SOLIDFX, LLC v. Jeppesen Sanderson, Inc. , 841 F.3d 827 ( 2016 )

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS October 31, 2016
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
SOLIDFX, LLC,
Plaintiff - Appellee/Cross-Appellant,
Nos. 15-1079
v. and 15-1097
JEPPESEN SANDERSON, INC.,
Defendant - Appellant/Cross-Appellee.
_________________________________
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:11-CV-01468-WJM-BNB)
_________________________________
Craig S. Primis, P.C. (John C. O’Quinn, Michael A. Glick, Jason M. Wilcox, and
Jennifer M. Bandy, with him on the briefs), Kirkland & Ellis LLP, Washington, District of
Columbia, for Defendant-Appellant.
Shannon Wells Stevenson (Kenzo Kawanabe, Benjamin B. Strawn, and Emily L.
Wasserman with her on the briefs), Davis Graham & Stubbs LLP, Denver, Colorado, for
Plaintiff-Appellee.
_________________________________
Before KELLY, McKAY, and McHUGH, Circuit Judges.
_________________________________
McHUGH, Circuit Judge.
_________________________________
This case involves a dispute between SOLIDFX, LLC, a software development
company, and Jeppesen Sanderson, Inc., a subsidiary of Boeing that develops aviation
terminal charts. SOLIDFX sued Jeppesen, asserting antitrust, breach-of-contract, and tort
claims. The district court granted partial summary judgment on the antitrust claims, but the
remaining claims proceeded to trial. The jury found in favor of SOLIDFX and awarded
damages in excess of $43 million.
Jeppesen now appeals, challenging only the district court’s ruling that SOLIDFX
could recover lost profits on its contract claims. SOLIDFX cross-appeals the district court’s
summary judgment order in favor of Jeppesen on the antitrust claims. Exercising
jurisdiction pursuant to 28 U.S.C. § 1291, we reverse and vacate the jury’s award of lost
profits, but we affirm the partial summary judgment on SOLIDFX’s antitrust claims.
I. BACKGROUND
A. Factual History
Jeppesen creates terminal charts, which provide pilots with the information necessary
to navigate and land at a specific airport. Jeppesen gathers information from over 220
countries, creates its charts, updates them periodically, and then sells the charts and updates
to customers. Jeppesen holds copyrights for portions of its charts, which use a proprietary
format, including unique symbology, colors, fonts, and layout. Historically, pilots used
paper terminal charts, but demand has risen for electronic alternatives to the bulkier hard-
copy versions.
In November 2008, Jeppesen contacted SOLIDFX to discuss options for making
Jeppesen’s terminal charts available for electronic viewing. SOLIDFX suggested using an e-
reader device known as the iRex and demonstrated a prototype to Jeppesen. The parties then
began negotiating a License and Cooperation Agreement (“License Agreement”) under
which Jeppesen would waive its standard licensing fee and grant SOLIDFX access to
2
Jeppesen Integration Toolkits, which are proprietary products that facilitate the integration
of Jeppesen’s terminal charts into third-party systems. In exchange, SOLIDFX would create
a “data management reader solution that works in conjunction with an e-book viewer, as
modified to access, utilize and display Jeppesen Data.”
In July 2009, before the License Agreement had been finalized, Jeppesen began
providing toolkits to SOLIDFX and SOLIDFX began selling iRex devices “embedded with
[SOLIDFX’s] software and pre-loaded with Jeppesen’s charts.” The parties then finalized
and executed the License Agreement on December 31, 2009.
In January 2010, Apple, Inc. announced the first version of its iPad product. Shortly
after the announcement, SOLIDFX registered with Apple as a software application (app)
developer and requested the necessary toolkit from Jeppesen to develop an iPad app.
Jeppesen did not provide the toolkit. Rather, in May 2010, Jeppesen announced it had
created its own iPad app, which it offered to its customers at no additional cost beyond their
terminal chart subscription fee.
B. Procedural History
Upon learning Jeppesen had developed its own iPad app, SOLIDFX sued Jeppesen
for antitrust violations, breach of contract, and various torts. The district court granted
summary judgment for Jeppesen on the antitrust claims but denied summary judgment on
the remaining claims. In particular, the district court rejected Jeppesen’s argument that the
License Agreement precluded the recovery of lost profits. The court instead concluded the
agreement was ambiguous as to whether all lost profits were barred and indicated it would
be up to the jury to decide what types of damages the parties intended to exclude.
3
During trial, both parties moved for a legal determination on the recoverability of lost
profits under the License Agreement. The district court reconsidered its prior ruling and
concluded the License Agreement excluded only lost profits that also qualified as
consequential damages. As a result, it held that lost profits falling within the definition of
direct damages could be recovered. The district court further determined that lost profits
from two of SOLIDFX’s apps qualified as direct damages, while lost profits from two other
apps were properly classified as consequential damages.1
After an eight-day trial, the jury found for SOLIDFX on all claims and awarded it
$43,096,003 in damages. The award included $20,922,500 in lost profits from SOLIDFX’s
projected iPad app sales during the initial term of the contract; $21,385,500 for lost business
value assuming the parties would have allowed the License Agreement to renew for an
additional five years; $615,000 for lost profits attributable to Jeppesen’s refusal to provide a
toolkit for tailored terminal charts for the iRex device; $1 for breach of the duty of good
faith and fair dealing; $173,000 for fraudulent misrepresentation;2 $1 for fraudulent
concealment; and $1 for intentional interference with business relations.
