.C. 2005) (citing Norman v. Tradewinds Airlines, Inc., 286 F. Supp. 2d 575, 594 (M.D.N.C. 2003)). Instead of looking to the acts that took place after the contract was entered into, as in a breach of contract claim, the relevant acts are those that took place both before, and at the time, the parties entered into the Learning Edition license agreement. Therefore, to prevail on its fraudulent inducement claim, plaintiff needed to present evidence that defendant never intended to honor the Learning Edition license agreement before and/or at the time the parties entered into the agreement. But intent can be difficult to prove, and, as a result, parties may use circumstantial evidence to demonstrate fraudulent intent. See Leftwich v. Gaines, 521 S.E.2d 717, 723 (N.C. Ct. App. 1999).
Having reviewed the evidence, the court finds that reasonable jurists could find in plaintiff's favor on its fraudulent inducement claim. Plaintiff presented considerable evidence that defendant misrepresented its intent in licensing the Learning Edition software, and took affirmative steps to hide its true intent from SAS representatives, knowing that plaintiff would not license the Learning Edition (or other products) to a company that intended to produce a competing product. Plaintiff presented evidence that defendant decided in early 2003 to develop a program similar to SAS. In August 2003, a WPL representative approached SAS to license the full SAS System, without disclosing its intent to develop a similar program, but instead stating, "I hope you can see that...
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