1
SOLIDFX’s FXView HD app would have displayed basic terminal charts on the
iPad, and its FXView Enterprise app would have done the same while also providing
document management and audit capabilities. Because these apps would have utilized
Jeppesen’s charts, the district court concluded lost profits from these apps were direct
damages. By contrast, SOLIDFX’s FX Maintain and FX Mobile apps did not use Jeppesen’s
charts at all. FX Maintain was an app for aviation mechanics, flight attendants, and other
non-pilots in the industry. And FX Mobile was a document management app for non-
aviation businesses. The district court concluded lost profits from these apps were “classic
examples of consequential damages.”
2
The district court vacated the portion of the jury’s verdict awarding damages for
fraudulent misrepresentation. SOLIDFX does not appeal that ruling.
4
Jeppesen now appeals but challenges only the district court’s ruling permitting
SOLIDFX to recover lost profits. SOLIDFX has filed a cross-appeal in which it contends
the district court erred in granting summary judgment in favor of Jeppesen on the antitrust
claims. We conclude the License Agreement unambiguously precludes the recovery of lost
profits, irrespective of whether they are direct or consequential damages. But we also
determine that, even if the agreement could be read to allow the recovery of direct lost
profits, the lost profits awarded by the jury here are consequential damages and therefore
not recoverable. Because we hold that SOLIDFX was contractually precluded from
recovering the amounts awarded for lost profits, we do not reach the question of whether
SOLIDFX proved those lost profits with reasonable certainty, nor do we address the
admissibility of expert testimony offered by SOLIDFX to establish the amount of its lost
profits. Finally, we agree with the district court that Jeppesen was entitled to summary
judgment on SOLIDFX’s antitrust claims.
II. DISCUSSION3
Jeppesen asserts several bases to reverse and vacate the portions of the jury’s award
that include lost profits. First, Jeppesen argues the district court incorrectly interpreted the
3
As a preliminary issue, SOLIDFX requests that we summarily affirm on all issues
because Jeppesen failed to provide a complete appendix. Although “[a]n appellant who
provides an inadequate record does so at his peril,” Dikeman v. Nat’l Educators, Inc., 81
F.3d 949, 955 (10th Cir. 1996), the appendices in this case allow for full review of the issues
on appeal. To the extent Jeppesen’s initial appendix may have been lacking, SOLIDFX filed
a sizeable supplemental appendix, as did Jeppesen. These supplements complied with our
local rules, which permit supplementation if a party finds omissions in the appendix. 10th
Cir. R. 30.2(A)(1). In addition, SOLIDFX has not identified specific deficiencies in the
appendices that create “an effective barrier to informed, substantive appellate review.”
Morrison Knudsen Corp. v. Fireman’s Fund Ins. Co., 175 F.3d 1221, 1238 (10th Cir. 1999).
Accordingly, we conclude the appendices are sufficient and proceed to the merits.
5
License Agreement to allow recovery of any lost profits. This involves “[t]he proper
construction of a contract,” which “is a question of law we review de novo.” Penncro
Assocs., Inc. v. Sprint Spectrum, L.P., 499 F.3d 1151, 1155 (10th Cir. 2007). Second,
Jeppesen contends that even if the district court was correct that the License Agreement
permitted the recovery of direct lost profits, the lost profits awarded by the jury here are
consequential damages. The proper classification of the damages as direct or consequential
is a question of law we review de novo. See Int’l Tech. Instruments, Inc. v. Eng’g
Measurements Co., 678 P.2d 558, 561 (Colo. App. 1983), superseded by statute on other
grounds as recognized in Colo. Dep’t of Soc. Servs. v. Bethesda Care Ctr., Inc., 867 P.2d 4
(Colo. App. 1993). In its cross-appeal, SOLIDFX challenges the district court’s grant of
partial summary judgment on its antitrust claims, which is a decision we also review de
novo. Applied Genetics Int’l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th
Cir. 1990).
6
A. Lost Profits
The parties disagree on whether the License Agreement prohibits entirely the
recovery of lost profits. Under Colorado law,4 “[w]e must construe the terms of the
agreement in a manner that allows each party to receive the benefit of the bargain, and the
scope of the agreement must faithfully reflect the reasonable expectations of the parties.”
Allen v. Pacheco, 71 P.3d 375, 378 (Colo. 2003). We begin first by examining the plain
language of the contract. Id. In doing so, “[w]e will enforce the agreement as written unless
there is an ambiguity in the language; courts should neither rewrite the agreement nor limit
its effect by a strained construction.” Id.
1. Plain Language of the License Agreement
The relevant contractual language reads as follows:
8.2 EXCLUSION OF CONSEQUENTIAL AND OTHER DAMAGES:
EXCEPT TO THE EXTENT OF THE INDEMNIFICATION
OBLIGATIONS SET FORTH IN SECTION 9, NEITHER PARTY
WILL HAVE ANY OBLIGATION OR LIABILITY
WHATSOEVER, WHETHER ARISING IN CONTRACT
(INCLUDING WARRANTY), TORT (WHETHER OR NOT
ARISING FROM THE NEGLIGENCE OF EITHER PARTY),
STRICT LIABILITY OR OTHERWISE,
8.2.1 FOR LOSS OF USE, REVENUE OR PROFIT; OR
8.2.2 FOR ANY OTHER INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL, EXEMPLARY,
PUNITIVE, OR OTHER DAMAGES WITH RESPECT TO
THE JEPPESEN DATA, THE JIT, AND OTHER
PRODUCTS AND SERVICES PROVIDED HEREUNDER;
AND
4
The parties agree Colorado law applies in this case.
7
8.2.3 ANY NONCONFORMANCE OR DEFECT IN THE
JEPPESEN DATA, THE JIT, OR OTHER THINGS
PROVIDED UNDER THIS AGREEMENT.
Section 8.2 begins with the heading “EXCLUSION OF CONSEQUENTIAL AND
OTHER DAMAGES,” which plainly indicates that the section will identify the damages
the parties agreed to exclude from the available remedies for breach, including
consequential damages, and other types of damages.
Next, Section 8.2 broadly proclaims that neither party will be liable to any extent
whatsoever for the categories of damages then identified in three separately numbered
paragraphs. First, in Subsection 8.2.1, the parties agreed to exclude damages “FOR LOSS
OF USE, REVENUE, OR PROFIT.” Together, Section 8.2 and Subsection 8.2.1 provide,
“[N]EITHER PARTY WILL HAVE ANY OBLIGATION OR LIABILITY
WHATSOEVER, . . . FOR LOSS OF USE, REVENUE, OR PROFIT.” Read plainly,
this language imposes an unqualified bar that prohibits either party from recovering lost
profits from the other.
According to SOLIDFX, however, Subsection 8.2.1 cannot be read as a free-standing
provision. Instead, SOLIDFX contends that Subsections 8.2.1 and 8.2.2 “are clearly linked
to each other by the words ‘or for any other,’” and “[t]his syntax makes clear that the
damages listed in 8.2.1 are not stand-alone categories of damages, but are merely examples
that fall within the larger categories listed in 8.2.2, such as indirect or consequential
damages.” That is, SOLIDFX reads Subsection 8.2.2 as qualifying the damages prohibited
by the list in Subsection 8.2.1. Although we agree that the subsections share an introductory
8
paragraph and are related in purpose, we do not agree that Subsection 8.2.2 qualifies
Subsection 8.2.1.
SOLIDFX’s interpretation ignores the structure of Section 8.2, including the use of
semicolons, separate paragraph numbers, and indentation, which evidence the intent to treat
Subsection 8.2.1 as a separate category of damages from those in Subsections 8.2.2 or 8.2.3.
The phrase “FOR ANY OTHER” appears in Subsection 8.2.2 and does not purport to limit
the effect of Subsection 8.2.1 either expressly or by reference.
Rather, the subsections of Section 8.2 provide three different types of excluded
damages. First, the parties agreed to exclude damages for loss of use, revenue, or profit, and
did so without express limitation. Second, in Subsection 8.2.2, the parties listed additional
categories of excluded damages: “ANY OTHER INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL, EXEMPLARY, PUNITIVE, OR OTHER
DAMAGES WITH RESPECT TO THE JEPPESEN DATA, THE JIT, AND OTHER
PRODUCTS AND SERVICES HEREUNDER.” Thus, Subsection 8.2.2 indicates that
damages other than those that were previously excluded in Subsection 8.2.1 for loss of use,
revenue, or profit are here excluded, and the specific categories now excluded are indirect,
incidental, consequential, special, exemplary, punitive, or other damages. But unlike
Subsection 8.2.1’s comprehensive bar to the recovery of lost profits, the damages identified
in Subsection 8.2.2 are only excluded “WITH RESPECT TO THE JEPPESEN DATA,
JIT, AND OTHER PRODUCTS AND SERVICES PROVIDED” under the License
Agreement. Finally, in Subsection 8.2.3, the parties barred the recovery of damages for
“ANY NONCONFORMANCE OR DEFECT IN THE JEPPESEN DATA, THE JIT,
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OR OTHER THINGS PROVIDED UNDER THIS AGREEMENT.” Again, this
subsection plainly excludes a separate category of damages than those identified in
Subsections 8.2.1 and 8.2.2.
Within Section 8.2, where the parties intended to limit the effect of a subsection’s
exclusion of identified damages, that limitation is stated in the subsection itself. For
example, in Subsection 8.2.2, the parties limited the exclusion to the listed damages but only
“WITH RESPECT TO” the products and services provided in the License Agreement.
And rather than assume that same restriction would carry over into the separately-numbered
Subsection 8.2.3, the parties explicitly reiterated the same limitation on the exclusion of
defect and nonconformance damages, “IN THE JEPPESEN DATA, THE JIT, OR
OTHER THINGS PROVIDED UNDER THIS AGREEMENT.” The insertion of this
limitation separately in both Subsections 8.2.2 and 8.2.3 belies SOLIDFX’s argument that
the separately-numbered sections modify one another.
Similarly, when the parties intended to refer to consequential damages, they did so
expressly. As previously noted, the underlined phrase at the beginning of Section 8.2
announces the intent to exclude “consequential and other damages.” Likewise, Subsection
8.2.2 plainly excludes indirect, incidental, and consequential damages. But the parties did
not use the term “consequential” to modify or limit the exclusion of lost profits in
Subsection 8.2.1 or to limit the exclusion of defect or nonconformity damages in Subsection
8.2.3. This omission indicates the intent to bar all lost profit damages without limitation, and
to exclude all damages for defect or nonconformity in things provided under the License
Agreement. “When a contract uses different language in proximate and similar provisions,
10
we commonly understand the provisions to illuminate one another and assume that the
parties’ use of different language was intended to convey different meanings.” Penncro
Assocs., Inc. v. Sprint Spectrum, L.P., 499 F.3d 1151, 1156–57 (10th Cir. 2007). Here, the
absence of the word “consequential” from Subsections 8.2.1 and 8.2.3, while using it in
Section 8.2 and Subsection 8.2.2, evidences the intent to bar both direct and consequential
lost profits and direct and consequential damages for defect or nonconformity.
SOLIDFX argues, however, that our decision in Penncro mandates a reading of
Subsection 8.2.1 that limits the exclusion to consequential lost profits. To the contrary,
Penncro supports our conclusion that Subsection 8.2.1 precludes the recovery of all lost
profit damages whether direct or consequential in nature. There, the relevant provision
“forb[ade] the recovery of ‘consequential damages,’ specifying that they ‘include, but are
not limited to, lost profits, lost revenues and lost business opportunities.’” Id. at 1155–56.
The district court held that use of the term “consequential damages” followed by a list of
examples “forb[ade] only ‘consequential’ or ‘indirect’ damages” and did “nothing to rule
out of bounds lost profits suffered as a direct consequence of [the defendant’s] breach.” Id.
On appeal, the defendant challenged that ruling, arguing the contract language prohibited
the recovery of all lost profits. Id. We disagreed and explained that the provision’s “syntax
alone propels us in this direction.” Id. at 1156. Specifically, we concluded that the “more
general term” used in the contract—consequential damages— “inform[ed] the subsequently
listed examples,” and thereby limited the excluded lost profit damages to those that also fall
within the general category of consequential damages. Id. In reaching that conclusion, we
distinguished cases involving contracts where “lost profits were not . . . placed in an
11
illustrative list of the sorts of consequential damages excluded; instead, they were singled
out as a separate and distinct category of forbidden damages.” Id. at 1157. And we cited
such cases as examples of “how parties easily can manifest an intent to preclude lost profits
of any stripe.” Id. at 1157–58 & n.8 (citing Imaging Sys. Int’l, Inc. v. Magnetic Resonance
Plus, Inc., 490 S.E.2d 124, 127 (Ga. Ct. App. 1997) (lost profits set off from consequential
damages by disjunctive “or”)). Because the parties in Penncro listed lost profits as an
example of a type of consequential damages, we held the contract excluded only
consequential lost profits. Id. at 1162.
Here, the License Agreement models the syntax and structure we recognized in
Penncro as excluding lost profits of any stripe. Section 8.2 does not generally exclude
consequential damages and then include lost profits as an example of such consequential
damages. Rather, Subsection 8.2.1 simply and without limitation states that “NEITHER
PARTY WILL HAVE ANY OBLIGATION OR LIABILITY WHATSOEVER . . .
FOR LOSS OF . . . PROFIT.” In addition, Subsection 8.2.1 ends with a semicolon
followed by the disjunctive “or,” after which Subsection 8.2.2 lists other distinct types of
damages foreclosed by the contract, including consequential damages. When interpreting
similar language—two clauses separated by a semicolon and “or”—the Supreme Court and
Colorado courts have held the clauses should be read separately. See, e.g., United States v.
Republic Steel Corp., 362 U.S. 482, 486 (1960) (provisions found to be separate and distinct
where separated by a semicolon); People v. Valenzuela, 216 P.3d 588, 591 (Colo. 2009)
(clauses “offset by the word ‘or’ and semicolons” defined “separate ways in which an
individual can violate that category, and therefore commit the offense”); People v. Boling,
12
261 P.3d 503, 506 (Colo. App. 2011) (“Each provision is different and is separated from the
others by a semicolon and the disjunctive word ‘or,’ which is ordinarily assumed to
demarcate different categories.”). We reach the same conclusion here.
Rather than interpreting the “any other” language in Subsection 8.2.2 as a limitation
on Subsection 8.2.1, the language is more appropriately read as indicating that, if there are
any indirect, incidental, consequential, special, exemplary, or punitive damages not already
excluded by Subsection 8.2.1, they are now excluded by Subsection 8.2.2, at least to the
extent they are “with respect to” the services and products provided under the License
Agreement. This interpretation gives meaning to the structure of Section 8.2 and to use of
the term “consequential” in Section 8.2 and Subsection 8.2.2 but not in Subsections 8.2.1
and 8.2.3.
The district court reached a contrary result primarily due to its concern that the
Licensing Agreement “does not contemplate that [Jeppesen] is paying [SOLIDFX] any
money for its services in developing the ‘System’. Thus, the only benefit to [SOLIDFX] in
entering into the Agreement is the profits which [it] could receive for sale of its ‘Systems’.”
Similarly, SOLIDFX maintains that enforcing Subsection 8.2.1 as written would defeat the
purpose of the Licensing Agreement by eliminating the ability for a party to be made whole.
But it is not the business of the courts to draft a better contract for the parties than
they did for themselves. See Allstate Ins. Co. v. Huizar, 52 P.3d 816, 820 (Colo. 2002)
(“[C]lear and unambiguous provisions cannot simply be rewritten by the courts”); Kansas
City Life Ins. Co. v. Pettit, 61 P.2d 1027, 1028 (Colo. 1936) (“It is elementary that neither
this court nor any other court can make a new contract in lieu of the one originally entered
13
into by the parties themselves.”). “The intent of the parties to a contract is to be determined
primarily from the language of the instrument itself.” Ad Two, Inc. v. City & Cty. of Denver
ex rel. Manager of Aviation, 9 P.3d 373, 376 (Colo. 2000). As discussed, Subsection 8.2.1
unambiguously establishes the parties’ intent to preclude recovery by either party of any lost
profits.
Furthermore, “[a]s a general rule, courts will uphold an exculpatory provision in a
contract between two established and sophisticated business entities that have negotiated
their agreement at arm’s length.” Rhino Fund, LLLP v. Hutchins, 215 P.3d 1186, 1191
(Colo. App. 2008); see also CompuSpa, Inc. v. Int’l Bus. Machs. Corp., 228 F. Supp. 2d
613, 626–27 (D. Md. 2002) (“[T]here is no public policy against enforcement of limited
liability clauses for abandonment of a contractual obligation, even if deliberate.”). Even if
the relevant contract provision “may severely if not completely restrict [a party’s] ability to
recover for [the relevant] breach of contract, parties are free to agree to such provisions.”
Imaging Sys., 490 S.E.2d at 127. Indeed, parties to a contract “must be able to confidently
allocate risks and costs during their bargaining without fear that unanticipated liability may
arise in the future, effectively negating the parties’ efforts to build these cost considerations
into the contract.” Vanderbeek v. Vernon Corp., 50 P.3d 866, 871 (Colo. 2002).
Both SOLIDFX and Jeppesen agreed they would bear the risk of their own lost
profits and forego other damages as identified in Section 8.2. And, in the License
Agreement itself, they explained the reason for their decision to limit the damages available
in the event of breach:
8.4 Effect of Limitation. The parties acknowledge that the limitations set forth in
this Section are integral to the amount of fees specified within this Agreement, and
14
recognize that were Jeppesen to assume any further liability beyond that set forth
herein, such fees could be substantially higher.
In other words, SOLIDFX expressly waived its ability to recover several types of damages,
including lost profits, and waived the warranties listed in Section 8.1.5 But for these waivers,
Jeppesen would not have waived the license fee to access its proprietary toolkits. The
inclusion of this acknowledgment further supports the reading of Section 8.2.1 as meaning
exactly what it says: “NEITHER PARTY WILL HAVE ANY OBLIGATION OR
LIABILITY WHATSOEVER . . . FOR LOSS OF USE, REVENUE OR PROFIT.”
Even if an agreement to limit only consequential lost profits would have been a better deal
for SOLIDFX, it is not the bargain it made.
And this interpretation does not leave SOLIDFX without a remedy as it contends.
SOLIDFX and Jeppesen both contractually waived the right to recover lost profits in
Subsection 8.2.1; the damages listed in Subsection 8.2.2 with respect to the products and
services provided under the License Agreement; and the defect and nonconformance
damages described in Subsection 8.2.3. But they did not exclude reliance damages—
damages incurred when products or services promised under the License Agreement were
not provided. Such damages “includ[e] expenditures made in preparation for performance or
in performance, less any loss that the party in breach can prove with reasonable certainty the
injured party would have suffered had the contract been performed.” Restatement (Second)
of Contracts § 349; see also Bunch v. Signal Oil & Gas Co., 505 P.2d 41, 43 (Colo. App.
1972) (“The fact that plaintiff failed to prove his damages concerning loss of profits will not
5
Section 8.1 contains a broad disclaimer of any express or implied warranties other
than those expressly contained in the License Agreement.
15
prevent his recovery for actual expenditures made in reasonable reliance on the performance
of the contract or made because of the breach of the contract.”).
Here, SOLIDFX originally claimed $173,000 in “wasted costs,” which SOLIDFX’s
expert explained were not lost profits but were “monies that were spent by SOLIDFX
because Jeppesen did not adhere to the terms of the contract.” Although SOLIDFX’s expert
included wasted costs in her original damage calculations, SOLIDFX omitted them from the
damages it sought at trial. Essentially, SOLIDFX made the tactical decision to drop its claim
for the type of damages available under the License Agreement in the hope of recovering
the much greater sums it claimed as lost profits. But SOLIDX was bound by the terms of the
License Agreement, including the exclusion of any lost profit damages. And because it did
not offer the evidence of “wasted costs” to the jury, SOLIDFX has not made a record of the
damages recoverable under the License Agreement.
In summary, the Licensing Agreement unambiguously precludes either party from
recovering lost profits. This reading is consistent with the structure, punctuation, and plain
language of Section 8.2. Although Section 8.2 greatly limits the available damages either
party can recover in the event of breach, it is not the courts’ role to create or enforce a
different contract than the one the parties negotiated. We must enforce the unambiguous
exclusion of lost profits contained in Subsection 8.2.1. Accordingly, the verdict must be
vacated to the extent it includes lost profits of any stripe.6
6
This includes damages awarded for lost business value because the district court
concluded that “calculations for lost business value [were] essentially equivalent to [the]
estimate of [SOLIDFX’s] future lost profits.” Although SOLIDFX’s expert “testified that
lost business value encompasses a business’[s] goodwill and other intangibles, she made no
attempt to quantify anything other than future expected revenues.” Indeed, on cross-
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2. Consequential Versus Direct Damages
Even if we agreed with the district court that the License Agreement excludes only
consequential lost profits, we would still vacate the verdict because the lost profits alleged
by SOLIDFX are consequential damages as a matter of law. To place our analysis in
context, we begin with a discussion of the distinction between consequential and direct
damages. We then explain why the evidence here falls within the definition of consequential
damages.
Colorado follows the general rule that allows the recovery of foreseeable damages for
breach of contract. See Vanderbeek, 50 P.3d at 871. This, in turn, includes damages for
losses that “may fairly and reasonably be considered . . . arising naturally, i.e., according to
the usual course of things, from [the] breach of contract itself.” Core-Mark Midcontinent,
Inc. v. Sonitrol Corp., 370 P.3d 353, 360 (Colo. App. 2016) (alterations in original) (quoting
Hadley v. Baxendale, 9 Exch. 345, 156 Eng. Rep. 145 (1854)). The damages flowing
directly from the breach are commonly referred to as general, or direct, damages. Id. The
second category of damages available for breach of contract includes special, or
consequential, damages. Id. Such consequential damages compensate for loss “reasonably . .
. supposed to have been in the contemplation of both parties, at the time they made the
contract, as the probable result of the breach of it,” but not flowing directly from the breach.
Id. (quoting Hadley, 9 Exch. at 354); see also Vanderbeek, 50 P.3d at 870–71 (approving the
Hadley measure of damages for breach of contract).
examination, SOLIDFX’s expert agreed that in projecting lost business value, she was
“monetiz[ing] the future profits of SOLIDFX.” Because SOLIDFX’s lost business value
equates to lost profits, this portion of the jury award is also vacated.
17
We have explained the difference between direct and consequential damages in the
context of lost profits:
Direct damages refer to those which the party lost from the contract itself—in
other words, the benefit of the bargain—while consequential damages refer to
economic harm beyond the immediate scope of the contract. Lost profits,
under appropriate circumstances, can be recoverable as a component of
either (and both) direct and consequential damages. Thus, for example, if a
services contract is breached and the plaintiff anticipated a profit under the
contract, those profits would be recoverable as a component of direct, benefit
of the bargain damages. If the same breach had the knock-on effect of causing
the plaintiff to close its doors, precluding it from performing other work for
which it had contracted and from which it expected to make a profit, those lost
profits might be recovered as “consequential” to the breach.
Penncro, 499 F.3d at 1156 (emphasis added). Thus, while it is true that lost profits often fall
within the larger category of consequential damages, lost profits that flow directly from the
breach of the contract itself are properly characterized as direct damages.
The Colorado Supreme Court has not expressly defined when lost profits qualify as
consequential damages. Although it has referred to specific lost profits as consequential
damages, see, e.g., W. Cities Broad., Inc. v. Schueller, 849 P.2d 44, 49 (Colo. 1993) (“At
trial, [the plaintiff] sought consequential damages, including lost profits, but did not seek
out-of-pocket expenses.”); Colo. Nat’l Bank of Denver v. Friedman, 846 P.2d 159, 174
(Colo. 1993) (affirming an award of “consequential damages for lost profits”), these cases
did not raise the issue of whether the lost profits were correctly characterized as direct or
consequential damages. We are convinced, however, that should that issue be placed
squarely before it, the Colorado Supreme Court would recognize that lost profits can be
either direct or consequential damages. And we are also confident that it would distinguish
between these types of lost profits based on its ordinary rule that direct damages flow
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directly from the breach of the contract with the breaching party, while consequential lost
profits flow from losses beyond the scope of that contract.
Applying these principles, the First Circuit recently addressed the proper
classification of lost profits under facts similar to those at issue here. In Atlantech Inc. v.
American Panel Corp., Atlantech, a dealer in aircraft LCD displays, sued its primary
product suppliers for breach of contract. 743 F.3d 287, 293 (1st Cir. 2014). Atlantech was
also party to a separate contract under which it was the exclusive vendor of LCD panels to
UIMDB, a company that integrated Atlantech’s LCD displays into aircraft instrument
panels. Atlantech and its suppliers engaged in a series of disputes that resulted in the
suppliers refusing to provide displays, and Atlantech sued them for breach of contract. After
a jury awarded Atlantech over $1 million in damages, the defendants appealed.
One of the issues considered by the First Circuit was whether the district court had
erred in upholding the jury’s damage award—which was based on lost profits—in light of
the contract’s express exclusion of “consequential, incidental, indirect, special or punitive
damages,” including “lost profits.” Id. at 289. Applying Georgia law, the appellate court
first explained that lost profits can qualify as either direct or consequential damages:
(1) lost profits which are direct damages and represent the benefit of the
bargain (such as a general contractor suing for the remainder of the contract
price less his saved expenses), and (2) lost profits which are indirect or
consequential damages such as what the user of the MRI would lose if the
machine were not working and he was unable to perform diagnostic services
for several patients.
Id. at 293 (quoting Imaging Sys., 490 S.E.2d at 127).
The court in Atlantech then examined the evidence of lost profits, which consisted of
proof of “past sales to UIMDB as well as evidence of UIMDB’s intent to buy certain
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quantities in the future.” Id. at 293. It concluded Atlantech’s lost profits qualified as
consequential damages because they were not “necessarily inherent in the contract”—i.e.,
they were contingent “on future deals with a business that [was] not a party to the [contract],
and . . . on anticipated prices and demand that [were] not determined by the contract itself.”
Id. at 294; see also Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 109
(2d Cir. 2007) (“Lost profits are consequential damages when, as a result of the breach, the
non-breaching party suffers loss of profits on collateral business arrangements. . . . By
contrast, when the non-breaching party seeks only to recover money that the breaching party
agreed to pay under the contract, the damages sought are general damages.”); Airlink
Commc’ns, Inc. v. Owl Wireless, LLC, No. 3:10 CV 2296, 2011 WL 4376123, at *3 (N.D.
Ohio Sept. 20, 2011) (unpublished) (holding lost profits were barred as consequential
damages because they “were contingent upon third-party agreements” and not directly tied
to the relevant contract). Accordingly, the First Circuit vacated the jury award.
As in Atlantech, SOLIDFX has failed to present any evidence of direct lost profits.
SOLIDFX did not present evidence of profits expected from the License Agreement itself;
SOLIDFX instead calculated its lost profits using hypothetical future sales to third parties of
the apps it hoped to develop under the License Agreement. These damages were foreseeable
and, absent the exclusions in Section 8.2, would be recoverable for breach of the License
Agreement. But they do not flow directly from breach of that agreement and are therefore
consequential damages.
SOLIDFX disagrees, relying on unprecedential decisions from jurisdictions other
than Colorado, and argues that similar types of lost profits have been treated as direct, rather
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than consequential damages. But the cases cited by SOLIDFX are readily distinguishable.
For example, in Claredi Corp. v. SeeBeyond Technology Corp., the district court concluded
that despite the waiver of consequential lost profits, the plaintiff could “present evidence to
the jury of sales . . . [the plaintiff] would have made if [the defendant] had not breached its
duty to make appropriate sales efforts under the Agreement.” No. 4:04CV1304 RWS, 2010
WL 1257946, at *6 (E.D. Mo. Mar. 26, 2010) (unpublished); see also Biovail Pharm., Inc.
v. Eli Lilly & Co., No. 5:01-CV-352-BO(3), 2003 WL 25901513, at *3 (E.D.N.C. Feb. 28,
2003) (unpublished) (explaining that lost profits may be either direct or consequential
damages depending on the nature of the contract and holding that where a supplier breached
the contract to supply goods for resale, the lost profits were direct damages); Biotronik A.G.
v. Conor Medsystems Ireland, Ltd., 22 N.Y.3d 799, 806 (N.Y. 2014) (explaining lost profits
may be direct if naturally flowing from the contract or from an existing resale contract or
may be consequential if stemming from anticipated collateral agreements). These cases
either lend support to our conclusion that the lost profits here are consequential damages or
are simply not on point.
In summary, direct lost profits are profits that would have been generated from the
agreement between the contracting parties, while consequential lost profits depend on a
separate agreement with a nonparty. SOLIDFX does not dispute that its profits from
projected app sales would have come entirely from anticipated contracts with unidentified
third parties; SOLIDFX did not anticipate any profits from Jeppesen directly. Consequently,
SOLIDFX’s lost profits are consequential, not direct, damages.
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B. Antitrust Claims
In its cross-appeal, SOLIDFX challenges the dismissal of its antitrust claims for
monopolization and attempted monopolization under § 2 of the Sherman Act. But it limits
its argument to a single allegation of anticompetitive conduct: Jeppesen’s refusal to deal.
Section 2 prohibits monopolization or attempted monopolization of “any part of the
trade or commerce among the several States, or with foreign nations.” 15 U.S.C. § 2.
“Illegal monopolization under § 2 of the Sherman Act has two distinct elements: ‘(1) the
possession of monopoly power in the relevant market and (2) the willful acquisition or
maintenance of that power as distinguished from growth or development as a consequence
of a superior product, business acumen, or historic accident.’” Rural Tel. Serv. Co. v. Feist
Publ’ns, Inc., 957 F.2d 765, 767 (10th Cir. 1992) (citation omitted). At summary judgment,
the district court assumed for purposes of its analysis that SOLIDFX had established
Jeppesen’s monopoly power in the relevant market. It therefore addressed only the second
element, which requires proof of “use of monopoly power ‘to foreclose competition, to gain
a competitive advantage, or to destroy a competitor.’” Eastman Kodak Co. v. Image Tech.
Servs., Inc. (Kodak I), 504 U.S. 451, 482–83 (1992) (citation omitted).
“A refusal to deal may be one of the mechanisms by which a monopolist maintains
its power.” See Feist Publ’ns, 957 F.2d at 768. To determine whether a refusal to deal
violates § 2, “we apply a two-part test. First, we look at the effects of the monopolist’s
conduct. Second, we look at its motivation.” Id. Although a business acting unilaterally “as
a general matter . . . can refuse to deal with its competitors, . . . such a right is not absolute;
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it exists only if there are legitimate competitive reasons for the refusal.” Kodak I, 504 U.S.
at 483 n.32.
The district court again skipped to the second element and determined Jeppesen had a
legitimate business justification for its refusal to provide SOLIDFX with the necessary
terminal charts and toolkits to develop an iPad app. Specifically, the district court concluded
Jeppesen “was properly exercising its right to refuse to license its copyrighted work.”
Both the First and Federal Circuits have held that the assertion of intellectual
property rights is a presumptively rational business justification for a unilateral refusal to
deal. In Data General Corp. v. Grumman Systems Support Corp., the First Circuit “[held]
that while exclusionary conduct can include a monopolist’s unilateral refusal to license a
copyright, an author’s desire to exclude others from use of its copyrighted work is a
presumptively valid business justification for any immediate harm to consumers.” 36 F.3d
1147, 1187 (1st Cir. 1994), abrogated on other grounds as recognized in Reed Elsevier, Inc.
v. Muchnick, 559 U.S. 154 (2010). The court in Data General clarified, however, that the
presumption was rebuttable. Id. at 1187 n.64.
The Federal Circuit reached a similar conclusion in In re Independent Service
Organizations Antitrust Litigation (Xerox), where it applied Tenth Circuit law but found we
“ha[d] not addressed in any published opinion the extent to which the unilateral refusal to
sell or license copyrighted expression can form the basis of a violation of the Sherman Act.”
203 F.3d 1322, 1328 (Fed. Cir. 2000). The Federal Circuit therefore attempted to decide
how we would resolve the issue and turned to precedent from other circuits to inform its
analysis. Id. In particular, the court recognized and agreed with Data General and cited a
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case in which the Fourth Circuit rejected the plaintiff’s illegal tying claim based solely on
the defendant’s unilateral decision to license copyrighted software to some third parties but
not others. Id. (citing Serv. & Training, Inc. v. Data Gen. Corp., 963 F.2d 680, 686 (4th Cir.
1992)).
The Federal Circuit acknowledged that the Ninth Circuit had “adopted a modified
version” of the Data General standard by “extend[ing] the possible means of rebutting the
presumption to include evidence that the defense and exploitation of the copyright grant was
merely a pretextual business justification to mask anticompetitive conduct.” Id. at 1329
(citing Image Tech. Servs., Inc. v. Eastman Kodak Co. (Kodak II), 125 F.3d 1195, 1219 (9th
Cir. 1997)). But the Federal Circuit rejected this approach and instead applied Data General
as being “more consistent with both the antitrust and the copyright laws and . . . the standard
that would most likely be followed by the Tenth Circuit.” Id. The court declined to examine
the defendant’s “subjective motivation in asserting its right to exclude under the copyright
laws for pretext, in the absence of any evidence that the copyrights were obtained by
unlawful means or were used to gain monopoly power beyond the statutory copyright
granted by Congress.” Id. And without such evidence, the defendant’s refusal to license
copyrighted materials did not support a § 2 claim. Id.
We agree with the approach taken by the courts in Xerox and Data General,
particularly because these decisions are consistent with our existing precedent. For instance,
in Novell, Inc. v. Microsoft Corp., Novell sought to impose § 2 liability based on
Microsoft’s refusal to deal. 731 F.3d 1064, 1074 (10th Cir. 2013). Novell alleged Microsoft
shared its internal protocols, in an effort to incentivize Novell to write software for
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Windows 95, but Microsoft then changed course by refusing to grant further access to its
protocols. Id. We held “that Microsoft’s conduct d[id] not qualify as anticompetitive
behavior within the meaning of section 2,” id. at 1080, because “[n]ormally, this sort of
unilateral behavior—choosing whom to deal with and on what terms—is protected by the
antitrust laws. Even a monopolist generally has no duty to share (or continue to share) its
intellectual or physical property with a rival,” id. at 1074; see also Four Corners
Nephrology Assocs., P.C. v. Mercy Med. Ctr. of Durango, 582 F.3d 1216, 1223–24 (10th
Cir. 2009) (concluding clinic was not required to share its facilities with a competitor);
Christy Sports, LLC v. Deer Valley Resort Co., Ltd., 555 F.3d 1188, 1196 (10th Cir. 2009)
(“[A]ntitrust will not force a resort developer to share its internal profit-making
opportunities with competitors.”).
To establish an unlawful refusal to deal by Jeppesen, SOLIDFX relies on Aspen
Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985). In Aspen, the Court
recognized the right of a business to refuse to deal but clarified the right is not unqualified.
Id. at 601. There, the defendant ceased participation in a cooperative joint venture and
refused to deal with its previous partner even if compensated for doing so. Under such
circumstances, the Court found sufficient evidence that the defendant had no valid business
justification for its refusal to deal. Id. at 608–11.
The Court has since explained that Aspen “is at or near the outer boundary of § 2
liability.” Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398,
409 (2004). The “limited exception” applies only where the plaintiff can establish the parties
had “a preexisting voluntary and presumably profitable course of dealing,” and “the
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monopolist’s discontinuation of the preexisting course of dealing must ‘suggest[] a
willingness to forsake short-term profits to achieve an anti-competitive end.’” Novell, 731
F.3d at 1074, 1075 (alteration in original) (quoting Trinko, 540 U.S. at 407). In other words,
the decision “must be irrational but for its anticompetitive effect.” Id. at 1075.
SOLIDFX did not present evidence to meet this standard. When SOLIDFX requested
access to the relevant toolkits to create an iPad app, Jeppesen refused, asserting its
copyrights and its desire to maintain the exclusivity of those rights. This invocation of
intellectual property rights was a presumptively rational business justification.7 See Xerox,
203 F.3d at 1328–29; Data Gen., 36 F.3d at 1187. And SOLIDFX did not present any
rebuttal evidence to prove Jeppesen acted solely with an anticompetitive motivation. Even
though Jeppesen refused to grant access to the toolkit to create an iPad app and the jury
concluded Jeppesen breached the License Agreement by its refusal, Jeppesen did not have
an independent antitrust duty to share its intellectual property with SOLIDFX. See Novell,
731 F.3d at 1074. Thus, the district court correctly concluded Jeppesen was not liable for
antitrust damages because it had established a valid business justification for its refusal to
deal.
7
SOLIDFX also relies on FTC v. Actavis, 133 S. Ct. 2223 (2013), as authority to the
contrary. But this reliance is misplaced because Actavis was a § 1 case involving potentially
collusive behavior among competitors. Id. at 2227. It did not address the rationality of a
defendant’s stated business justification for purposes of a § 2 unilateral refusal-to-deal
claim.
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III. CONCLUSION
For the above reasons, we reverse the district court’s interpretation of Section 8.2 and
hold that lost profits are not recoverable under the Licensing Agreement. Even if the
License Agreement precluded only consequential lost profits, SOLIDFX’s damages fall
within that exclusion. We accordingly vacate the portions of the jury’s verdict that awarded
$20,922,500 in lost profits from SOLIDFX’s projected iPad app sales during the initial term
of the contract; $21,385,500 for lost business value based on anticipated lost profits after the
initial contract term; and $615,000 for lost profits for tailored terminal charts for the iRex
device. We also affirm the grant of partial summary judgment on SOLIDFX’s antitrust
claims.
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